Sant. Agro Tech Overseas Pvt. Ltd, Jammu V. The Dy. Commissioner of Income-tax, Jammu

ITA 217/ASR/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73270 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-02-2014
• Assessment Year: misc
• Appeal Filed On: 24-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Section: 40A(3); 143(3); 131; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.217(ASR)/2012 ASSESSMENT YEAR:2004-05 PAN :AACCS1906Q M/S. SAT AGRO TECH OVERSEAS PVT. LTD. VS. DY.COMMR . OF INCOME TAX, BARI BRAHMANA, JAMMU. CIRCLE-1, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.P.N.ARORA, ADVOCATE RESPONDENT BY: SH. MAHAVIR SINGH, DR DATE OF HEARING: 11/02/2014 DATE OF PRONOUNCEMENT:24/02/2014 ORDER PER BENCH ; THE ASSESSEE HAS ARISES FROM THE ORDER OF THE CIT( A), JAMMU DATED 1.3.2012 FOR THE ASSESSMENT YEAR 2004-05.THE ASSES SEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: ITA NO.217(ASR0/2012 2 1. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN RETAIN ING ADDITION OF RS.2076155/- ON ACCOUNT OF DISALLOWANCE OF 20% OF P AYMENTS MADE FOR PURCHASE OF PADDY FROM AGRICULTURISTS. 2. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T THE PAYMENTS OF RS.10380722 WAS MADE TO AGRICULTURISTS AND NOT TO TRADERS ON THE VOUCHERS/RECEIPTS WHICH HAVE BEEN DULY SIGNE D BY AGRICULTURISTS. 3. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T AS PER ORDER OF CIT AN INDEPENDENT ENQUIRY WAS TO BE CONDUCTED BY T HE AO WHICH WAS NOT CONDUCTED AND THE ADDITION HAVE BEEN MADE ON THE SUBMISSIONS MADE BEFORE CIT AND TO AO RESPECTIV ELY. 4. THE DISALLOWANCE HAS BEEN MADE AFTER REOPENING ASST T. UNDER SECTION 263 OF THE IT ACT, BY CIT WHEN THE ABOVE AS STT. WAS MADE U/S 143(3) OF THE ACT AND ALL BOOKS OF ACCOUNTS AND RELATING RECORDS WERE PRODUCED AND CHECKED BY A.O. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM TH E ORDER OF THE AO AND THE RELEVANT PORTION IS REPRODUCED HEREINBELOW FOR THE SAKE OF CONVENIENCE: VIII) RS.1,03,60,772/- CASH PAYMENTS FOR PURCHASE OF PADDY: IT HAS BEEN OBSERVED FROM THE BANK STATEMENT THAT I N 236 INSTANCES, OTHER THAN THOSE DISCUSSED ABOVE, THE AS SESSEE HAS MADE PAYMENTS OTHER THAN ACCOUNT PAYEE CHEQUES. WITH RE GARD TO ITA NO.217(ASR0/2012 3 ITA NO.217(ASR0/2012 4 ITA NO.217(ASR0/2012 5 ITA NO.217(ASR0/2012 6 3. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER. 4. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.ARORA, ADVOCATE, PRIMA- FACIE ARGUED THAT THE SAID PAYMENTS ARE THE GENUINE PAYMENTS FOR WHICH IDENTITY AND PROOF IN THE FORM OF BILLS AND VOUCHE RS WERE PRODUCED BEFORE THE A.O. AND THE SAME COULD NOT BE DISPUTED. HE FUR THER ARGUED THAT THE SAID PAYMENTS ARE COVERED UNDER EXCEPTIONS AND ARE COVER ED UNDER RULE 6DD(E). AND SINCE PAYMENTS HAVE BEEN MADE FOR THE PURCHASE OF AGRICULTURE PRODUCE AND THIS FACT CANNOT BE DENIED BY THE REVENUE . 4.1. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMI TTED THAT WHILE PASSING U/S 263 OF THE ACT, THE LD. CIT HAS DIRECTED IN PAR A 6.2 OF THE ORDER THAT THE AO WHILE MAKING THE ADDITION HAS NOT MADE PROPER EN QUIRIES, WHICH IS REPRODUCED AS UNDER: 6.2. THE AO HAS FURTHER REPORTED THAT ON TEST CHECK OF VARIOUS PURCHASE BILLS PRODUCED BY THE ASSESSEE AND THE MOD E OF PURCHASES I.E. PURCHASES MADE ON COUNTER BY THE ASSESSEE, THE CLAI M OF THE ASSESSEE THAT ALL THE PERSONS ARE AGRICULTURISTS CANNOT BE A CCEPTED AS SUCH WITHOUT ANY INDEPENDENT/FIELD ENQUIRY. HE HAS THUS REPORTED THAT IN ORDER TO ASCERTAIN THE FACTUAL POSITION, PROPER ENQ UIRY IS REQUIRED TO BE MADE. THE TOTAL ENTRIES POINTED OUT BY THE AO IN HI S PROPOSAL ARE MORE THAN ONE THOUSAND INVOLVING TRANSACTIONS WORTH MORE THAN RS.1.95 CRORES, WHICH HAS NOT BEEN ENQUIRED INTO BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO EXAMINE THE GENUINENES S OF ASSESSEES CLAIM. THEREFORE, IN VIEW OF THESE FACTS, THE FAILU RE ON THE PART OF THE AO TO EXAMINE AND CONDUCT PROPER ENQUIRY WHILE COM PLETING THE ASSESSMENT WITH RESPECT TO THE GENUINENESS OF THE CASH PAYMENTS MADE, RENDERS THE ORDER PASSED BY HIM ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF REVENUE. ITA NO.217(ASR0/2012 7 SINCE IN THIS CASE, WHILE MAKING THE ADDITION, THE AO HAS NOT MADE PROPER ENQUIRIES, THUS THE VERY BASIS ON WHICH THE CASE WA S REOPENED HAS NOT BEEN COMPLIED WITH AND THE ADDITION CANNOT BE BASED ON C ONJECTURES, SURMISES AND SUPPOSITION; AS THE AO HAS MISERABLY FAILED TO MAKE INDEPENDENT ENQUIRY BEFORE MAKING THE ADDITION OF RS.20,76,155/-. IT IS RELEVANT TO POINT OUT THAT ALL THE VOUCHERS WERE DULY PRODUCED BEFORE THE AO W HILE COMPLETING THE ASSESSMENT IN COMPLIANCE TO ORDER U/S 263 OF THE IN COME TAX ACT, 1961. THE AO HAS FAILED TO APPRECIATE THAT AFTER A LAPSE OF 5 YEARS, IT IS NOT POSSIBLE TO PRODUCE THE PERSONS FROM WHOM WE HAD MADE PURCHASES OF PADDY AND THE PAYMENTS WERE MADE TO THE AGRICULTURISTS NOT HAVING ANY TRADING ACTIVITIES. THE PRODUCTION OF THE PERSONS WAS NOT POSSIBLE AND THEIR VOUCHERS WERE DULY PRODUCED FOR VERIFICATION. MOREOVER, THE PAYMENTS A RE COVERED UNDER RULE 6DD(E) OF THE ACT, WHICH CLEARLY SHOWS/SPEAKS THAT THE PAYMENTS CAN BE MADE FOR AGRICULTURE PRODUCE IN EXCESS OF RS.20,000 /- THE PURPOSE OF INTRODUCTION OF SECTION 40A(3) OF THE ACT WAS TO PR EVENT AND CHECK THE EVASION OF TAX AND THE FLOW OF UNACCOUNTED MONEY AN D TO CHECK THE SHOWING FICTITIOUS OR FAKE TRANSACTIONS. IN THE CASE OF THE ASSESSEE THERE IS NO SUCH INTENTION OF THE ASSESSEE. THE ASSESSEE HAD MADE PA YMENTS TO THE AGRICULTURISTS FOR SUPPLY OF PADDY DURING THE YEAR 2003-04. LIST OF PAYMENTS OF RS.1,03,80,772/- FURNISHED AT THE TIME OF PROCEE DING INDICATE THAT THESE ITA NO.217(ASR0/2012 8 PAYMENTS WERE VERY MINOR. HAD THE ASSESSEE BEEN D EALING WITH TRADERS OR ARHTIAS THE PAYMENTS WOULD HAVE BEEN MADE THROUGH P AYEE ACCOUNT CHEQUES. IN THIS CASE, PERSONS FROM WHOM THE PADDY WAS PURCHASED ARE AGRICULTURISTS AND THEY WERE ILLITERATE AND THEY WE RE NOT HAVING ANY BANK ACCOUNT AS THEY WERE SMALL FARMERS. IT MAY BE POINT ED OUT THAT THE ASSESSEE IS NOT PURCHASING PADDY FROM THE TRADERS OR THE ARH TIAS. THE ASSESSEE IS PURCHASING PADDY DIRECTLY FROM THE AGRICULTURISTS W HO USED TO COME TO THE FACTORY TO SELL THE SAME. IT IS AN ADMITTED FACT TH AT THE ASSESSEE IS PURCHASING PADDY AT THE PREVAILING MARKET RATE AND THERE IS NO DENIAL OF TRUTH. FURTHERMORE, IT MAY BE SUBMITTED THAT THE ASSESSEE HAS PURCHASED THE PADDY AND THE SAME WAS SOLD. THIS FACT IS DULY CLEAR FROM THE AUDIT REPORT AVAILABLE AT PAGE NOS. 9 TO 19 OF THE PAPER BOOK, WHERE THE C OMPLETE TALLY DETAILS WERE FURNISHED AND THIS STOCK ACCOUNT HAS DULY BEEN ACC EPTED BY THE DEPARTMENT. IT MAY BE POINTED OUT THAT DURING THE FIRST HEARING OF THIS CASE BEFORE THE AO, WE HAVE PRODUCED ALL THE DETAILS AND BOOKS OF ACCOU NTS, VOUCHERS, WHICH HAVE DULY BEEN ACCEPTED IN THE FIRST ORDER PASSED B Y THE AO ON 23.10.2006. IT IS FURTHER POINTED OUT THAT THE ASSESSEE IS CARR YING ON THE BUSINESS SINCE 1997-98 WHEN THIS BUSINESS CAME INTO EXISTENCE. IT IS RELEVANT TO POINT OUT THAT THIS CASE IS COVERED UNDER RULE 6DD(E) WHICH IS REPRODUCED HEREUNDER, WHERE THE PAYMENT IS MADE FOR THE PURCHASE OF AGRIC ULTURE OR FOREST PRODUCE. ITA NO.217(ASR0/2012 9 IT WILL NOT BE OUT OF PLACE TO MENTION HERE THAT TH E AGRICULTURISTS WHO COME FOR MAKING THE SALE OF PADDY ARE ILLITERATE AND THE Y DO NOT HAVE ANY BANK ACCOUNTS IN THE AREA WHERE THEY LIVE AND RESIDE BEC AUSE THEIR LANDS ARE SITUATED NEAR THE BORDER AREA OF JAMMU. 6DD. NO DISALLOWANCE UNDER SUB-SECTION (3) OF SECTION 40 A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFI TS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB-SECTION (3A) OF SE CTION 40A WHERE A PAYMENT OR AGGREGATE OF (E) WHERE THE PAYMENT IS MADE FOR THE PURCHASE OF (I) AGRICULTURAL OR FOREST PRODUCE; OR (II) THE PRODUCE OF ANIMAL HUSBANDRY (INCLUDING LI VESTOCK, MEAT, HIDES AND SKINS) OR DAIRY 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 ARTIC LES, PRODUCE OR PRODUCTS; 4.2. THE LD. COUNSEL FOR THE ASSESSEE FURTHER STATE D THAT LOOKING TO ALL THE FACTS AND THE CIRCUMSTANCES OF THE CASE, IT IS OBVI OUS THAT THERE WAS NO EARTHLY REASON FOR LD. CIT(A) TO CONFIRM THE ADDITI ON MADE BY THE AO WHEN ALL THE PURCHASES ARE DULY ACCOUNTED FOR AND THE PA YMENTS HAVE BEEN MADE TO THE SMALL FARMERS WHO WERE ILLITERATE AND THEY DID NOT HAVE ANY BANK ACCOUNT AND ALL ARE RESIDING IN SMALL VILLAGES. HE ACCORDIN GLY REQUESTED THAT THE ITA NO.217(ASR0/2012 10 APPEAL OF THE ASSESSEE MAY BE ACCEPTED AND THE ADDI TION CONFIRMED BY THE LD CIT(A) MAY BE DELETED. 5. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE AO DID NOT MAKE THE EXTENSIVE ENQUIRY WHILE MAKING THE ORIGINAL ASSESSMENT. THERE FORE, THE MATTER WAS PICKED UP FOR REVISIONAL PROCEEDINGS U/S 263 OF THE ACT AND THE AO IN THE PRESENT PROCEEDINGS ACCORDINGLY CONFIRMED THE ADDIT ION OF RS. 1,03,80,772/- OUT OF TOTAL ADDITION AS DIRECTED UNDER SECTION 26 3 OF THE ACT AT RS.1,95,25,119/-. THERE IS NO DISPUTE TO THE FACT T HAT THE ASSESSEE HAD PRODUCED BILLS/VOUCHERS SHOWING PAYMENTS MADE IN C ASH/BEARER CHEQUES TO AGRICULTURISTS WHO DID NOT HAVE ANY BANK ACCOUNT. THE ASSESSEE HAS SUBMITTED THE EXPLANATION THAT IT IS NOT POSSIBLE T O PRODUCE THE PERSONS FROM WHOM PURCHASES WERE MADE AFTER LAPSE OF FIVE YEARS. THE PAYMENTS HAVE BEEN MADE TO THE AGRICULTURISTS NOT HAVING ANY TRAD ING ACTIVITIES AND ACCORDINGLY SUCH PAYMENTS ARE COVERED UNDER RULE 6D D(J) OF THE I.T. RULES, 1962. THESE SUBMISSIONS TO THE ASSESSEE ARE PART OF CIT(A) ORDER AT PAGES 5 & 6, WHICH FOR THE SAKE OF CONVENIENCE ARE REPRODUC ED AS UNDER: IN ORDER TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE , THE ASSESSEE PRODUCED BILLS/VOUCHERS WHICH CLEARLY SHOWS THAT PA YMENTS ARE MADE ITA NO.217(ASR0/2012 11 CASH/BEARER CHEQUES TO AGRICULTURISTS WHO DO NOT HA VE BANK ACCOUNT. THE AOS CONTENTION THAT ASSESSEE COULD NOT PRODUCE PERSON IS DUE TO REASON THAT AFTER LAPSE OF 5 YEARS IT IS NOT POSSIB LE TO PRODUCE THE PERSONS FROM WHOM PURCHASES WERE MADE. MOREOVER, HA D THESE BEEN REGULAR TRADERS, HE COULD HAVE PRODUCED THE PERSON CONCERNED. AS THE PAYMENTS WERE MADE TO AGRICULTURALISTS NOT HAVING A NY TRADING ACTIVITY, THE PRODUCTION OF PERSON WAS NOT POSSIBLE AND THERE WERE ONLY BILLS/VOUCHERS WHICH WERE PRODUCED FOR VERIFIC ATION. MOREOVER, THE PAYMENTS ARE COVERED UNDER RULE 6DD(J) OF INCOM E TAX ACT WHICH CLEARLY SAYS THAT PAYMENTS CAN BE MADE FOR AGRICULT URE OR FOREST PRODUCER IN EXCESS OF RS.20,000/- . THE MAIN THRUST BEHIND INTRODUCTION OF SEC. 40A(3) IS TO PREVENTIVE AND CHECK THE EVASION OF TAX AND FLOW OF UNACCOUNTE D MONEY OR TO CHECK THE TRANSACTION WHICH ARE NOT GENUINE AND MAY BE PUT AS CAMOUFLAGE TO EVADE TAX BY SHOWING FICTITIOUS OR FA KE TRANSACTION. IN THE CASE OF ASSESSEE, THERE IS NO SUCH INTENTION OF THE ASSESSEE AND ASSESSEE HAD MADE PAYMENTS TO AGRICULTURALIST FOR S UPPLY OF PADDY DURING THE YEAR 2003-04. LIST OF PAYMENTS OF RS.1,0 3,80,772/- FURNISHED AT THE TIME OF ASSESSMENT ALSO CLEARLY IN DICATES THAT 99% PAYMENTS ARE BELOW 50,000/- RANGING FROM 27,267/- O NWARDS. HAD THE ASSESSEE BEEN DEALING WITH TRADERS/OR ARHITYAS, IT SHOULD HAVE MAINTAINED THE ACCOUNT AND MADE PAYMENTS THROUGH T HEIR ACCOUNTS. MOREOVER, THE NATURE OF PAYMENT OF BELOW 50,000/- C LEARLY SHOWS THAT PADDY HAS BEEN RECEIVED NOT AS TRUCK LOAD BUT TROLL EYS WHICH CARRY SMALLER WEIGHT INSTEAD OF FULL WEIGHT OF 9 TO 10 TO NES. 6.1. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF T HE CASE, WHEN ALL THE PAYMENTS AS SUBMITTED BY THE ASSESSEE ARE COVERED U NDER RULE 6DD(J) OF THE INCOME TAX RULES, 1962, FOR WHICH NO PERVERSE FINDI NGS HAVE BEEN GIVEN BY THE AO AND THE LD. CIT(A), THEN NO ADDITION IS REQU IRED TO BE MADE UNDER SECTION 40A(3) OF THE ACT. THE AO WAS MORE WITHIN H IS POWER TO MAKE ENQUIRY INDEPENDENTLY AND ALL THE BILLS AND VOUCHER S PROVING THE IDENTITY ITA NO.217(ASR0/2012 12 WERE ON RECORD BUT THE AO CHOSE NOT TO MAKE INDEPE NDENT ENQUIRY. THE POWER TO MAKE ENQUIRIES VESTS WITH THE AO U/S 131 O F THE ACT AND NOT WITH THE ASSESSE. THEREFORE, THE ASSESSEE CANNOT BE BLAM ED AND CANNOT BE PENALIZED BY MAKING ADDITIONS OF THE PAYMENTS SO M ADE WHICH ARE, IN FACT, ARE GENUINE PAYMENTS AND ARE COVERED UNDER RULE 6DD (J) OF I.T.RULES, 1962. THEREFORE, THE LD. CIT(A) IS NOT JUSTIFIED IN CONFI RMING THE ADDITION MADE BY THE AO. ACCORDINGLY, THE AO IS DIRECTED TO DELETE T HE ADDITION SO MADE. HENCE, ALL THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 217(ASR)/2012 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH FEBRUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24TH FEBRUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. SAT AGRO TECH OVERSEAS PVT. LTD. JAMMU 2. THE DCIT, CIRCLE-1, JAMMU 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR)