Diamond Tannery & Co., Kolkata V. I.T.O., Wd-45(2), Kol, Kolkata

ITA 2041/KOL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7954 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 02-12-2009
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Assessee Lawyers: SOUMITRA CHOW DHURY
• Section: 40A(3); 251

Judgement Text

INCOME TAX APPELLATE TRIBUNAL B BENCH, KOLKA TA (BEFORE HONBLE SMT. DIVA SINGH, JM & SHRI C.D.RAO, AM) I.T.A.NO.2041/KOL/2009 ASSESSMENT YEAR : 2004-05 DIAMOND TANNERY & CO. -VS- ITO, WARD-33(4), KOLKATA PAN : AABFD 9556B KOLKATA (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SOUMITRA CHOWDHURY RESPONDENT BY : SMT. JYOTI KUMARI O R D E R PER SMT. DIVA SINGH, JUDICIAL MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 07.09.2009 OF THE CIT-(A)-XX, KOLKATA RELATING TO ASSESSMENT YEAR 200 4-05 WHEREIN THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE BEFORE US :- 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ORDER OF LD. AO U/S 143 (3) OF THE IT ACT 1961 WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES UNDER WHIC H THE APPELLANT WAS COMPELLED TO MAKE THE PAYMENTS. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS NOT RATIONAL IN DISPOSING APPEAL WITHIN A REASONABLE PE RIOD AND TAKING A TIME GAP OF TWO YEARS BETWEEN FIRST AND FINAL/CONCLUSIVE HEA RING OF THE APPEAL. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) WAS NOT JUSTIFIED IN HIS ACTION, EVEN AFTER KNOWING THAT THE PAYMENTS WE RE NOT ONLY GENUINE, BUT WERE DULY VERIFIED AND ESTABLISHED IN DEPARTMENTAL ENQUIRY, AND RELATES TO THE PARTIES STATIONED AT U.P. AND BIHAR AT A DISTANCE O F MORE THAN THOUSAND KILOMETERS AND PAYMENTS HAD TO BE MADE THROUGH OTHE R PARTIES. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER OF CIT(A) WAS NOT RATIONAL IN NOT APPRECIATING THAT DENIAL OF APPLICA BILITY OF RULE 6DD WITH VARIOUS PLEAS WHILE APPLYING THE PROVISION OF SEC.4 0A(3) AMOUNTS TO DENIAL OF JUSTICE TO THE APPELLANT. 5. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) WAS IRRATIONAL IN CONFIRMING THE DOMESTIC ELECTRICITY CONSUMPTION OF THE APPELLANT AT RS.48,000/- WITHOUT ANY BASIS. 6. THAT IN THE FACTS AND CIRCUMSTANCE OF THE CASE T HE ORDER OF CIT(A) IS IRRATIONAL UNJUST AND BAD IN LAW. 7. THAT THE APPELLANT CRAVES LEAVE TO RAISE ADDITIO NAL GROUND OR GROUNDS BEFORE OR AN COURSE OF HEARING OF APPEAL. 2 2. THE RELEVANT FACTS OF THE CASE AS APPEARING IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE WHO IS A PARTNERSHIP FIRM ENGAGED IN MANUF ACTURING AND SELLING OF FINISHED LEATHER WAS REQUIRED BY THE AO TO EXPLAIN THE PAYME NT OF RS.24,68,900/- MADE BY WAY OF BEARER CHEQUES FOR THE SUPPLY OF RAW HIDES. THE BREAK-UP OF THE SAID AMOUNT AS APPEARING AT PAGE 2 OF THE ASSESSMENT ORDER IS AS U NDER :- SL.NO. NAME OF THE PARTY AMOUNT (RS.) 1. ANKHAR QUARISHI 5,76,400 2. MD.RAZZAQUE 2,97,400 3. JAHANGIR ALAM 7,02,000 4. ANWAR ALI 4,88,300 5. RIZWAN KHAN 2,50,000 6. JALIL AHMED 1,54,200 TOTAL 24,68,900 2.1. IN REPLY THE ASSESSEE SUBMITTED THAT THE PAYMENTS MADE AGAINST THE PURCHASE OF HIDES WERE COVERED BY THE EXCEPTIONS PROVIDED UNDER SECTION 40A(3) OF THE ACT AS THE PAYMENTS WERE MADE TO THE PRODUCERS OF HIDES AND SK INS. RELIANCE WAS PLACED UPON SUB-RULE (II) OF RULE 6DD(F) OF THE INCOME TAX RULE S WHICH READS AS UNDER :- RULE 6DD(F) PROVIDES THAT : WHERE THE PAYMENT IS MADE FOR THE PURCHASE OF I) AGRICULTURAL OR FOREST PRODUCE; OR II) THE PRODUCE OF ANIMAL HUSBANDRY (INCLUDING HIDES AN D SKINS)OR DIARY OR POULTRY FARMING; OR III) FISH OR FISH PRODUCTS; OR IV) THE PRODUCTS OF HORTICULTURE OR APICULTURE, TO THE CULTIVATOR, GROWER, OR PRODUCER OF SUCH ARTI CLES, PRODUCE OR PRODUCTS. 2.2. ON A PERUSAL OF THE DOCUMENTARY EVIDENCE FILED BY WAY OF SALE BILLS AND WEIGH BILLS THE AO WAS OF THE VIEW THAT THAT THE PAYMENTS WERE MADE AFTER MORE THAN A FEW MONTHS FROM THE DATES THE HIDES WERE DISPATCHED TO THE ASSESSEE. THUS SINCE THE ASSESSEE HAD SUFFICIENT TIME TO MAKE PAYMENTS THROU GH CROSSED BANK DRAFT CONSIDERING THAT THE PARTIES WHO HAD SUPPLIED THE HIDES RECEIVE D THE PAYMENTS AFTER A LONG GAP FROM THE DATES OF DISPATCH. ACCORDINGLY AS THERE WA S NO URGENCY ON THE PART OF THE PARTIES TO RECEIVE THEIR PAYMENTS. IN THE CIRCUMSTA NCES THE AO CONCLUDED THAT THERE WAS NO BUSINESS EXPEDIENCY MAKING THE PAYMENTS TO T HE SUPPLIERS OF HIDES THROUGH 3 BEARER CHEQUES. AS SUCH 20% OF THE SAID AMOUNT AMOU NTING TO RS.4,93,780/- WAS DISALLOWED. 2.3. AGGRIEVED BY THIS THE ASSESSEE WENT IN A PPEAL BEFORE THE LD. CIT(A) BEFORE WHOM THE FOLLOWING SUBMISSIONS WERE MADE. 3.2. THE LD. AR APPEARED ON BEHALF OF THE APPELL ANT AND FILED WRITTEN SUBMISSION. IT WAS CONTENDED THAT ALL PURCHASES ARE GENUINE AND HAVE NOT BEEN DISPUTED BY THE AO. SECONDLY, THE APPELLANT HAS PUR CHASED HIDES AND SKINS FROM U.P. AND BIHAR, THROUGH SOME PERSON OR ORGANIZATION S THAT ARE THE PRODUCERS AS WELL AS COLLECTING AGENT LOCATED IN THOSE AREAS. TH ESE SUPPLIERS PROCURE RAW HIDES AND SKINS FROM PRIMARY PRODUCERS AND SEND THE M BY SPECIFICATIONS. BUT, AS THE SUPPLIERS DO NOT HAVE ANY BANK ACCOUNT, THE PAYMENTS ARE MADE BY BEARER CHEQUES SO THAT THE SUPPLIERS COULD EASILY EN-CASH THE CHEQUES AND CLEAR THE DUES OF PRIMARY GROWERS. AS SUCH, THE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE IN THE CASE OF THE APPELLANT. RELIANCE W AS PLACED ON VARIOUS LEGAL PRONOUNCEMENTS. 2.4. IN THE CIRCUMSTANCES THE ISSUE WAS REMANDE D BACK TO THE AO AND THE AO WAS DIRECTED TO EXAMINE THE SUPPLIERS AND VERIFY THE C LAIM OF THE ASSESSEE. THE CONCERNED PARTIES WERE NOT PRODUCED THE ASSESSEE CLAIMED THAT HE HAD GOT NO PERSONAL INFLUENCE OR LEGAL AUTHORITY FOR PRODUCING THEM AS SUCH HE RE LIED UPON THE NECESSARY DOCUMENTS. IN THIS CIRCUMSTANCES RELYING UPON THE ORDER DATED 7 TH MARCH, 2008 IN ITA NO.1545/KOL/2007 THE CIT(A) UPHELD THE ACTION OF TH E AO HOLDING THAT THE ONUS PLACED UPON THE ASSESSEE WAS NOT DISCHARGED. RELIAN CE PLACED UPON THE PROPOSITION THAT THE PAYMENT WERE GENUINE WAS NOT ACCEPTED BY T HE LD. CIT(A) HOLDING THAT IF THE PURCHASES WERE NOT GENUINE THEY WOULD HAVE BEEN DIS ALLOWED IN FULL. SECTION 40A(3) CONTEMPLATES ONLY GENUINE PAYMENTS WHERE THE MODE O F PAYMENTS IS NOT AS PER THE REQUIREMENT OF THE STATUTE. AS SUCH HE HELD THAT TH E PAYMENTS WERE NOT MADE TO THE PRODUCERS. THE ACTION OF THE AO WAS UPHELD. 3. THE LD. AR INVITING ATTENTION TO THE PAPER B OOK FILED BEFORE US SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VIRTU E OF ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING A. YR. A COPY OF THE SAID ORDER DATED 14.9.2007 IN ITA NO.153/KOL/2007 IS PLACED AT PAGES 4 AND 5 OF THE PAPER BOOK. IT WAS ALSO SUBMITTED THAT ON THE SAID ISSUE THE KOLKA TA BENCH IS CONSISTENTLY DECIDING 4 THE SAME IN FAVOUR OF THE ASSESSEE. RELIANCE WAS AL SO PLACED UPON ORDER DATED 30 TH JUNE, 2009 IN ITA NOS. 181 AND 182.KOL.2009 IN THE CASE OF M/S. CRESCENT EXPORT SYNDICATE, COPY OF WHICH IS PLACED AT PAGES 5 TO 8 OF THE PAPER BOOK. IN THE SAID ORDER THE TRIBUNAL HAD FOLLOWED THE DECISION IN FAVOUR OF THE ASSESSEE IN THE CASE OF THE SAME ASSESSEE DATED 27 TH JULY, 2007 IN ITA NO.324/KOL/2007, COPY OF WHICH I S PLACED AT PAGES 12 TO 17 OF THE PAPER BOOK WHICH ORDER IT WAS SUBMITTED HAS BEEN UPHELD BY THE HONBLE CALCUTTA HIGH COURT IN ITA NO.202 OF 2008 V IDE ITS JUDGEMENT DATED 30 TH JULY, 2008, COPY OF WHICH IS PLACED AT PAGES 9 TO 1 1. IN SIMILAR VEIN IT WAS CONTENDED THE JUDGEMENT OF THE JURISDICATIONAL HIGH COURT DAT ED 4 TH AUGUST, 2008 IN THE CASE OF CIT VS- CPL TANNERY IN ITA NO.186 OF 2008 IN GA NO .867 OF 2008 WAS ALSO RELIED UPON WHEREIN THE DEPARTMENTAL APPEAL HAD BEEN DISMI SSED BY THE JURISDICTIONAL HIGH COURT. COPY OF THE SAID WAS PLACED AT PAGES 18 AND 19. THE SAID JUDGEMENT, IT WAS POINTED OUT, IS PUBLISHED IN (2008) 175 TAXMAN 316 (KOLKATA). ATTENTION WAS INVITED TO THE REMAND REPORT OBTAINED BY THE LD. CIT(A) COP Y OF WHICH IS PLACED AT PAGES 27 TO 29 OF THE PAPER BOOK AND HEAVY RELIANCE WAS PLAC ED AT THE FOLLOWING PARA AT PAGE 29 SO AS TO CONTEND THAT THE ASSESSEES CLAIM HAS BEEN ACCEPTED BY THE AO IN THE REMAND REPORT : IT MAY BE SUBMITTED TO THE BEST OF THE KNOWLEDGE O F THE ASESSEES THAT THESE SIX PARTIES AT THE RELEVANT TIME WERE THE PRODUCERS OF RAW HIDE AND SKIN WHO COULD SUPPLY IN BULK QUANTITY TO CATER THE NEED OF THE AS SESSEES RAW MATERIALS OF SEMI PROCESSED HIDE AND SKIN FOR FURTHER TANNING. AS IT WILL BE APPARENT FROM THE LEDGER COPIES OF TH E ACCOUNT ANNEXED. THERE IS NO SPECIFIC CREDIT FACILITY BUT THE TRANSACTIONS AR E MADE AS PER THE AVAILABILITY OF FUND THROUGH COLLECTION OF SALES PROCEEDS OF FIN ISHED STOCK (TANNED FINISHED LEATHER) AND ALSO SOMETIMES ON THE BASIS OF NEEDS O F THE PARTIES (RECIPIENT) COMMUNICATED THROUGH THEIR AGENT. 4. THE LD. DR, ON THE OTHER HAND, APART FROM H EAVILY RELYING UPON THE ORDERS OF THE TAX AUTHORITIES VEHEMENTLY SUBMITTED THAT IN THE RE MAND REPORT THERE IS NO CONCLUSION DRAWN IN FAVOUR OF THE ASSESSEE BY THE AO AS THE AO HAS SIMPLY REPRODUCED THE SUBMISSIONS OF THE ASSESSE. IT WAS HER SUBMISSION T HAT THE ISSUE IS SQUARELY IN FAVOUR OF THE DEPARTMENT BY VIRTUE OF THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF SILK FAB EXPORTS VS- CIT 295 ITR 123 (KERA LA). RELIANCE WAS ALSO PLACED 5 UPON THE JUDGEMENT OF THE ASSAM HIGH COURT IN THE C ASE OF BAGMARI TEA CO. 251 ITR 640. 5. IN REPLY THE LD. AR CONTENDED THAT THE P OINT AT ISSUE IS FULLY COVERED IN ASSESSEES FAVOUR BY VIRTUE OF THE ORDER OF THE TRI BUNAL IN ASSESSEES OWN CASE AND THE SUBMISSIONS REPRODUCED IN THE REMAND REPORT HAVE NO T BEEN DISPUTED BY THE AO. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS SEEN THAT THE POINT AT ISSUE IS PUREL Y FACTUAL NAMELY WHETHER THE PURCHASES HAVE BEEN MADE BY THE ASSESSEE FROM THE PRODUCERS O F HIDES AND SKINS OR NOT.. ON A CONSIDERATION OF THE SUBMISSION OF THE PARTIES BEFO RE THE BENCH IT IS SEEN THAT ON FACTS A CLARIFICATION IS REQUIRED AS SIMPLY ARGUING THAT TH E ISSUE IS COVERED BY THE EARLIER YEARS ORDERS OF THE TRIBUNAL SHALL NOT SUFFICE. SIMILARLY RELYING UPON THE ORDERS OF THE TRIBUNAL IN THE CASE OF DIFFERENT ASSESSES AND THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT WITHOUT FACTS WILL NOT BE OF MUCH HELP. IT IS SEEN FROM THE COPY OF THE ORDER OF THE CIT(A) IN 2003-04 A.YR. WHICH HAD BEEN CONSIDER ED BY THE CO-ORDINATE BENCH IN ASSESSEES CASE THE PAYMENTS UNDER QUESTION PERTAIN ED TO THE PARTY NAMED SHEBNAM HIDE COMPANY AMOUNTING TO RS.3,50,000/- WHICH THE C OORDINATE BENCH HAD CONSIDERED TO BE AS A PAYMENT HAVING BEEN MADE TO T HE PRODUCERS. IN THE FACTS OF THE PRESENT CASE THE PARTIES ARE ENTIRELY DIFFERENT. TH EY ARE SIX IN NUMBER AS MENTIONED IN PAGE 2 OF THE ASSESSMENT ORDER THE SAME HAVE BEEN R EPRODUCED IN THE EARLIER PART OF THE ORDER AND ARE DISTINCTLY DIFFERENT. ACCORDINGLY IT CANNOT BE SAID THAT THE ISSUE IS COVERED BY ASSESSEES OWN CASE IN THE EARLIER YEARS . SIMILARLY THE JUDGEMENTS RELIED UPON BY THE LD. DR ARE ALSO OF NOT MUCH HELP TO TH E ISSUE AT HAND AS THEY PROCEED ON ENTIRE DIFFERENT FACTS CONTEMPLATING THE EXCEPTIONS CARVED UNDER ENTIRELY DIFFERENT RULES. 6.1. IT IS SEEN THAT THE JUDGEMENT OF THE ASS AM HIGH COURT IN THE CASE OF BAGMARI TEA LTD. 251 ITR 640 IS NOT OF MUCH HELP TO THE DEP ARTMENT IN VIEW OF THE FACT THAT IT PROCEEDS IN REGARD TO THE POSITION AS IT PERTAINED AND PREVAILED IN A.YR. 1977-78 UNDER RULE 6DD(J) CONSIDERING CIRCULAR NO.220 DATED 31 ST MAY, 1977 (108 ITR (STATUTE 8) IN WHICH IT WAS NECESSARY FOR THE ASSES SEE TO SHOW COMPELLING 6 CIRCUMSTANCES ON ACCOUNT OF PAYMENTS MADE IN CASH S O AS TO PROVE TO THE SATISFACTION OF THE AO THAT THE TRANSACTIONS ARE MADE AT A PLACE WHERE EITHER THE PURCHASER OR THE SELLER DOES NOT HAVE A BANK ACCOUNT. HOWEVER, IN TH E FACTS OF THE PRESENT CASE THE ISSUE HAS TO BE CONSIDERED IN THE LIGHT OF THE REQUIREMEN TS OF RULE 6DD(F)(II) WHICH HAS BEEN REPRODUCED IN THE EARLIER PART OF THIS ORDER. THE O NLY REQUIREMENT FOR THE ISSUE AT HAND IS THAT THE PAYMENTS SHOULD HAVE BEEN MADE TO THE P RODUCERS. 6.2. SIMILARLY IT IS SEEN THAT THE JUDGEMENT OF THE HONBLE KERALA HIGH COURT RELIED UPON BY THE DEPARTMENT IS ALSO OF NO HELP. IN THE C ASE OF SILK FAB EXPORTS CITED SUPRA IT IS SEEN THAT THE ISSUE WAS CONSIDERED AGAIN IN THE LIGHT OF THE REQUIREMENTS AS SPELT OUT IN RULE 6DD(J) WHICH MANDATED QUA THE ISSUE AS CONS IDERED BY THE HONBLE HIGH COURT ON THE FACTS OF THAT CASE IN 1994-95 A.YR. TH AT IT WAS NECESSARY TO SHOW EITHER EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES AS TO WHY CASH PAYMENT WAS BEING MADE AS IT WAS TO BE ESTABLISHED THAT IT WAS NOT PRACTICAB LE TO MAKE PAYMENT BY OTHER MODES OR THERE WAS A GENUINE DIFFICULTY TO THE PAYEE HAVING REGARD TO THE NATURE OF THE TRANSACTIONS. THIS WAS TO BE ESTABLISHED TO THE SAT ISFACTION OF THE AO AS PER THE REQUIREMENTS OF RULE 6DD(J). IN THE FACTS OF THE PR ESENT CASE THE ISSUE HAS TO BE CONSIDERED IN THE LIGHT OF THE REQUIREMENT OF RULE 6DD(F)(II). 6.3. SIMILARLY IT IS SEEN THAT THE ASSESSEE B EFORE US HAS RELIED UPON THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CPL TA NNEY. ON A PERUSAL IT IS SEEN THAT THE SAID JUDGEMENT PROCEEDS ON THE FINDING OF THE F ACT THAT THE CONCERNED PARTIES WERE PRODUCERS. ACCORDINGLY THE FINDING THEREON SHALL AP PLY ONLY ONCE ON FACTS IT CAN BE SAID THAT THE CONCERNED . PARTIES WERE PRODUCERS OF HIDES AND SKIN. 6.4.. THUS IN VIEW OF THE FACT THAT THE SP ECIFIC PARTIES MENTIONED IN THE ASSESSMENT ORDER HAD NOT BEEN CONSIDERED BY THE CO- ORDINATE BENCH IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. ONLY REFEREN CE WAS MADE TO THE REMAND REPORT AND THE ARGUMENTS WERE SIMPLY ADVANCED ON T HE LEGAL ISSUE THAT THE POINT AT ISSUE IS COVERED BY THE SAID ORDER ON BEHALF OF THE ASSESSEE AND SIMILARLY BY THE 7 JUDGEMENTS OF KERALA AND ASSAM HIGH COURT REFERRED BY THE DEPARTMENT THE APPEAL WAS LISTED FOR CLARIFICATION. BOTH THE PARTIES WERE HEARD ON FACTS. 6.5. .THE SUBMISSIONS ON BEHALF OF THE ASSESSE E WERE THAT THE ASSESSEE HAS CONTINUED IN THE SAME LINE OF BUSINESS AND AS SUCH IS NECESSA RILY REQUIRED TO PROCURE HIDES FOR ITS BUSINESS DIRECTLY FROM SCAVENGERS AND HAS PROCURED THEM CONSISTENTLY FROM THE PRODUCERS. IT WAS SUBMITTED THAT THERE IS A WHOLE P ROCESS INVOLVED BEFORE THE RAW HIDES AND SKINS COULD BE USED IN THE LEATHER INDUSTRY. IN THIS CONTEXT ATTENTION WAS INVITED TO THE SUBMISSIONS ON BEHALF OF THE ASSESEE BEFORE THE LD. CIT(A) AND WHICH HAD BEEN REPRODUCED IN THE REMAND REPORT NAMELY THAT BAPARI ES ARRANGE TO PROCURE RAW HIDES AND SKINS FROM THE PRIMARY PRODUCERS AND THEREAFTER ARRANGE TO SEND THE GOODS BY TRANSPORT AS PER THE REQUIREMENT OF THE ASSESSEE AN D THUS HIDES AND SKINS PROCURED FROM UP AND BIHAR THROUGH SOME PERSONS OR ORGANIZATION W HO ARE KNOWN TO THE ASSESSEE ARE PRODUCERS AND COLLECTING AGENTS (BAPARIES) LOCATED IN THOSE AREAS. AS SUCH EVEN IF THE PARTIES ARE DIFFERENT IN THE YEAR UNDER CONSIDERATI ON THE NATURE OF THE ACTIVITY CONTINUES TO BE THE SAME. 6.6. THE LD. DR, ON THE OTHER HAND, RELYING UP ON THE CIRCULAR 8 OF 2006 DATED 6 TH OCTOBER, 2006 COPY OF WHICH WAS FILED BEFORE THE BE NCH, SUBMITTED THAT AS PER THE SAID CIRCULAR THAT ANY PERSON BY WHATEVER NAME CALLED, W HO BUYS ANIMALS FROM THE FARMERS, SLAUGHTERS THEM ETC. TO GET BENEFIT OF RULE 6 DD IS REQUIRED TO FURNISH A DECLARATION FROM A PERSON RECEIVING THE PAYMENTS THAT HE IS A PRODUCER OF MEAT AND THAT THE PAYMENT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE W AS MADE ON HIS INSISTENCE AND FURTHER CONFIRMATION FROM A VETERINARY DOCTOR CERTI FYING THAT THE PERSON SPECIFIED IN THE CERTIFICATE IS A PRODUCER OF MEAT. THE CONFIRMATION AS PER THIS CIRCULAR IN THE FACTS OF THE PRESENT CASE ARE NOT AVAILABLE ON RECORD. 6.7. THE LD. AR IN REPLY CONTENDED THAT THE A SSESSEE AT NO POINT HAS EVER CLAIMED THAT HE IS A PRODUCER OF MEAT AS SUCH HE ONLY DEALS WITH HIDES AND SKINS WHICH ARE USED IN THE LEATHER MANUFACTURING AS SUCH THE SAID CIRCU LAR DOES NOT HAVE ANY APPLICATION. 8 6.8. CONSIDERING THE ABOVE ARGUMENTS AND THE F ACTS AS HAVE BEEN DISCUSSED IN THE EARLIER PART OF THIS ORDER WE FIRST PROPOSE TO DEAL WITH THE ARGUMENTS OF THE LD. DR AND HOLD THAT THE SAID CIRCULAR IS NOT APPLICABLE TO TH E CASE AT HAND. THE SAID CIRCULAR APPLIES TO PRODUCERS OF MEAT AND THE PAYMENTS MADE IN REGARD THERETO. THE ASSESSEE HAS NEVER BEEN CONSIDERED TO BE A PRODUCER OF MEAT AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF LEATHER. FURTHER IT IS ALSO SEEN T HAT THE NON-APPLICATION OF THE SAID CIRCULAR TO THE ISSUE AT HAND HAS ALREADY BEEN TAKE N INTO CONSIDERATION BY THE CO- ORDINATE BENCH IN THE CASE OF M/S. TAJ LEATHER WORK S VS- ACIT IN ITA NO.466/KOL/2007 DATED 16.11.2009 COPY OF WHICH IS P LACED AT PAGES 20-25 OF THE PAPER BOOK. AT PARA 6 HAS HAD AN OCCASION TO CONSID ER THIS. 6.9 IT IS ALSO SEEN THAT IN THE FACTS OF THE CASE CONSISTENT ARGUMENTS BEFORE THE AUTHORITIES ON BEHALF OF THE ASSESSEE HAS BEEN THAT THE ASSESSEE IS IN THE SAME LINE OF BUSINESS WHICH IS NOT IN DISPUTE AND IS NECESSARILY REQUIRED TO PROCURE HIDES AND SKINS FOR ITS BUSINESS AND THE SAME CAN BE PROCURED FROM PRODUCERS AS RAW HIDES AND SKINS ARE NOT CAPABLE OF BEING USED DIRECTLY. A PERUSAL O F THE ORDER DT. 10.11.2007 IN THE CASE OF M/S. TEJ LEATHER SHOWS AT PAGE 21 PARA 3 ADDRESS ES THE FACTS PREVALENT IN THIS LINE OF BUSINESS. 3. THAT THE LD. A/R FOR THE APPELLANT PRODUCES SO ME BILLS SHOWING PURCHASE OF WET SALT COW HIDE AND WET SALT COW CALF FROM DIFFER ENT PARTIES. THE LD. A/R FOR THE APPELLANT SUBMITS THAT HIDES CAN VERY APPROPRIA TELY BE DESCRIBED AS GOODS. FURTHERMORE, UNLIKE CROPS, FRUITS AND VEGE TABLES, HIDES CAN NEITHER BE DESCRIBED AS AGRICULTURAL GOODS NOR THESE CAN BE DE SCRIBED, UNLIKE MINERALS, AS NATURAL GOODS. AFTER AN ANIMAL IS KILLED ITS HIDES CANNOT BE SOLD STRAIGHTWAY. BECAUSE, THE HIDE BECOMES PUTRID IN NO TIME. TO GUA RD AGAINST PUTREFACTION THE HIDES HAVE TO BE PROCESSED I.E. TREATED WITH SALE, BEFORE THESE ARE SOLD. THIS PROCESSING IS DONE BY THE SELLERS, WHICH MEANS THE SELLER HAS TO MAKE SOME ALTERATION TO THE STATE OF GOODS HE PURCHASES FROM THE BUTCHER BEFORE HE IS ABLE TO SELL THESE, THEREFORE, IT CAN BE VERY WELL TO BE SAID THAT THE SAID TRADERS ARE BASICALLY PRODUCERS OF ANIMAL HUSBANDRY INCLUDING H IDES AND SKINS, THEREFORE, THEY ARE COVERED BY RULE 6DD(F)(II). 6.10. IN THE FACTS OF THE PRESENT CASE IT HAS BEEN CONSISTENTLY ARGUED THAT THE HIDES AND SKINS HAVE BEEN OBTAINED FROM UP AND BIHAR AND IF THEY ARE NOT SUBJECTED TO THE PROCESS OF SALTING ETC. THEY CANNOT BE USED. THESE FACTS HAVE NOT BEEN DISPUTED IN THE 9 REMAND REPORT AND THE CIT(A) HAS ALSO NOT COMMENTED UPON THE SAME. THE CONSISTENT ORDERS OF THE TRIBUNAL ACCEPTING THIS PR OCESS IN THIS LINE OF BUSINESS HAS ALSO NOT BEEN COMMENTED UPON BY THE DEPARTMENT. WE MAY R EFER TO THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS- C PL TANNERY WHICH HAS ALSO CONSIDERED THESE FACTS IN THE FOLLOWING MANNER :- WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE ARGUMENTS ADVANCED FROM BOTH SIDES AND ALSO PERUSED CAREFULLY THE RELEVANT PAPERS. WE FIND THAT THE ASSESSING OFFICER IN HIS ORDER AT PARA 3.8 STATES THAT THE ASSESSEE HAS ALSO ADMITTED THAT THEY COLLECT RAW HIDES/SKIN FROM VILL AGES FROM THE ORIGINAL SKIN PEELERS, PROCESS THESE HIDE AND SKIN TO SOME EXTENT AND ONLY AFTER THAT, THOSE SKIN/HIDES ARE SOLD TO TANNERY. THUS THE ASSESSING OFFICER ADMITS THAT THE SMALL SUPPLIERS OF HIDES AND SKIN DO CARRY OUT PROC ESSING AFTER OBTAINING THE GOODS FROM ORIGINAL SKIN PEELERS. THE CIT(A) ALSO I N HIS ORDER AT PARA 2.2. DESCRIBES THAT PROCESSING IS DONE BY THESE SUPPLIER S. THUS, THE FACT THAT PROCESSING IS DONE IS NOT DISPUTED BY THE AUTHORITI ES BELOW. THE VIEW THAT PROCESSING IS DONE IS NOT DISPUTED BY THE AUTHORITI ES BELOW. THE VIEW THAT PROCESSING IN THIS CASE CANNOT BE EQUATED TO PRODUC TION WILL RENDER THE INTERPRETATION OF THE WORK PRODUCTION USED IN RULE 6DD(F) EXTREMELY TECHNICAL AND MEANINGLESS AND WILL FRUSTRATE THE PROVISIONS O F EXTREMELY TECHNICAL AND MEANINGLESS AND WILL FRUSTRATE THE PROVISIONS OF TH E RULE. RULE 6DD WAS CREATED TO CURVE OUT EXCEPTION OF THE RIGOURS OF SECTION 40 A(3) AND SUCH EXCEPTIONS ARE TO BE UNDERSTOOD IN THE BACKGROUND OF COMMERCIAL EX PEDIENCY AND OTHER RELEVANT FACTORS. THIS HAS BEEN ACCEPTED BY THE CBD T BY ISSUING PRESS NOTE DATED 2.5.1969 AND THE VIEW THAT PRODUCTS OTHERWIS E COVERED UNDER RULE 6DD, WHEN SUBJECTED TO SOME PROCESSING SHOULD ALSO QUALI FY FOR EXEMPTION HAS BEEN ADMITTED. IN THIS VIEW OF THE MATTER AND AFTER CON SIDERING THE ISSUE IN GREAT DETAIL, WE ARE OF OUR CONSIDERED VIEW, THAT THE AD DITION OF RS.2.50 LAKHS UNDER SECTION 40A(3) IS UNCALLED FOR AND HENCE DELETED. T HE FIRST GROUND OF APPEAL THUS SUCCEEDS. EMPHASIS PROVIDED BY THE BENCH. 6.11. ACCORDINGLY IN THE LIGHT OF THE ABOVE PEC ULIAR FACTS AND CIRCUMSTANCES THOUGH NO DOUBT THE PARTIES ARE NOT THE SAME AS MENTIONED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR THE NATURE OF THE ACTIVITY AND THE FACTS AS HAVE BEEN SPELT OUT IN DETAIL IN THE EARLIER PART OF THIS ORDER LEAD TO THE CONCL USION THAT THE PERSONS FROM WHOM THE HIDES AND SKINS WERE PURCHASED WERE THE PRODUCERS A S SUCH THE PAYMENTS MADE TO THEM COME UNDER THE BENEFIT CARVED OUT UNDER THE EXCEPTI ON MADE IN SUB-RULE (II) OF 6DD(F) OF THE IT RULES. THE GROUND RAISED BY THE ASSESSEE AS SUCH IS ALLOWED. 10 7. IN THE RESULT THE APPEAL OF THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 31.03.2010. SD/- SD/- (C.D.RAO) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :31.03.2010. COPY OF THE ORDER IS FORWARDED TO :- 1. M/S. DIAMOND TANNERY & CO., 119/2, MATHESWARTALA ROAD, KOLKATA 700046. 2. I.T.O.WARD-33(4), KOLKATA 3. C.I.T.(APPEALS)-XX, KOLKATA 4) C.I.T. KOLKA TA 5. D.R., ITAT, KOLKATA BY ORDER ASSISTANT REGISTRAR I.T.A.T., KOLKATA R.G./P.S. TRUE COPY