M /S Patel Traders, Baroda V. The I T O, Baroda

ITA 1854/AHD/1999

• Counselvise Citation: 185420514 RSA 1999
• Duration Of Justice: 11 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 29-08-2011
• Assessment Year: 1994-1995
• Appeal Filed On: 10-09-1999
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 40A(3); 234B; 147; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A N PAHUJA, ACCOUNTANT MEMBER ITA NO.1854/AHD/1999 (ASSESSMENT YEAR:-1994-95) M/S PATEL TRACTORS, C/O MANUBHAI PATEL, 58, ARUNODAY SOCIETY, ALKAPURI, BARODA V/S INCOME-TAX OFFICER, WARD- 1(3), AAYAKAR BHAVAN, BARODA PAN:NOT AVAILABLE [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI MUKUND BAKSHI, AR REVENUE BY:- SHRI VINOD TANWANI, DR DATE OF HEARING:- 29-08-2011 DATE OF PRONOUNCEMENT:- 30-08-2011 O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE FILED ON 10.9.1999 AGA INST AN ORDER DATED 21-06-1999 OF THE LD. CIT(APPEALS)-I II, BARODA FOR THE ASSESSMENT YEAR 1994-95, RAISES THE FOLLOWING G ROUNDS:- [1] THE LEARNED CIT(A)-III, BARODA ERRED IN LAW AN D IN FACTS IN CONFIRMING THE ACTION OF THE LD. ASSESSING OFFICER IN MAKIN G AN ADDITION OF RS.402000/- BY DISALLOWING THE PAYMENTS MADE TO M/S SHIVAM TRACTORS AND M/S SHANTI MOTORS, BY INVOKING THE PROVI SIONS OF SECTION 40A(3). THE ADDITION BEING CONTRARY TO LAW A ND FACTS DESERVES TO BE DELETED. [2] THE LD. AO HAS ERRED IN LAW IN LEVYING INTEREST U/S 234B AND 234C AS THE APPELLANT HAD PAID THE TAX DUE ON THE RETURNED INCOME. [3] YOUR APPELLANT CRAVES LIBERTY TO ADD, ALTER, AMEND , SUBSTITUTE OR WITHDRAW ANY OF THE GROUNDS OF APPEAL HEREINABOVE CON TAINED . 2. THIS APPEAL INITIALLY DISMISSED VIDE ORDER DATED 14.7.2003 ,WAS RECALLED VIDE ORDER DATED 24.6.2011 IN MA NO.357/AH D./2006. ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL, FACT S, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING LOSS OF R S.7,590/- FILED ON 17-01-1995 BY THE ASSESSEE, WAS PROCESSED ON 30.3.1 995 U/S 2 ITA NO.1854/AHD/1999 143(1)(A) OF THE INCOME-TAX ACT,1961[HEREINAFTER RE FERRED TO AS THE ACT] . SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED U/S 147 OF THE ACT WITH THE SERVICE OF A NOTICE U/S 148 OF THE AC T ON 14.8.1996.IN RESPONSE, THE ASSESSEE SUBMITTED THAT RETURN FILED ON 17.1.1995 BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT. ON SCRUTINY OF AUDITORS REPORT IN FORM NO.3CB & 3CD, THE ASSESSING OFFICER [AO IN SHORT] NOTICED THAT THE ASSESSEE M ADE PAYMENTS IN CASH AS DETAILED BELOW: DATE NAME OF THE PARTY AMOUNT (RS.) REMARKS 16-4-93 SHANTI MOTORS, BALSAD 82,000 AGAINST TRACTORS PURCHASE BILL 8-10-93 SHIVAM TRACTORS, NADIAD 1,77,000 12-10-93 SHIVAM TRACTORS, NADIAD 1,23,000 7-3-94 SHIVAM TRACTORS, NADIAD 20,000 TOTAL 4,02,000 2.1 TO A QUERY BY THE AO, PROPOSING TO DISALLOW TH E AFORESAID AMOUNT IN TERMS OF PROVISIONS OF SECTION 40A(3) OF THE ACT , THE ASSESSEE EXPLAINED THAT THEY WERE DEALING IN TRACTO RS AND THE FINANCE FOR SUCH PURCHASES WAS NORMALLY ARRANGED TH ROUGH FINANCIAL INSTITUTIONS .IMMEDIATELY ON INTIMATION FROM THE I NSTITUTIONS, THE CUSTOMERS INSIST FOR IMMEDIATE DELIVERY. IT WAS EXP LAINED THAT THE PAYMENT OF RS.82,000/- TO M/S SHANTI MOTORS WAS MAD E ON 16.4.93 AGAINST DELIVERY OF TRACTOR ON THE SAME DAY. SIMIL ARLY PAYMENTS OF RS.1,77,000/- AND RS.1,23,000/- WAS MADE TO SHIVAM TRACTORS FOR PURCHASE OF TRACTORS FOR SHRI AMRUTBHAI MOHANBHAI PATEL AND SHRI PURSHOTTAM MATHURBHAI PATEL, WHO HAD GIVEN THE CASH ON THE SAME DAY, WITH AN INSISTENCE FOR DELIVERY OF TRACTOR ON OR BEFORE 16-10-93, WHICH WAS THE BEGINNING OF NAVRATRI. ON CASH PAYMEN T, M/S SHIVAM TRACTORS DELIVERED THE TRACTOR ON 12-10-93 FOR DELI VERY TO SHRI AMRUTBHAI. THE ASSESSEE ALSO MADE FURTHER PAYMENT O F RS.20,000/- TO SHIVAM TRACTORS ON 17-3-94 AGAINST PURCHASE OF T RACTOR FOR SHRI KESHUBHAI CHOTABHAI, FROM WHOM SUCH RECEIPT WAS REC EIVED ON THE 3 ITA NO.1854/AHD/1999 SAME DAY. ON RECEIPT OF SUCH MONEY THE ASSESSEE PU RCHASED A TRACTOR DELIVERED THROUGH A BILL ON 31-3-94. IT WA S FURTHER CONTENDED THAT THE COMPULSION OF THE TRADE PRACTICE COMPELLED THE ASSESSEE TO ENGAGE IN SUCH PRACTICE AND THE PAYMENTS HAVE BEEN MADE FOR GENUINE TRANSACTIONS AND TO THE PAYEES WHO ARE IDE NTIFIABLE AND THEREFORE, ADDITION U/S 40A(3) WAS NOT WARRANTED. H OWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE ON T HE GROUND THAT THE ASSESSEE DID NOT ANY FURNISH EVIDENCE THAT M/S SHIVAM TRACTORS INSISTED ON CASH PAYMENT OR EXPRESSED UNWILLINGNES S TO DELIVER THE TRACTOR UNLESS THE ASSESSEE MADE PAYMENT FOR THE SA ME. IN RESPECT OF SHANTI MOTORS, THE AO OBSERVED THAT THE ASSESSEE MADE PAYMENT OF RS.82,000/- IN CASH WHILE PAYMENT OF RS.45,000 /- WAS MADE BY DEMAND DRAFT. SINCE THE ASSESSEE COULD MAKE THE ENT IRE PAYMENT THROUGH DD, APPARENTLY THEY CONTRAVENED THE PROVISI ONS OF SECTION 40A(3) OF THE ACT. ACCORDINGLY, THE AO DISALLOWED T HE AMOUNT OF RS.4,02,000/-. 3 ON APPEAL, THE LEARNED CIT(A) UPHELD THE DISALLOW ANCE IN THE FOLLOWING TERMS:- 2.2. I HAVE CONSIDERED THE FACTS OF THE CASE. THE APPELL ANTS CASE IS THAT ITS CUSTOMERS USED TO INSIST ON TAKING DELIVERIES ON CERTAIN A USPICIOUS DAYS AND THE SUPPLIER OF THE TRACTORS TO THE APPELLANT INSI STED ON FULL PAYMENT BEFORE THE DELIVERIES WERE MADE TO THE APPELLANT. IT IS NOT THE CASE OF THE APPELLANT THAT THE SUPPLIER INSISTED ON CASH PAYMENT. THE STRESS IS ON THE FULL PAYMENT BEFORE THE DELIVERIES. IT IS FURTHER SEEN T HAT IN THE CASE OF M/S. SHIVAM TRACTORS, WHERE THE APPELLANT HAS DONE BUSINESS TO THE TUNE OF RS.60 LAKHS, ALL THE PAYMENTS EXCEPT THREE (THE DETAILS O F WHICH ARE GIVEN IN THE EARLIER PARAGRAPHS). THIS FACT GOES CONTRARY TO THE ARGUMENT OF THE APPELLANT THAT ITS CUSTOMERS USED TO INSIST ON TAKING DELIVE RIES ON CERTAIN AUSPICIOUS DAYS AND THE APPELLANT HAD TO MAKE CASH PAYMENT TO ENSURE THE DELIVERY ON THE GIVEN DATES AS HAD IT BEEN SO THE C ASH PAYMENT TO THE SUPPLIERS SHOULD HAVE BEEN TAKEN PLACE IN MANY MORE CASES. THE FACT THAT OUT OF THE TRANSACTION OF RS.60 LAKHS WITH M/S SHI VAM TRACTORS, RS.55 LAKHS WAS PAID BY WAY OF CHEQUE OR DEMAND DRAFT GOES TO PR OVE THAT THIS WAS NOT THE CASE WHICH COULD INFLUENCE THE ASSESSEES MODE O F TRANSACTION WITH ITS SUPPLIERS. FURTHER, IT IS SEEN THAT THE PAYMENT OF RS.1,77,000/- WAS MADE TO M/S SHIVAM TRACTORS ON 8-10- 93 AGAINST WHICH THE DELIVERY WAS MADE ON 16-10-93 THAT IS TO SAY THAT TH ERE USE TO BE 4 ITA NO.1854/AHD/1999 SOME GAP BETWEEN THE DATE OF DELIVERY AND PAYMENT MADE AND MAKING A DRAFT IS A MATTER OF ONE HOUR OR AT MOST A FEW HOURS A ND THUS THE PAYMENT COULD HAVE BEEN MADE THROUGH DRAFT ON THE SAME DAY ON WHICH THE CASH WAS RECEIVED BY THE APPELLANT FROM ITS CUSTOMERS. FURTHER, THE APPELLANTS CASE IS NOT COVERED BY THE CIRCUMSTANCES IN THE CIRCULAR NO.20 2 DATED 31- 5-97 ISSUED BY THE CBDT. IT IS ALSO SEEN THAT NO CORROBO RATIVE EVIDENCE HAS BEEN SUBMITTED EITHER BEFORE THE AO OR BEFORE ME FROM THE SUPPLIERS OF TRACTORS TO INDICATE THAT FULL PAYMENT WAS INSISTED BE FORE GIVING DELIVERY. EVEN IT BE SO, THE INSISTENCE WAS ON THE FULL PAYMENT AND NOT OF CASH PAYMENT AND HENCE THE CASE LAWS CITED BY THE APPELLANTS COU NSEL ARE NOT APPLICABLE IN THE PRESENT CASE. IN VIEW OF ABOVE, I HO LD THAT THE CASH PAYMENT MADE BY THE APPELLANT TOTALING TO RS.4,02,000/ - IS FULLY COVERED BY THE PROVISIONS OF SECTION 40A(3) AND HENCE THE ADDITION M ADE IN THIS BEHALF IS CONFIRMED. 4 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE REITERATED THEIR SUBMISSIONS BEFORE THE LE ARNED CIT(A) WHILE THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AT THE OUTSET, WE FIND THAT THE ASSESSEE DID NOT ESTABLISH BEFORE THE AO/LD. CIT(A) THAT THE AFORESAID PAYMENT S MADE IN CASH TO M/S SHANTI MOTORS OR SHIVAM TRACTOR FOR PURCHASE OF TRACT ORS WAS COVERED BY ANY OF THE EXCEPTIONAL CIRCUMSTANCES PRESCRIBED UND ER THE R. 6DD OF THE IT RULES,1962. INDISPUTABLY AND AS POINTED OUT BY THE LD. CIT(A), THE ASSESSEE DID NOT PLACE ANY CORROBORATI VE EVIDENCE EITHER BEFORE THE AO/LD. CIT(A) OR EVEN BEFORE US, SUGGESTING THAT THE AFORESAID SUPPLIERS OF TRACTORS INSISTED ON F ULL PAYMENT BEFORE GIVING DELIVERY OF THE TRACTORS. HONBLE JURISDICTI ONAL HIGH COURT IN HASANAND PINJOMAL VS. CIT,112 ITR 134(GUJ) HELD THA T THE PROVISIONS OF SEC. 40A(3) OF THE ACT ARE MANDATORY AND THERE IS NO DISCRETION LEFT WITH THE TAXING AUTHORITY UNDER THI S SUB-SECTION TO ALLOW SUCH EXPENDITURE. THE RIGOUR OF THE RULE CONT AINED IN THIS SUB- SECTION IS, HOWEVER, RELAXED TO SOME EXTENT BY THE SECOND PROVISO TO THE SAID SUB-SECTION WHICH PROVIDES THAT NO DISALLO WANCE UNDER THE SAID SUB-SECTION SHALL BE MADE WHERE ANY SUCH PAYME NT IS MADE 5 ITA NO.1854/AHD/1999 OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT, IN SUCH CASES AND UNDER SUCH CI RCUMSTANCES AS MAY BE PRESCRIBED, HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUS INESS EXPEDIENCY AND OTHER RELEVANT FACTORS. SECTION 40A(3) OF THE A CT REFERS TO THE EXPENDITURE INCURRED BY THE ASSESSEE IN RESPECT OF WHICH PAYMENT IN A SUM EXCEEDING TEN THOUSAND RUPEES IS MADE OTHERWI SE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT. IT MEANS THAT ALL OUTGOINGS ARE BROUGHT UNDER THE WORD 'EXPENDITURE' FOR THE PURPOSE OF THE SECTION. THE EXPENDITURE FOR PURCHASING STOCK- IN-TRADE IS ONE OF SUCH OUTGOINGS AND THE PAYMENTS MADE FOR PURCHASES WOULD ALSO BE COVERED BY THE WORD 'EXPEND ITURE' AND SUCH PAYMENTS CAN BE DISALLOWED IF THEY ARE MADE IN CASH IN THE SUMS EXCEEDING THE AMOUNT SPECIFIED UNDER SECTION 4 0A(3). SINCE THE ASSESSEE DID NOT ESTABLISH BEFORE THE LOWER A UTHORITIES AND EVEN BEFORE US THAT THEIR CASE FALLS WITHIN ANY OF THE EXCEPTIONS UNDER RULE 6DD OF THE IT RULES ,1962 NOR ANY MATER IAL HAS BEEN PLACED BEFORE US ,CONTROVERTING THE AFORESAID FINDI NGS OF THE LD. CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO .1 IN THE APPEAL IS DISMISSED.T 6. GROUND NO. 2 IN THE APPEAL RELATES TO LEVY OF I NTEREST U/S.234B & 234C OF THE ACT. SINCE THE LD. AR ON BEHALF OF TH E ASSESSEE DID NOT MAKE ANY SUBMISSIONS ON THIS GROUND WHILE THE LEVY OF INTEREST U/S 234B & 234C OF THE ACT BEING MANDATORY [COMMI SSIONER OF INCOME TAX. VS ANJUM M. H. GHASWALA AND OTHERS,252 ITR 1(SC), AFFIRMED BY HON'BLE APEX COURT IN THE CASE OF CIT V . HINDUSTAN BULK CARRIERS [2003] 259 ITR 449(SC) AND IN THE CASE OF CIT V. SANT RAM MANGAT RAM JEWELLERS [2003] 264 ITR 564(SC)], THIS GROUND IS DISMISSED. 6 ITA NO.1854/AHD/1999 7 NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO. 3 IN THE APPEAL, ACCORDINGLY, THIS GROUND IS DISMISSED. 8. NO OTHER SUBMISSION OR ARGUMENT WAS MADE BEFOR E US. 9. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 30-08-2011 SD/- SD/- ( BHAVNESH SAINI ) JUDICIAL MEMBER ( A N PAHUJA ) ACCOUNTANT MEMBER DATED : 30-08-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S PATEL TRACTORS, C/O MANUBHAI PATEL, 58, ARUN ODAY SOCIETY, ALKAPURI, BARODA 2. INCOME-TAX OFFICER, WARD-1(3), BARODA 3. CIT CONCERNED 4. CIT(A)-III, BARODA 5. DR, ITAT, AHMEDABAD BENCH-C, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD