ITO, Krishnagiri V. Sri B.A.Rajagopal(HUF), Krishnagiri

ITA 2087/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1092 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-02-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 08-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 40A(3)

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL: A - BENCH:CHEN NAI (BEFORE SHRI HARI OM MARATHA, JUDICIAL MEM BER AND ABRAHAM P. GEORGE. ACCOUNTANT MEMBER) ITA NO. 2087/MDS/10 ASST.YEAR 2001-02 THE ITO, WARD I(1), KRISHNAGIRI VS. SRI B.A.RAJAGOPAL (HUF), 14/616 BHARATHIYAR ST., KRISHNAGIRI. PAN AACHB1300A (APPELLANT) (RESPONDENT) APPELLANT BY RESPONDENT BY: SHRI. SHAJI P. JACOB SHRI K.MEENATCHI SUNDARAM ORDER PER SHRI ABRAHAM P.GEORGE, A.M: IN THIS APPEAL FILED BY THE REVENUE DIRECTED AGAI NST THE ORDER DATED 20-09-2010 OF THE CIT(A), SALEM IT HAS RAISED ALTOG ETHER NINE GROUNDS. GROUND NOS. 1 AND 9 ARE GENERAL NEEDING NO ADJUDICA TION. ITA NO. 2087MDS /10 2 2. VIDE; ITS GROUND NO.2 REVENUE IS AGGRIEVED THAT THE CIT(A) CONDONED THE DELAY IN FILING THE APPEAL AND ADJUDIC ATED THE ISSUE RAISED THEREIN. 3. IT WAS NOTED BY LD. CIT(A) DURING THE ADJUDICAT ION OF THE APPEAL OF THE ASSESSEE THAT THE ASSESSMENT ORDER WAS RECEIVED BY ASSESSEE ON 11- 11-2006 AND THE APPEAL WAS BELATED BY ABOUT THREE Y EARS SINCE IT WAS FILED ONLY IN NOVEMBER 2009. SUBMISSION OF THE ASSESSEE W AS THAT IT HAD CLOSED ITS BUSINESS ON 01-04-2006 AND RELEVANT PAPERS WERE MISPLACED. ACCORDING TO THE ASSESSEE IT CAME TO KNOW ABOUT THE DEMAND ONLY WHEN A REMINDER WAS ISSUED BY DEPARTMENT AND THE DELAY WAS NOT WILLFUL. ASSESSEE ALSO POINTED OUT BEFORE THE CIT(A) THAT TH E ISSUES RAISED IN ITS APPEAL WERE DECIDED IN ITS FAVOUR IN THE EARLIER YE ARS. LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS CONDONED THE DELAY. 3. NOW BEFORE US, LD. DR SUBMITTED THAT THERE WAS W ANT OF DUE CARE AND ATTENTION AND THERE WAS NO SUFFICIENT CAUSE FOR THE DELAY OF ABOUT 35 MONTHS. ACCORDING TO HIM, THE DELAY WAS CONDONED BY LD. CIT(A) WITHOUT CONSIDERING THE ESSENTIAL REQUIREMENTS TO BE SATISF IED FOR SUCH CONDONATION. PER CONTRA, LD. AR SUPPORTED THE ORDER OF LD. CIT(A). 4. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL S UBMISSIONS. IT IS NOT DISPUTED THAT ASSESSEE HAD CLOSED ITS BUSINESS ON 01-04-2006. IT IS ITA NO. 2087MDS /10 3 ALSO NOT DISPUTED THAT ASSESSMENT ORDER WAS RECEIVE D BY ASSESSEE ONLY ON 11-11-2006. WHEN THE BUSINESS OF THE ASSESSEE WAS C LOSED AND THERE WAS SHIFTING OF OFFICE THERE WAS EVERY CHANCE THAT PAPERS COULD HAVE BEEN MISPLACED. FURTHER, ONE OF THE MAIN GROUNDS RAISED BY THE ASSESSEE WAS ON DISALLOWANCE MADE UNDER SEC. 40A(3) OF THE ACT, WHICH WAS DECIDED IN ITS FAVOUR IN EARLIER YEARS. SINCE EFFECTUATION OF SUBSTANTIAL JUSTICE IS THE PRIMARY DUTY OF THE APPELLATE FORUMS UNDER THE INC OME-TAX ACT, THE RULES OF PROCEDURES ARE NOT TO BE FOLLOWED SO RIGOROUSLY AS TO CAUSE DETRIMENT TO THE AGGRIEVED PARTY. ON THE FACT SITUATION STATED A BOVE, WE ARE OF THE OPINION THAT LD. CIT()A) WAS RIGHT IN CONDONING THE DELAY. NO INTERFERENCE IS CALLED FOUR. GROUND NO.2 OF THE REVENUE STANDS DISM ISSED. 5. VIDE ITS GROUND 3 TO 8 GRIEVANCE OF THE REVENUE IS THAT CIT(A) DELETED THE DISALLOWANCE MADE BY AO UNDER SEC.40A(3 ) OF THE ACT. 6. SHORT FACTS APROPOS ARE THAT ASSESSEE, WHOLESALE DEALER IN SUGAR WAS PURCHASING SUGAR FROM CO-OPERATIVE SUGAR MILLS AND PAYMENTS WERE MADE BY REMITTANCE IN CASH TO BANKS SITUATED AT THE SITE OF LSUCH MILLS. AS PER AO SEC.40A(3) WAS CLEARLY APPLICABLE. RELYING O N HIS OWN ORDER FOR ASST. YEAR 2001-02, AO PUT THE ASSESSEE ON NOTICE T HAT 20% OF SUCH PAYMENT WAS LIABLE TO BE DISALLOWED. THOUGH ASSESSE E SUBMITTED THAT THE PAYMENTS WERE MADE TO BANK BRANCHES SITUATED IN THE PREMISES OF CO- OPERATIVE SUGAR MILLS FROM WHERE IT WAS PURCHASING SUGAR, AO WAS OF THE ITA NO. 2087MDS /10 4 OPINION THAT ASSESSEE COULD HAVE REMITTED THE AMOUN T BY DEMAND DRAFT IN FAVOUR OF THE MILLS AND PAYMENT BY CASH WAS NOT ESS ENTIAL. FURTHER, AS PER THE LD. AO EXEMPTION PROVIDING FOR EXCEPTIONAL CIRC UMSTANCES AND GENUINE HARDSHIP WAS OMITTED FROM RULE 6DD(J) OF THE INCOME -TAX RULES 1962 (IN SHORT THE RULES) WITH EFFECT FROM 25-07-1995 AND THEREFORE, DISALLOWANCE OF 20% WAS CALLED FOR. HE, THEREFORE, MADE A DISALL OWANCE OF ` 97,27,030/- ON PAYMENTS OF ` 4,86,35,140/-.. 7. IN ITS APPEAL BEFORE THE CIT(A) CLAIM OF THE ASS ESSEE WAS THAT THE PAYMENTS HAVING BEEN MADE THROUGH CO-OPERATIVE BANK S, SUB-CLAUSE (III) OF CLAUSE (A) TO RULE 6DD OF THE RULES APPLIED. LD. CIT(A) WAS APPRECIATIVE OF THIS CONTENTION. ACCORDING TO HIM, IN ASSESSEES OWN CASE FOR A.YS. 1998-99 AND 2002-03 THE ISSUE WAS DECIDED IN ITS FAVOUR. CIT(A) ALSO NOTED THAT COORDINATE BENCH OF THIS TRIBUNAL I N ITA NO.1656/MDS/2005 HAD UPHELD THE ORDER OF THE CIT(A) IN THIS REGARD F OR ASST. YEAR 2002-03. HE, THEREFORE, ALLOWED THE APPEAL OF THE ASSESSEE O N THIS ISSUE. 8. NOW BEFORE US, LD. DR STRONGLY ASSAILING THE ORD ER OF THE CIT(A) SUBMITTED THAT THERE WAS CLEAR VIOLATION OF SEC.40A (3) OF THE ACT AND DISALLOWANCE WAS RIGHTLY MADE. PER CONTRA, LD. AR S UBMITTED THAT THE ISSUE IS NO MORE RESINTEGRA. RELYING ON THE DECISION OF T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. B,G,SUBRAMANIAM [ TAX CASE (APPEAL) NO.766 OF 2009 DATED 18-08-2009], LD. COUNSEL SUBMI TTED THAT SIMILAR ITA NO. 2087MDS /10 5 DISALLOWANCE MADE ON PURCHASES MADE BY PAYMENT OF C ASH THROUGH BRANCHES OF CO-OPERATIVE BANK, WAS DELETED BY THIS TRIBNUNAL AND THE DELETION UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT. 9. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL S UBMISSIONS. ASSESSEE HAD MADE REMITTANCES IN CASH THROUGH BRANC HES OF CO-OPERATIVE BANKS LOCATED IN THE PREMISES OF CO-OPERATIVE SUGAR MILLS WHEREFROM IT WAS PURCHASING SUGAR. THIS POSITION IS NOT DISPUTED. AO MADE DISALLOWANCE RELYING ON SEC.40A(3) OF THE ACT. WE FIND THAT SIMI LAR ISSUE HAD COME UP BEFORE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF B.G. SUBRAMANIAM (SUPRA) WHERE IT WAS HELD BY THEIR LORDSHIPS AS UND ER: 4. THE PROVISO TO SEC.40A(3) READS AS UNDER: PROVIDED FURTHER THAT NO DISALLOWANCE UNDER THIS SUB-SEC. SHALL BE MADE WHERE ANY PAYMENT IN A SUM EXCEEDING TWENTY THOUSAND RUPEES IS MADE OTHERWISE THAN BY AN ACCOUN T PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, INASUCH A CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCR IBED, HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITI ES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER REL EVANT FACTORS. 5. IF WE APPLY THE SPECIFIC STIPULATIONS CONTAINED IN THE PROVISO, WE FIND THAT IT DEPENDS UPON THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AN D OTHER RELEVANT FACTORS IN ORDER TO ENABLE AN ASSESSEE TO CLAIM THE DEDUCTIONS. IN THE CASE ON HAND, THE TRIBUNAL HAS NOTED THAT THE P AYMENTS WERE MADE AT THE INSISTENCE OF THE SUGAR MILL FROM WHERE THE PURCHASES WERE MADE BY THE ASSESSEE. PURCHASES WERE SAID TO H AVE BEEN MADE FROM THE DISTRICT CO-OP. SUGAR MILL, WHICH IS A QUASI GOVERNMENT CONCERN, AND THE PAYMEN5TS WERE ALSO MAD E IN THE BRANCHES OF THE CO-OP. BANKS WHICH WERE LOCATED IN THE CONCERNED CO-OP. SUGAR MILL. IN SUCH CIRCUMSTANCES, THE CONDU CT OF THE ASSESSEE IN HAVING DEPOSITED THE PAYMENT IN CASH IN THE BRANCHES ITA NO. 2087MDS /10 6 LOCATED IN THE CO-OP. SUGAR MILL AT THE INSISTENCE OF THE CONCERNED SUGAR MILL WILL SQUARELY FALL UNDER THE EXPRESSION CONSIDERATIONS OF BUSINESS EXPEDIENCY. WHEN THE CIT(A) AS WELL AS TH E TRIBUNAL WERE CONVINCED OF THE SAID POSITION, NAMELY, THE APPLICA TION OF THE PROVISO TO SEC.40A(3) OF THE ACT, WE DO NOT FIND ANY QUESTI ON OF LAW, MUCH LEAS SUBSTANTIAL QUESTION OF LAW INVOLVED IN THIS A PPEAL. THE PERCEPTION OF THE CIT(A) AS WELL AS THE TRIBUNAL WH ILE APPLYING THE PROVISO TO SEC.40A(3) WAS PERFECTLY IN ORDER, WHICH WAS BASED ON THE SPECIAL CIRCUMSTANCES INVOLVED IN THIS CASE. WE , THEREFORE, DO NOT FIND ANY SCOPE TO ENTERTAIN THIS APPEAL. THE AP PEAL FAILS AND THE SAME IS DISMISSED. WE ARE OF THE OPINION THAT THE FACT SITUATION BEING SIMILAR, LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE. NO INTERFER ENCE IS CALLED FOR. GROUNDS 3 TO 8 OF THE REVENUE STAND DISMISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 14 - 02-2011. SD/- SD/- (HARI OM MARATHA) JUDICIAL MEMBER (ABRAHAM P.GEOPRGE) ACCOUNTANT MEMBER CHENNAI: 14TH FEBRUARY, 2011. NBR CC: ASSESSEE/ ASSESSING OFFICER/ CIT(A)/ CIT/ D .R/ GUARD FILE. ITA NO. 2087MDS /10 7