ITO, Ward-3(1), Malda, Malda V. M/s. English Bazar Foreign Liquor Off Shop No.1, Malda

ITA 1805/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5538 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-03-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 04-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: S M SURANA
• Section: 40A(3); 131

Judgement Text

1 ITA NO. 1805/KOL/2017 ENGLISH BAZAR FOREIGN LIQUOR OFF SHOP NO.1., AY 201 4-15 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1805/KOL/2017 ASSESSMENT YEAR: 2014-15 INCOME-TAX OFFICER, WD-3(1), MALDA VS. M/S. ENGLISH BAZAR FOREIGN LIQUOR OFF SHOP NO. 1, (PAN: AABEF5741P) APPELLANT RESPONDENT DATE OF HEARING 07.03.2019 DATE OF PRONOUNCEMENT 03.06.2019 FOR THE APPELLANT SHRI ROBIN CHOUDHURY, ADDL. CIT, SR. DR FOR THE RESPONDENT SHRI S. M. SURANA, ADVOCATE ORDER PER SHRI A. T. VARKEY, JM: THIS APPEAL FILED BY REVENUE IS AGAINST THE ORDER O F LD. CIT(A), JALPAIGURI DATED 07.06.2017 FOR AY 2014-15 ON THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCE OF TH E CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING THE CASH PAYMENTS IN EXCESS OF THE PRESCRI BED LIMIT U/S 40A(3) ON THE GROUND THAT THERE IS NO ELEMENT OF TAX EVASION IN THE TRAN SACTIONS, DESPITE THE FACT THAT SUCH EXCEPTION OR ALLOWANCE ON THE GROUND OF GENUINENESS OF BUSINESS TRANSACTIONS HAS NOT BEEN PROVIDED EITHER IN SECTION 40A(3) OR RULE 6DD. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN RELYING RELIED UPON THE DECISIONS OF THE JURISDICTI ONAL ITAT IN THE CASES OF MOTOR CH. MONDAL V. INCOME TAX OFFICER (2016) 48 CCH 008 (KOL TRIB) AND ASHOK KUMAR MONDAL V. INCOME-TAX OFFICER, WARD-2(2), ASANSOL (2 016) 161 ITD 521 (KOLKATA TRIB), DESPITE THE FACT THAT THE CITED CASES PERTAI N TO RETAILERS OF COUNTRY SPIRIT IN WHICH THE BUSINESS IS REGULATED BY THE 'WEST BENGAL EXCIS E(SUPPLY OF COUNTRY SPIRIT ON PAYMENT OF DUTY) RULES, 2005', AND THAT THE INSTANT CASE RELATES TO AN ASSESSEE WHO IS A RETAILER OF FOREIGN LIQUOR AND NONE OF THE PAYEES IN DEFAULT OF SECTION 40A(3) ARE COVERED BY THE RULES FORMULATED FOR COUNTRY SPIRIT SUPPLIERS. 2 ITA NO. 1805/KOL/2017 ENGLISH BAZAR FOREIGN LIQUOR OFF SHOP NO.1., AY 201 4-15 2. BRIEFLY STATED FACTS AS OBSERVED BY THE AO ARE T HAT THE ASSESSEE FIRM IS DERIVING INCOME FROM BUSINESS OF FOREIGN LIQUOR UNDER THE NA ME AND STYLE OF M/S. ENGLISH BAZAR FOREIGN LIQUOR SHOP NO. 1. DURING THE COURSE OF SCRUTINY PROCEEDINGS THE AO FOUND THAT THE ASSESSEE MADE CASH PURCHASE EXCEEDIN G RS.20,000/- OR MORE FROM DIFFERENT PARTIES IN A SINGLE DAY TO THE TUNE OF R S.1,29,11,500/- DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. IT WAS SUBMITTED ON BEHA LF OF THE ASSESSEE THAT CASH PAYMENTS WERE RECEIVED BY THE BONDERS/DISTRIBUTORS THROUGH THEIR SALES REPRESENTATIVES FOR AN AMOUNT OF LESS THAN RS.20,000/- IN A SINGLE DAY, WHO GENERALLY HOLD THE MONEY FOR FIVE TO SIX DAYS IN THEIR CUSTODY AND THEN SEND THE BONDERS/DISTRIBUTORS. THE BONDERS/DISTRIBUTORS HAD RECORDED THE PAYMENTS ON T HE DATE ON WHICH THE SAME WAS RECEIVED BY THEM AND HENCE THE PAYMENTS RECORDED IN THEIR BOOKS WERE MORE THAN RS.20,000/-. THE ASSESSEE ALSO CITED VARIOUS EXCEP TIONS GIVEN IN RULE 6DD OF THE I. T. RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES ) AND CIRCUMSTANCES UNDER WHICH PAYMENT MADE IN EXCESS OF RS.20,000/- IN A SINGLE D AY TO A SINGLE PARTY WOULD NOT ATTRACT THE PROVISIONS OF SECTION 40A(3) OF THE ACT . CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE AO DISALLOWED RS.1,29,11,500/- AS PE R THE PROVISION OF SECTION 40A(3) OF THE ACT AND ADDED THE SAME TO THE TOTAL INCOME O F THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO ALLO WED THE ASSESSEES APPEAL HOLDING THAT THE PAYMENTS WOULD BE COVERED BY RULE 6DD(B) A ND RULE 6DD(K) OF THE RULES. AGGRIEVED REVENUE IS BEFORE US. 3. AT THE TIME OF HEARING BEFORE US, THE LD. DR ASS AILING THE DECISION OF THE LD. CIT(A) REFERRED TO THE CASE OF ATTAR SINGH GURMUKH SINGH (1991) 59 TAXMAN 11 (SC) TO STATE THAT THE DECISION OF THE LD. CIT(A) IS INC ORRECT. ACCORDING TO LD. DR, THE ASSESSEES CASE DOES NOT FALL IN THE EXCEPTIONS GI VEN UNDER RULE 6DD. ACCORDING TO HIM, FROM A PERUSAL OF CIRCULAR NO. 1 OF 2009 OF C BDT DATED 27.03.2009 REVEALS THAT THE SCOPE OF THE RIGORS OF SEC. 40A(3) HAS BEEN EXP LAINED TO THE EXTENT THAT EVEN TO THE CASES WHERE PAYMENTS IN EXCESS OF RS.20,000/- ARE S PLIT BY AN ASSESSEE INTO SEVERAL CASH PAYMENTS IN A SINGLE DAY, EACH BELOW RS.20,000 /- WILL FALL IN THE KEN OF SEC. 3 ITA NO. 1805/KOL/2017 ENGLISH BAZAR FOREIGN LIQUOR OFF SHOP NO.1., AY 201 4-15 40A(3) OF THE ACT. ACCORDING TO HIM, SEC. 40A(3) WO ULD TAKE WITHIN ITS SWEEP, TRANSACTIONS WHICH ARE FOUND TO HAVE BEEN CARRIED O UT IN CONTRAVENTION OF THE STATUTORY PROVISION, AND CANNOT ESCAPE FROM THE RIGORS OF THE SECTION SOLELY FOR THE REASON THAT GENUINENESS OF SUCH TRANSACTIONS IS NOT IN DOUBT. THUS, ACCORDING LD. DR, FROM THE OBSERVATION OF THE HONBLE SUPREME COURT IN THE CAS E OF ATTAR SINGH GURMUKH SINGH (SUPRA) REGARDING THE SCOPE OF PROVISION OF SEC. 40 A(3) AND THE SUBSEQUENT AMENDMENT IN RULE 6DD AND THE OBSERVATION OF THE TRIBUNAL, MU MBAI BENCH IN THE CASE OF INTERNATIONAL SHIPS STORES SUPPLIERS THE ORDER OF L D. CIT(A) AND THE SCOPE OF SECTION 40A(3) NEED TO BE RE-CONSIDERED. THEREFORE, ACCORD ING TO HIM, THE LD. CIT(A) ERRED IN GIVING RELIEF TO THE ASSESSEE AND HE, WANTS THE DEC ISION OF LD. CIT(A) TO BE REVERSED AND THE AOS ORDER TO BE UPHELD IN THIS REGARD. 4. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT THE ASSESSEE PURCHASED COUNTRY LIQUOR FROM BONDED WARE HOUSES UNDER THE LICENSE IS SUED BY THE DEPARTMENT OF EXCISE, GOVT. OF W.B. ACCORDING TO LD. AR, IN FACT , NOBODY CAN SELL COUNTRY LIQUOR UNLESS SO PERMITTED UNDER THE NOTIFICATION OF GOVER NMENT OF WEST BENGAL AND THE BONDERS (DEALERS) ARE CONSIDERED AS AGENTS OF GOVER NMENT OF WEST BENGAL. ACCORDING TO HIM, THE ASSESSEE HAD PURCHASED COUNTRY LIQUOR F ROM FEW OF SUCH BONDERS. IT WAS POINTED OUT BY THE LD. AR THAT ONE OF THE CONDITION S FOR PURCHASE OF THE LIQUOR IS THAT WITHOUT PAYMENT OF THE ENTIRE VALUE INCLUDING THE E XCISE, V A T AND OTHER LEVIES GOODS WOULD NOT BE ALLOWED TO BE LIFTED. ACCORDING TO HIM, THE BONDERS WHO SELLS THE GOODS TO THE ASSESSEE APPOINT THEIR FIELD AGENTS FO R COLLECTION OF THE MONEY FROM THE RETAILERS (LIKE ASSESSEE) AND DEPOSITS THE MONEY I NTO THE BANK ACCOUNT MAINTAINED BY THE DEALER/BONDER IN THE PARTICULAR CITY /TOWN. THE ASSESSEE'S CASE WAS THAT IT HAD MADE EACH PAYMENT OF RS. 20000/- OR LESS TO SUCH AGENTS WHO DEPOSITED THE MONEY AFTER COLLECTING THE SAME AFTER KEEPING IT IN THEIR CUSTO DY FOR A FEW DAYS AND LATER ONLY DEPOSIT IT IN THE BANK ACCOUNT OF THE DEALER. THUS, ACCORDING TO LD. AR, THIS MIGHT HAVE BEEN THE REASON THAT THE DEALERS/BONDERS CREDITED T HE MONEY IN THEIR BOOKS ON THE DAY WHEN THE MONEY AFTER COLLECTION BY THEIR AGENTS IN 5-6 DAYS FROM THE ASSESSEE WAS 4 ITA NO. 1805/KOL/2017 ENGLISH BAZAR FOREIGN LIQUOR OFF SHOP NO.1., AY 201 4-15 DEPOSITED IN THE LOCAL BANK ACCOUNT OPENED IN THE T OWN BY THE BONDERS. THE AO ALSO ISSUED NOTICE U/S. 131 TO THE BONDERS AND UNDISPUTE D FACT EVEN IN THE STATEMENT OF THE DEALERS RECORDED BY THE AO WAS THAT (1) THEY APPOIN TED COLLECTION AGENT IN EACH OF THE TOWN FOR COLLECTION FROM THE RETAILERS, (2) THAT TH EY MAINTAINED BANK ACCOUNT IN THE PARTICULAR TOWN OR CITY, (3) THAT THE COLLECTION A GENTS DEPOSITED MONEY SO COLLECTED FROM THE RETAILERS LIKE THE ASSESSEE IN SUCH BANK A CCOUNTS MAINTAINED BY THEM, (4) THAT IN THEIR BOOKS THE MONEY WAS CREDITED AS RECEIVED B Y DEPOSITING IN THE BANK THE ENTRY OF WHICH WAS MORE THAN 20000/ - WHICH WAS THE MONEY DEPOSITED BY THE AGENT IN THE BANK OF THE BONDER. (5) THAT THE ENTIRE SALE MADE B Y THE BONDERS WAS REFLECTED AS PURCHASE IN THE BOOKS OF THE ASSESSEE AND SUCH PURC HASE WAS GENUINE. THE AFORESAID FACTS HAVE BEEN CULLED CLOWN FROM THE STATEMENT MAD E BY THE BONDERS U/S. 131 AND OBSERVED BY THE AO IN THE ASSESSMENT ORDER ITSELF. ACCORDING TO LD. AR, THE AO DISALLOWED THE AFORESAID PAYMENTS U/S. 40A(3) ON TH E GROUND THAT THE PAYMENT WAS CREDITED BY THE PARTY ON A SINGLE DAY THROUGH THE C ASH DEPOSIT IN THE BANK ACCOUNT WHICH WAS MORE THAN RS. 20000/ - . ACCORDING TO HI M, THERE IS NO DISPUTE THAT THE ASSESSEE PURCHASED COUNTRY LIQUOR FROM BONDERS/DEAL ERS FROM THEIR BONDED WARE HOUSE APPOINTED UNDER THE NOTIFICATION OF THE GOVT. OF WE ST BENGAL AND THESE DEALERS ARE THE AGENTS OF GOVT. OF WEST BENGAL. IT WAS POINTED OUT BY THE LD. AR THAT IN THE CASE OF RITWIK KUMAR BERA ITA NO. 2316/K/2013 DATED. 21.2.2 014 THAT THE PAYMENT IS COVERED UNDER RULE 6DD(B) AND THEREFORE THE PROVISI ONS OF SEC. 40A(3) ARE NOT APPLICABLE. THE AFORESAID DECISION OF THE ITAT HAS BEEN CONFIRMED BY THE HON'BLE CALCUTTA HIGH COURT VIDE ITS JUDGMENT DATED 11.6.20 18. IT WAS SUBMITTED BY LD. AR THAT THE ITAT IN THE CASE OF SARBARI SUPPLEMENTARY CS SHOP IN ITA NO. 858 AND 860/K/2016 HAS HELD THAT PAYMENT MADE INTO THE BANK ACCOUNT OF THE WHOLESALE LICENSEE, FOR ALL PRACTICAL PURPOSES ARE THE PAYMEN TS MADE TO THE STATE GOVERNMENT AND THEREFORE PROVISIONS OF SEC. 40A( 3) ARE NOT APPLIC ABLE. IT WAS SUBMITTED BY LD. AR THAT IN THE CASE OF GOLKUNDA PACHWAI CS SHOP THE DE CISION OF AMRAI PACHWAI AND CS SHOP WAS CONSIDERED WHEREIN ALSO SIMILAR VIEW AS TH AT OF IN THE CASE OF RITWIK KUMAR BERA WAS TAKEN. THE DECISION IN THE CASE OF AMRAI P ACHWAI AND CS SHOP WAS ALSO 5 ITA NO. 1805/KOL/2017 ENGLISH BAZAR FOREIGN LIQUOR OFF SHOP NO.1., AY 201 4-15 CONFIRMED BY THE HON'BLE CALCUTTA HIGH COURT. IT WA S BROUGHT TO OUR NOTICE THAT IN THE CASE OF BIRGIRI CS SHOP THE HON'BLE ITAT RELIED ON ITS DECISION IN THE CASE OF ASHOKE MONDAL ITA NO. 873/K/2012 FOR ASSESSMENT YEAR 2009- 10 DATED 6.2.2014 WHEREIN IT WAS RECOGNIZED THAT PAYMENT FOR COUNTRY SPRIT OR CO UNTRY LIQUOR HAS TO BE MADE TO THE WARE HOUSE RUN BY THE STATE GOVERNMENT AND THE CASE WAS COVERED BY RULE 6DD ( B). SIMILAR VIEW HAS BEEN TAKEN IN THE FOLLOWING CASES FOR WHICH COPY OF JUDGMENTS HAVE BEEN FILED. ETHEI BARI C.S. SHOP, JALPAIGURI ITA NO . 1322/KOL/2017 DECIDED ON 20.10.2018. IN THIS CASE, IT WAS POINTED OUT BY THE LD. AR THAT THE SELLERS OF THE LIQUOR INCLUDED THE PARTIES FOR PAYMENT TO WHOM THE PROVI SIONS OF SEC. 40A(3) HAVE BEEN APPLIED IN THE CASE OF THE ASSESSEE. SARVARI SUPPL EMENTARY C.S. SHOP ITA NO. 858/860/K/2016 DATED 19.1.2018. SAVITRI DEVI RAJES H KUMAR AND AMP AND ORS ITA NO. 2198/99/KOL/ 2016 DATED 4.7.2018. APART FROM TH E AFORESAID JUDICIAL PRECEDENT, ACCORDING TO LD. AR, THAT THERE IS NO DISPUTE THAT THE PAYMENT WAS GENUINE. THE FOLLOWING JUDGMENTS ARE CITED: 1. ITATS JUDGMENT IN THE CASE OF SHARMA ENG. SUPPLIER ITA NO. 1846/K/2018 DATED 28.12.2018 IT WAS HELD VIDE PARA 7 AS UNDER: 'SINCE THE AO HAS NO DOUBTED THE GENUINENESS OF THE PURCHASE MADE BY CASH BY THE ASSESSEE FROM PAUL ENG. CENTER, BY APPLYING THE RATIO AS HEL D BY THE JURISDICTIONAL HIGH COURT OF THE OPINION THAT NO DISALLOWANCE WARRANTED SO. WE ORDER DELETION OF THE ADDITION'. 2. THE ITAT KOLKATA BENCH IN THE CASE OF BINOD KUR NAR BURNWAL IN ITA NO. 1864/K/2017 PRONOUNCED ON 12.12.2018 AFTER CONSIDER ING A NUMBER OF JUDGMENTS ON THE ISSUE HAS HELD THAT IF THE PURCHAS E IS GENUINE NO DISALLOWANCE CAN BE MADE U/S. 40A(3). 3. THE ITAT IN THE CASE OF NIRMAL KUMAR DAS IN ITA NO. 391/K/2014 HAS TAKEN SIMILAR VIEW THAT WHEN THE PAYMENTS ARE GENUI NE AND FURTHER WHEN CASH PAYMENT WAS ULTIMATELY DEPOSITED IN BANK (RELYING O N SMT. SHELLY PASI 350 ITR 227), NO DISALLOWANCE CAN BE MADE U/S. 40A(3). THE ITAT ALSO RELIED ON THE 6 ITA NO. 1805/KOL/2017 ENGLISH BAZAR FOREIGN LIQUOR OFF SHOP NO.1., AY 201 4-15 JUDGEMENT OF HONBLE SUPREME COURT IN CTO VS. SWAST IK ROADWAYS FOR THE PROPOSITION OF HARSHNESS AND FURTHER RELIED ON THE JUDGEMENT OF HONBLE RAJASTHAN HIGH COURT IN HARSHILA CHORARIA 298 ITR 3 49 HOLDING THAT THE EXCEPTIONS CONTAINED IN RULE 6DD ARE NOT EXHAUSTIVE . 4. SIMILAR VIEW HAS BEEN TAKEN BY THE ITA T IN THE CASE OF STANDARD LEATHER PVT. LTD AFTER ANALYZING A NUMBER OF JUDGEMENT THAT IF THE GENUINITY OF THE PURCHASE AND PAYMENT IS NOT DISPUTED NO DISALLOWANC E CAN BE MADE U/S. 40A(3). HE ALSO RELIED ON FOLLOWING JUDGMENTS: 1. MANASH KUMAR GIRI ITA NO. 1578/K/2016 DATED 31.7 .2018 2. RAM NAGAR PACHOI CS (S) SHOP ITA NO. L85/186/K/2 014 DATED 3.8.2016. 3. SHRI RAMAPADA PANDA ITA NO.67/K/2013 DATED 07.10 .2015. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ISSUE IN NO LONGER R ES INTEGRA AND WE NOTE THAT THE TRIBUNALS DECISION IN A SIMILAR CASE WHERE IN THE ASSESSEE PURCHASED COUNTRY LIQUOR FROM DEALERS FROM THEIR BONDED WAREHOUSE APPOINTED UNDER THE NOTIFICATION OF GOVT. OF WEST BENGAL THIS TRIBUNAL HAS HELD THE DEALERS ARE THE AGENTS OF GOVT. OF WEST BENGAL IN THE CASE OF RIKTWIK KUMAR BERA, ITA NO. 2316/KOL /20-13 DATED 21.02.2014 THAT THE PAYMENT IS COVERED UNDER RULE 6DD(B) AND, THEREFORE , THE PROVISIONS OF SEC. 40A(3) ARE NOT APPLICABLE. WE NOTE THAT THE AFORESAID DEC ISION OF THE TRIBUNAL HAS BEEN CONFIRMED BY THE HONBLE CALCUTTA HIGH COURT VIDE I TS ORDER DATED 11.06.2018 IN ITAT NO. 103 OF 2014, GA 2127 OF 2014. WE NOTE THA T IN A SIMILAR CASE THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASES OF A SHOK MONDAL VS. ITO, ASANSOL IN ITA NO. 873/KOL/2012 DATED 06.02.2014 FOR AY 2009-1 0 AND IN THE CASE OF M/S. AMRAI PACHWAI & C.S. SHOP, SUPRA HAS HELD AS UNDER: 7 ITA NO. 1805/KOL/2017 ENGLISH BAZAR FOREIGN LIQUOR OFF SHOP NO.1., AY 201 4-15 8 ITA NO. 1805/KOL/2017 ENGLISH BAZAR FOREIGN LIQUOR OFF SHOP NO.1., AY 201 4-15 FROM THE DISCUSSION ABOVE AND THE JUDICIAL PRECEDEN T (SUPRA), WE ARE OF THE OPINION THAT THE ISSUE IS SQUARELY COVERED BY THE AFORESAID DECISIONS OF THE COORDINATE BENCH OF THIS TRIBUNAL, RESPECTFULLY FOLLOWING THE SAID DECI SIONS OF THE COORDINATE BENCH OF THIS TRIBUNAL, THE FINDING OF THE LD. CIT(A) ON THIS ISS UE STANDS CONFIRMED. THEREFORE, THE GROUNDS RAISED BY THE REVENUE ARE LIABLE TO BE DISM ISSED. 6. IN THE RESULT, THE APPEAL OF REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JUNE, 2019 SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 3RD JUNE, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT ITO, WARD-3(1), MALDA 2 RESPONDENT M/S. ENGLISH BAZAR FOREIGN LIQUOR OFF SHOP NO. 1, N. S. ROAD, MALDA-732101. 3 4 5 CIT(A), JALPAIGURI. (SENT THROUGH E-MAIL) CIT , JALPAIGURI DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR