Shri Haresh Tikamdas Harwani, Ahmednagar V. Dy. CIT, Ahmednagar Circle , Ahmednagar

ITA 1961/PUN/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2236 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-12-2020
• Assessment Year: 2007-2008
• Appeal Filed On: 12-12-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: PRASHANT MUNOT
• Keywords: Additional evidence; Set aside
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI P.M. JAGTAP , V ICE P RESIDENT(KZ) . / ITA NO. 1 961 /PUN/20 19 / ASSESSMENT YEAR : 20 07 - 08 SHRI HARESH TIKAMDAS HARWANI AMBAR PLAZA - A, OFFICE NO.118, OPP : BUS STAND, AHMEDNAGAR 414001 PAN : A BJPH1214M ....... / APPELLANT / V/S. THE DY. COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR / RESPONDENT ASSESSEE BY : SHRI PRASHANT MUNOT REVENUE BY : SHRI S.P. WALIMBE / DATE OF HEARING : 0 2 .12.2020 / DATE OF PRONOUNCEMENT : 03 .12.2020 / ORDER PER P.M. JAGTAP, VP : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD.CIT(A) - 2 , PUNE , DATED 12 .0 9 .201 9 . 2. THE ISSUE RAISED IN GROUND NO.1 RELATES TO THE DISALLOWANCE OF RS.8,17,165/ - MADE BY THE ASSESSING OFFICER U/S 40A(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AND CONFIRMED BY THE LD. CIT(A). ITA NO . 1961 /PUN/ 20 1 9 2 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL WHO IS ENGAGED IN CONSTRUCTION BUSINESS. THE R ETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HIM ON 26 - 10 - 2007 DE CLARING TOTAL INCOME OF RS.5,49,408/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , IT WAS NOTICED BY THE ASSESSING OFFICER FROM THE VERIFICATION OF BANK STATEMENTS OF THE ASSESSEE THAT CERTAIN PAYMENTS WERE MADE IN CASH EXCEEDING RS.20,000/ - AGGREGATING TO RS.40,85,825/ - . SINCE THE SAID PAYMENTS WERE MADE IN CASH IN CONTRAVENTION OF PROVISIONS OF SECTION 40A(3) OF THE ACT, THE ASSESSEE WAS CALLED UPON BY THE ASSESSING OFFICER TO OFFER HIS EXPLANATION IN THE MATTER. IN REPLY, IT WAS SUBMITTED ON BEHALF O F THE ASSESSEE THAT MAJORITY OF THE AMOUNTS WERE WITHDRAWN FROM BANK FOR DAY - TO - DAY EXPENSES AND THE SAME WERE DULY REFLECTED IN THE CASH BOOK. THE ASSESSEE HOWEVER COULD NOT PRODUCE ANY EVIDENCE IN THE FORM OF CASH BOOK TO SUPPORT AND SUBSTANTIATE THE SA ID EXPLANATION. THE ASSESSING OFFICER THEREFORE, INVOKED SECTION 40A(3) OF THE ACT AND MADE THE DISALLOWANCE OF RS.8,17,165/ - BEING 20% OF THE PAYMENTS MADE IN CASH EXCEEDING THE LIMIT OF RS.20,000/ - . 4. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 40A(3) OF THE ACT WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), A DETAILED SUBMISSION WAS MADE ON BEHALF OF THE ASSESSEE ON THIS ISSUE, A SUMMARY OF WHICH WAS A S UNDER: (I) CASH WITHDRAWALS FOR DAY TO DAY REQUIREMENTS - RS.28,96,050/ - (II) PAYMENTS TO GOVERNMENT - RS.3,25,000/ - (III) DRAWINGS ON CAPITAL ACCOUNT - RS.30,000/ - (IV) LOAN GIVEN BY ACCOUNT PAYEE CHEQUE - RS.1,00,000/ - (V) PAYMENT TO CREDITO RS BY ACCOUNT PAYEE CHEQUE S - RS.7,34,775/ - 5. THE ADDITIONAL EVIDENCE IN THE FORM OF LETTERS FROM THE CONCERNED CREDITORS CONFIRMING THE PAYMENTS MADE BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUES WERE ALSO FILED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A ). THE SAID ADDITIONAL EVIDENCE ALONG WITH SUBMISSIONS MADE ON ITA NO . 1961 /PUN/ 20 1 9 3 BEHALF OF THE ASSESSEE WERE FORWARDED BY THE LD. CIT(A) TO THE ASSESSING OFFICER. IN THE REMAND REPORT FURNISHED TO THE LD. CIT(A) , IT WAS SPECIFICALLY POINTED OUT BY THE ASSESSING OFFICER TH AT THE ASSESSEE DID NOT FURNISH CASH BOOK FOR VERIFICATION DURING THE REMAND PROCEEDINGS AND IN THE ABSENCE OF THE SAME, EXPLANATION OFFERED BY THE ASSESSEE WAS NOT VERIFIABLE. KEEPING IN VIEW THIS COMMENT MADE BY THE ASSESSING OFFICER IN THE REMAND REPOR T, THE LD. CIT(A) UPHELD THE ACTION OF ASSESSING OFFICER IN INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND CONFIRMED THE DISALLOWANCE OF RS.8,17,165/ - MADE BY THE ASSESSING OFFICER. 6 . I HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT A DETAILED SUBMISSION WAS FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) IN SUPPORT OF ITS CASE THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT WERE NOT APPLICABLE TO THE ENTIRE CASH WITHDRAWALS / PAYMENTS MADE BY HIM DURING THE YEAR UNDER CONSIDERATION. A SUMMARY OF THE SAID WITHDRAWALS / PAYMENTS WAS ALSO PREPARED AND FURNISHED BY THE ASSESSEE GIVING THE FOLLOWING DETAILS: (I) CASH WITHDRAWALS FOR DAY TO DAY REQUIREMENTS - RS.28,96,050/ - (II) PAYMENTS TO GO VERNMENT - RS.3,25,000/ - (III) DRAWINGS ON CAPITAL ACCOUNT - RS.30,000/ - (IV) LOAN GIVEN BY ACCOUNT PAYEE CHEQUE - RS.1,00,000/ - (V) PAYMENT TO CREDITORS BY ACCOUNT PAYEE CHEQUE - RS.7,34,775/ - 7. THE ADDITIONAL EVIDENCE IN THE FORM OF LETTERS FR OM THE CONCERNED CREDITORS CONFIRMING THE PAYMENTS MADE TO THEM BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUES W AS ALSO FILED BY THE ASSESSEE. HOWEVER, WHEN THIS ADDITIONAL EVIDENCE ALONG WITH SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE ON THE ISSUE WAS FORWARDE D BY THE LD. CIT(A) TO THE ASSESSING OFFICER FOR VERIFICATION, THE ASSESSEE DID NOT PRODUCE THE CASH BOOK AND IN THE ABSENCE OF THE SAME, THE ASSESSING OFFICER COULD NOT VERIFY THE CLAIM MADE BY THE ASSESSEE. AT THE TIME OF HEARING BEFORE THE TRIBUNAL, TH E LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS MAINTAINED A CASH BOOK AND HE IS IN A POSITION TO PRODUCE ITA NO . 1961 /PUN/ 20 1 9 4 THE SAME FOR VERIFICATION BEFORE THE ASSESSING OFFICER. HE HAS URGED THAT AN OPPORTUNITY MAY THEREFORE, BE AFFORDED TO THE ASSESSE E BY SENDING THE MATTER BACK TO THE ASSESSING OFFICER. ALTHOUGH THE LD. DR HAS INITIALLY RAISED AN OBJECTION FOR SENDING THE MATTER BACK TO THE ASSESSING OFFICER AGAIN FOR VERIFICATION ON THE GROUND THAT SUFFICIENT OPPORTUNITY WAS ALREADY OFFERED TO THE A SSESSEE IN THIS REGARD, HE HAS FINALLY SUBMITTED THE MATTER CAN BE SENT BACK TO THE ASSESSING OFFICER FOR PROPER VERIFICATION IF THE ASSESSEE UNDERTAKES TO PRODUCE THE CASH BOOK AND OTHER EVIDENCE TO SUPPORT AND SUBSTANTIATE HIS EXPLANATION IN THE MATTER. SINCE THE LD. COUNSEL FOR THE ASSESSEE HAS UNDERTAKEN TO PRODUCE THE CASH BOOK AND OTHER EVIDENCE TO SUPPORT AND SUBSTANTIATE THE CASE OF ASSESSEE ON THIS ISSUE, I CONSIDER IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO SET ASIDE THE IMPUGNED ORDER OF LD. CIT(A) ON THIS ISSUE AND REMIT THE MATTER TO THE FILE OF ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AFTER VERIFYING THE EXPLANATION OF THE ASSESSEE FROM THE RELEVANT RECORD INCLUDING ESPECIALLY THE CASH BOOK AND OTHER EVIDENCES WHICH THE ASSESSE E IS DIRECTED TO PRODUCE. GROUND NO.1 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. THE ISSUE RAISED IN GROUND NO.2 RELATES TO THE DISALLOWANCE OF 15% OF THE WAGES MADE BY THE ASSESSING OFFICER WHICH IS SUSTAINED BY THE LD. CIT(A) TO THE EXTENT OF 7%. 9. IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH ITS RETURN OF INCOME, A SUM OF RS. 30,12,756/ - WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF WAGES. IN SUPPORT OF HIS CLAIM FOR THE EXPENDITURE INCURRED ON WAGES , THREE WAGE REGISTERS WERE PRODUCED BY THE ASSESSEE FOR VERIFICATION BEFORE THE ASSESSING OFFICER. ON VERIFICATION, THE ASSESSING OFFICER FOUND THAT THE WAGES AS CLAIMED BY THE ASSESSEE IN THE SAID REGISTERS WERE NOT FULLY SUPPORTED BY THE RELEVANT DOCUMENTARY EVIDENCE. HE ALSO FOUND THAT THE EXPENDITURE ON WAGES CLAIMED BY THE ASSESSEE AT 31.36% OF HIS RECEIPTS WAS ON THE HIGHER ITA NO . 1961 /PUN/ 20 1 9 5 SIDE. HE THEREFORE, DISALLOWED A SUM OF RS.4,51,913/ - BEING 15% OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE ON WAGES. 10 . ON APPEAL, THE LD. CIT(A) FOUND THAT EVEN THOUGH THE WAGES CLAIMED BY THE ASSESSEE WERE NOT FULLY SUPPORTED BY RELEVANT DOCUMENTARY EVIDENCE, WORKING MADE BY THE ASSESSING OFFICER TO COMPUTE THE WAGES AT 31.36% OF THE TOTAL RECEIPTS WAS WRONG IN AS MUCH AS TH E INCREASE IN WORK - IN - PROGRESS WAS NOT TAKEN INTO CONSIDERATION BY THE ASSESSING OFFICER WHILE MAKING THE SAID WORKING. ACCORDING TO THE LD. CIT(A), THE WAGES CLAIMED BY THE ASSESSEE WERE ACTUALLY 22.73% OF THE TOTAL RECEIPTS AND INCREASE IN WORK - IN - PROGR ESS. KEEPING IN VIEW THIS POSITION, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE OF 15% MADE BY THE ASSESSING OFFICER OUT OF WAGES TO 7%, THEREBY SUSTAINING THE DISALLOWANCE OF RS.4,51,913/ - MADE BY THE ASSESSING OFFICER OUT OF WAGES TO RS.2,25,956/ - . 1 1 . I HAVE HEARD THE ARGUMENTS OF BOTH SIDES ON THIS ISSUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE CLAIM MADE BY THE ASSESSEE ON ACCOUNT OF WAGES WAS NOT FULLY SUPPORTED BY THE DOCUMENTARY EVIDENCE AND EVEN THE LD. COUNSEL FOR TH E ASSESSEE HAS NOT BEEN ABLE TO BRING ANYTHING ON RECORD TO REBUT OR CONTROVERT THE FINDING RECORDED BY THE ASSESSING OFFICER AS WELL AS LD. CIT(A) TO THIS EFFECT. AT THE SAME TIME, IT IS OBSERVED THAT THE DISALLOWANCE OF 15% OF WAGES WAS MADE BY THE ASSE SSING OFFICER AFTER HAVING FOUND THAT THE TOTAL WAGES CLAIMED BY THE ASSESSEE AT 31.36% OF THE TOTAL RECEIPTS WERE ON THE HIGHER SIDE. AS RIGHTLY NOTED BY THE LD. CIT(A) IN THIS REGARD, THERE WAS A MISTAKE IN THE WORKING MADE BY THE ASSESSING OFFICER IN A S MUCH AS THE SUBSTANTIAL INCREASE IN WORK - IN - PROGRESS DURING THE YEAR UNDER CONSIDERATION WAS NOT TAKEN INTO CONSIDERATION BY THE ASSESSING OFFICER WHILE WORKING THE PERCENTAGE OF WAGES AT 31.36%. SINCE THE WAGES AS CORRECTLY WORKED OUT BY THE LD. CIT(A) AT 22.73% WAS FAIR AND REASONABLE, I AM OF THE VIEW THAT DISALLOWANCE OF 7% OF THE WAGES ITA NO . 1961 /PUN/ 20 1 9 6 SUSTAINED BY THE LD. CIT(A) FOR THE UNVERIFIABLE ELEMENT INVOLVED IN THE WAGES IS SLIGHTLY ON THE HIGHER SIDE AND IT W OULD BE FAIR AND REASONABLE TO RESTRICT THE SAME TO 5%. ACCORDINGLY, I MODIFY THE IMPUGNED ORDER OF LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO RE - COMPUTE THE DISALLOWANCE OUT OF WAGES TO THE EXTENT OF 5%. GROUND NO.2 IS THUS, PARTLY ALLOWED. 11 . IN THE RESULT, THE APPEAL O F ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE O PEN COURT ON 3 RD DECE MBER , 2020 SD/ - ( P.M. JAGTAP ) VICE PRESIDENT / PUNE; / DATED : 3 RD D ECEMBER, 2020. GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT (A) - 2 , PUNE 4 . 5. THE PR. CIT - 1 , PUNE , , / DR, ITAT, SMC PUNE 6 . / GUARD FILE / BY ORDER, / / TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE