ITO, Warangal V. M/s Divya Pesticides & Seeds, Warangal

ITA 242/HYD/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6278 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 19-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S RAMA RAO
• Assessee Lawyers: SUNIL BABU
• Keywords: Gift
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA.NO.174/HYD/2009 ASSESSMENT YEAR 2005-06 M/S DIVYA PESTICIDES & SEEDS, WARANGAL (PAN/GIR D-383) VS THE ITO, WARD 1, WARANGAL (APPELLANT) (RESPONDENT) ITA.NO.242/HYD/2009 ASSESSMENT YEAR 2005-06 THE ITO, WARD 1, WARANGAL VS M/S DIVYA PESTICIDES & SEEDS, WARANGAL (PAN/GIR D-383) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S. RAMA RAO RESPONDENT BY: SHRI SUNIL BABU O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO ARE CROSS APPEALS DIRECTED AGAINST THE O RDER PASSED BY THE CIT(A)-VIJAYAWADA DATED 26.11.2008 AND PERTAINS TO THE ASSESSMENT YEARS 2005-06. 2. THE ASSESSEE RAISED THE GROUND IN ITS APPEAL IS WITH REGARD TO SUSTAINING ADDITION OF RS.7 LAKHS BEING RS.2 LAKHS BROUGHT IN BY SHRI B. RAJENDRA BABU (HUF) AND RS.5 LAKHS BEING BROUGHT IN BY SMT. N. SWETHA, THE PARTNERS OF THE PARTNERSHIP FIRM. ITA NOS.174 & 242 OF 2009 M/S DIVYA PESTICIDES & SEEDS LTD. 2 3. BRIEF FACTS OF THE CASE ARE THAT THE TWO PART NERS VIZ., SHRI B. RAJENDRA BABU (HUF) AND SMT. SWETA HAVE BROUGHT IN NEW CAPITALS OF RS.5,85,400/- AND RS.5 LAKHS RESPECTIVELY. SHRI R. BABU (HUF) HAS EXPLAINED THAT RS.2,00,400/- WAS WITHDRAWN ON 31.1. 2004 FROM HUF ACCOUNT MAINTAINED WITH M/S HARITA AGRO AGENCIES AN D IT WAS INVESTED VIDE CHEQUE NO.112346 ON 1.4.2004 WITH THE ASSESSEE . IN ORDER TO VERIFY THESE FACTS, THE BANK ACCOUNT OF SRI B.R. BABU (HU F) WAS CALLED FOR BUT IT WAS NOT PRODUCED. SHRI B.R. BABU HAS ALSO CLAIMED INVESTMENT OF 3.85 LAKHS THROUGH THE SAME CHEQUE NO.112346 BY SPLITTIN G THE ENTRY IN THREE PARTS IN ITS BOOKS OF ACCOUNTS. THIS INVESTMENT, T HROUGH A SINGLE CHEQUE NO.112346 DATED 1.4.2004 WAS A POINT OF SUSPICION W HICH WAS NOT CLEARED. THE ASSESSEE COULD NOT SATISFACTORILY PROVE THE SOU RCE OF CAPITAL OF RS.5,85,400/- BROUGHT BY SHRI B.R. BABU. 4. SMT N. SWETA HAS BROUGHT IN CAPITAL OF RS.5 LA KHS BY WAY OF CASH AS UNDER: DATE RS.(AMOUNT) 3.8.2004 2,00,000 4.8.04 50,000 6.8.04 50,000 7.8.04 50,000 24.11.04 50,000 24.11.04 50,000 24.11.04 50,000 6.1.2005 40,000 6.1.2005 30,000 29.1.2005 40,000 29.1.2005 40,000 ITA NOS.174 & 242 OF 2009 M/S DIVYA PESTICIDES & SEEDS LTD. 3 5. THE ASSESSING OFFICER ASKED THE LEARNED AUTHOR ISED REPRESENTATIVE TO EXPLAIN THE SOURCE OF THE ABOVE C APITAL AND SHE INTIMATED THAT HER RETURNS FOR THE ASSESSMENT YEARS 2001-02, 2002-03, 2003-04 AND 2004-05 ARE AVAILABLE ON RECORD AND SAME CAN BE VER IFIED THERE FROM. THE ASSESSING OFFICER HAS OBSERVED THAT SHE DID NOT FIL E HER RETURN OF INCOME FOR THE ASSESSMENT YEARS 2003-04 AND THE RETURNS OF INC OME FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 WERE FILED ON 26.12.2005. NONE OF THESE RETURNS WERE SCRUTINIZED AND THEREFORE, IT IS DIFFICULT TO BELIEVE THE AVAILABLE OF THIS MUCH CASH WITH HER. THE ASSESSIN G OFFICER HAS ALSO RELIED ON THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF UNIVERSAL SUBSCRIPTION AGENCY (P) LTD. VS. JCIT (207 CTR 62). THE ASSESSEE WAS ASKED TO PROVE HER CREDIT WORTHINESS BUT SOURCE OF CASH OF RS.5 LAKHS INTRODUCED BY SMT. N. SWETHA WAS NOT PROVED. THE ASSESSING OFFICER ALSO PERUSED HER RETURNS AND FOUND THEM INCOMPLETE AND D EFECTIVE SINCE THEY WERE NOT ACCOMPANIED BY LIST OF SUNDRY DEBTORS, CRE DITORS, BALANCE SHEET, OUTSTANDING PRINCIPAL AMOUNTS ETC. IN THE ABSENCE OF THESE PARTICULARS WITH HER RETURNS OF INCOME THE ASSESSING OFFICER CO ULD NOT BELIEVE THE AVAILABILITY OF CASH OF RS.5 LAKHS WITH HER. HOWEV ER, SMT. N. SWETHA HAS CLAIMED THAT THE SOURCE OF THIS CASH IS OUT OF MARR IAGE GIFTS RECEIVED FROM HER PARENTS AND RELATIVES BUT THE ASSESSING OFFICER DID NOT ACCEPT THIS EXPLANATION. ON APPEAL TO CIT(A), THE ASSESSEE HA S STATED THAT SMT. N. SWETA IS AN ASSESSEE AND FILED RETURNS OF INCOME AD MITTING INCOME FROM INTEREST. IN THE ASSESSMENT YEARS 2001-02, SHE ADM ITTED INCOME OF RS.56,500/- AND ALSO MENTIONED RECEIPT OF RS. 2 LAK HS AS GIFTS FROM HER PARENTS THROUGH CHEQUE ISSUED ON 18.2.2001. FURTHE R, GIFTS AMOUNTING TO RS.2 LAKHS WERE ALSO RECEIVED FROM OTHER THAN FRIEN DS AND RELATIVES AND THUS SHE WAS HAVING CASH BALANCE OF RS.4,51,500. T HE TOTAL AMOUNT AVAILABLE AS ON 1.4.2004 WAS OF RS.5,91,000 AND OU T OF THIS, RS.5 LAKHS WAS INVESTED IN THE ASSESSEE FIRM. ITA NOS.174 & 242 OF 2009 M/S DIVYA PESTICIDES & SEEDS LTD. 4 6. SHRI R. BABU (HUF) IS ALSO A PARTNER OF M/S HA RITA AGRO AGENCIES AND WITHDREW RS.2,00,400/- FROM IT AND DEP OSITED THE SAME ON 1.4.2002 WITH THE ASSESSEE FIRM. THIS WITHDRAWAL WAS ON 31.1.2004 THROUGH A DEMAND DRAFT AND THIS DEMAND DRAFT WAS DE POSITED WITH THE ASSESSEE FIRM ON 1.4.2004 AND THIS AMOUNT WAS RECOR DED ON 1.4.2004 IN THE BOOKS OF M/S HARITA AGRO AGENCIES. THE ASSESSE E WITHDREW OF RS.3.85 LAKHS ON 3.11.2004 FROM PARTNERSHIP FIRM AND RE-DEP OSITED THE SAME ON 9.12.2004 AS EVIDENT FROM BANK ACCOUNT OF THE ASSES SEE WITH BANK OF BARODA, WARANGAL. OUT OF THIS SUM OF RS.3.85 LAKHS SRI B.R. BABU REPAID RS.3 LAKHS AND RS.85,000 ON 9.12.2004 AND 28.3.2005 RESPECTIVELY THROUGH BANK ACCOUNT. THE CIT(A) CALLED FOR REMAN D REPORT FROM THE ASSESSING OFFICER. THOUGH THE ASSESSEE HAS STATED THAT SHE HAD RECEIVED GIFTS OF RS.2 LAKHS FROM HER RELATIVES VIDE CHEQUE NO.190393 AND 190394 BUT NO BANK ACCOUNT WAS PRODUCED OF HER PARENTS. A CCORDING TO ASSESSING OFFICER, SMT. SWETA INVESTED WITH M/S TEJA PESTICI DES AND SEEDS IN THE ASSESSMENT YEARS 2005-06 AND THEREBY CASH BALANCE A VAILABLE WITH HER AS ON 31.3.2006 WAS ONLY RS.1,35,800/-. THUS THERE W ERE NO SUFFICIENT FUNDS AVAILABLE WITH HER TO MAKE INVESTMENT IN THE ASSESSEE FIRM. AS REGARDS INVESTMENT OF RS.2,00,400/- THE PARTNER SHR I B.R. BABU (HUF) HAS STATED THAT THE SAID AMOUNT WAS INVESTED OUT OF THE FUNDS AVAILABLE IN HIS CAPITAL ACCOUNT WITH THE FIRM M/S HARITA AGRO AGENC IES IN WHICH HE WAS A PARTNER. IT WAS ALSO STATED BY HIM THAT THE SAID A MOUNT WAS WITHDRAWN ON 31.1.2004 FOR THE ASSESSMENT YEARS 2004-05 THROUGH CHEQUE BEARING NO.112346 FOR PURCHASE OF A DD NO.692384 IN FAVOUR OF M/S ISAGRO (ASIA) AGRO CHEMICALS (P) LTD. FOR RS.2 LAKHS FROM THE BAN K ACCOUNT HELD BY M/S HARITA AGRO AGENCIES. IT WAS FURTHER STATED THAT THE SAID DD WAS DEPOSITED WITH M/S SWATHI SEEDS AND PESTICIDES WHO IS AN AUTHORIZED DISTRIBUTOR TO THE SAID COMPANY TOWARDS ADVANCES FO R SUPPLY OF SEEDS TO BE MADE TO M/S M/S DIVYA PESTICIDES AND SEEDS. IT IS AN ADMITTED FACT THAT SHRI B.R. BABU HAD TAKEN A DD IN FAVOUR OF THE SUPP LIER OUT OF THE CAPITAL ITA NOS.174 & 242 OF 2009 M/S DIVYA PESTICIDES & SEEDS LTD. 5 AVAILABLE WITH THE FIRM M/S HARITA AGRO AGENCIES AN D THE CLAIM THAT THE SAME AMOUNT HAS BEEN SHOWN AS HIS INVESTMENT IN M/S M/S DIVYA PESTICIDES AND SEEDS AS ON 1.4.2004. IT IS NOT COR ROBORATED BY ANY DOCUMENTARY EVIDENCE. SINCE M/S SWATHI SEEDS AND PE STICIDES TO WHOM THE SAID DD WAS CLAIMED TO HAVE BEEN ISSUED, HAS SH OWN THE RECEIPT IN THE NAME OF M/S HARITA AGRO AGENCIES AS A TRADE CREDIT OR BUT NOT EITHER SRI B.R. BABU OR M/S M/S DIVYA PESTICIDES AND SEEDS. ACCORDING TO THE CIT(A), THE ASSESSEE WAS ABLE TO EXPLAIN ONLY CASH OF RS.3.85 LAKHS BY SHRI B.R. BABU (HUF) AND BALANCE AMOUNT OF RS.2,00,400/- INVESTMENT BY SHRI R.BABU (HUF) AND BY RS.5 LAKHS BY SMT. SWETA WAS N OT SATISFACTORILY EXPLAINED AND THE ADDITION WAS SUSTAINED TO THAT EX TENT. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. AGAINST THE DELET ION OF 3.85 LAKHS THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. SHRI B. RAJENDRA BABU (HUF) M ADE AN INVESTMENT IN THE FIRM AS FOLLOWS: SL.NO. DATE PARTICULARS AMOUNT 1 1.4.2004 DD NO.63528 RS.2,00,400 2 9.12.2004 CH.NO.793253 RS.3,00,000 3 24.3.2005 CH.NO.793254 RS.85,000 TOTAL RS.5,85,400/- 7.1. THE FIRST RS.2,00,400/- HAS SAID TO BE WITH DRAWN BY M/S B. R. BABU OUT OF THE FUNDS AVAILABLE IN ITS CAPITAL A CCOUNT M/S HARITA AGRO AGENCIES IN WHICH HE WAS A PARTNER. THE SAID AMOUN T WAS WITHDRAWN ON 31.1.2004 THROUGH CHEQUE BEARING NO.112346 FOR A PU RCHASE OF A DD NO.692384 IN FAVOUR OF M/S M/S ISAGRO (ASIA) AGRO C HEMICALS (P) LTD. FOR RS.2 LAKHS FROM THE BANK ACCOUNT OF M/S HARITA AGRO AGENCIES. THE SAID DD WAS DEPOSITED WITH M/S M/S SWATHI SEEDS AND PEST ICIDES WHO IS AN AUTHORIZED DISTRIBUTOR. THE PAYMENT WAS MADE TOWAR DS ADVANCE OF SUPPLY OF SEEDS TO BE MADE TO M/S DIVYA PESTICIDES AND SEE DS. THIS AMOUNT HAS ITA NOS.174 & 242 OF 2009 M/S DIVYA PESTICIDES & SEEDS LTD. 6 BEEN SHOWN AS INVESTMENT BY SHRI B.R. BABU IN THE B OOKS OF M/S DIVYA PESTICIDES AND SEEDS AS ON 1.4.2004. ACCORDING TO THE ASSESSING OFFICER SINCE M/S SWATHI SEEDS AND PESTICIDES HAS NOT SHOWN THESE BALANCE IN EITHER NAME OF MR. B.R. BABU (HUF) NOR IN THE NAME OF M/S M/S DIVYA PESTICIDES AND SEEDS AND IT IS AN UNEXPLAINED CREDI T. ON THE OTHER HAND, IT WAS SHOWN IN THE NAME OF M/S HARITA AGRO AGENCIES. IN OUR OPINION THIS IS NOT CORRECT. THE FACT OF TAKING A DEMAND DRAFT IN FAVOUR OF M/S SWATHI SEEDS AND PESTICIDES FROM THE ACCOUNT OF M/S HARITA AGRO AGENCIES IS NOT DOUBTED. ADMITTEDLY, THE DEMAND DRAFT HAS BEEN DRA WN FOR AN AMOUNT OF RS.2,00,400/- FROM M/S HARITA AGRO AGENCIES IN FAVO UR OF M/S ISAGRO (ASIA) CHEMICALS (P) LTD. LATER THE SAME WAS DEPOSI TED WITH M/S SWATHI SEEDS AND PESTICIDES TOWARDS SUPPLY OF SEEDS TO BE MADE. BECAUSE OF BUSINESS EXPENDANCY, THE ASSESSEE HAS GIVEN A DEMAN D DRAFT IN FAVOUR OF M/S ISAGRO (ASIA) AGRO CHEMICALS (P) LTD. FROM THE ACCOUNT OF M/S HARITA AGRO AGENCIES WHEREIN SHRI B.R. BABU (HUF) IS A PA RTNER. IN OUR OPINION, THE TRANSACTION WAS FULLY EXPLAINED BY THE ASSESSEE . THERE IS NO NECESSITY TO DOUBT THIS TRANSACTION ON THE REASON THAT M/S SW ATHI SEEDS AND PESTICIDES HAS SHOWN THE ABOVE RS.2,00,400 IN THE N AME OF M/S HARITA AGRO AGENCIES. IN OUR OPINION, THE ADDITION OF RS. 2,00,400 IS NOT JUSTIFIED AND THE SAME IS DELETED. REGARDING BALANCE OF RS.3 .85 LAKHS, THE ASSESSING OFFICER HAS ADMITTED THAT THESE AMOUNT IN VESTED BY M/S B.R. BABU(HUF) HAS BEEN REFLECTED IN THE BANK ACCOUNT OF MR.B.R. BABU BEARING NO.1512 HELD WITH BANK OF BARODA, WARANGAL BRANCH AND IT WAS FOUND GENUINE. BEING SO, IN OUR OPINION, THE DELET ION OF ADDITION OF RS.3.85 LAKHS IS JUSTIFIED. 8. COMING TO THE INVESTMENT OF MRS. SWETA AT RS.5 LAKHS, SHE HAS BEEN AN INCOME TAX ASSESSEE FROM THE ASSESSMENT YEA RS 2001-02, 2002- 03, 2003-04 AND 2004-05 TO 2006-07. IN HER RETURN OF INCOME FOR THE ASSESSMENT YEARS 2001-02 SHE HAS SHOWN A RECEIPT OF GIFT OF RS.2 LAKHS ITA NOS.174 & 242 OF 2009 M/S DIVYA PESTICIDES & SEEDS LTD. 7 FROM HER RELATIVES AND RS.2 LAKHS FROM HER PARENTS THROUGH CHEQUE NO.190393 AND 190394 DATED 8.2.2004 ON THE OCCASION OF HER MARRIAGE HELD ON 18.2.2001. FOR NOT ACCEPTING THE ABOVE CRE DIT AS GENUINE IS THAT THE ASSESSEE HAS NOT PRODUCED BANK ACCOUNT STATEMEN T. HOWEVER, IT IS A FACT THAT THE ASSESSEE HAS BEEN FILING RETURN OF IN COME WHEREIN HER CASH POSITION IS EXPLAINED AS BELOW: ASSESSMENT YEAR CASH POSITION (INCLUDING INTEREST RECEIPTS) INTEREST AMOUNT DECLARED REMARKS 2001-02 4,51,500 56,000 THE ASSESSEE WAS MARRIED ON 18.2.2001 AND DISCLOSED A CASH AMOUNT OF RS.4 LAKHS AS GIFTS. THIS WAS STATED TO BE CIRCULATED FOR INTEREST. THUS, THE PERIOD FOR WHICH THE AMOUNT WAS ALLEGEDLY KEPT IN CIRCULATION FOR INTEREST IS JUST FOR ABOUT 40 DAYS. HOWEVER, THE INTEREST OFFERED AT RS.56,500/- APPEARS TO BE RATHER EXORBITANT AND NOT GENUINE. 2002-03 5,11,300 59,800 ----- 2003-04 NOT FILED NOT FILED ------ 2004-05 5,95,800 60,900 ------ 2005-06 1,35,800 40,000 DURING THIS ASSESSMENT YEAR SMT. N. SWETHA HAD INVESTED RS.5 LAKHS IN THE FIRM M/S TEJA PESTICIDES AND SEEDS AND THUS, LEFT WITH CASH BALANCE OF RS.1,35,800/- 2006-07 1,47,800 60,000 THE PARTNER HAS SHOWN RS.60 ,000 AS INTEREST INCOME OUT OF THIS (RS.1,35,800) AMOUNT WHICH WAS GIVEN ON INTEREST. THIS APPEARS TO BE RATHER TAILORED AND NOT GENUINE. 9. IT IS ADMITTED FACT THAT SMT. SWETHA IN THE RE TURN OF INCOME FILED FOR THE ASSESSMENT YEARS 2001-02, ON 31.5.200 2, HAD DISCLOSED THAT SHE RECEIVED RS.2 LAKHS AS GIFTS FROM RELATIVES AND RS.2 LAKHS FROM HER PARENTS THROUGH CHEQUE NO.190393 AND 190394 DATED 8.2.2001, ON THE OCCASION OF HER MARRIAGE HELD ON 18.2.2001. HOWEVE R, WHEN SHE WAS ASKED TO PRODUCE THE BANK ACCOUNT STATEMENT IN SUPP ORT OF MONIES RECEIVED FROM HER PARENTS, SHE COULD NOT PRODUCE TH E SAME AS VERIFICATION. ITA NOS.174 & 242 OF 2009 M/S DIVYA PESTICIDES & SEEDS LTD. 8 FROM THE ABOVE, IT IS AMPLY CLEAR THAT SMT. N. SWET HA DURING THE ASSESSMENT YEAR 2005-06 HAD INVESTED RS.5 LAKHS WIT H M/S TEJA PESTICIDES AND SEEDS AND THUS, LEFT WITH CASH BALAN CE OF RS.1,35,800 AS ON 31.3.2005. THUS, IT IS EVIDENT THAT SMT. SWETHA WA S NOT IN POSSESSION OF SUFFICIENT FUNDS SO AS TO INVEST IN M/S DIVYA PESTI CIDES AND SEEDS DURING THE ASSESSMENT YEAR 2005-06. FURTHER, NO MENTION W HATSOEVER HAS BEEN MADE IN THE RETURNS FILED FOR THE ASSESSMENT IN QUE STION. HENCE, THE CLAIM OF THE ASSESSEE THAT THE INVESTMENT OF RS.5 L AKHS IN M/S DIVYA PESTICIDES AND SEEDS IS NOT GENUINE. THIS IS FURTH ER SUBSTANTIATED BY THE FACT THAT THE SAID INVESTMENT OF RS.5 LAKHS BY SMT. SWETHA WAS MADE IN CASH. HOWEVER, THE PLEA OF THE ASSESSEE COUNSEL IS THAT SMT. SWETA IS HAVING SUFFICIENT FUNDS TO INVEST WITH THE M/S DIVY A PESTICIDES AND SEEDS IN THE ASSESSMENT YEARS UNDER CONSIDERATION. THESE FACTS ARE TO BE VERIFIED W.R.T. TO THE FINANCIAL STATEMENTS OF SMT. SWETA. ACCORDINGLY WE SET ASIDE THIS ISSUE TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO THE ASSESSEE TO LEAD NECESSARY EVIDENCE IN SUPPORT OF HER CLAIM. 10. THE GROUND RAISED BY THE REVENUE IN ITS APPEA L IS WITH REGARD TO DELETION OF ADDITION ON ACCOUNT OF PROVISIONS OF SECTION 40A(3) OF THE IT ACT. THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CON SIDERATION MADE MULTIPLE TRANSACTIONS/PAYMENTS IN A DAY AGGREGATE O F WHICH IS MORE THAN RS.20,000/-. HOWEVER, THE INDIVIDUAL PAYMENTS HAVE NOT EXCEEDED RS.20,000/- . THE CIT(A) PLACED RELIANCE ON THE JU DGEMENT IN THE CASE OF CIT VS. KOTHARI SANITATION AND TILES (P) LTD. (282 ITR 117) (MDS. HC) AND DELETED THE ADDITION. IN OUR OPINION, THE DELETIO N OF ADDITION BY THE CIT(A) IS JUSTIFIED. AS PER THE PROVISIONS OF SEC.40A(3) STOOD IN THE RELEVANT ASSESSMENT YEAR 2005-06, WHERE THE ASSESSEE MADE A NY PAYMENT EXCEEDS RS.20,000/- OTHERWISE THAN BY AN A/C PAYEE CHEQUE D RAWN ON A BANK OR A/C PAYEE BANK DRAFT, NO DEDUCTIONS WILL BE ALLOWED . THIS PROVISION WAS AMENDED BY THE FINANCE ACT 2007 W.E.F. 1.4.2008 AS FOLLOWS: ITA NOS.174 & 242 OF 2009 M/S DIVYA PESTICIDES & SEEDS LTD. 9 SECTION 40A(3) : WHERE THE ASSESSEE INCURS ANY EX PENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENT MADE TO A P ERSON IN A DAY OTHERWISE THAN BY AN A/C PAYEE CHEQUE OR A/C PAYEE BANK DRAFT, EXCEEDS RS.20,000/-, NO DEDUCTION SHALL BE ALLOWED IN RESPE CT OF SUCH EXPENDITURE. 10.1. THE NEWLY AMENDED PROVISIONS WILL COME INTO EFFECT FROM 1.4.2008 AND IT IS NOT APPLICABLE FOR THE ASSESSMEN T YEAR 2005-06. IN VIEW OF THIS, THOUGH THE AGGREGATE OF PAYMENT EXCEEDS RS .20,000/- IN A DAY, HOWEVER, EACH PAYMENT IS LESS THAN RS.20,000/- AND THE PROVISIONS OF SEC.40A(3) NOT APPLICABLE TO THE ASSESSMENT YEAR UN DER CONSIDERATION. IN VIEW OF THIS, WE ARE INCLINED TO DISMISS THIS GROUN D RAISED BY THE REVENUE. 11. THE REVENUE HAS RAISED ONE MORE GROUND IN ITS APPEAL IS WITH REGARD TO DELETION OF ADDITION OF RS.3.85,000 MADE BY BEING AN AMOUNT OF CAPITAL INTRODUCED BY SMT. SWETA & R. BABU (HUF). SINCE WE HAVE CONSIDERED SIMILAR ISSUE IN THE ASSESSEES APPEAL W HERE WE HAVE DELETED THE SUSTAINED ADDITION OF RS.2,00,400/- BEING CAPIT AL INTRODUCED BY HUF, THIS GROUND RAISED BY THE REVENUE BECOMES INFRUCTUO US. ACCORDINGLY IT IS DISMISSED AS INFRUCTUOUS. 12. THE NEXT GROUND IS WITH REGARD TO DELETION OF ADDITION OF RS.2,07,264/- BEING THE DIFFERENCE IN STOCK. THE A SSESSING OFFICER IN HIS REMAND REPORT DATED 4.6.2008 STATED THAT SINCE THE CLAIM OF PURCHASE RETURNS OF RS.7,50,147/- BY THE ASSESSEE FOUND TO B E CORRECT AND IN CONFORMITY WITH THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND THE ADDITION ON ACCOUNT OF PURCHASE RETURNS ARE NOT WAR RANTED. BEING SO, THE DEPARTMENT CANNOT HAVE ANY GRIEVANCE ON DELETION OF ADDITION OF RS.2,07,264/- ON ACCOUNT OF DIFFERENCE IN STOCK. T HE DELETION OF ADDITION MADE BY THE CIT(A) IS CONFIRMED. THIS GROUND RAISE D BY THE REVENUE STANDS DISMISSED. ITA NOS.174 & 242 OF 2009 M/S DIVYA PESTICIDES & SEEDS LTD. 10 13. IN THE RESULT, THE ASSESSEES APPEAL IN ITA N O.174/HYD/2009 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THAT OF THE REVENUE IN ITA NO.242/HYD/2009 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 30 .9.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 30TH SEPTEMBER, 2010 COPY FORWARDED TO: 1. SHRI S. RAMA RAO, ADVOCATE, FLAT NO.103, H.NO.3 -6-542/4, INDIRA DEVI NILAYAM, ST. NO.7, HIMAYAT NAGAR, HYDER ABAD 2. ITO, WARD I, WARANGAL 3. CIT(A)- VIJAYAWADA. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP