M/s. China Automobile, Hooghly V. ITO, Ward - 1(3), Hooghly, Hooghly

ITA 229/KOL/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6423 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 15-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHERJEE
• Assessee Lawyers: P K DAS
• Keywords: Business expenditure; Corroborative evidences; Assessment record
• Section: 40A(3); 143(3); 133(6)

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.229/KOL/2016 ASSESSMENT YEAR:2009-10 M/S CHINA AUTOMOBILE PROP. SRI PRANAB NANDY, JANGIPARA, HOOGHLY, WEST BENGAL-712404 [ PAN NO.ADEPN 9894 L ] / V/S . INCOME TAX OFFICER, WARD-1(3), AAYAKAR BHAWAN, KHADINAMORE, CHINSURAH, HOOGHLY, /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI P.K. DAS, ADVOCATE /BY RESPONDENT SHRI A. BHATTACHERJEE, ADDL CIT-DR /DATE OF HEARING 05-04-2018 /DATE OF PRONOUNCEMENT 03-05-2018 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-6, KOLKATA DATED 04.12.2015. A SSESSMENT WAS FRAMED BY ITO WARD-1(3), HOOGLY U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 23.12.2011 FOR ASSE SSMENT YEAR 2009-10. THE GROUNDS RAISED BY THE ASSESSEE PER ITS APPEAL ARE AS UNDER: - 1. FOR THAT THE ASSESSMENT IS BAD IN LAW RELYING O N MISCONCEIVED IN FACTS AS WELL AS IN LAW. 2. FOR THAT THE LD. CIT(A)-6/KOL IS ERRED IN CONFIR MING THE ADDITION OF WHOLE AMOUNT OF PAYMENT MADE IN CASH IN EXCESS OF RS.20,0 00/- IN DAY AGGREGATING TO ITA NO.229/KOL/2016 A.Y. 2009-10 M/S CHINA AUTOMOBILE VS. ITO WD-1(3) , HGL. PAGE 2 RS.15,83,647/- TO SMS AUTO FOR ALLEGED VIOLATION OF PROVISION OF SEC. 40A(3) OF THE INCOME TAX ACT, 1961 READ WITH RULE 6DD WITHOUT CONSIDERING THE ACTUAL FACTS AND CIRCUMSTANCES AND GENUINENESS OF CASE OF YOUR PETITIONER BASED ON MERE SURMISES AND SUPPOSITION. IT IS WHOLLY BAD AND ILLEGAL AND SUCH EXPENSE BEING FULLY DEDUCTIBLE BUSINESS EXPENSES. 3. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A)- 6/KOL WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMIN G ADDITION UNDER SECTION 40A(3) OF THE INCOME TAX ACT, 1961 READ WITH RULE 6 DD WITHOUT CONSIDERING THE FACT THAT DISALLOWANCE FOR CASH PAYMENTS NOT AP PLICABLE IF THERE IS NO DISPUTE AS TO GENUINENESS OF PAYMENT AND BUSINESS C OMPULSION AND THEREFORE BAD IN LAW. THE ORDER PASSED U/S. 143(3) IS LIABLE TO BE QUASHED OR CANCELLED IN THE CIRCUMSTANCES IT MAY KINDLY BE HELD ACCORDINGLY . 4. FOR THAT YOUR PETITIONER CRAVES THE RIGHT TO PUT ADDITIONAL GROUNDS AND/OR TO ALTER/AMEND/MODIFY THE PRESENT GROUNDS AT THE TIME OF HEARING. SHRI P.K. DAS LD. ADVOCATE APPEARED ON BEHALF OF AS SESSEE AND SHRI A. BHATTACHERJEE, LD. DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 2. SOLE ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY SUSTAI NING THE DISALLOWANCE OF RS.15,83,647/- UNDER THE PROVISION OF SECTION 40A(3 ) OF THE ACT. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS AN IND IVIDUAL AND DEALER OF TWO WHEELERS COMPANY NAMELY M/S SMS. DURING THE YEAR UNDER CONSI DERATION, ASSESSEE HAS MADE PAYMENT IN CASH FOR RS.15,83,647/- TO SMS AUTO EXCE EDING RS.20,000/-. THE FACT OF CASH PAYMENT WAS CONFIRMED ON THE REPLY RECEIVED FR OM SMS AUTO IN RESPONSE TO THE NOTICE ISSUED U/S. 133(6) OF THE ACT. ACCORDINGLY, AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE SALES WERE DIRECTLY M ADE BY SMS AUTO TO THE PARTIES AND ASSESSEE WAS ACTING AS AN AGENT OF SMS AUTO AS DELCREDERE AGENT. THEREFORE, ASSESSEE IS ENTITLED TO MAKE THE PAYMENT IN CASH AS PER THE PROVISION OF RULE 6DD OF THE IT RULES, 1962. THE ASSESSEE ALSO SUBMITTED THA T THE AO HAS NOT VERIFIED THE PURCHASE REGISTER, CASH MEMO FOR SALES, OR SALE BIL L WITH VAT REGISTER OF SMS AUTO WHO CLAIMED TO HAVE MADE SALES THROUGH ASSESSEE. TH E ASSESSEE USED TO COLLECT THE SALES PROCEEDS FROM THE CUSTOMERS ON BEHALF OF SMS AUTO WHICH WAS SUBSEQUENTLY FORWARDED TO SMS AUTO. THE CONFIRMATION RECEIVED FR OM SMS AUTO DOES NOT HAVE ITA NO.229/KOL/2016 A.Y. 2009-10 M/S CHINA AUTOMOBILE VS. ITO WD-1(3) , HGL. PAGE 3 ANY DETAILS OF SALE SHOWN BY SMS AUTO TO THE THIRD PARTIES IN THE ACCOUNT OF THE ASSESSEE. THEREFORE, THE CONFIRMATION RECEIVED FROM SMS AUTO IS DEFECTIVE. HOWEVER, LD. CIT(A) DISREGARDED THE CONTENTION OF ASSESSEE A ND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- 3,2 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E APPELLANTS SUBMISSIONS. THE ASSESSING OFFICER DISALLOWED PAYMENTS IN EXCESS OF RS.200,0000/- MADE IN CASH IN A DAY AGGREGATING TO RS.15,83,647/- AS PER THE CLEAR PROVISIONS OF SEC.4A(3) OF THE ACT. THE APPELLANTS ARGUMENT IS T HAT THE PAYMENTS WERE NOT MADE ON ACCOUNT OF EXPENSES OF THE APPELLANT AT AL L BECAUSE THE APPELLANT WAS ONLY AN AGENT OF SMS AUTO AND NOT A CUSTOMER. SMS A UTO USED TO SALE MOTOR CYCLES TO ITS CUSTOMERS THROUGH THE APPELLANT AND T HE APPELLANT USED TO COLLECT THE SALES PROCEEDS FOR AND ON BEHALF OF SMS AUTO. I T WAS ALSO CONTENDED THAT THE BOOKS OF ACCOUNT AND LEDGERS WERE NOT PROPERLY EXAMINED BY THE AO. THE AR WAS GIVEN AN OPPORTUNITY TO PRODUCE THE BOOKS OF ACCOUNT BUT ON 27.11.2015, IT WAS STATED THAT THE BOOKS OF ACCOUNT COULD NOT BE PRODUCED. I HAVE EXAMINED THE ASSESSMENT RECORD AND FIND FROM T HE COPY OF ACCOUNT FURNISHED BY SMS AUTO THAT BILLS USED TO BE RAISED ON THE APPELLANT AS IF THE APPELLANT WAS THE CUSTOMER OF SMS AUTO AND THE APPE LLANT USED TO PAY BY WAY OF CHEQUES OR CASH, AS THE CASE MAY BE. ACCORDINGLY , A RUNNING LEDGER ACCOUNT WAS MAINTAINED. NO EVIDENCE HAS BEEN PRODUCED BY TH E APPELLANT TO SHOW THAT THE APPELLANT HAD NOT MADE THE PAYMENTS IN CASH ON ACCOUNT OF PURCHASES AND WAS AN AGENT OF SMS AUTO. THE MATERIAL ON RECORD IN CLUDING THE FINANCIAL STATEMENTS ONLY GO TO PROVE THAT THE APPELLANT IS A CUSTOMER OF SMS AUTO AND HAD MADE CASH PAYMENTS AGGREGATING TO RS.15,83,647/ - IN VIOLATION OF PROVISION OF SEC. 40A(3) OF THE ACT. HENCE, THE DIS ALLOWANCE OF RS.15,83,647/- MADE BY THE AO U/S 40A(3) IS CONFIRMED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 5. LD. AR FOR THE ASSESSEE FILED PAPER BOOK WHICH COMPRISES PAGES 1 TO 30 AND SUBMITTED THAT THE SALES WERE MADE BY SMS AUTO DIRE CTLY TO THE PARTIES AND THIS FACT IS EVIDENT FROM THE INVOICE RAISED BY SMS AUTO TO THE ASSESSEE STATING THAT SALE THROUGH CHINA AUTOMOBILE. THE COPIES OF THE TAX INVOICE IS SUED BY SMS AUTO ARE PLACED AT PAGES 3 TO 11 OF THE PAPER BOOK. THEREFORE, IT IS C LEAR THAT THERE WAS IN EXISTENT THE RELATIONSHIP OF PRINCIPAL & AGENT BETWEEN ASSESSEE AND SMS AUTO. HE ALSO SUBMITTED THAT ASSESSEE WAS REGISTERED UNDER WEST BENGAL VALU E ADDED TAX (VAT) UNDER THE CATEGORY OF AGENCY BUSINESS. SIMILARLY, NATURE OF B USINESS IN TAX AUDIT REPORT WAS SPECIFIED AS DEALER AND RESELLER OF MOTOR CYCLE. TH US, LD. AR SUBMITTED THAT THE ITA NO.229/KOL/2016 A.Y. 2009-10 M/S CHINA AUTOMOBILE VS. ITO WD-1(3) , HGL. PAGE 4 ASSESSEE WAS ACTING AS AGENT OF SMS AUTO. THEREFORE , THERE WAS NO VIOLATION OF RULE 40A(3) OF THE ACT. ON THE OTHER HAND, LD. DR SUBMITTED THAT THERE IS N O EVIDENCE SUGGESTING THAT THERE WAS EXISTENT THE RELATIONSHIP OF AGENCY BETWEEN ASS ESSEE AND THE SMS AUTO. THEREFORE THE ASSESSEE HAS VIOLATED THE PROVISION O F SECTION 40A(3) OF THE ACT BY MAKING THE CASH PAYMENT. HE VEHEMENTLY RELIED ON TH E ORDER OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE PRESENT CASE, THE ISSUE IS RELATED TO THE DISALLOWANCE MADE BY THE AO U/S 40A(3) OF THE ACT B Y MAKING CASH PAYMENT EXCEEDING RS.20,000/-. THE VIEW TAKEN BY THE AO WAS SUBSEQUENTLY CONFIRMED BY LD. CIT(A). FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THE DOCUMENTARY EVIDENCE SUGGESTING THAT TH ERE WAS AGENCY RELATIONSHIP BETWEEN ASSESSEE AND SMS AUTO. HOWEVER, THE SUBMISS ION WAS MADE BY ASSESSEE BEFORE AO AS WELL AS BEFORE LD. CIT(A) THAT THERE I S AGENCY RELATIONSHIP BETWEEN ASSESSEE AND SMS AUTO. THE AO WAS VERY MUCH AWARE O F THE ADDRESS OF SMS AUTO BUT HE DID NOT EXERCISE HIS POWER UNDER THE PROVISI ON OF LAW TO VERIFY THE RELATIONSHIP BETWEEN ASSESSEE AND SMS AUTO. 6.1 WE ALSO NOTE THAT THE ASSESSEE CLAIMED TO HAVE ACTED AS DELCREDERE AGENT BUT ASSESSEE IN THE BOOKS OF ACCOUNT HAS SHOWN THE TRAN SACTION AS PURCHASED AND SALE IN HIS BOOKS OF ACCOUNT. HAD ASSESSEE BEEN ACTING AS A N AGENT OF SMS AUTO IN THE CAPACITY OF DELCREDERE AGENT THEN HE SHOULD HAVE BO OKED ONLY THE AMOUNT OF COMMISSION INCOME IN HIS BOOKS OF ACCOUNT. HOWEVER, WE NOTE THAT BOOKS OF ACCOUNT CANNOT BE DECISIVE IN DECIDING WHETHER ASSESSEE IS DELCREDERE AGENT. ON PERUSAL OF OTHER SUPPORTING EVIDENCE SUCH AS SALE INVOICE ISSU ED BY THE SMS AUTO WHEREIN IT WAS CLEARLY RECORDED SALE THROUGH CHINA AUTOMOBILE SUGG EST THAT SALE WAS DIRECTLY MADE BY SMS AUTO TO THE PARTIES. BUT, IT WAS ROUTED THRO UGH ITS AGENT I.E. CHINA AUTOMOBILE. SIMILARLY, WE ALSO NOTE THAT THE ASSESS EE HAS BEEN REGISTERED UNDER THE WEST BENGAL VAT UNDER THE CATEGORY OF AGENCY BUSINE SS, WHICH ALSO SUGGEST THAT ASSESSEE IS ACTING AS AGENT OF SMS AUTO. IN VIEW OF ABOVE, WE NOTE THAT THE SITUATION OF ASSESSEE IS DOUBTFUL WHETHER ASSESSEE IS AN AGEN T OF SMS AUTO BUT AO WAS VERY ITA NO.229/KOL/2016 A.Y. 2009-10 M/S CHINA AUTOMOBILE VS. ITO WD-1(3) , HGL. PAGE 5 MUCH EMPOWERED UNDER THE PROVISION OF LAW TO ASCERT AIN THE FACTS THAT WHETHER ASSESSEE IS AN AGENT OF SMS AUTO. BUT HE FAILED TO EXERCISE HIS POWER GIVEN UNDER THE STATUTE. THEREFORE, IN OUR CONSIDERED VIEW THE BENE FIT OF DOUBT GOES IN FAVOUR OF ASSESSEE. IN VIEW OF THE ABOVE, WE HAVE NO HESITATI ON TO REVERSE THE ORDERS OF AUTHORITIES BELOW. HENCE, THIS GROUND OF ASSESSEE I S ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 03/05/2018 SD/- SD/- ( % ') ( ') (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ) - 03/05/2018 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S CHINA AUTOMOBILE PROP. SRI PRNAB NAN DY, JANGIPARA HOOGHLY- PIN-712404 2. /RESPONDENT-ITO WARD-1(3), AAYAKAR BHAWAN, KHADINAM ORE, CHINSURAH HOOGHLY 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . %%, , , / DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY HEAD OF OFFICE/DDO ,,