Girija Shankar Giri, Lucknow V. Asstt. Commissioner of Income Tax, Lucknow

ITA 194/LKW/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4602 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 24-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 40A(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.194/LKW/2014 ASSESSMENT YEAR 2010-11 ASST. COMMISSIONER OF INCOME TAX, RANGE-III, LUCKNOW VS GIRIJA SHANKAR GIRI (PROP. P.G. TRADERS) 33A, ASHISH NAGAR, KURSI ROAD, RING ROAD LUCKNOW PAN AERPG 9819 G (RESPONDENT) (APPELLANT) SHRI PRADEEP KAPOOR, CA APPELLANT BY SHRI AMIT NIGAM, DR RESPONDENT BY 01/02/2016 DATE OF HEARING 15/03/2016 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE O RDER OF LD. CIT (A)-I, LUCKNOW DATED 15.12.2013 FOR THE AY 2010-11. 2. THE GROUND NO.1 RAISED BY THE ASSESSEE IS AS UND ER: 1. BECAUSE, WHILE UPHOLDING THE VALIDITY OF ASSESS MENT ORDER DATED 10.01.2013, THE CIT(A) HAS FAILED TO CONSIDER AND O MITTED TO NOTE THAT I) JURISDICTION IN THE CASE LIED WITH ITO-3(1), LU CKNOW AS IS EVIDENT FROM THE FACT THAT FIRST NOTICE UNDER SECTION 143(2), HAD BEEN ISSUED BY THE SAID INCOME TAX AUTHORITY. 2 II) SUBSEQUENT NOTICES UNDER SECTION 143(2) DATED 09.09.2011 AND 27.09.2011 ISSUED BY DIFFERENT INCOME TAX AUTHORITY DESIGNATED AS ACIT, RANGE-3, LUCKNOW, WERE NOT VALID IN THE ABSENCE OF ANY ORDER HAVING BEEN PASSED UNDER SECTION 127 [TRANSFERRING JURISDICTION FROM ITO 3(1) TO ACIT, RANGE 3]; III) IN CONSEQUENCE OF (I) AND (II) ABOVE, THE ASSE SSMENT ORDER DATED 10.01.2013 WAS WHOLLY WITHOUT JURISDICTION. 3. REGARDING THIS GROUND, VARIOUS CONTENTIONS WERE RAISED BY THE LD. AR OF THE ASSESSEE BUT WHEN IT WAS POINTED OUT THAT SI NCE THE FIRST NOTICE WAS ISSUED BY THE ITO AND THE SUBSEQUENT NOTICES WERE I SSUED BY ACIT, WHO IS SENIOR TO ITO AND THE ASSESSMENT IS FRAMED BY DCIT, THE ASSESSMENT ORDER IS VALID AS PER SEVERAL TRIBUNALS ORDER OF THE SAME B ENCH. IN REPLY, LD. AR OF THE ASSESSEE FAIRLY CONCEDED THAT THE PRESENT ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THESE TRIBUNALS ORDERS. AC CORDINGLY, GROUND NO.1 OF THE ASSESSEE IS REJECTED. 4. REGARDING GROUND NOS. 2 TO 8 INVOLVING TWO ISSUE S I.E. DISALLOWANCE OF RS.28.00 LAKH U/S 40A(3) AND DISALLOWANCE OF RS.38, 88,175/- BEING ADHOC DISALLOWANCE OUT OF LABOUR CHARGES AT THE RATE OF 1 0%, IT WAS SUBMITTED BY LD. AR OF THE ASSESSEE THAT OUT OF TOTAL DISALLOWAN CE MADE BY THE ASSESSING OFFICER OF RS.28.00 LAKH U/S 40A(3) OF THE ACT OF W HICH DETAILS ARE AVAILABLE ON PAGE 2 OF THE ASSESSMENT ORDER, THERE ARE THE PAYME NTS, WHICH ARE NOT TO BE DISALLOWED AS PER RULE 6DD OF THE INCOME TAX RULES 1962. HE SUBMITTED THAT DETAILED SUBMISSIONS WERE MADE BEFORE THE LD. CIT(A ) ON THIS ASPECT WHICH HAS BEEN REPRODUCED BY THE LD. CIT(A) ON PAGES 13 T O 15 OF HIS ORDER. IT WAS POINTED OUT THAT PAYMENT TO M/S H.L. BRICK FIELD OF RS.4.70 LAKH IS COVERED BY CLAUSE-F OF RULES 6DD BECAUSE THE BRICKS WERE REPRO DUCED BY THE BRICK SUPPLIER WITHOUT THE AID OF POWER. REGARDING THE PA YMENT TO M/S SHAKTI 3 ENTERPRISES RS.3.30 LAKH