Dattatraya Shivaji Bandal, Satara V. Deputy Commissioner of Income-tax,

ITA 193/PUN/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1153 (ITAT-PUNE)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 24-02-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Principle of natural justice
• Section: 40A(3); 143(3); 133A; 234B; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 193/PN/2015 %' ( ')( / ASSESSMENT YEAR : 2010-11 SHRI DATTATRAYA SHIVAJI BANDAL, PROP. KAILASH FOOD INDUSTRIES, AT AMRUTWADI, POST PACHWAD, TAL. WAI, DISTT. SATARA PAN : AABPB8740K ....... / APPELLANT ' / V/S. DY. COMMISSIONER OF INCOME TAX, SATARA CIRCLE, SATARA / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI B.C. MALAKAR / DATE OF HEARING : 06-07-2015 / DATE OF PRONOUNCEMENT : 04-09-2015 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE IMPUGNING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-IV, PUNE DATED 17-12 -2014 FOR THE ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THE APPEAL: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY TH E A.0. 2 ITA NO. 193/PN/2015, A.Y. 2010-11 RS.1,31,01,987/- INVOKING PROVISIONS OF S. 40A(3) O F THE ACT ESPECIALLY WHEN THE APPELLANT HAD NOT MAINTAINED ANY REGULAR B OOKS OF ACCOUNT AND NO DIRECT CASH PAYMENTS WERE MADE WHEN APPELLAN T CONSISTENTLY SUBMITTED THAT THE PAYMENTS WERE COVERED BY RULE 6D D(K) OF I. T. RULES 1962. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE DISALLOWANCE MADE BY A.0. OF RS.1,31,61,987/- AND CONFIRMED BY C IT(A) IS CONTRARY TO LAW AND WITHOUT JURISDICTION. THE SAME BE QUASHED. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE A.0. COLLECTED THE INFORMATION BY ISSUING NOTICES TO MANY PERSONS UNDER SECTION 133(6) OF THE ACT WHICH INFORMATION WAS COLLECTED ON THE B ACK OF THE ASSESSEE- APPELLANT AND USED AGAINST HIM. THERE WAS SERIOUS C ONTRAVENTION OF THE PRINCIPLES OF NATURAL JUSTICE WHICH ISSUE GOING TO THE ROOT OF THE MATTER WAS IGNORED BY THE LD. CIT(A). THE ORDER OF THE LD. C1T(A) IS VITIATED IN LAW. IT BE, THEREFORE, SET ASIDE. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEVY OF INTEREST U/S 234A, 234B AND 234C IS NOT JUSTIFIED. 5) THE APPELLANT CRAVES TO LEAVE, ADD/AMEND OR ALTER A NY OF THE ABOVE GROUNDS OF APPEAL. 2. A PERUSAL OF THE GROUNDS WOULD SHOW THAT GROUND NOS . 1 TO 3 ARE DIRECTED AGAINST THE ADDITION OF RS.1,31,01,987/- U/S. 40 A(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE AC T). GROUND NO. 4 IS AGAINST THE CHARGING OF INTEREST U/S. 234A, 234B AND 234C OF THE ACT, WHEREAS GROUND NO. 5 IS GENERAL IN NATURE. 3. THE BRIEF FACTS OF THE CASE ARE : THE ASSESSEE IS AN IN DIVIDUAL AND IS ENGAGED IN THE BUSINESS OF MAKING PHARSAN, SHEV, WAFERS, C HIVDA AND OTHER SNACKS. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 11-10-2010, DECLARING INCOME OF RS.33,31,410/-. SURVEY ACTION U/S. 133A WAS CARRIED ON TH E PREMISES OF THE ASSESSEE ON 25-02-2010. THE ASSESSEE DURING TH E COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DATED 19-11-2012 INFO RMED THE 3 ITA NO. 193/PN/2015, A.Y. 2010-11 ASSESSING OFFICER THAT NO BOOKS OF ACCOUNT ARE MAINTAINED FOR THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2010-11. HOWEV ER, THE ASSESSING OFFICER DISCOVERED THAT THE ASSESSEE IN HIS PROFIT AND LOSS ACCOUNT HAS SHOWN SALES OF RS.3,46,11,731/-. IN VIEW OF SA LES TURNOVER EXCEEDING RS.40,00,000/- PER ANNUM, THE ASSESSEE WAS REQ UIRED TO MAINTAIN REGULAR BOOKS OF ACCOUNT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 44AA(2) AND ALSO SHOULD HAVE GOT THE ACCOUNTS AU DITED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 44AB. ON VERIFICA TION OF THE DOCUMENTS IMPOUNDED DURING SURVEY, IT WAS FOUND THAT THE ASSESSEE HAD MADE CASH PAYMENTS EXCEEDING RS.20,000/- FOR THE PU RCHASES FROM A SINGLE PARTY IN A DAY DURING THE RELEVANT PERIOD. M AJORITY OF THE PAYMENTS WERE MADE IN CASH EXCEEDING RS.20,000/- TO M/S . LUNKAD BROTHERS, PUNE. APART FROM M/S. LUNKAD BROTHERS, THE AS SESSEE HAD ALSO MADE CASH PAYMENTS TO VARIOUS OTHER PARTIES EXCEE DING RS.20,000/- FOR PURCHASES IN A SINGLE DAY. THE ASSESSING O FFICER HELD THAT THE PAYMENTS HAVE BEEN MADE IN VIOLATION OF SECTION 40A(3) AND THE PAYMENTS MADE DOES NOT FALL UNDER ANY OF THE EXCEPT IONS GIVEN IN RULE 6DD OF THE INCOME TAX RULES. THE ASSESSING OFFICER MA DE ADDITION OF RS.1,31,01,987/-, ACCORDINGLY. AGGRIEVED BY THE ASSESSMENT ORDER DATED 19-03-2013, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER AN ALYZING THE FACTS OF THE CASE, DETAILS OF THE CASH PAYMENTS MADE BY THE ASSE SSEE AND THE EXPLANATION FURNISHED FOR MAKING SUCH CASH PAYMEN TS, HELD THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE PAYME NTS BY CASH ON REGULAR BASIS WERE MADE UNDER EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES OR OUT OF BUSINESS COMPULSIONS. THE COMMISS IONER OF INCOME TAX (APPEALS) UPHELD THE FINDINGS OF ASSESSING OFFICER AND 4 ITA NO. 193/PN/2015, A.Y. 2010-11 DISMISSED THE APPEAL OF THE ASSESSEE. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. 4. SHRI M.K. KULKARNI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCO UNT EXCEPT THE REGISTER WHICH WAS IMPOUNDED DURING THE COURSE OF SURVE Y ACTION. THE ASSESSEE HAS ALREADY BEEN PENALIZED FOR DEFAULT COMMITTED FOR NON- MAINTENANCE OF BOOKS OF ACCOUNT U/S. 271A AND NON-AUDIT OF BOOKS OF ACCOUNT U/S. 44AB. THE STATEMENT OF ACCOUNT SUPPLIED BY THE SELLE RS OF MATERIAL WOULD SHOW THAT THE TRANSACTIONS TOOK PLACE ON WEEKLY BASIS WHEN THE WEEKLY BAZAAR WAS HELD AT AMRUTWADI I.E. THE PLA CE OF BUSINESS OF THE ASSESSEE. THAT THE REPRESENTATIVE OF TH E SUPPLIERS OF MATERIALS WOULD VISIT THE ASSESSEE ON THE WEEKLY BAZAAR DAY, TAKE ORDER FOR SUPPLY OF MATERIAL FOR NEXT WEEK AND COLLECT THE AMOU NT FROM THE ASSESSEE FOR THE MATERIAL SUPPLIED IN THE EARLIER WEEK. THE REPRESENTATIVES WOULD COLLECT THE SALE PRICE OF THE MATERIA L SUPPLIED IN CASH AS THE SELLER WAS NOT MAINTAINING ANY BANK ACCOUNT AT OR NEARBY THE BUSINESS PLACE OF THE ASSESSEE. THE PAYMENTS IN CAS H MADE BY THE ASSESSEE ARE COVERED BY THE PROVISIONS OF RULE 6DD(K) OF THE INCOME TAX RULES. SINCE, THE REPRESENTATIVES OF THE SELLER WOULD TRAVEL A LONG DISTANCE OF ABOUT 90 KMS FROM PUNE TO AMRUTWADI TO COLLE CT FRESH ORDERS FOR SUPPLY OF MATERIAL AND PAYMENTS FOR THE MATER IALS SUPPLIED, THE PAYMENTS BY CHEQUE AND/OR DRAFT ETC. WAS NOT FEASIB LE. THEREFORE, SUCH PAYMENTS IN CASH WERE MADE OUT OF BUSINESS EXPEDIE NCY AND UNDER EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES. SINCE, TH E ASSESSEE HAD NOT MAINTAINED ANY REGULAR BOOKS OF ACCOUNT, THE ASS ESSEE HAD FILED HIS RETURN OF INCOME ON ESTIMATE BASIS. THE ASSESSING OFFICER ACCEPTED THE SALES FIGURE OF RS.3,46,11,731/- AND THE NET INCOME 5 ITA NO. 193/PN/2015, A.Y. 2010-11 RETURNED I.E. RS.33,31,410/-. NO OTHER ADDITION EXCEPT U/S. 40A(3) WAS MADE. THUS, THE ESTIMATED INCOME COMPUTED BY THE ASSES SEE WAS ACCEPTED. IN EARLIER ASSESSMENT YEARS I.E. ASSESSMENT Y EARS 2007-08, 2008-09 AND 2009-10 AD-HOC ADDITIONS WERE MADE DURING THE ASSESSMENT PROCEEDINGS U/S. 143(3) R.W.S. 147 BUT NO DISA LLOWANCE U/S. 40A(3) WAS EVER MADE. THEREFORE, DISALLOWANCE U/S. 40A(3 ) IS UNCALLED FOR IN THE IMPUGNED ASSESSMENT YEAR. TO SUPPOR T HIS SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS: I. CIT VS. BANWARI LAL BANSHIDHAR; 229 ITR 229 (ALL.). II. CIT VS. SMT. SANTOSH JAIN; 296 ITR 324 (P&H). 5. AU CONTRAIRE SHRI B.C. MALAKAR REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) AND PRAYED FOR DISMISSING THE APPEAL OF THE ASSES SEE. THE LD. DR SUBMITTED THAT THE ASSESSEE WAS MAINLY DEALING WITH M /S. LUNKAD BROTHERS FROM PUNE. THE PLACE OF BUSINESS OF THE ASSESSE E IS ONLY 90 KMS FROM PUNE. IT IS NOT THE CASE OF THE ASSESSEE THA T THE ASSESSEE IS NOT HAVING BANK ACCOUNT OR THERE IS NO BANK AT THE PLA CE OF BUSINESS OF THE ASSESSEE OR THE SUPPLIER OF THE MATERIAL. THE ASSESS EE NEVER APPROACHED M/S. LUNKAD BROTHER OR THE OTHER PARTIES T O WHOM CASH PAYMENTS WERE MADE TO DEAL THROUGH PROPER BANKING CHA NNELS. EXPLANATION FURNISHED BY THE ASSESSEE FOR MAKING CASH PA YMENTS DOES NOT FALL WITHIN ANY OF THE EXCEPTIONS GIVEN IN RULE 6DD OF TH E INCOME TAX RULES. IN SUPPORT OF HIS SUBMISSION THE LD. DR PLACED R ELIANCE ON THE DECISIONS RENDERED IN THE CASE OF S. VENKATA SUBBA RAO VS. CIT REPORTED AS 173 ITR 340 (A.P.) AND IN THE CASE OF T G M UTHA VS. ITO REPORTED AS 54 ITD 460 (PUNE). 6 ITA NO. 193/PN/2015, A.Y. 2010-11 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE ASSESSEE IN ITS APPEAL HAS PRIMARILY RAISED TWO ISSUES: I. DISALLOWANCE OF RS.1,31,01,987/- U/S. 40A(3) BY REJECTING THE SUBMISSIONS OF THE ASSESSEE AND IGNORING THE PROVISIONS O F RULE 6DD(K) OF THE INCOME TAX RULES, 1962, AND II. LEVY OF INTEREST U/S. 234A, 234B AND 234C OF THE ACT. 7. THE COMMISSIONER OF INCOME TAX (APPEALS) IN THE ORDER H AS GIVEN ELABORATE DETAILS OF CASH PAYMENTS EXCEEDING RS.20,000/- M ADE BY THE ASSESSEE IN A SINGLE DAY TO A SINGLE PARTY. A PERUSAL OF THE DETAILS SHOW THAT THE ASSESSEE HAS BEEN DEALING WITH VARIOUS PARTIES AND THE MO DE OF TRANSACTION WITH THEM HAS BEEN PRIMARILY IN CASH. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS A TURNOVER OF RS.3,46,11,731/- . DESPITE THE FACT THAT THE ASSESSEE IS HAVING SUCH A HUGE TURNOVER , THE ASSESSEE IS NOT MAINTAINING BOOKS OF ACCOUNT MUCH LESS TO SAY ABOUT THE AUDIT OF ACCOUNTS. A PERUSAL OF THE MATERIALS AVAILABLE ON RECORD S HOWS THAT THE ASSESSEE IS A RECALCITRANT AND HAS SCANTY RESPECT FOR THE LAW OF THE LAND. THE ASSESSEE HAS TRIED TO TAKE SHELTER OF THE EXCEPT IONS PROVIDED UNDER RULE 6DD(K) OF THE ACT. FOR THE SAKE OF CONVENIENCE THE R ELEVANT EXTRACT OF RULE 6DD(K) IS REPRODUCE AS UNDER: 6DD. NO DISALLOWANCE UNDER SUB-SECTION (3) OF SECT ION 40A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFI TS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB-SECTION (3A) OF SE CTION 40A WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON I N A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES IN THE C ASES AND CIRCUMSTANCES SPECIFIED HEREUNDER, NAMELY: - XXXXXXXXXX XXXXXXXXXX (K) WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVI CES ON BEHALF OF SUCH PERSON; 7 ITA NO. 193/PN/2015, A.Y. 2010-11 8. WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE DOE S NOT FALL WITHIN THE EXCEPTION GIVEN IN CLAUSE (K) OF RULE 6DD. IT IS NO T THE CASE OF THE ASSESSEE THAT THE ASSESSEE OR THE SUPPLIERS OF T HE MATERIALS ARE NOT HAVING BANK ACCOUNT. THE EXCEPTIONS IN RULE 6DD ARE PROVIDED TO MITIGATE THE SITUATIONS WHERE, EITHER OF THE PARTIES TO THE TRANSACTION DOES NOT HAVE THE BENEFIT OF BANKING FACILITIES OR ARE STRAIN ED BY SOME EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES TO DEAL IN CASH. SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE CASH PAYME NTS WERE MADE TO THE AUTHORISED REPRESENTATIVE WHO WOULD TRAVEL 90 KM S FOR WEEKLY BAZZAR TO THE PLACE OF ASSESSEE TO COLLECT ORDERS AND THE PAYMEN TS OF THE MATERIAL SUPPLIED IS UNSUSTAINABLE. TRAVELLING 90 KMS TO COLLEC T PAYMENT CERTAINLY CANNOT BE AN EXCUSE TO MAKE PAYMEN T IN VIOLATION OF THE PROVISIONS OF THE INCOME TAX ACT. AS FAR AS AGENTS REFERRED IN RULE 6DD(K) ARE CONCERNED, THE AUTHORISED REPRESENTATIVES OF T HE SUPPLIER OF MATERIAL CANNOT BE EQUATED WITH THE AGENTS REFERRED T O IN RULE 6DD(K) OF INCOME TAX RULES. 9. THE LD. COUNSEL FOR THE ASSESSEE HAS TRIED TO DRAW SUPPORT FROM THE DECISIONS RENDERED IN THE CASES OF CIT VS. BANWARI L AL BANSHIDHAR (SUPRA) AND IN THE CASE OF CIT VS. SMT. SANTOSH JAIN (SUPRA ). IN THE SAID CASES THE HON'BLE HIGH COURTS DELETED THE DISALLOWAN CE MADE U/S. 40A(3) ON THE GROUND THAT THE INCOME OF THE ASSESSEE W AS ESTIMATED BY APPLYING GP RATE BY REJECTING THE BOOKS OF ACCOUNT OF T HE ASSESSEE. THE HON'BLE ALLAHABAD HIGH COURT HELD THAT WHEN GROSS PROFIT R ATE IS APPLIED, IT WOULD TAKE CARE OF EVERYTHING AND THERE WAS N O NEED FOR THE ASSESSING OFFICER TO MAKE SCRUTINY OF THE AMOUNT INCURRED ON THE PURCHASES BY THE ASSESSEE. THE HON'BLE PUNJAB AND HA RYANA HIGH COURT IN THE CASE OF CIT VS. SMT. SANTOSH JAIN (SUPRA) CON CURRED WITH THE VIEW TAKEN IN THE CASE OF CIT VS. BANWARI LAL BANSHIDHAR (SUPRA). 8 ITA NO. 193/PN/2015, A.Y. 2010-11 WE ARE OF THE VIEW THAT THE RATIO LAID DOWN BY THE HON' BLE HIGH COURTS IN THE AFOREMENTIONED CASES WOULD NOT APPLY IN TH E FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE ASSESSING OFFICER HAD NOT MADE ANY ADDITION BY APPLYING GP RATE BY REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. IT IS THE CASE OF THE ASSESSEE THAT NO BOOKS OF ACCOUN T ARE MAINTAINED. FURTHER, EXCEPT FOR THE DISALLOWANCE U/S. 40A(3) NO ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER IN SCRUTINY ASSESSMENT. THE CASE OF THE ASSESSEE IS ENTIRELY ON A DIFFERENT FOOTING AND NO BENEFIT OF THE CASE LAWS RELIED UPON BY THE LD. COUN SEL FOR THE ASSESSEE CAN BE GIVEN. 10. WE CONCUR WITH THE FINDINGS OF THE COMMISSIONER OF INCO ME TAX (APPEALS). THE IMPUGNED ORDER IS WELL REASONED AND JUSTIFIED , NO INTERFERENCE IS WARRANTED IN THE IMPUGNED ORDER. 11. AS FAR AS CHARGING OF INTEREST U/S. 234A, 234B AND 234 C IS CONCERNED, THE SAME IS MANDATORY AND CONSEQUENTIAL (CIT VS. ANJUM M.H. GHASWALA; 252 ITR 1). THEREFORE, THIS GROUND OF APPEAL IS LIABLE TO BE DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED BEING DEVOID OF ANY MERIT. ORDER PRONOUNCED ON MONDAY, THE 04 TH DAY OF SEPTEMBER, 2015. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 04 TH SEPTEMBER, 2015 RK 9 ITA NO. 193/PN/2015, A.Y. 2010-11 *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-IV, PUNE 4. ' / THE CIT-III, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE