The Income-tax Officer, Jalandhar V. M/s. Prabhat Leathers, Jalandhar

ITA 213/ASR/2014

• Counselvise Citation: 21320914 RSA 2014
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 19-02-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 03-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.213(ASR)/2014 ASSESSMENT YEAR:2005-06 PAN :AABFP6871D INCOME TAX OFFICER, VS. M/S. PRABHAT LEATHERS, WARD 1(3), JALANDHAR. 101, LEATHER COMPLEX, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.V.K.SINGH, DR RESPONDENT BY:SH.SURINDER MAHAJAN, CA DATE OF HEARING:19/02/2015 DATE OF PRONOUNCEMENT: 17/03/2015 ORDER PER B.P.JAIN,AM: THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), JALANDHAR, DATED 17.01.2014 FOR THE ASSESSMENT YEA R 2005-06 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.9,30,800/- MADE BY WAY OF DISALLOWANCE U/S 40A(3 ) OF THE ACT IGNORING THAT: ITA NO.213(ASR)/2014 2 I) THE AFFIDAVITS AND CERTIFICATES FILED BY THE ASSESS EE ARE NOT SELF SERVING DOCUMENTS AS COMPLETE IDENTITY OF THE PERSONS IS NOT ESTABLISHED WITH THE DOCUMENTS FILE D. II) NO EVIDENCE WAS BROUGHT ON RECORD INDICATING BUSINE SS EXIGENCY OR EXCEPTIONAL CIRCUMSTANCES COMPELLING TH E ASSESSEE TO MAKE PAYMENTS IN CASH WHICH WERE MADE I N JALANDHAR. III) THE CBDT IN CIRCULAR NO.8 OF 2006 HAS CLARIFIED THA T EXCEPTION OF RULE 6DD(1) IS NOT AVAILABLE IN RESPEC T OF CASH PAUMENTS MADE FOR THE PURCHASE OF HIDES/SKINS FROM A PERSON WHO IS NOT PROVED TO BE A PRODUCER OF THES E GOODS. IV) THE AUDITOR HAS SUPPRESSED THE FACT OF MAKING HUGE CASH PAYMENTS OF THE RS.46.54 LACS IN THE AUDIT REPORT, OBVIOUSLY AS THESE PAYMENTS WERE NOT COVERED UNDER RULE 6DD(1) OF THE I.T. RULES. 2. THAT, IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) BE SET ASIDE AND THAT OF THE A.O. RESTORED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 29.10.20 05 DECLARING THEREIN AN INCOME OF RS.3,04,322/-. THE ASSESSEE WAS ENGAGED I N THE BUSINESS OF MANUFACTURING AND SALE OF FINISHED LEATHER. DURING THE ASSESSMENT PROCEEDINGS, THE AO HAS NOTICED THAT THE ASSESSEE HAS MADE CASH PAYMENTS OF RS.46,54,005/- TO 82 PARTIES IN VIOLATION OF PRO VISIONS OF SECTION 40A(3) OF THE ACT FOR THE PURCHASE OF HIDES AND SKINS. THE AO, THEREFORE, DISALLOWED 20% OF THE CASH PAYMENTS AND MADE AN ADDITION OF RS .9,30,800/- TO THE RETURNED INCOME OF THE ASSESSEE. ANOTHER ADDITION O F RS.11,225/- WAS ALSO MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OUT OF T ELEPHONE EXPENSES CLAIMED BY THE ASSESSEE AT RS.67,355/-. THE ASSESSM ENT IN THIS CASE WAS ITA NO.213(ASR)/2014 3 COMPLETED IN THIS CASE VIDE ORDER U/S 143(3) OF THE ACT DATED 31.12.007 AT AN ASSESSED INCOME OF RS.12,46,347/-. 3. BEFORE THE LD. CIT(A), THE ASSESSEE MADE SUBMISS IONS, WHICH WERE FORWARDED TO THE AO FOR COMMENTS AND AFTER RECEIV ING COMMENTS OF THE AO, COUNTER COMMENTS OF THE ASSESSEE WERE TAKEN AFT ER CONDUCTING THE ENQUIRIES, THE LD. CIT(A) AFTER CONSIDERING THE SUB MISSIONS OF THE ASSESSEE, COMMENTS OF THE AO AND COUNTER COMMENTS OF THE ASSE SSEE, DELETED THE ADDITION SO MADE BY THE AO. 4. THE CASE OF THE AO WHILE MAKING DISALLOWANCE OF RS.9,30,800/- WAS THAT THE ASSESSEE HAS NOT DEALT WITH THE CIRCULAR N O.8 OF 2006 DATED 06.10.2006. SINCE THE ASSESSEE HAS NOT BROUGHT ON R ECORD ANY BUSINESS EXIGENCY OR EXCEPTIONAL CIRCUMSTANCES COMPELLING TH E ASSESSEE TO MAKE PAYMENTS IN CASH, THE ASSESSEE HAS NOT TAKEN DECLAR ATION FROM THE PERSON RECEIVING THE PAYMENT THAT HE IS PRODUCER OF MEAT. THE ASSESSEE HAS NOT TAKEN CONFIRMATION THAT THE PAYMENT WAS MADE IN CAS H ON INSISTENCE OF A PERSON RECEIVING PAYMENT AND FINALLY CONFIRMATION FROM A VETERINARY DOCTOR CERTIFYING THAT THE PERSON SPECIFIED IN THE CERTIF ICATE WAS A PRODUCER OF MEAT AND SLAUGHTERING WAS DONE UNDER HIS SUPERVISION, HA S ALSO NOT BEEN TAKEN BY THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, WE REPRO DUCE CIRCULAR NO.8 OF 2006 DATED 06.10.2006, HEREINBELOW: ITA NO.213(ASR)/2014 4 CIRCULAR NO. 8/2006, DATED 6-10-2006 CLARIFICATION REGARDING THE MEANING OF THE EXPRESSI ON THE PRODUCE OF ANIMAL HUSBANDRY USED IN SUB-CLAUSE (II) OF CLAUSE (F) OF RULE 6DD OF THE INCOME-TAX RULES, 1962 1. REFERENCE IS INVITED TO THE CLARIFICATION ISSUED VIDE CIRCULAR NO. 4/2006, DATED 29TH MARCH, 2006 ON THE ABOVE SUBJECT . VIDE THIS CIRCULAR, IT WAS CLARIFIED THAT THE EXPRESSION THE PRODUCE OF ANIMAL HUSBANDRY USED UNDER RULE 6DD(F)(II) WOULD INCLUDE LIVESTOCK AND MEAT AND IN A CASE WHERE PAYMENT EXCEEDING RUPEES T WENTY THOUSAND IS MADE TO A PRODUCER OF THE PRODUCTS OF ANIMAL HUS BANDRY (INCLUDING LIVESTOCK, MEAT, HIDES AND SKINS) OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT FOR THE PURCHASE OF SUCH PRODUCE, NO DISALLOWANCE SHOULD BE ATTRACTED UNDER SECTION 40A(3) READ WITH RULE 6DD. IT WAS FURTHER CLARIFIED THAT T HE ABOVE EXCEPTION WILL NOT BE AVAILABLE IN RESPECT OF PAYMENT FOR THE PURCHASE OF LIVESTOCK, MEAT, HIDES AND SKINS FROM A PERSON WHO IS NOT PROVED TO BE THE PRODUCER OF THESE GOODS AND IS ONLY A TRADER, B ROKER OR ANY OTHER MIDDLEMAN BY WHATEVER NAME CALLED. 2. REPRESENTATIONS HAVE BEEN RECEIVED FROM CERTAIN QUARTERS SEEKING FURTHER CLARIFICATION AS TO WHO ARE THE PRODUCERS O F LIVESTOCK AND MEAT AND THE EVIDENCE REQUIRED TO BE FURNISHED IN THIS R EGARD BY THE PERSONS MAKING THE PAYMENTS. 3. THE BOARD AFTER EXAMINATION OF THE ISSUE IS OF T HE VIEW THAT ANY PERSON, BY WHATEVER NAME CALLED, WHO BUYS ANIMALS F ROM THE FARMERS, SLAUGHTERS THEM AND THEN SELLS THE RAW MEAT CARCASS ES TO THE MEAT PROCESSING FACTORIES OR TO THE TRADERS/RETAIL OUTLE TS WOULD BE CONSIDERED AS PRODUCER OF LIVESTOCK AND MEAT. 4. THE BENEFIT OF RULE 6DD OF THE INCOME-TAX RULES, 1952 SHALL BE AVAILABLE TO THE PERSON REFERRED TO AT PARA 3 ABOVE SUBJECT TO FURNISHING OF THE FOLLOWING : (I) A DECLARATION FROM THE PERSON RECEIVING THE PAY MENT THAT HE IS A PRODUCER OF MEAT; ITA NO.213(ASR)/2014 5 (II) A CONFIRMATION THAT THE PAYMENT, OTHERWISE THA N BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT, WAS MADE ON HIS INSISTENCE; AND (III) A FURTHER CONFIRMATION FROM A VETERINARY DOCT OR CERTIFYING THAT THE PERSON SPECIFIED IN THE CERTIFICATE IS A PRODUC ER OF MEAT AND THAT SLAUGHTERING WAS DONE UNDER HIS SUPERVISION. 5. FROM THE READING OF THE CIRCULAR HEREINABOVE AN D PERUSAL OF THE ORDER OF THE AO, IT IS EVIDENT THAT IT IS NOT THE CASE OF THE AO THAT PAYMENTS HAVE NOT BEEN MADE TO THE PRODUCERS OF HIDES AND SKINS. ALSO, IT IS NOT THE CASE OF THE AO THAT PURCHASES MADE ARE FROM TRADER, BROKER OR THROUGH MIDDLEMEN OR PURCHASES ARE NOT GENUINE. THE CASE OF THE AO IS THAT THE ASSESSEE HAS NOT COMPLIED WITH PARA-4 OF CIRCULAR NO.8 OF 2006 DATED 06.10.2006. FIRST OF ALL BEFORE INVOKING THE SAID CIRCULAR, THE ASSESSEE WAS NOT GIVEN OPPORTUNITY TO REBUT THE SAME. HOWEVER, THE SAID PARA-4 ALONGWITH PARA 2 & 3 OF CIRCULAR NO. 8 OF 2006 MENTIONED HEREINABOVE ARE APPLICABLE TO THE PRODUCERS OF LIVE-STOCK AND MEAT AND NOT TO DEALERS/TRADERS OF HIDES AND SKINS. AS REGARDS THE CERTIFICATE OF THE VETERINARY DOCTOR, THE SAID CERTIFICATE APPEARS TO BE LOGICAL IN CASE OF PRODUCER OF MEAT BUT NOT FOR THE HIDES & SKINS OF DEAD ANIMALS. IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE SAID PARA-4 OF CIRCULAR NO.4 OF 2006 REFERRED TO HEREINABOVE IS NO T APPLICABLE IN THE PRESENT FACTS OF THE CASE. ACCORDINGLY, WE FIND NO INFIRMIT Y IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY DELETED THE ADDITION OF R S.9,30,800/- MADE BY THE AO. HENCE, THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.213(ASR)/2014 6 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I N ITA NO.213(ASR)/2014 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17TH MARCH, 2015. SD/- SD/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17TH MARCH, 2015 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. PRABHAT LEATHERS, JALANDHAR. 2. THE ITO WARD 1(3), JALANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.