Sri.R.P.Narayana Rao, Mysore V. Income Tax Officer, Mysore

ITA 2176/BANG/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8459 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 09-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: C R NULVI
• Keywords: Source of fund; Additional evidence
• Section: 40A(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH - SMC A BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T.A. NO. 2176 /BANG/201 6 (ASSESSMENT YEAR : 200 8 - 09 ) SHRI R P NARAYANA RAO, PROP. SRI RAGHAVENDRA TEXTILES, BAZAR ROAD, NANJANGUD - 571 301 MYSO RE DISTRICT. PAN AAOPN 7143 H VS. INCOME TAX OFFICER, WARD 1(3) NEW WARD 2(3), MYSORE. APPELLANT RESPONDENT. APPELLANT BY : SHRI C.R. NULVI, C.A. RESPONDENT BY : SHRI AR.V.SREENIVASAN, JCIT (D.R) DATE OF H EARING : 23.02.2017. DATE OF P RONOUNCEMENT : 22 .03. 201 7 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER DT.30.03.2016 OF COMMISSIONER OF INCOME TAX (APPEALS) , MYSORE FOR THE ASSESSMENT YEAR 2008 - 09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 2 ITA NO. 2176 /BANG/ 2016 3 ITA NO. 2176 /BANG/ 2016 3. GROUND NO.1 IS GENERAL IN NATURE AND DO NOT REQUIRE ANY SPECIFIC ADJUDICATIO N. 4. GROUND NOS.2 TO 5 ARE REGARDING DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') . T HE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN CASH PAYMENTS IN EXCESS OF RS.20,000 TO 11 PARTIES FOR PURCHASE O F TEXTILES. THE DETAILS OF THE PAYMENTS ARE REPRODUCED BY THE ASSESSING OFFICER IN PARA 2 AS UNDER : 4 ITA NO. 2176 /BANG/ 2016 THUS THE ASSESSING OFFICER DISALLOWED THE SAID AMOUNT OF RS.4,49,969 BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE ASSESSEE CHALLEN GED THE ACTION OF THE ASSESSING OFFICER BEFORE THE CIT (APPEALS) BUT COULD NOT SUCCEED. 5. BEFORE THE TRIBUNAL, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT OUT OF RS.4,39,000, A SUM OF RS.1, 90,009 WAS PAID THROUGH DD AND THE REFORE THE SAID AMOUNT WAS NOT HIT BY THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS FURTHER CONTENDED THAT AS PER THE UNAMENDED PROVISIONS OF SECTION 40A(3) WHICH ARE APPLICABLE FOR THE YEAR UNDER C ONSIDERATION IF THE INDIVIDUAL PAYMENT IS LESS THAN RS.20,000 THEN NO DISALLOWANCE CAN BE MADE UNDER THIS SECTION BY CLUBBING TOGETHER VARIOUS PAYMENTS MADE TO THE SAME PARTY. THE LEARNED 5 ITA NO. 2176 /BANG/ 2016 AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT AS PER THE UNAMENDED PROVISIONS THE INDIVIDUAL PAYMENT OF EX CEEDING RS.20,000 IS THE CONDITION FOR DISALLOWANCE. THE AMENDMENT IN THE PROVISIONS HAS BEEN BROUGHT BY FINANCE ACT, 2008 W.E.F. 1.4.2009 THEREFORE THE AMENDED PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE FOR TH E YEAR UNDER CONSIDERATION. HE HAS REFERRED TO THE PAYMENTS MADE BY THE ASSESSEE THROUGH VOUCHERS PLACED AT PAGES 6 TO 11 OF THE PAPER BOOK. THUS THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT WHEN THE INDIVIDUAL PAYMENT IS LESS THAN RS.20,000 TO EACH PARTY THEN NO DISALLOWANCE IS CALLED FOR UNDER SECTION 40A(3) OF THE ACT. 6. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT IT IS CLE AR THAT THE ASSESSEE HAS SPLITTING THE AMOUNT INTO VARIOUS SMALL PAYMENTS MADE TO SAME PARTY IN A SINGLE DA Y WITH THE MOTIVE AND OBJECT TO CIRCUMVENT TO SECTION 40A(3) OF THE ACT. THUS THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS CONTENDED THAT SPLITTING OF PAYMENT IS NOT A SEPARATE TRANSACTION BUT ONLY TO AVOID THE PROVISIONS OF SECTION 40A(3) OF THE ACT THEN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS JUSTIFIED. 7. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, IT IS NOTED THAT THE ASSESSEE HAS PAID CASH TO SAME PARTY IN A SINGLE DAY BY SPLITTING IT TO RS.15,000 E ACH. I T IS PERTINENT TO NOTE THAT THE SAID PAYMENT IS 6 ITA NO. 2176 /BANG/ 2016 NOT REPRESENTING SEPARATE INDIVIDUAL TRANSACTION BUT THE PAYMENT HAS BEEN MADE IN RESPECT OF A SINGLE TRANSACTION. THE NUMBERING GIVEN ON THE CASH VOUCHERS REFLECT THAT MORE THAN ONE PAYMENT OF RS.15 ,000 T O EACH PARTY HAS BEEN MADE UNDER SAME MANUAL NUMBER THOUGH THE PRINTED VOUCHER NUMBER IS DIFFERENT. THUS WHEN MORE THAN ONE PAYMENT HAS BEEN MADE ON A SINGLE DAY TO A SINGLE PARTY IN RESPECT OF SINGLE TRANSACTION THEN IT IS NOT A SEPARATE PAYMENT B UT IT IS ONLY SPLITTING OF THE AMOUNT WHICH IS MORE THAN RS.20,000 INTO SMALL AMOUNTS INTO RS.15,000. THEREFORE WHEN A PAYMENT IN RESPECT OF A SINGLE TRANSACTION HAS BEEN MADE TO A PARTY ON SAME DATE THOUGH IT MAY BE SHOWN BY SPLITTING IN RS.15,000 EACH THEN THE TOTAL SUM PAID BY THE ASSESSEE IN RESPECT OF A SINGLE TRANSACTION WILL BE COUNTED FOR THE PURPOSE OF PROVISIONS OF SECTION 40A(3) OF THE ACT. ONLY WHEN EACH PAYMENT REPRESENTS A SEPARATE TRANSACTION THEN AS PER THE UNAMENDED PROVISIONS OF SECTIO N 40A(3), THE SAME WILL NOT ATTRACT THE DISALLOWANCE UNDER THE SAID SECTION. THEREFORE I DO NOT FIND ANY SUBSTANCE OR MERITS IN THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT AS PER THE UNAMENDED PROVISIONS OF THE ACT, THE TRANSACTIONS OF TH E ASSESSEE DO NOT ATTRACT THE PROVISIONS OF SECTION 40A(3). AS REGARDS THE CLAIM OF THE ASSESSEE THAT OUT OF RS.4,39,000, A SUM OF RS.1,09,000 WAS PAID THROUGH DD, THIS FACT HAS NOT BEEN EXAMINED BY THE AUTHORITIES BELOW 7 ITA NO. 2176 /BANG/ 2016 AND THEREFORE IT IS SET ASIDE TO T HE RECORD OF THE ASSESSING OFFICER TO VERIFY THE SAME AND THEN DECIDE THIS ISSUE AS PER LAW. 8. GROUND NO.6 IS REGARDING ADDITION UNDER SECTION 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED LOAN CREDIT. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN THE CREDITORS IN THE NAME OF 8 PARTIES T OTAL AMOUNTING TO RS.1,40,000. T HE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE NAMES AND ADDRESSES AND SOURCE OF FUNDS OF 8 PARTIES. SINCE THE ASSESSEE DID NOT RESPOND TO THE SHOW CAUSE NOTICE THEREFORE THE ASSESSING OFFICER MADE AN ADDITION OF RS.1,40,000 UNDER SECTION 68 OF THE ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE CIT (APPEALS) AND CONTENDED THAT ALL THESE LOANS DID NOT EXCEED RS.20,000 EACH AND ADDRESSED PROVIDE D BY THE ASSESSEE WERE FOUND NOT VERIFIABLE FOR WANT OF DETAILS SUCH AS DOOR NUMBER, PINCODE NUMBER, ETC. T HE CIT (APPEALS) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 9. BEFORE THE TRIBUNAL, THE ASSESSEE HAS FILED THE ADDITIONAL EVIDENCE R EGARDING THE CONFIRMATION AS WELL AS ADDRESS AND ID PROOF. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE ADDITIONAL EVIDENCE MAY BE REMITTED TO THE ASSESSING OFFICER FOR VERIFICATION. 8 ITA NO. 2176 /BANG/ 2016 10. ON THE OTHER HAND, THE LEARNE D DEPARTMENTAL REPRESENTATIVE HAS VEHEMENTLY OPPOSED TO THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE AT THIS STAGE. 11. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, IT IS NOTED THAT THE ADDITION UNDER SECTION 68 OF THE ACT WAS MADE BY THE AUTHORITIES BELOW FOR WANT OF THE NECESSARY DETAILS OF ADDRESS AND CREDITWORTHINESS OF THE LOAN CREDITORS. THE ASSESSEE HAS NOW FILED THE ADDITIONAL EVIDENCE IN THE SHAPE OF ADDRESS AND ID PROOF PLACED AT PAGE NOS.15 TO 22 OF T HE PAPER BOOK. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE ADDITION HAS BEEN MADE FOR WANT OF NECESSARY DETAILS AND EVIDENCE, THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE IS REMITTED TO THE RECORD OF THE ASSESSING OFFICER FOR VERIF ICATION AND ADJUDICATION OF THE ISSUE. 12. GROUND NO.7 IS REGARDING ADDITION ON ACCOUNT OF SUPPRESSED SALES. 13. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE INFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT REGARDING UNACCOUNTED SALE OF THE ASSESSEE. ACCORDINGLY, THE CIT (APPEALS) DIRECTED THE ASSESSING OFFICER TO ENHANCE THE ASSESSMENT BY MA KING AN ADDITION OF RS.83,601. 14. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE ENHANCEMENT OF ASSESSMENT ON A CCOUNT OF SUPPRESSED SALES OF THE 9 ITA NO. 2176 /BANG/ 2016 TOTAL AMOUNT IS NOT JUSTIFIED AND ONLY A GROSS PROFIT ADDITION CAN BE MADE ON THIS AMOUNT. 15. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE ORDER OF AUTHORITIES BELOW AND SUBMITTED TH AT WHEN THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE AGAINST THIS SUPPRESSED SALES, THEN THE ENTIRE AMOUNT HAS TO BE ADDED TO THE INCOME OF THE ASSESSEE. 16. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, IT IS NO TED THAT ON THE BASIS OF THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, THE CIT (APPEALS) FOUND THAT THERE IS UNACCOUNTED SALE OF RS.83,601. THE CIT (APPEALS) HAS FURTHER NOTED THAT ALL RELATABLE EXPENDITURE WERE ALREADY CLAIMED AND ALLOWED IN TH E ASSESSMENTS AND THEREFORE THE ENTIRE AMOUNT WAS DIRECTED TO BE ADDED TO THE INCOME OF THE ASSESSEE. CONSEQUENTLY, THE CIT (APPEALS) HAS ENHANCED THE ASSESSMENT. SINCE IT IS AN ADDITION ON ACCOUNT OF UN ACCOUNTED SALES THEREFORE, CORRESPONDING EXPENDITU RE TOWARDS PURCHASE HAS TO BE ALLOWED. THERE CANNOT BE ANY SALE WITHOUT CORRESPONDING PURCHASE AND THEREFORE THE ENTIRE AMOUNT OF SUPPRESSED SALES CANNOT BE TREATED AS INCOME OF THE ASSESSEE. HENCE THE ASSESSING OFFICER IS DIRECTED TO CONSIDER ONLY THE GROSS PROFIT ON THIS SALES AS INCOME OF THE ASSESSEE. 10 ITA NO. 2176 /BANG/ 2016 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 .0 3. 201 7 . SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER BANGALORE, DT. 22 .03 .20 17. *REDDY GP COPY TO : 1 . APPELLANT 2 . RESPONDENT 3 . C.I.T. 4 . CIT(A) 5 . DR, ITAT, BANGALORE. 6 . GUARD FILE. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL BANGALORE.