ITO, Vellore V. Shri K.Mohammed Ayoob, Ambur

ITA 1815/CHNY/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57968 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-02-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 04-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR; ANIRUDH RAI
• Assessee Lawyers: S GOPALAN
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 1815/MDS/2008 (ASSESSMENT YEAR : 2004-05) THE INCOME TAX OFFICER, WARD I(3), VELLORE. (APPELLANT) V. SHRI K. MOHAMMED AYOOB, 23, BAITHUL MOKARAM MOSQUE ST., FLOWER GARDEN, AMBUR. PAN: AFYTM0572J (RESPONDENT) APPELLANT BY : SHRI ANIRUDH RAI, CIT DR & SHRI K.E.B. RENGARAJAN, JUNIOR STANDING COUNSEL RESPONDENT BY : SHRI S. GOPALAN, CA DATE OF HEARING : 15.02.2012 DATE OF PRONOUNCEMENT : 15.02.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL OF THE REVENUE, IT ASSAILS THE ORD ER DATED 12.6.2008 OF COMMISSIONER OF INCOME TAX (APPEALS)-I X, CHENNAI, DELETING THE PENALTY LEVIED ON THE ASSESSEE UNDER S ECTION 271(1)(C) OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'), FOR THE IMPUGNED ASSESSMENT YEAR. I.T.A. NO. 1815/MDS/08 2 2. SHORT FACTS APROPOS ARE THAT WHILE COMPLETING TH E ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR, ASSESSING OFFICER MADE A DISALLOWANCE OF ` 22,62,318/- UNDER SECTION 40A(3) OF THE ACT. ASSESSEE HAD MADE PURCHASES OF ` 1,13,11,590/- THROUGH 107 TRANSACTIONS WHICH, AS PER THE A.O., ATTRACTED THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE CHEQUES ISSUED BY THE ASSESSEE ON VARIOUS DATES FROM 1.6.2003 TO 16.2.2004 FOR THE SA ID PURCHASES, WERE ONLY BEARER CHEQUES AND NOT ACCOUNT PAYEE CHEQ UES. THOUGH THE ASSESSEE PLEADED THAT SELLERS INSISTED IMMEDIAT E PAYMENT THROUGH CASH OR BEARER CHEQUES AND HE WAS COMPELLED TO MAKE THE PAYMENT BY ISSUING SIMPLE BEARER CHEQUES, THE ASSES SING OFFICER DID NOT ACCEPT SUCH EXPLANATION BUT MADE A DISALLOWANCE OF 20% OF SUCH PAYMENTS, RELYING ON SECTION 40A(3) OF THE ACT. IT SEEMS ASSESSEE DID NOT FILE ANY FURTHER APPEAL ON SUCH ASSESSMENT. THEREAFTER, ASSESSING OFFICER ISSUED THE ASSESSEE A NOTICE UNDE R SECTION 271(1)(C) OF THE ACT FOR FILING INACCURATE PARTICUL ARS. ONCE AGAIN IT WAS PLEADED BY THE ASSESSEE THAT THE ADDITION WAS A GREED SINCE THE PAYMENTS WERE MADE BY BEARER CHEQUES, BUT, THIS BY ITSELF WOULD NOT IN ANY WAY DILUTE THE GENUINENESS OF THE PAYMENTS M ADE FOR THE PURCHASES. ACCORDING TO ASSESSEE, THE PURCHASES WE RE NEVER I.T.A. NO. 1815/MDS/08 3 DISBELIEVED, BUT THE DISALLOWANCE MADE WAS A STATUT ORY ONE. ACCORDING TO THE ASSESSEE, LEVY FOR CONCEALMENT OR FOR FILING INACCURATE PARTICULARS COULD NOT BE DONE ON A STATU TORY DISALLOWANCE. HOWEVER, THIS WAS NOT ACCEPTED BY THE A.O. RELYING ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF A.M. S HAH & CO. V. CIT (238 ITR 415), A.O. WAS OF THE OPINION THAT ASSESSE E HAD FILED INACCURATE PARTICULARS OF HIS INCOME. AS PER THE A .O., THERE WAS A DELIBERATE CAMOUFLAGING OF PAYMENTS WHICH WERE MADE BY SIMPLE BEARER CHEQUES AND SUCH A CAMOUFLAGING WAS NOTHING BUT FURNISHING OF INACCURATE PARTICULARS OF INCOME. SHE, THEREFOR E, HELD THAT IT WAS A FIT CASE TO LEVY PENALTY AND THE PENALTY WAS LEVIED AT MINIMUM AMOUNT OF ` 7,17,966/-. 3. IN ITS APPEAL BEFORE LD. CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT IF HE HAD REFUSED TO MAKE PAYMENTS EITHER BY CASH OR AT LEAST BY BEARER CHEQUES, NOBODY WOULD HAVE SUPPLIED HIM RAW MATERIALS WHICH WERE BASICALLY REQUIRED BY HIM. AC CORDING TO HIM, HE FILED THE TAX AUDIT REPORT PREPARED BY HIS CHARTERE D ACCOUNTANT AND THE PAYMENTS WERE ALL GENUINE. ASSESSEE ALSO SUBMI TTED HE WAS NEVER INFORMED BY HIS CHARTERED ACCOUNTANT EVEN AT THE STAGE OF FILING OF THE RETURN THAT PAYMENTS BY BEARER CHEQUE S WERE NOT ALLOWED I.T.A. NO. 1815/MDS/08 4 UNDER THE ACT, LEST HE WOULD HAVE PAID THE TAX SUO MOTU. LD. CIT(APPEALS) WAS APPRECIATIVE OF THESE CONTENTIONS . ACCORDING TO HIM, IN THE AUDIT REPORT FILED BY THE ASSESSEE, THE DIFFICULTY TO ASCERTAIN WHETHER PAYMENTS MADE BY THE ASSESSEE WER E BY CROSSED CHEQUES OR DEMAND DRAFTS WAS CLEARLY MENTIONED. AC CORDING TO HIM, DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT ITSEL F COULD BE DISPUTED AND ON SUCH DEBATABLE DISALLOWANCE, THERE COULD BE NO QUESTION OF LEVY OF PENALTY. HE ALSO NOTED THAT THE ASSESSEE W AS PURCHASING WETBLUE HIDES AND SKINS AND RULE 6DD(F) OF INCOME-T AX RULES, 1962 WOULD CLEARLY SAVE THE ASSESSEE FROM THE RIGOURS OF SECTION 40A(3). HE, THEREFORE, DELETED THE PENALTY LEVIED ON THE AS SESSEE. 4. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF LD. CIT(APPEALS) , SUBMITTED THAT ASSESSEE HAD MADE PA YMENTS BY BEARER CHEQUES AND NOT THROUGH ACCOUNT PAYEE CHEQUE S AND THEREFORE, OUGHT HAVE MADE A SUO MOTU DISALLOWANCE OF 20% OF SUCH DISALLOWANCE IN VIEW OF SECTION 40A(3) OF THE ACT. HAVING NOT DONE SO, HE COULD NOT TURN AROUND AND SAY THAT ALL PARTI CULARS WERE CORRECTLY FILED AND THERE WAS NO FURNISHING OF ANY INACCURATE PARTICULARS IN THE RETURN OF INCOME. I.T.A. NO. 1815/MDS/08 5 5. PER CONTRA, LEARNED A.R. STRONGLY SUPPORTED THE ORDER OF LD. CIT(APPEALS) . 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. ADMITTEDLY, ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF LEATHER PRODUCTS. ALSO, IT HAS NOT B EEN DISPUTED BY THE REVENUE THAT THE PURCHASES MADE BY THE ASSESSEE WER E OF WETBLUE HIDES AND SKINS. CLAUSE (E) OF RULE 6DD AS IT STOO D AT THE RELEVANT PERIOD OF TIME, CLEARLY EXEMPTED FROM THE RIGOURS O F SECTION 40A(3), PAYMENTS MADE FOR THE PURCHASE OF PRODUCE OF ANIMAL HUSBANDRY INCLUDING LIVESTOCK, MEAT, HIDES AND SKINS. THEREF ORE, AS NOTED BY THE LD. CIT(APPEALS), THE DISALLOWANCE UNDER SECTION 4 0A(3) ITSELF WAS DEBATABLE, TO SAY THE LEAST. IN ANY CASE, THIS WAS A STATUTORY DISALLOWANCE AND IN OUR OPINION, WHERE THE GENUINEN ESS OF THE PAYMENTS HAS NOT BEEN QUESTIONED OR DOUBTED, WE CAN NOT FASTEN ON AN ASSESSEE A PENALTY FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. TAX AUDIT REPORT HAS CLEAR LY MENTIONED THAT IT WAS NOT POSSIBLE TO VERIFY WHETHER THE PAYMENTS WER E MADE BY CROSSED CHEQUES OR DRAFTS. SINCE THE RULE 6DD(E) I TSELF SAVED THE ASSESSEE FROM THE RIGOURS OF SECTION 40A(3) OF THE ACT, WE CANNOT SAY THAT THERE WAS ANY FURNISHING OF INACCURATE PAR TICULARS OR I.T.A. NO. 1815/MDS/08 6 CONCEALMENT OF INCOME. LEVY OF PENALTY WAS CERTAIN LY NOT JUSTIFIED ON THE FACTS OF THE CASE. LD. CIT(APPEALS) RIGHTLY DE LETED THE PENALTY. NO INTERFERENCE IS CALLED FOR. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 15 TH FEBRUARY, 2012. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 15 TH FEBRUARY, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-IX, CHENNAI-34 (4) CIT, CHENNAI-VIII, CHENNAI (5) D.R. (6) GUARD FILE