FOR PURCHASE OF CEMENT, IT WAS SUBMITTED THAT THE SUPPLIER WAS NEW TO THE ASSESSEE AND THEREFORE, HE INSISTED FOR THE PAYMENT TO BE MADE IN CASH BEFORE THE SUPPLY COULD BE MADE AND THEREFORE THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMEN T OF THE HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT VS. AVTAR SI NGH & SONS REPORTED IN 188 ITR 669 (ALL.). REGARDING THE PAYMENT OF RS.2.4 5 LAKH TO GODRAY STEEL FABRICATORS LTD., IT WAS SUBMITTED THAT THE PAYMENT WAS REQUIRED TO BE MADE ON THE DATE WHICH WAS SUNDAY I.E. 20.12.2009 AND TH EREFORE, THIS PAYMENT IS COVERED BY CLAUSE J OF RULE 6DD. HE ALSO SUBMITTED THAT IN RESPECT OF PAYMENT OF RS.2.60 LAKH TO M/S NEEMA STEEL WORKS, R S.2.60 LAKH TO OM SHAKTI ENTERPRISES AND RS.2.35 LAKH TO H.L. BRICK F IELD ALSO, CLAUSE J OF RULE 6DD IS APPLICABLE BECAUSE PAYMENT TO THESE THREE PA RTIES WERE ALSO MADE ON THE SAME DATE I.E. 20.12.2009 BEING SUNDAY. REGARDI NG PAYMENT OF RS.6.00 LAKH TO GOMTI FURNITURE ALSO, IT WAS SUBMITTED THAT THE ARGUMENT WAS SAME FOR THIS PARTY AS IN THE CASE OF SHAKTI ENTERPRISES . REGARDING PAYMENT OF RS.1.00 LAKH TO B.P. ENTERPRISES, IT WAS SUBMITTED THAT ARGUMENT IS SAME IN RESPECT OF THIS PARTY AS IN THE CASE OF H.L. BRICK FIELD. REGARDING PAYMENT OF RS.3.00 LAKH TO RASTOGI FABRICATORS, IT WAS SUBMITT ED THAT THE ARGUMENT IN RESPECT OF THIS PARTY IS SAME AS IN RESPECT OF SHAK TI ENTERPRISES. 5. LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF TH E AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT ON PAGES 169 TO 170 OF THE PAPER BOOK IS COPY OF LEDGER ACCOUNT OF ALL THE PARTIES TO WHOM THE CASH PAYMENTS WERE MADE. FIRST PARTY IS M/S BHA RAT BRICKFIELD AND TO THIS PARTY, CASH PAYMENT WAS MADE ON 20.12.2009 OF RS.2. 35 LAKH AND THE MATERIALS WERE RECEIVED FROM THIS PARTY AS PER THE SAME ACCOUNT ON 25.12.2009. HENCE, IT IS SEEN THAT THE CASH PAYMENT WAS MADE FIRST AND THE MATERIALS WERE RECEIVED THEREAFTER. SAME IS THE CAS E WITH THE REMAINING EIGHT PARTIES I.E. M/S B.P. ENTERPRISES RS.1.00 LAKH, M/S GODRAY STEEL FABRICATORS 4 RS.2.45 LAKH, M/S GOMTI FURNITURE RS.6.00 LAKH, M/ S H.L. BRICKFIELD RS.4.70 LAKH, M/S NEEMA STEEL WORKS RS.2.60 LAKH, M/S O.M. SHAKTI ENTERPRISES RS.2.60 LAKH, RASTOGI ENTERPRIES RS.3.00 LAKH AND M /S SHAKTI ENTERPRISES RS.3.30 LAKH TOTAL RS.28.00 LAKH. IN RESPECT OF ALL THESE PARTIES, CASH PAYMENT WAS MADE BEFORE THE RECEIPT OF SUPPLY. NOW, IN THE LIGHT OF THESE FACTS, WE EXAMINE THE ISSUE AS PER SECTION 40A(3) READ WITH R ULE 6DD. THE PROVISO BELOW SUB SECTION 3A OF SECTION 40A READS AS UNDER: - PROVISO TO SECTION 40A(3A) PROVIDES THAT NO DISALL OWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFI TS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB-SECTION (3) AND THIS SUBSECTION[SECTION 40A(3A)] WHERE A PAYMENT OR AGGR EGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, IN SUCH CASES AND U NDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED, HAVING REGARD T O THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDE RATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. 7. FROM THE ABOVE PROVISO, IT IS SEEN THAT APART FR OM THE CIRCUMSTANCES WHICH ARE PRESCRIBED AS RULE 6DD, IT IS ALSO TO BE CONSIDERED AS TO WHAT IS THE NATURE AND EXTENT OF B ANKING FACILITIES AVAILABLE, CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. IT WAS CONTENDED BEFORE THE LD. CIT(A) AS PER PART REPRODUCED BY THE LD. CIT(A) IN PARA 8.4 OF HIS ORDER THAT IN SOME CASES, THE ASSESSEES CLAIM WAS THAT THE SUPPLIER IS PRODUCER OF GOODS WITHOUT THE AID OF POWER AND THEREFORE AS PER CLAUSE F OF RULE 6DD, THERE IS EXC EPTION FROM THE OPERATION OF SECTION 40A(3). IN SOME CASES, THE CLA IM OF THE ASSESSEE WAS THAT THE SUPPLIER WAS NEW TO THE ASSESSEE AND THERE FORE, HE INSISTED THAT THE PAYMENT TO BE MADE IN CASH PRIOR TO THE SUPPLY. IN SOME OTHER CASES, THIS WAS THE CLAIM THAT PAYMENT WAS MADE ON A DATE FAILING ON SUNDAY I.E. 20.12.2009. ALL THESE CLAIM OF THE ASSESSEE WE RE REJECTED BY LD. CIT(A) ON THIS BASIS THAT THE ASSESSEE COULD NOT PR ODUCE THE EVIDENCE 5 REGARDING THIS CLAIM THAT THE SUPPLIER INSISTED FOR MAKING CASH PAYMENT. REGARDING THE SUPPLIER BEING PRODUCER OF GOODS WITH OUT THE AID OF POWER, THIS WAS OBJECTION OF LD. CIT(A) THAT SUCH SUPPLIER IS NOT PRODUCING THE GOODS IN A COTTAGE INDUSTRY AND REGARDING THE CLAIM THAT SOME PAYMENTS WERE MADE ON SUNDAY, THIS WAS THE OBJECTION OF THE LD. CIT(A) THAT THE ASSESSEE COULD NOT ESTABLISH THAT THE PAYMENT WAS R EQUIRED TO BE MADE ON THAT DATE I.E. SUNDAY. HENCE, IT IS SEEN THAT TH E ASSESSEE COULD NOT ESTABLISH ITS CLAIM BY BRINGING COGENT EVIDENCE IN SUPPORT OF HIS CONTENTIONS BUT THIS IS A FACT THAT THE PAYMENTS IN CASH WERE MADE PRIOR TO THE RECEIPT OF SUPPLY OF GOODS AND HENCE, THE BU SINESS EXPEDIENCY OF MAKING CASH PAYMENT GETS SUPPORTED. BECAUSE UNLESS THERE IS BUSINESS EXPEDIENCY TO MAKE ADVANCE PAYMENT IN CASH, NO BUSI NESSMEN WILL MAKE PAYMENT TO A PARTY IN CASH IN ADVANCE AND WAIT FOR THE SUPPLY OF RECEIPT OF GOODS FOR FIVE TO TEN DAYS. THIS IS NOT THE CASE OF THE REVENUE THAT THE IDENTITY OF THE SUPPLIER TO WHOM THE CASH PAYMENT W AS MADE IS IN DOUBT AND THERE IS NO DOUBT EXPRESSED BY THE REVENUE REGA RDING GENUINENESS OF THE PAYMENT AND THE ONLY OBJECTION OF THE AUTHOR ITIES BELOW IS THIS THAT THE PAYMENT WAS MADE IN VIOLATION TO THE MODE OF PA YMENT PRESCRIBED IN SECTION 40A (3). AS PER THE PROVISO BELOW SUB SECTI ON 3A OF SECTION 40A, IT IS SEEN THAT NO DISALLOWANCE IS CALLED FOR UNDER SECTION 40A(3) IF IT IS FOUND THAT THERE IS BUSINESS EXPEDIENCY FOR MAKING PAYMENT IN VIOLATION TO THE MODE OF PAYMENT SPECIFIED IN SECTION 40A(3). WE HAVE SEEN ABOVE THAT IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS ABLE TO ESTABLISH THAT THERE WAS BUSINESS EXPEDIENCY TO MAKE CASH PAYMENT TO THESE NINE PARTIES BECAUSE THE ASSESSEE IS GETTING SUPPLY ONLY AFTER SOME DAYS OF MAKING CASH PAYMENT AND ASSESSEE ALSO GETS SOME HEL P FROM CLAUSE-F OR CLAUSE J OF RULE 6DD ALTHOUGH THE ASSESSEE IS NOT A BLE TO BRING COGENT EVIDENCE ABOUT APPLICABILITY OF THESE CLAUSES OF RU LE 6D. BUT SINCE, THE ASSESSEE IS ABLE TO ESTABLISH BUSINESS EXPEDIENCY B Y SHOWING THAT THE 6 CASH PAYMENT WAS MADE FIRST AND THE SUPPLIES WERE R ECEIVED AFTER A GAP OF FIVE TO TEN DAYS FROM ALL THESE NINE PARTIES AND IN VIEW OF APPLICABILITY OF RULE 6DD AS CLAIMED ALTHOUGH COULD NOT BE SUBSTA NTIATED, WE ARE OF THE CONSIDERED OPINION THAT DISALLOWANCES U/S 40A(3 ) IS NOT JUSTIFIED UNDER THESE FACTS. WE THEREFORE, DELETE THE SAME. 8. NOW, WE DEAL WITH THE SECOND ISSUE I.E. REGARDIN G ADHOC DISALLOWANCE OUT OF LABOUR CHARGES @ 10%. AS PER PARA 4 OF THE A SSESSMENT ORDER, THIS IS THE OBJECTION OF THE ASSESSING OFFICER THAT THE ASS ESSEE HAS DEBITED RS.3,88,81,751/- UNDER THE HEAD LABOUR CHARGES IN H IS P&L ACCOUNT AND FROM THE VERIFICATION OF THE BOOKS OF ACCOUNTS, IT IS FO UND THAT ONLY SELF MADE VOUCHERS WERE AVAILABLE AND THE ASSESSEE HAS NOT MA INTAINED ANY REGISTER OR MUSTER ROLL AND ONLY CASH PAYMENTS WERE MADE FOR TH ESE EXPENSES. THE ASSESSING OFFICER ALSO NOTED THAT LABOUR CHARGES IN CURRED BY THE ASSESSEE WORKS OUT TO RS.77.09% OF THE TOTAL RECEIPT. HENCE IT IS SEEN THAT THE ASSESSING OFFICER HAS ONLY TWO OBJECTIONS THAT THER E ARE ONLY SELF MADE VOUCHERS AND THAT THERE IS NO REGISTER OR MUSTER RO LL. REGARDING THIS OBJECTION THAT THERE IS ONLY SELF MADE VOUCHERS, WE ARE OF TH E CONSIDERED OPINION THAT THIS OBJECTION IS NOT VALID BECAUSE FOR MAKING PAYM ENT TO LABOURERS, THERE CANNOT BE INDEPENDENT BILL. REGARDING NON MAINTENAN CE OF THE REGISTER OR MUSTER ROLL, IT IS EXPLAINED BY THE ASSESSEE THAT L ABOUR WERE PUT TO WORK AT DIFFERENT LOCATIONS OR PROJECTS UNDERTAKEN BY THE U .P. NIRMAN NIGAM AND THE ATTENDANCE AND THE WAGES ROLL WERE MAINTAINED BY TH E PROJECT MANAGER OF DIFFERENT UNITS OF NIRMAN NIGAM AND THE ASSESSEE HA S MADE PAYMENTS TO DIFFERENT LABOURS AS AND WHEN REQUIRED BY PETTY LAB OUR AFTER WITHDRAWING CASH FROM ITS BANK AND THE ASSESSEE HAS NOT PAID MORE TH AN RS.20,000/- IN A DAY TO ANY LABOUR IN CASH. IT IS ALSO SUBMITTED THAT TH E ASSESSEE HAS GOT DUE PAYMENTS FROM U.P. NIRMAN NIGAM AFTER VERIFYING THE NUMBER OF PERSONS EMPLOYED AT DIFFERENT PLACES OF THE PROJECT SUPERVI SED BY THEM. HENCE, IT IS SEEN THAT THE ASSESSEE HAS MADE PAYMENT FOR THE LAB OURERS ENGAGED AT 7 DIFFERENT LOCATIONS AND THE ASSESSEE WAS GETTING PA YMENT AFTER VERIFICATION OF THE NUMBER OF PERSONS EMPLOYED AT DIFFERENT PLACES AND THE PROJECTS SUPERVISED BY THE U.P. NIRMAN NIGAM. SAMPLE VOUCHER S FOR LABOUR PAYMENTS ARE AVAILABLE ON PAGES 171 TO 209 AND IN THE BACK O F ALL THESE VOUCHERS, THE NAMES, AMOUNT AND THUMB IMPRESSION/SIGNATURE OF ALL THE LABOURS ARE AVAILABLE. 9. CONSIDERING THESE FACTS, WE ARE OF THE CONSIDERE D OPINION THAT UNDER THESE FACTS AND IN THE ABSENCE OF ANY ADVERSE MATER IAL, ADHOC DISALLOWANCE OF 10% OF LABOUR CHARGES IS NOT JUSTIFIED, WE, THEREFO RE, DELETE THE SAME. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DAT E MENTIONED ON THE CAPTION PAGE) SD/- SD/- (SUNIL KUMAR YADAV) (A.K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15 /03/2016 AKS COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTR AR