M/s. Hathibhai M. Patel, KHAMBHAT V. The Income Tax Officer, Ward-3(3), Petlad

ITA 1967/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8872 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 23-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 30-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Additional evidence
• Section: 40A(3); 143(3); 142(1); 234B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO. 1967/AHD/2014 / ASSESSMENT YEAR: 2005-06 M/S. HATHIBHAI M PATEL, 1, RAJDARSHAN, STATION ROAD, KHAMBHAT-388620 PAN : AAAFH 9339 R VS. ITO, WARD 3(3), PETLAD [ / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI PARIN SHAH, AR REVENUE BY : MR. SANJEEV KUMAR DEV, SR DR / DATE OF HEARING : 23/03/2017 / DATE OF PRONOUNCEMENT: 24/03/2017 / O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 20 05-06 IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, BARODA DATED 21.03.2014 VIDE APPEAL NO.CAB(A)-V/268/09-10, ARISING OUT OF ORDER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) DATED 26.11.2007 FRAMED BY THE INCOME-TAX OFFICER, WARD-3 (3), PETLAD. 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE MADE BY AO OF RS. 52, 500/6UT OF CARTING EXPENSES. LD. CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT APPELLANT SUBMITTED LEDG ER ACCOUNT OF CARTING EXPENSES ALONG WITH TOTAL BILLS BEFORE AO DURING AS SESSMENT PROCEEDINGS. LD. CIT (A) OUGHT TO HAVE DELETED DISALLOWANCE MADE BY AO ON FRIVOLOUS GROUNDS. IT BE SO HELD NOW. 2. WITHOUT PREJUDICE TO THE FACT OF SUBMISSION OF THE BILLS DURING ASSESSMENT PROCEEDINGS, ID. CIT (A) ERRED IN LAW IN NOT ADMITT ING DISPUTED BILLS AS ADDITIONAL EVIDENCE UNDER RULE 46 OF IT RULES SUBST ANTIATING GENUINENESS OF EXPENSES INCURRED BY THE APPELLANT. THE IMPUGNED OR DER BE SET ASIDE TO ID. CIT (A) WITH DIRECTION TO ADMIT ADDITIONAL EVIDENCE ON THE PRINCIPLES OF NATURAL JUSTICE. IT BE SO HELD NOW. ITA NO. 1967/AHD/2014 HATHIBHAI M PATEL VS. ITO AY : 2005-06 - 2 3. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE MADE BY AO OF RS. 30, 000/- INVOKING PROVISIONS OF SECTION 40A(3) OF THE ACT. BOTH THE LOWER AUTHORITIES HAVING ACCEPTED GENUINENESS O F TRANSACTION OUGHT NOT TO HAVE DISALLOWED PAYMENT MADE THROUGH BEARER CHEQUE ON REQUEST FROM BUSINESS ASSOCIATE. IT BE SO HELD NOW. 4. LEVY OF INTEREST U/S 234BOF THE ACT IS NOT JUST IFIED. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PART NERSHIP FIRM, ENGAGED IN THE BUSINESS OF ROAD CONSTRUCTION. RETURN OF INCOME WA S FILED ON 31.10.2005, DECLARING TOTAL INCOME AT RS.4,71,570/-. CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) FOLLOWED BY 142(1) WERE ISSUED AND DULY SERVED UPON THE ASSESSEE. NECESSARY DETAILS, AS CAL LED FOR, WERE DULY FURNISHED BY THE ASSESSEE. TOTAL RECEIPT FOR THE YEAR WAS SHO WN AT RS.1,70,83,131/- AND BOOKS OF ACCOUNTS WERE AUDITED U/S 44AB OF THE ACT. ASSESSMENT WAS COMPLETED AFTER DISALLOWING CARTING EXPENSES OF RS. 52,500/-, DISALLOWANCE U/S 40A(3) OF THE ACT AT RS.30,000/- AND DISALLOWANCE O F TELEPHONE EXPENSES AT RS.9,420/-. IN TOTAL, AFTER MAKING DISALLOWANCES O F RS.91,920/-, THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS.5,63,490/-. 4. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE TH E LD. CIT(A) AND CONTENDED FOR DISALLOWANCE OF CARTING EXPENSES OF R S.52,500/- AND DISALLOWANCE U/S 40A(3) OF RS.30,000/-; BUT DID NOT PRESS DISALL OWANCE OF RS.9,420/- FOR TELEPHONE EXPENSES. HOWEVER, LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL ON TWO ISSUES RELATING TO DISALLOWANCE OF CARTING EXPENSES OF RS.52,500/- AND DISALLOWANCE U/S 40A(3) OF RS.30,000/-. 6. FIRST WE TAKE UP GROUND NOS. 1 & 2, RELATING TO DISALLOWANCE OF CARTING EXPENSES OF RS.52,500/-. 7. LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUB MITTED THAT ASSESSEE HAS INCURRED A SUM OF RS.35,35,555/- FOR CARTING EXPENS ES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, COMPLETE DETAILS WITH PARTY -WISE ACCOUNT WERE ITA NO. 1967/AHD/2014 HATHIBHAI M PATEL VS. ITO AY : 2005-06 - 3 FURNISHED RELATING TO CARTING EXPENSES OF RS.34,83 ,055/- AND, ONLY FOR A MINOR AMOUNT OF RS.52,500/-, THE ASSESSEE COULD FURNISH O NLY NAMES OF THE PARTIES BUT COULD NOT FILE EVIDENCE TO THE SATISFACTION OF THE LD. ASSESSING OFFICER. LD. COUNSEL CONTENDED THAT ASSESSEES BOOKS OF ACCOUNTS WERE AUDITED AND, EXCEPT FOR 1.5% OF THE TOTAL CARTING EXPENSES, THE REMAINI NG AMOUNT WAS FOUND TO BE CORRECT WITH PROPER SUPPORTING. IN SUCH A SITUATION , NO DISALLOWANCE WAS CALLED FOR. 8. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE ISSUE RAISED IN THIS GROUND IS AGAI NST THE ORDER OF THE CIT(A) CONFIRMING DISALLOWANCE OF RS.52,500/- ON ACCOUNT O F CARTING EXPENSES. ON PERUSAL OF THE ASSESSMENT ORDER, WE FIND THAT DETAI LS WERE CALLED FOR FROM THE ASSESSEE ABOUT THE CARTING EXPENSES OF RS.35,35,555 /-. ASSESSEE FURNISHED DETAILS WITH PARTY-WISE ACCOUNT OF CARTING EXPENSES OF RS.34,83,055/- TO THE SATISFACTION OF THE LD. ASSESSING OFFICER. THE ISSU E REMAINED ONLY FOR RS.52,500 /- . WE FIND THAT THE ASSESSEES GROSS RECEIPTS ARE OF R S. 1.71 CRORES APPROX. AND THE CARTING EXPENSES, WHICH ARE NORMALLY IN THE NATURE OF LABOUR AND FREIGHT CHARGES, ARE INCURRED ON DAY TO DAY BASIS. ASSESSE E HAS FAIRLY SATISFIED THE ASSESSING OFFICER TO 98.5% OF THE TOTAL CARTING EXP ENSES. WE FURTHER OBSERVE THAT ASSESSEE HAS FURNISHED THE DETAILS OF EXPENSES OF R S.52,500/- WHICH WERE INCURRED TOWARDS CARTING EXPENSES PAID TO M/S. GURU DEV QUARRY WORKS AND CHIMANBHAI AMBALAL PATEL; BUT, FOR SOME REASONS, CO ULD NOT PRODUCE THE BILLS DURING THE COURSE OF ASSESSMENT PROCEEDINGS; HOWEVE R, THEY WERE SUBSEQUENTLY PLACED BEFORE THE FIRST APPELLATE AUTHORITY. 10. WE ARE, THEREFORE, OF THE VIEW THAT IN SUCH A S ITUATION WHERE THE ASSESSEE HAS FAIRLY PROVED THE EXPENSES AND LOOKING TO THE T YPE OF BUSINESS ASSESSEE IS INVOLVED INTO, I.E., ROAD CONSTRUCTION WORK, NO DIS ALLOWANCE WAS CALLED FOR AT RS.52,500/-. WE DELETE THE SAME. THIS GROUND OF ASSESSEE IS ALLOWED. ITA NO. 1967/AHD/2014 HATHIBHAI M PATEL VS. ITO AY : 2005-06 - 4 11. GROUND NO.3 RELATES TO DISALLOWANCE OF RS.30,00 0/- U/S 40A(3) OF THE ACT. LD. COUNSEL SUBMITTED THAT THERE WAS A PAYMENT OF R S.1,50,000/- TO SHRI GIRISHBHAI J. PATEL (CREDITOR OF ASSESSEE) THROUGH BEARER CHEQUE NO.071028 OF KALUPUR CO.OP. BANK OF ANAND. THE ASSESSING OFFICE R, ON VERIFICATION OF BANK STATEMENT, OBSERVED THAT CASH HAS BEEN WITHDRAWN AG AINST THIS CHEQUE AND, AS THE AMOUNT OF THE CHEQUE WAS EXCEEDING RS.20,000/- AND IT WAS NOT PAID BY ACCOUNT PAYEE OR CROSSED CHEQUE, LD. ASSESSING OFFI CER OBSERVED THAT ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 40A(3) OF TH E ACT AND DISALLOWED 20% OF THE AMOUNT AND CONFIRMED THE DISALLOWANCE OF RS.30, 000/-. 12. LD. COUNSEL FURTHER SUBMITTED THAT THE ALLEGED AMOUNT OF RS.1,50,000/- WAS PAID TO SHRI GIRISHBHAI J. PATEL ON HIS REQUEST FOR GETTING QUICK PAYMENT. FURTHER, SHRI GIRISHBHAI J. PATEL IS REGULARLY ASSE SSED TO INCOME-TAX AND HIS PAN WAS ALSO SUBMITTED. THEREFORE, THE PAYMENT OF R S.1,50,000/- IS TO BE CONSIDERED AS GENUINE PAYMENT AND NO DISALLOWANCE W AS CALLED FOR U/S 40A(3) OF THE ACT. 13. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTAT IVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE GRIEVANCE OF THE ASSESSEE IS AGAIN ST THE DISALLOWANCE OF RS.30,000/- U/S 40A(3) OF THE ACT FOR MAKING PAYMEN T THROUGH BEARER CHEQUE OF RS.1,50,000/- TO THE CREDITOR. WE FIND THAT ASS ESSEE HAS NOT DISPUTED THE FACT THAT PAYMENT OF RS.1,50,000/- WAS GIVEN TOWARDS EXP ENDITURE INCURRED AND THIS SUM WAS PAID THROUGH A BEARER CHEQUE TO SHRI GIRISH BHAI J. PATEL OF RS.1,50,000/-. LD. COUNSEL HAS ONLY TAKEN A PLEA T HAT THE BEARER CHEQUE WAS ISSUED ON THE REQUEST OF THE CREDITOR FOR GETTING A N EARLY PAYMENT, BECAUSE THE CHEQUES OF CO-OPERATIVE BANK NORMALLY GET CLEARED I N 3-6 DAYS. HOWEVER, LD. COUNSEL COULD NOT PROVE THAT THE SAID PAYMENT WAS C OVERED IN ANY OF THE EXCEPTIONS UNDER RULE 6DD OF IT RULES AND THE CONTE NTIONS WERE GENERAL IN NATURE. ITA NO. 1967/AHD/2014 HATHIBHAI M PATEL VS. ITO AY : 2005-06 - 5 15. PROVISIONS OF SECTION 40A(3) OF THE ACT CONTEMP LATE THAT DEDUCTION OF AN EXPENDITURE WILL NOT BE ALLOWED IF THE PAYMENT OR C REDIT PAYMENT MADE TO A PERSON IN A DAY EXCEEDING RS.20,000/- IS MADE OTHER WISE THAN BY AN ACCOUNT PAYEE CHEQUE/DRAFT. THE FACTS OF THE ASSESSEE CLEA RLY SHOW THAT THE IMPUGNED PAYMENT OF RS.1,50,000/- FALLS UNDER THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND ASSESSEE COULD NOT PROVE THAT THIS TRANSACTION FALLS IN ANY OF THE EXCEPTIONS PROVIDED IN RULE 6DD OF THE IT RULES. WE ARE, THER EFORE, OF THE VIEW THAT, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, NO INTER FERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.30,000/- MADE BY THE ASSESSING OFFICER U/S 40A(3) OF THE ACT. 16. GROUND NO.4 IS AGAINST THE CHARGING OF INTEREST U/S 234B OF THE ACT. WE HOLD THAT CHARGING OF INTEREST IS CONSEQUENTIAL AND ACCORDINGLY DISPOSE OF THIS GROUND OF THE ASSESSEE. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED ORDER PRONOUNCED IN THE COURT ON 24 TH MARCH 2017 AT AHMEDABAD. SD/- SD/- ( S.S. GODARA ) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER AHMEDABAD; DATED, 24/03/2017 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ & / CONCERNED CIT 4. & ) ( / THE CIT(A)- 5. $ , $ , /DR,ITAT, AHMEDABAD, 6. 0 / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT.REGISTRAR) $ ITAT, AHMEDABAD