M/s. Kaycee Trading Co., Kolkata V. ITO, Ward - 32(1), Kolkata

ITA 1888/KOL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2528 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 17-05-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 12-11-2009
• Court: TRIBUNAL
• Department Lawyers: A K PRAMANICK
• Assessee Lawyers: DILIP BASU
• Keywords: Principle of natural justice
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SRI D. K. TYAGI, JM & HONBLE SRI B. C. MEENA, AM] I.T.A. NO.1888/KOL/2009 ASSESSMENT YEAR: 2003-04 M/S. KAYCEE TRADING CO. -VS- INCOME-TAX OFFICER , WD-32(1), KOLKATA. (PA NO. AADFK 1092 P) (APPELLANT) (RESPONDENT) & I.T.A. NO.2129/KOL/2009 ASSESSMENT YEAR : 2003-04 INCOME-TAX OFFICER, WD-32(1), KOLKATA. -VS- M/S. KAYCEE TRADING CO. (APPELLANT) (RESPONDENT) ASSESSEE BY : SRI DILIP BASU RESPONDENT BY : SRI A. K. PRAMANICK O R D E R PER D. K. TYAGI, JM: BOTH THESE APPEALS PREFERRED BY THE ASSESSEE AND TH E REVENUE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), KOLKATA DATED 07.09.20 09 FOR THE ASSESSMENT YEAR 2003- 04. SINCE BOTH THE APPEALS HAVE ARISEN OUT OF THE SAME ORDER AND HAVE BEEN HEARD TOGETHER, FOR THE SAKE OF CONVENIENCE, WE DISPOSE O F BOTH THE APPEALS BY THIS CONSOLIDATED ORDER. 2. THOUGH THE ASSESSEE HAS TAKEN 7 GROUNDS OF APPEA L BUT THE SOLE ISSUE INVOLVED IN THIS CASE IS SUSTAINING THE DISALLOWANCE OF RS.1,18 ,28,894/- BEING 20% OF RS.5,91,44,472/- APPLYING THE PROVISIONS OF SECTIO N 40A(3) OF THE I. T. ACT, 1961. THE REVENUE BY ITS REVISED GROUNDS OF APPEAL HAS ALSO A GITATED AGAINST THE ACTION OF THE LD. CIT(A) IN ALLOWING PART RELIEF TO THE ASSESSEE OF R S.38,91,814/- ON ACCOUNT OF ADDITION MADE U/S. 40A(3) OF THE ACT AND ALSO IN ADMITTING F RESH EVIDENCE IN VIOLATION OF RULE 46A OF THE I. T. RULES. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESEE IS A P ARTNERSHIP FIRM AND HAD FILED ITS RETURN OF INCOME ON 17.11.2003 DECLARING A TOTAL I NCOME OF RS.1,50,220/-. ORIGINALLY, THE ASSESSMENT WAS COMPLETED ON 31.3.2006 U/S. 143( 3) AT TOTAL ASSESSED INCOME OF RS.1,21,06,710/- BY MAKING DISALLOWANCE U/S. 40A(3) OF THE ACT. AGGRIEVED BY THE SAID ORDER, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT (A) AND IT WAS DISPOSED OFF BY THE 2 HIM ON 3.8.2006. AGAINST THE SAID ORDER, THE ASSES SEE WENT IN APPEAL BEFORE THE ITAT AND THE ITAT VIDE ITS ORDER DATED 20.4.2007 RESTORE D THE MATTER BACK TO THE FILE OF THE AO BY OBSERVING AS UNDER : WE HAVE HEARD BOTH THE PARTIES. WE HAVE ALSO CONS IDERED VARIOUS ORDERS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IN THIS CASE. TH E LD. COUNSEL FOR THE ASSESEE HAS RELIED ON THE EARLIER ORDER OF THIS TRIBUNAL. HOW EVER, CIRCULAR NO. 8 OF 2006 (SUPRA) RELIED ON BY THE LD. DR MAKES IT CLEAR THAT THE ASS ESSEE IS BOUND TO FURNISH EVIDENCE THAT THE PAYMENTS WERE MADE EXCLUSIVELY TO THE PROD UCERS AND NOT OTHERWISE AND SINCE IN THE PRESENT CASE THE ASSESEE HAS NOT BEEN ABLE T O SUBMIT SUCH EVIDENCE AT THE TIME OF HEARING BEFORE US, WE KEEPING IN VIEW THE PRINCIPLE OF NATURAL JUSTICE, RESTORE THE MATTER BACK TO THE FILE OF THE AO TO RE-DECIDE THE CASE AN D DIRECT THE ASSESSEE TO PRODUCE EVIDENCE IN SUPPORT OF ITS CLAIM THAT THE PAYMENTS WERE ACTUALLY MADE TO THE PRODUCERS OF RAW HIDES AND SKINS AND NOT OTHERWISE. WE HOLD AND DIRECT ACCORDINGLY. IN COMPLIANCE TO THE DIRECTION OF THE ITAT, THE AO RE-DECIDED THE CASE AFTER AFFORDING OPPORTUNITY TO THE ASSESSEE TO ADDUCE THE EVIDENCE THAT THE PAYMENT MADE, OTHERWISE THAN CROSSED ACCOUNT PAYEE CHEQUES, WERE TO THE PRO DUCERS OF THE RAW HIDE AND SKINS, AND THE AO OBSERVED THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO PROVE THAT THE PAYMENT WERE MADE TO THE PRODUCERS OF THE RAW HIDE AND SKIN. HENCE, THE AO MAINTAINED THE DISALLOWANCE OF RS.1,18,28,894/- BEI NG THE 20% OF RS.5,91,44,472/- U/S. 40A(3) OF THE ACT AS MADE IN THE ORIGINAL ORDER DAT ED 31.3.2006. BEFORE LD. CIT(A) THE ASSESSEE FILED CERTAIN CONFIRMATIONS OF THE PARTIES CERTIFYING THAT THEY WERE THE PRODUCERS OF RAW HIDES AND SKINS AND THEY HAD SOLD RAW SKINS TO THE ASSESSEE AND RECEIVED THE PAYMENT THROUGH BEARER CHEQUES. ON THESE CERTIFICA TES REMAND REPORT FROM THE AO WAS CALLED FOR AND THE AO WAS OF THE VIEW THAT SINCE TH E ASSESSEE HAS FAILED TO PRODUCE THE SUPPLIERS BEFORE HIM THE CERTIFICATES CANNOT BE CON SIDERED AS SUFFICIENT EVIDENCE TO COME OUT OF THE RIGORS OF PROVISIONS OF SECTION 40A(3) O F THE ACT. HOWEVER, THE LD. CIT(A) AFTER VERIFYING THE CONFIRMATIONS/CERTIFICATES WITH THE COPIES OF THE BILLS OF THE SUPPLIERS IN WHOSE CASES THEY WERE FILED, ACCEPTED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER : 6.2. IT IS SUBMITTED BY THE APPELLANT THAT ON THE PURCHASES TO THE EXTENT OF RS.2,69,90,530/-, THE PROVISIONS OF SEC. 40A(3) ARE NOT APPLICABLE AND THE DISALLOWANCE MADE BY THE AO. ON THESE PURCHASES DESERVES TO BE D ELETED. AS MENTIONED ABOVE, DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT WAS ASKED TO PRODUCE THE COPIES OF BILLS WITH RESPECT TO THE SUPPLIERS IN WHOSE CASES CONFIRMATIONS WERE FILED. ON VERIFICATION OF BILLS SUBMITTED BY THE APPELLANT VI S--VIS THE CERTIFICATES OF THE SUPPLIERS, IT IS SEEN THAT IN THE CASES OF ABDUL GAFFAR, MEGHA LAYA, MD. KHALIL, BHUTAN, ABDUL JABBAR, BHUTAN, SANTOSH KUMAR, MP, SHAHDAT HUSSAIN, BHUTAN AND SHOAIB AHMED, BHUTAN, THE SIGNATURES ON THE CERTIFICATE DO NOT TA LLY WITH THE SIGNATURES ON THE BILLS. HENCE, THE GENUINENESS OF CERTIFICATES IN THESE CAS ES IS DOUBTFUL AND IT APPEARS THAT 3 SOME ONE ELSE HAS SIGNED THOSE CERTIFICATES. HEN CE, NO CREDIT OF THESE SIX CERTIFICATES IS ALLOWABLE TO THE APPELLANT. IT IS HELD THAT IN TH E CASES OF BALANCE 12 SUPPLIERS, THE APPELLANT WAS ABLE TO SUBSTANTIATE ITS CLAIM THAT T HE PAYMENT BY BEARER CHEQUES WERE MADE TO THE PRODUCERS OF RAW HIDES AND SKIN. THE A MOUNT OF PURCHASES FROM THESE 12 PARTIES COMES TO RS.1,94,59,070/-. THUS, THE AO I S DIRECTED TO RESTRICT DISALLOWANCE U/S. 40A(3) OF THE ACT ON THE PURCHASES OF RS.3,96, 85,402/-, WHICH COMES TO RS.79,37,080/-. THE DISALLOWANCE U/S. 40A(3) TO TH E EXTENT OF RS.79,37,080/- IS CONFIRMED. AGGRIEVED BY THIS ORDER OF THE LD. CIT(A), THE ASSE SSEE AS WELL AS REVENUE BOTH ARE IN APPEALS BEFORE US. 4. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL F OR THE ASSESSEE SUBMITTED THAT THE ASSESSEE OBTAINED CERTIFICATES FROM EIGHTEEN P ARTIES FOR RS.2,69,90,530/- FROM THE PRODUCERS OF RAW HIDE AND SKINS OUT OF WHICH THE LD . CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE IN RESPECT OF PURCHASES FROM THE TWELVE PA RTIES TO THE EXTENT OF RS.1,94,59,070/- IN RESPECT OF OTHER CERTIFICATES FILED BEFORE HIM T HE RELIEF WAS NOT GIVEN ON THE GROUND THAT SIGNATURE ON THE PURCHASE BILLS AND THE CERTIF ICATES NOW FILED BEFORE HIM DO NOT TALLY. HE FURTHER SUBMITTED THAT SIGNATURE MADE IN FY 2002 -03 MAY SLIGHTLY DIFFER FROM THE SIGNATURE MADE IN FY 2008-09 AND, THEREFORE, THE LD . CIT(A) WAS NOT JUSTIFIED IN NOT GIVING RELIEF TO THE ASSESSEE IN RESPECT OF ALL THE CERTIFICATES FROM THE PRODUCERS FILED BEFORE HIM. BY CONCLUDING HIS ARGUMENT HE PRAYED T HAT THE ASSESSEE SHOULD HAVE BEEN GIVEN RELIEF TO THE EXTENT OF CERTIFICATES FILED. 5. ON THE OTHER HAND, THE LD. DR PLACING RELIANCE O N THE ORDER OF THE AO SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN GIVING REL IEF TO THE ASSESSEE SIMPLY ON THE BASIS OF CERTIFICATES FILED BEFORE HIM DESPITE THE FACT T HAT NO SUPPLIERS WERE PRODUCED BEFORE THE AO OR BEFORE THE LD. CIT(A) BY THE ASSESSEE. H E, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF AO BE R ESTORED. 6. HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AV AILABLE ON RECORD, CONSIDERED THE PURCHASE BILLS, CERTIFICATES/CONFIRMATIONS AND FIND THAT THE ASSESSEE PURCHASED RAW HIDES AND SKINS FOR RS.5,91,44,472/- AND PAYMENTS WERE MA DE TO THE SUPPLIERS BY MODE OTHER THAN CROSSED ACCOUNT PAYEE CHEQUES AND HENCE, THE A O MADE THE DISALLOWANCE @ 20% WHICH CAME TO RS.1,18,28,894/- BY APPLYING THE PROV ISIONS OF SECTION 40A(3) OF THE I. T. ACT. THE LD. CIT(A) HAS RESTRICTED THIS DISALLO WANCE TO RS.79,37,080/- AND GAVE RELIEF TO THE ASSESSEE ON THE BASIS OF THE CERTIFIC ATES/CONFIRMATIONS FILED BY THE ASSESSEE FROM THE SUPPLIERS OF THE RAW HIDES AND SKINS TO TH E FACT THAT THEY WERE THE PRODUCERS OF 4 RAW HIDES AND SKINS AND THE PAYMENTS HAD BEEN MADE TO THEM BY BEARER CHEQUES. THE LD. CIT(A), HOWEVER, DID NOT GIVE RELIEF TO THE ASS ESSEE IN RESPECT OF SIX CERTIFICATES/CONFIRMATIONS FILED BEFORE HIM SIMPLY ON THE GROUND THAT THE SIGNATURES ON THE PURCHASE BILLS AND THESE CERTIFICATES DO NOT TA LLY. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT SLIGHT DIFFERENCE IN THE SIGNATURE IS POSSIBLE WITH THE PASSAGE OF TIME AS THE PURCHASE BILLS WERE SIGNED BY THE SUPPLIERS IN FY 2 002-03 AND THE CERTIFICATES WERE SIGNED BY THEM DURING THE FY 2008-09. WE FURTHER FI ND THAT THE LD. CIT(A)S FINDING THAT THE SIGNATURES DO NOT TALLY IS NOT ON THE BASI S OF ANY EXPERTS ADVICE. THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN NOT ACCEPTING THE C LAIM OF THE ASSESSEE IN RESPECT OF THESE CERTIFICATES FILED BY THE PRODUCERS OF THE RA W HIDES AND SKINS. THE AO IS, THEREFORE, DIRECTED TO GIVE RELIEF TO THE ASSESSEE ON THE BASIS OF THE CERTIFICATES/CONFIRMATIONS GIVEN BY THE PRODUCERS O F RAW HIDES AND SKINS. WE FIND NO MERIT IN THE ARGUMENTS ADVANCED BY THE LD. DR THAT THERE IS A VIOLATION OF RULE 46A OF THE I. T. RULES IN THIS CASE AS ON THE SUBMISSION OF THE ASSESSEE REMAND REPORT WAS OBTAINED BY THE LD. CIT(A) AND ONLY AFTER TAKING IN TO CONSIDERATION THE REMAND REPORT AND THE EVIDENCE PRODUCED BEFORE HIM RELIEF HAS BEE N GIVEN TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.6.2010 SD/- SD/- (B. C. MEENA) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :30 TH JUNE, 2010 PRONOUNCED BY SD/- (CDR) SD/-(DKT) AM JM COPY TO : 1. M/S. KAYCEE TRADING CO. C/O DILIP BASU FCA, 8/2, K. S. ROYT ROAD, TOP FLOOR, ROOM NO. 21 & 22, KOLKATA-1. 2. ITO, WARD-32(1), KOLKATA. 3. CIT(A), , KOLKATA. 4. CIT, , KOLKATA. 5. D.R., ITAT, KOLKATA. TRUE COPY BY ORDER DEPUTY REGISTRAR JD.(SR.P.S.) I.T.AT., KOLKATA