Shambhu Prakash Sah, Patna V. I.T.O., Patna

ITA 238/PAT/2013

• Counselvise Citation: [2015] 117 COUNSELVISE.COM (IT) 9148 (ITAT-PATNA)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 19-05-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 12-11-2013
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR MISHRA
• Assessee Lawyers: K N PRASAD
• Keywords: Rule 8D; Set aside
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, PATNA SMC BENCH, PATNA BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 238/PAT./2013 ( ASSESSMENT YEAR : 201011 ) SHAMBHU PRAKASH SAH PROP: ANUP STORE MALSALAMI, PATNA CITY, PATNA PAN AMSPS7421B APPELLANT V/S INCOME TAX OFFICER WARD-6(3), PATNA .... RESPONDENT ASSESSEE BY : SHRI K.N. PRASAD, ADVOCATE REVENUE BY : SHRI RAJESH KUMAR MISHRA, D.R. DATE OF HEARING 02.08.2016 DATE OF ORDER 02.09 .2016 O R D E R AFORESAID APPEAL BY THE ASSESSEE IS DIRECTED AGAIN ST THE IMPUGNED ORDER DATED 13 TH AUGUST 2013, PASSED BY THE LEARNED COMMISSIONER (APPEALS), PATNA, FOR THE ASSESSMENT Y EAR 201011. GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UND ER: 2. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) IS NOT JUSTIFIED IN DISMISSING THE GROUNDS R AISED BEFORE HIM THAT THE DEMAND NOTICE SERVED WITH THE ASSESSMENT O RDER HAS NOT BEEN AUTHENTICATED BY THE ASSESSING OFFICER AND AS SUCH THE ASSESSMENT ORDER AS PASSED IS VITIATED IN LAW AND F IT TO BE ANNULLED. IT IS RESPECTFULLY SUBMITTED THAT THE CON SEQUENT ASSESSMENT ORDER IS NON-EST, NON EXISTING, IN-FRUCT UOUS AND FIT TO BE DECLARED ANNULLED. THE UNAUTHENTICATED DEMAND NO TICE IS NOT CURABLE ULS 292B OF THE I.T. ACT, 1961. IN ANY VIEW OF THE MATTER, SINCE THE DEMAND NOTICE IS NOT AUTHENTICATED AND AS SUCH THE INTIMATION OF DEMAND IS NOT ENFORCEABLE IN LAW AS A LSO CONSEQUENT ASSESSMENT ORDER IS VITIATED IN LAW, NON-EST, NON-E XISTING, IN- 2 SHAMBHU PRAKASH SAH FRUCTUOUS AND FIT TO BE DECLARED ANNULLED. 3. F OR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 1,44,620/- IN RESPECT OF PAGE 4 OF SKS-10 . NO ADDITION IS CALLED FOR AS PER PAGE 4 OF SKS-10 . IN ANY VIEW OF THE MATTER, THE ADDITION OF RS. 1,44,620/- AS SUSTAINED IS FIT TO BE DELETED. 4. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.14,00,870/ AS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CASH PURCHASE 0 SUGAR. THE TRANSACTION OF SUGAR IS DULY RECORDED IN THE BOOKS 0 ACCOUNT AND THERE IS NO DISPUTE ABOUT THE GENUINENE SS OF TLU TRANSACTION AND PAYMENT AND IDENTITY OF THE RECEIVE R. THE TRANSACTION OF THE SUGAR WAS EXCLUSIVELY ON CASH TE RM. THE CASE OF THE ASSESSEE COVERED BY PROVISO TO SECTION 40A(3) O F THE I.T. ACT, 1961. IN ANY VIEW OF THE MATTER, THE ADDITION OF RS . 14,00,870/- AS CONFIRMED THE LEARNED CIT(A) IS FIT TO BE DELETED. 2. INSOFAR AS GROUNDS NO.2 AND 3 ARE CONCERNED, THE LE ARNED COUNSEL FOR ASSESSEE SUBMITTED, HE DID NOT WISH TO PRESS THESE GROUNDS. CONSEQUENTLY, THESE GROUNDS ARE DISMISSED AS NOT PRESSED . 3. THE ONLY EFFECTIVE ISSUE REMAINING IN THE PRESENT A PPEAL RELATES TO CONFIRMATION OF ADDITION OF ` 14,00,870 ON ACCOUNT OF CASH PURCHASE OF SUGAR. 4. THE ASSESSING OFFICER MADE ADDITION OF ` 14,00,870, FOR SUGAR PURCHASED IN CASH IN AMOUNTS EXCEEDING ` 20,000 IN VIOLATION OF PROVISIONS OF SECTION 40A(3). 5. UPON ASSESSEES APPEAL, THE LEARNED COMMISSIONER (AP PEALS) CONFIRMED THE ADDITION HOLDING AS UNDER: 3 SHAMBHU PRAKASH SAH 17. I HAVE CONSIDERED THE FACTS OF THE CASE. UNDIS PUTED FACTS ARE THAT THE PURCHASE BILLS AS WELL AS THE PAYMENTS IN RESPECT OF PURCHASE OF SUGAR TO THE EXTENT OF ` 14,00,870 ARE IN CASH IN AMOUNTS EXCEEDING ` 20,000. AS FAR AS REFERENCE TO THE PROVISO TO SUBSECTION 3A OF SECTION 40A OF THE INCOME TAX ACT , 1961 IS CONCERNED, IT IS MENTIONED IN THIS PROVISO THAT DIS ALLOWANCE IS NOT TO BE MADE UNDER SUBSECTION 3 AND SUBSECTION 3A H AVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITY AVAILABLE, CONSIDERATION OF THE BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS AS ASSESSMENT YEAR BE PRESCRIBED. TO IMPLEM ENT THE SAME, RULE 8DD HAS BEEN PUT IN PLACE WHICH SPECIFIES THE CIRCUMSTANCES WHEN PAYMENT IN CASH EXCEEDING OF RS. 20,000/- CAN BE MADE. SUCH PAYMENTS CAN BE SPARED THE WRATH OF SECTION 40A(3) OF THE INCOME-TAX ACT, 1961 IF IT IS SHOWN THAT THE PAYMENT IS COVERED BY ANY O F THE MITIGATING CLAUSE OF RULE 6DD. SUPPLIERS INSISTING ON CASH PAYMENT IS NOT A MITIGATING CIRCUMSTANCE. THE CASE LAWS AND THE CIRCULAR RELIED UPON BY THE APPELLANT AND CLAIM THAT THE PURCHASES ARE VERIFIABLE ARE FOR THE PERIOD WHEN CLAUSE (J) EXISTED IN RULE 6DD WHICH PROVIDED FOR EXEMPTION UNDER EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES AND THERE WAS OPTION WITH THE ASSESSE E TO SHOW BEFORE THE AO TO HIS SATISFACTION THAT SUCH PAYMENTS HAD BEEN MADE UNDER SUCH CIRCUMSTANCES. HOWEVER, THIS CLAUSE IS NO LONGER IN OPERATION SINC E LONG. THE CASE LAWS TO THE EFFECT THAT THE PAYMENTS SHOUL D BE ALLOWED WHEN TRANSACTIONS ARE GENUINE SUCH AS THOSE REPORTED IN 173 ITR 358 AND 179 ITR 122 (GIRDHARI LA L GOENKA VS. CIT) ALSO RELATE TO PERIOD WHEN THIS CLAU SE WAS IN OPERATION AND RELIANCE HAS BEEN PLACED ON TH IS CLAUSE FOR ARRIVING AT THIS CONCLUSION. AFTER OMISS ION OF THIS CLAUSE, NO SUCH DISCRETION IS THERE WITH THE ASSESSING OFFICER TO GO INTO THE CIRCUMSTANCES' OF THE PAYMENTS. THE APPELLANT IS AN OLD BUSINESSMAN IN TH IS TRADE. THE SUPPLIERS ALSO WOULD HAVE KNOWN HIM WELL . IN ANY CASE, THERE WERE ONLY TWO OPTIONS BEFORE HIM. E ITHER TO MAKE PAYMENT OF LESS THAN RS. 20,000/- IN ONE TRANSACTION OR TO MAKE PAYMENT THROUGH THE BANKING CHANNEL. ACCORDINGLY, THE DISALLOWANCE OF RS. 14,00,870/-. 6. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4 SHAMBHU PRAKASH SAH 7. LEARNED COUNSEL FOR ASSESSEE SUBMITTED, THE ASSESSE E IS DOING RETAIL BUSINESS IN DIFFERENT ITEMS OF GROCERY WHICH, INTER ALIA, INCLUDES SUGAR. HE SUBMITTED, DEALERS SELLING SUGAR INSISTED ON CASH T ERM. IN THIS REGARD, HE REFERRED TO CERTIFICATE OF SELLING DEALERS. HE FURT HER SUBMITTED THAT IF THE ASSESSING OFFICER INTENDED TO ADD THE PURCHASE OF S UGAR OF ` 14,00,870, THEN THE CORRESPONDING SALE THEREOF SHOULD HAVE BEEN DEL ETED. HE FURTHER SUBMITTED, THERE ARE EXCEPTIONS CARVED OUT IN SECTI ON 40A(3) CONSIDERING THE BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. 8. PERCONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 9. I HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. PROVISIONS OF RULE 6D D(J) WHICH RELATES TO MITIGATING CIRCUMSTANCES UNDER SECTION 40A(3), PROV IDES THAT NO DISALLOWANCE UNDER SECTION 40A(3) SHALL BE MADE WHE RE THE ASSESSEE SATISFIED THE ASSESSING OFFICER REGARDING CASH PAYM ENT THAT (A) IT WAS DONE DUE TO EXCEPTIONAL AND/OR UNAVOIDABLE CIRCUMSTANCES , AND (B) BECAUSE PAYMENT IN THE MANNER AFORESAID WAS NOT PRACTICABLE , OR WOULD HAVE BEEN CAUSED GENUINE DIFFICULTY TO THE PAYEE, HAVING REGA RD TO THE NATURE OF THE TRANSACTION AND THE NECESSITY FOR EXPEDITIOUS SETTL EMENT THEREOF; AND ALSO FURNISHES EVIDENCE TO THE SATISFACTION OF THE ITO A S TO THE GENUINENESS OF THE PAYMENT AND IDENTITY OF THE PAYEE. IN THIS CONNECTI ON, I FIND, IT IS THE ASSESSEES PLEA THAT ASSESSEE WAS DEALING IN SUGAR AND THE SELLER INSISTED FOR CASH PAYMENT. THE LEARNED COUNSEL FOR ASSESSEE SUBM ITTED, THE CONFIRMATION 5 SHAMBHU PRAKASH SAH LETTER FROM THE SELLERS PLACED AT PAGES11, 13 AND 17 OF THE PAPER BOOK, FOR THE PROPOSITION THAT SINCE THERE WAS A SCARCITY OF SUGAR COMMODITY, THE SALES WERE MADE IN CASH. THE SELLERS ALSO CERTIFIED THE C ASH PURCHASES MADE. I FIND, THE CERTIFICATES AND DETAILS WERE ALSO AVAILA BLE BEFORE THE ASSESSING OFFICER WHO HAS NOT MADE ANY ADVERSE COMMENT REGARD ING THE VERACITY OF THESE CERTIFICATES. UNDER THESE CIRCUMSTANCES, IN M Y CONSIDERED OPINION, THE ASSESSEES CASE FALLS UNDER KEN OF RULE 6DD(J). ACC ORDINGLY, I SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND D ECIDE THE ISSUE IN FVOUR OF THE ASSESSEE. 10. IN THE RESULT, APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.09.2016 SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER PATNA, DATED: 02.09.2016 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, PATNA CITY CONCERNED; (5) THE DR, ITAT, PATNA; (6) GUARD FILE. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY A.R. / SR.P.S./P.S. ITAT, PATNA