Biswanath Mondal, Burdwan V. ITO,Ward-2(2), Asansol, Asansol

ITA 199/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4411 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 19-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 03-02-2014
• Court: TRIBUNAL
• Assessee Lawyers: U DASGUPTA LD
• Keywords: Opportunity of being heard
• Section: 40A(3); 142(1)

Judgement Text

ITA NO. 199/KOL/14 BISWANATH MONDAL 1 IN THE INCOME TAX APPELLATE TRIBUNAL,B BENCH, KOLKATA BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 199/KOL/2014 A.Y: 2010-11 BISWANATH MONDAL VS. INCOME-TAX OFFICER PAN:AMQPM0377G WARD 2(2),ASANSOL (APPELLANT) (RESPONDENT) APPEARANCES BY: SHRI U.DASGUPTA, ADVOCATE, LD.AR FOR THE ASSESSEE SHRI TANUJ KR. NEOGI, JCIT, LD. SR.DR FOR T HE REVENUE DATE OF HEARING : 19-07- 2016 DATE OF PRONOUNCEMENT : 04-10-2016 O R D E R SHRI S.S. VISWANETHRA RAVI, JM :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25-11-2013 OF THE COMMISSIONER OF INCOME TAX( APPEALS), ASANSOL FOR THE ASSESSMENT YEAR 2010-11. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING EFFECTIVE GROUND:- 1)FOR THAT ON THE FACTS OF THE CASE THE LD.CIT(A),A SANSOL, WAS NOT LEGALLY JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 76,01,538/-, MADE BY THE A.O. U/S. 40A(3) OF THE AC T'61, WHEN SUCH PAYMENTS MADE INTO THE BANK ACCOUNT OF TH E SELLER, ( BEING GOVERNMENT WAREHOUSE UNDER RULE-7 OF WEST B ENGAL EXCISE ( SCS PD ) RULES'05 ) , ARE LEGALLY COVERED BY ITA NO. 199/KOL/14 BISWANATH MONDAL 2 EXCEPTIONS TO RULE - 6DD OF THE INCOME TAX RULES '6 2 , AND AS SUCH THE ADDITION MAY PLEASE BE DELETED. 2) FOR THAT ON THE FACTS OF THE CASE THE IDENTITY O F THE PAYEE, THE GENUINENESS OF THE TRANSACTION AND PAYMENTS BEI NG FULLY ACCOUNTED AND DISCLOSED, BOTH, BY THE PURCHASER AND THE SELLER, THE SCOPE AND OBJECT OF SECTION 40A(3) OF T HE ACT'61, IS SATISFIED, AND THE DISALLOWANCE SUSTAINED BY THE CI T(A) , ON THIS COUNT, MAY PLEASE BE DELETED. 3) FOR THAT ON THE FACTS OF THE CASE THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND ANY FURTHER GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. THE ASSESSEE IS AN INDIVIDUAL AND DEALING IN THE BUSINESS OF COUNTRY SPIRIT AND PACHWAI SHOP. THE AS SESSEE FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME O F RS.3,97,690/- FOR THE A.Y:2010-11. UNDER SCRUTINY N OTICE U/S. 143(2) AND THEREAFTER NOTICE U/S. 142(1) WERE ISSUED. 4. THE AO FOUND THE ASSESSEE PURCHASED COUNTRY SPIR IT FROM ASANSOL BOTTLING PLANT IN CASH TO AN EXTENT OF RS.76,01,538/- AND NOT SATISFIED WITH THE EXPLANATI ON OFFERED BY THE ASSESSEE, THE AO DISALLOWED AN AMOUN T OF RS.76,01,538/- FOR VIOLATION OF PROVISIONS OF SECTI ON 4OA(3) ACT AND ADDED SAME TO THE RETURNED INCOME OF THE ASSESSEE. 5. BEFORE THE CIT-A, THE ASSESSEE CONTENDED THAT RU LE 6(2) OF WEST BENGAL EXCISE (SUPPLY OF COUNTRY SPIRI T ON PAYMENT OF DUTY) RULES, 2005 DEBARS DIRECT PAYMENT TO LOCAL TREASURY FOR ISSUE OF COUNTRY SPIRIT AND THE BOTTLING COMPANY RECEIVING THE PAYMENT ON BEHALF OF GOVERNME NT AND MONEY IS DEPOSITED IN BANK ACCOUNT BELONGING TO ITA NO. 199/KOL/14 BISWANATH MONDAL 3 BOTTLING COMPANY AND THE PROVISIONS OF SECTION 40A( 3) OF THE ACT IS NOT APPLICABLE. CONSIDERING THE SUBMISSI ONS, THE CIT-A CONFIRMED THE DISALLOWANCE AND ADDITIONS MADE THEREON. THE RELEVANT PORTION OF WHICH IS REPRODUCE D HEREIN BELOW: 6. RULES 4 AND 5 OF WEST BENGAL EXCISE (SUPPLY OF COUNTRY SPIRIT ON PAYMENT OF DUTY) RULES, 2005 PRESCRIBE THE MANNER OF PAYMENT TO WEST BENGAL GOVT . IT STATES THAT BOTTLING PLANT HAS TO MAKE ADVANCE PAYMENT TO GOVT. AND SUMS PAID BY INDIVIDUAL DEALER S ARE DEBITED TO THE ADVANCE. THERE IS NO REMITTANCE OF CASE BY CASE REMITTANCE OF SUMS PAID BY DEALERS TO BOTTLING PLANT FOR SUBSEQUENT REMITTANCE BY BOTTLIN G PLANT TO GOVT. THE RULES NO WHERE PRESCRIBE MANDATO RY CASH PAYMENT. 7. GROUND 5 IS BY WAY OF RELIANCE TO CIRCULAR 220 D ATED 31.5.1977 TO STATE THAT SECTION 40A(3) IS NOT ATTRA CTED. SINCE THE CIRCULAR WAS ISSUED, LAW HAS BEEN AMENDED SO AS TO MAKE IT NON-DISCRETIONARY. THE POWER AVAILABL E TO ASSESSING OFFICER IS LIMITED AND IS WITHIN CONFINES OF RULE 6DD AS PREVAILING IN AY 2010-11. HENCE THE CIRCULAR MENTIONED IN GROUND 5 HAS NO RELEVANCE. AFTER CONSIDERING ALL ASPECTS, SINCE THE THREE QUESTIONS RAISED BY ME WITH REASONS ARE NOT NEGATED IN ANY MANNER, A ND FURTHER WEST BENGAL EXCISE (SUPPLY OF COUNTRY SPIRI T ON PAYMENT OF DUTY) RULES, 2005 DOES NOT MAKE CASH PAYMENT COMPULSORY AND FURTHER SINCE BOTTLING PLANT IS NOT GOVERNMENT, I HOLD THAT THE ASSESSING OFFICER H AS RIGHTLY APPLIED THE DISALLOWANCE UNDER SECTION 40A( 3). GROUNDS 2 TO 5 ARE DISPOSED OF DIRECTING ASSESSING OFFICER TO VERIFY WHETHER ANY PAYMENT BELOW RS 20,0 00 WAS DISALLOWED AND IF SO ELIMINATE THE SAME AND RECOMPUTE CORRECT AMOUNT TO BE DISALLOWED. REASONAB LE OPPORTUNITY OF BEING HEARD IS TO BE GRANTED TO ASSE SSEE BEFORE IMPLEMENTING THIS DIRECTION. THE GROUNDS ARE TREATED AS PARTLY ALLOWED. 6. AGGRIEVED BY SUCH ORDER OF THE CIT-A, NOW THE AS SESSEE IS IN APPEAL BY RAISING THE ABOVE MENTIONED GROUNDS. 7. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ISSUE INVOLVED IN ITA NO. 199/KOL/14 BISWANATH MONDAL 4 THIS APPEAL OF THE ASSESSEE RELATING TO THE DISALLO WANCE UNDER SECTION 40A(3) IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS DECISIONS OF THIS TRIBUNAL. IN ONE OF S UCH CASES, NAMELY M/S. AMRAI PACHWAI & C.S. SHOP DECIDED BY TH E TRIBUNAL VIDE ITS ORDER DATED 15.01.2014 PASSED IN ITA NO. 1251/KOL/2011, PAYMENTS WERE MADE BY THE ASSESSEE A GAINST PURCHASES MADE FROM THE SAME PARTY, NAMELY M/S. ASA NSOL BOTTLING & PACKING CO. PVT. LIMITED BY DEPOSITING THE CASH DIRECTLY IN THE BANK ACCOUNT OF THE SAID SUPPLIER I N THE SUMS EXCEEDING RS.20,000/- AND THE DISALLOWANCE MADE FOR THE SAME UNDER SECTION 40A(3) WAS DELETED BY THE TRIBUNAL FO R THE FOLLOWING REASONS GIVEN IN PARAGRAPHS NO. 21 & 22 O F ITS ORDER:- 21. WE FIND THAT M/S. ASANSOL BOTTLING & PACKAGING CO. PVT. LTD. IS A BOTTLING PLANT CUM WAREHOUSE UND ER RULE 2(VII) OF THE WEST BENGAL EXCISE RULES, 2005 W ITH PRIVILEGE GRANTED U/S 22 OF THE BENGAL EXCISE ACT, 1909. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO GO INTO THE DEFINITION OF WAREHOUSE AS PROVIDED UNDER THE S TATE EXCISE RULES, 2005, AS BELOW:- WAREHOUSE, UNDER RULE 2(VII) OF THE W.B. EXCISE RULES, 2005, MEANS THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VENDORS, ESTABLISHED AT CONVENIENT PLACES BY THE COMMISSIONER AT THE EXPENS E OF THE STATE GOVERNMENT, OR AT THE EXPENSE OF A PER SON TO WHOM THE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SEL LING COUNTRY SPIRIT BY WHOLESALE HAS BEEN GRANTED UNDER SECTION 22 OF THE ACT, OR OF A LICENSED WHOLESALE V ENDOR OF COUNTRY SPIRIT. THE ABOVE DEFINITION MAKES IT CLEAR THAT THE 'WAREHOUSE' REFERRED TO UNDER THE STATE EXCISE RULE S IS UNDER THE DIRECT CONTROL AND AUTHORITY OF THE COMMISSIONER OF STATE EXCISE BECAUSE IT IS ESTABLIS HED BY THE COMMISSIONER OF STATE EXCISE AND AS SUCH IS A STATE GOVERNMENT ESTABLISHMENT. IT IS ALSO PERTINEN T TO NOTE THAT THE EXPENDITURE IN RELATION TO SUCH WAREH OUSE IS BORNE BY THE STATE GOVERNMENT OR BY THE LICENSEE TO WHOM THE EXCLUSIVE PRIVILEGE IS GRANTED U/S 22 OF T HE BENGAL EXCISE ACT, 1909. HENCE THERE COULD BE NO DO UBT THAT THE WAREHOUSE IS ESTABLISHED BY THE STATE EXCI SE COMMISSIONER. HENCE IT COULD BE SAFELY CONCLUDED TH AT THE WAREHOUSE SO ESTABLISHED BY THE STATE EXCISE COMMISSIONER IS A STATE GOVERNMENT ESTABLISHMENT. I T WOULD ALSO BE PERTINENT TO NOTE THAT THE SAID WAREH OUSE ITA NO. 199/KOL/14 BISWANATH MONDAL 5 HAS BEEN SPECIFICALLY ESTABLISHED FOR SUPPLY OF COU NTRY SPIRIT TO RETAIL VENDORS (ASSESSEE HEREIN) ONLY AND NOT TO ANYBODY ELSE. IT WOULD BE PERTINENT TO LOOK INTO THE DEFINITION O F 'WHOLESALE LICENSEE' AS PER RULE 2(VIII) OF THE EXC ISE RULES 2005 AS BELOW.- RULE 2(VIII) - 'WHOLESALE LICENSEE' MEANS THE WHOLE SALE VENDOR OF COUNTRY SPIRIT TO WHOM LICENCE HAS BEEN GRANTED IN WEST BENGAL EXCISE FORM NO. 26. IT WOULD BE PERTINENT TO LOOK INTO SECTION 22 OF TH E BENGAL EXCISE ACT. 1909 AT THIS JUNCTURE AS BELOW:- SECTION 22 - GRANT OF EXCLUSIVE PRIVILEGE OF MANUFA CTURE AND SALE OF COUNTRY LIQUOR OR INTOXICATING DRUGS - (1) THE STATE GOVERNMENT MAY GRANT TO ANY PERSON, O N SUCH CONDITIONS AND FOR SUCH PERIOD AS IT MAY THINK FIT, THE EXCLUSIVE PRIVILEGE - (A) OF MANUFACTURING, OR SUPPLYING BY WHOLESALE, OR (B) OF MANUFACTURING, AND SUPPLYING BY WHOLESALE, O R (C) OF SELLING, BY WHOLESALE OR RETAIL. OR (D) OF MANUFACTURING OR SUPPLYING BY WHOLESALE AND SELLING RETAIL, OR (E) OF MANUFACTURING AND SUPPLYING BY WHOLESALE AND SELLING RETAIL, ANY COUNTRY LIQUOR OR INTOXICATING DRUG WITHIN ANY SPECIFIED LOCAL AREA: PROVIDED THAT PUBLIC NOTICE SHALL BE GIVEN TO THE INTENTION TO GRANT ANY SUCH EXCLUSIVE PRIVILEGE. AN D THAT ANY OBJECTIONS MADE BY ANY PERSON RESIDING WITHIN T HE AREA AFFECTED SHALL BE CONSIDERED BEFORE AN EXCLUSI VE PRIVILEGE IS GRANTED. (2) NO GRANTEE OF ANY PRIVILEGE UNDER SUB-SECTION ( 1) SHALL EXERCISE THE SAME UNLESS OR UNTIL HE HAS RECE IVED A LICENSE IN THAT BEHALF FROM THE COLLECTOR OR THE EXCISE COMMISSIONER. HENCE IT COULD BE SAFELY CONCLUDED THAT M/S. ASANSO L BOTTLING & PACKAGING CO. PVT LTD (BOTTLING PLANT) I S A WAREHOUSE WITHIN THE MEANING OF RULE 2(VII) OF THE EXCISE RULES 2005 AND SAID WAREHOUSE IS A STATE GOVERNMENT ESTABLISHMENT, ESTABLISHED AND CONTROLLE D BY THE EXCISE COMMISSIONER. IT WOULD BE RELEVANT TO REPRODUCE RULE 6DD(B) OF THE IT RULES AT THIS JUNCTURE;- ITA NO. 199/KOL/14 BISWANATH MONDAL 6 (B) WHERE THE PAYMENT IS MADE TO THE GOVERNMENT AND , UNDER THE RULES FRAMED BY IT, SUCH PAYMENT IS REQUI RED TO BE MADE IN LEGAL TENDER. IN THE INSTANT CASE, THE ASSESSEE (RETAIL VENDOR) H AD MADE CASH PAYMENTS FOR PURCHASE OF COUNTRY SPIRIT B Y DEPOSITING CASH DIRECTLY INTO THE BANK ACCOUNT OF M /S ABPL AS PER RULE 6(2) OF THE EXCISE RULES 2005 , IT HAS TO BE CONSTRUED AS PAYMENT MADE TO THE STATE GOVERNMENT AUTHORITY AND ACCORDINGLY FALLS UNDER TH E EXCEPTION PROVIDED IN RULE 6DD(B) OF THE IT RULES. 22. IT IS NOT IN DISPUTE THAT M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD HAVE BEEN GRANTED LICENCE TO ACT AS A WHOLESALER FOR SUPPLY OF COUNTRY LIQUOR TO THE RETAIL VENDOR AS PER THE REGULATIONS OF THE EXCISE DEPARTM ENT, GOVERNMENT OF WEST BENGAL. AT THE COST OF REPETITIO N, WE WOULD LIKE TO STATE THAT THE SAID REGULATION MANDATED THE PAYMENTS TO BE MADE DIRECTLY INTO THE BANK ACCOUNT OF THE SAID WHOLESALE LICENSEE BY THE RETAIL VENDOR (I.E ASSESSEE HEREIN) FOR STRICT AND EFFECTIVE REGULATION OF THE COUNTRY LIQUOR AND FOR PREVENTION OF SPURIOUS STOCKS AND BLACK MARKETING TRANSACTIONS FROM THE SAME. HENCE IT COULD BE SAFEL Y CONCLUDED THAT THE SAID WHOLESALE LICENSEE HAD ACTE D AT THE INSTANCE OF THE STATE GOVERNMENT. ONCE THIS IS SO, THEN THE SAID WHOLESALE LICENSEE COULD BE CONSTRUED AS AN AGENT OF THE STATE GOVERNMENT. FOR THE SAKE OF CONVENIENCE, THE RELEVANT RULE IS REPRODUCED HEREUNDER:- RULE 6DD(K) - WHERE THE PAYMENT IS MADE BY ANY PERS ON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CAS H FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON. THE PAYMENT MADE BY THE ASSESSEE RETAIL VENDOR TO T HE PRINCIPAL, GOVERNMENT OF WEST BENGAL THROUGH ITS WHOLESALE AGENT. THE RELATIONSHIP BETWEEN THE ASSES SEE (AUTHORIZED RETAILER) AND GOVERNMENT OF WEST BENGAL (THE SUPPLIER) ACTING UNDER WEST BENGAL EXCISE RULE S THROUGH ITS AUTHORISED WHOLESALER LICENSEE (AGENT), BOTH DEFACTO AND DEJURE, IS ONE OF 'PRINCIPAL' AND 'AGENT'. WE HOLD THAT THE ASSESSEE RETAIL VENDOR HA D MADE PAYMENT TO THE SAID AGENT (WHOLESALE LICENSEE) WOULD FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD (K) OF THE RULES. 8. AS THE ISSUE INVOLVED IN THE PRESENT APPEAL AS W ELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASE OF M/S. AMRAI PACHWAI & C.S. SHOP (SUPRA), WE RESPECTF ULLY FOLLOW THE DECISION RENDERED BY THE COORDINATE BENCH OF TH IS TRIBUNAL ITA NO. 199/KOL/14 BISWANATH MONDAL 7 IN THE SAID CASE AND DELETE THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER AND CONFIRMED BY THE CIT-A UNDER SECTION 40A(3) OF THE ACT. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH OCTOBER,2016 SD/- SD/- P.M JAGTAP S.S.VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 04 /10/2016 1. THE APPELLANT/ ASSESSEE: SHRI BISWANATH M ONDAL PROP: CH HATAPATHAR C.S & PACHAI SHOP CHHATAPATBAR, P.O KALIBARI, ASANS OL 71339(WB). 2 . THE RESPONDENT/ REVENUE: INCOME TAX OFFICER, PARMAR BUILDING APCAR GARDEN G.T ROAD (W) ASANSOL 713304. 3. CIT 4. CIT(A) 5. THE DEPARTMENTAL REPRESENTATIVE 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGIS TRAR ** PRADIP SPS INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA COPY OF THE ORDER FORWARDED TO : -