Kapil Traders, Ahmednagar V. Addl CIT, Ahmednagar

ITA 2498/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85189 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 17-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 40A(3); 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.2498/PN/2012 (ASSESSMENT YEAR: 2009-10) KAPIL TRADERS DATTANAGAR, SHRIRAMPUR, DIST. AHMEDNAGAR. PAN: AAHFK9754G . APPELLANT VS. THE ADDL. COMMISSIONER OF INCOME TAX, AHMEDNAGAR RANGE, AHMEDNAGAR. . RESPONDENT APPELLANT BY : SHRI S.N. PURANIK RESPONDENT BY : SHRI RAJESH DAMOR DATE OF HEARING : 24-11-2014 DATE OF PRONOUNCEMENT : 26-11-2014 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A)-I, PUNE DATED 05.11.2012 RELATING TO ASSESSMENT YEAR 2009- 10 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. HON. COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE ADDITIONS AT RS.6,92,112/- PAID TO TWO SALESMAN AS NON GENUINE. A O HAD DISALLOWED SAID EXPENDITURE U/S.40A(3), AS PER HIS INTERPRETATION PAYMENT WAS IN CASH & IN EXCESS OF RS.20,000/- GENUINENESS OF SAID EXPENDITURE WAS VERIFIED BY A O & NOT SUSPECTED BUT DISALLOWED MERELY ON ACCOUNT OF CASH PAYMENT. 2. APPELLANT PRAYS FOR DELETION OF INTEREST CHARGED U /S 234, SAME MAY BE DELETED. 3. APPELLANT PRAYS TO ADD, ALTER, AMEND, RATIFY, EXPLA IN, AND / OR WITHDRAW THE GROUND/S AS THE OCCASION MAY DEMAND. ITA NO.2498/PN/2012 KAPIL TRADERS 2 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT AT RS.6,92,112/-. 4. THE BRIEF FACTS OF THE CASE ARE THAT, DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD CLAIMED EXPENDITURE ON AC COUNT OF COMMISSION OF RS.26,58,342/- PAID TO VARIOUS INDIVIDUALS. THE CLAIM OF THE ASSESSEE WAS THAT THE SAID COMMISSION WAS PAID ON THE BASIS OF SALES MADE BY THEM. ON PERUSAL OF THE COPIES OF ACCOUNT S OF THE SAID PERSONS, THE ASSESSING OFFICER NOTED THAT CASH PAYMENTS EXCEEDING RS.20,000/- WERE PAID TO THE SAID PERSONS AS PER THE TA BULATED DETAILS UNDER PARA 3.1, TOTALING RS.7,94,872/-. THE SAID PAYMENTS WERE IN CONTRAVENTION TO THE PROVISIONS OF SECTION 40A(3) OF THE AC T AND HENCE, SAME WAS DISALLOWED BY THE ASSESSING OFFICER. 5. BEFORE THE CIT(A), THE CONTENTION OF THE ASSESSEE WAS THAT THE CASH ENTRIES AS ON 31.03.2009 WERE ACTUALLY TRANSFER ENTRIES FROM PETTY CASH ACCOUNT TO SALESMEN ACCOUNT AND THE PETTY CASH BOOK WOULD DEMONSTRATE THAT EACH ENTRY WAS BELOW RS.20,000/-. THE ASSESSEE FILED THE COPIES OF THE PETTY CASH REGISTER ALONG WITH PAN OF THE CONCERNED PERSONS TO WHOM THE CASH WAS PAID, BEFORE TH E CIT(A). THE CIT(A) ON EXAMINATION OF THE DETAILS FURNISHED BY THE ASSESS EE ACCEPTED THE CASH PAYMENTS IN RESPECT OF THREE PARTIES I.E. S/SHRI ARIF PATEL, RANJIT KATHORIA AND KISHOR SANAP. HOWEVER, ON PER USAL OF THE CASH PAYMENTS TO TWO PERSONS I.E. S/SHRI RAJESH ARORA A ND S.M. MANTRI, THE CIT(A) NOTED THAT THE SAID CASH PAYMENTS WE RE IN THE RANGE OF RS.17,500/- TO 19,950/-. THE DATE-WISE PAYMENT S MADE ARE ENLISTED AT PAGE 3 OF THE APPELLATE ORDER. IN RESPONSE T O VARIOUS QUERIES RAISED BY THE CIT(A) AS TO HOW THE PAYMENTS WER E ARRIVED AT ITA NO.2498/PN/2012 KAPIL TRADERS 3 CONSIDERING THAT THEY WERE ALSO CHEQUE PAYMENTS MADE T O THE SAME PERSONS AND WHETHER THESE WERE RELATABLE TO THE SALES REALIZED FOR THE CORRESPONDING PERIOD, THE ASSESSEE STATED THAT THESE P AYMENTS WERE MERELY ADVANCES PAID TO THE CONCERNED PERSONS. THE ASSESSEE FURTHER STATED THAT THE CONCERNED PERSONS WERE NOT EMPLOYEES OF THE ASSESSEE BUT WERE ENGAGED AS COMMISSION AGENTS TO REALIZE THE MO NEYS OUTSTANDING TO THE ASSESSEE BY WAY OF SALES AND THERE WAS NO WRITTEN CONTRACTUAL AGREEMENT WITH THE SAID PERSONS. THE CIT(A) QUESTIONED THE PAYMENTS MADE IN CASH AND IN ADVANCE TO SUCH PERS ONS WHO WERE NOT THE REGULAR EMPLOYEES OF THE ASSESSEE. FURTHER, IT W AS NOTED BY THE CIT(A) THAT SINCE THE PERSONS HAD BANK ACCOUNTS AN D CHEQUE PAYMENTS WERE MADE TO THEM, THERE WAS NO JUSTIFIABLE REA SON FOR MAKING THE CASH PAYMENTS IN A MANNER STRUCTURED TO AV OID THE RECOURSE OF SECTION 40A(3) OF THE ACT. THUS, THE CIT(A) HEL D THE SAID PAYMENTS TOTALING RS.6,92,112/- TO BE NON-GENUINE EXPEN DITURE AND OTHERWISE LIABLE TO BE DISALLOWED UNDER SECTION 37(1) OF THE ACT. 6. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF CI T(A). THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINT ED OUT THAT THE SAID COMMISSION PAYMENTS WERE SUBJECT TO TDS AND T HE ASSESSEE HAD DEDUCTED TDS OUT OF SAID PAYMENTS AND DEPOSITED TH E SAME. OUR ATTENTION WAS DRAWN TO THE CERTIFICATE OF TDS ON COMMISSIO N PLACED AT PAGES 7 & 8 AND 15 & 18 OF THE PAPER BOOK. IT WAS FURTHER POINTED OU T BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE THAT SINCE TDS HAD BEEN DEDUCTED ON THE SAME, THE AMOUNTS ARE A LLOWABLE AS AN EXPENDITURE AND THERE WAS NO MERIT IN DISALLOWING THE SAME BEING IN CONTRAVENTION OF SECTION 40A(3) OF THE ACT. THE LEARNED AU THORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO POINTED OUT THAT T HE RECIPIENTS ITA NO.2498/PN/2012 KAPIL TRADERS 4 HAD ALREADY PAID TAXES ON THE SAID COMMISSION RECEIPTS AN D THE DISALLOWANCE HAD RESULTED IN DOUBLE ADDITION. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE HAS PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS ENGAGED IN TRADING FOR INDIA MADE FORE IGN LIQUOR, BEER AND WINE ON WHOLESALE BASIS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED COMMISSION EXPEND ITURE OF RS.26,58,342/- BEING PAID TO VARIOUS INDIVIDUALS. THE ASSESSIN G OFFICER ON VERIFICATION OF THE DETAILS AND PERUSAL OF THE COPIE S OF ACCOUNTS OF THE SAID PERSONS, NOTED THAT THE CERTAIN PA YMENTS EXCEEDING RS.20,000/- WERE MADE BY THE ASSESSEE. THE P ERSON-WISE TABULATED DETAILS TOTALING RS.7,94,872/- ARE AS UNDER:- SR.NO. NAME OF PERSON TO WHOM COMMISSION PAID TOTAL COMMISSION PAID DURING THE YEAR CASH PAYMENT PERCENTAGE OF CASH TO CHEQUE PAYMENT 1 ARIF PATEL 5,01,118 28,125 5.60% 2 RAJ ESH ARORA 3,23,864 2,38,864 73.75% 3 RANJIT KATHORIA 3,68,614 20,813 5.64% 4 S.M. MANTRI 6,04,443 4,53,248 74.98% 5 KISHOR SANAP 3,78,012 53,822 14.23% TOTAL 7,94,872 9. THE ASSESSING OFFICER DISALLOWED THE SAID PAYMENTS BEING MADE IN VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. T HE CIT(A) DELETED THE ADDITION ON ACCOUNT OF PERSONS AT SR. NO.1, 3 AND 5. HOWEVER, THE CIT(A) WHILE CONSIDERING THE ISSUE NOTED THAT IN ADDITION TO CASH PAYMENTS BEING MADE TO THE SAID PERSONS, CHEQU ES WERE ALSO BEING ISSUED TO THE SAID PERSONS. THE DATE-WISE DETAILS O F PAYMENTS, ITA NO.2498/PN/2012 KAPIL TRADERS 5 THE MODE AND AMOUNT OF PAYMENTS IN RESPECT OF PAYMENTS TO SHRI RAJESH ARORA AND SHRI S.M. MANTI ARE AS UNDER:- NAME OF THE SALESMAN MODE OF PAYMENT DATE PAYMENT RAJESH ARORA CAS H 15 - APR - 08 19,950 CHEQUE NO. 176532 7 - MAY - 08 50,000 CASH 15 - MAY - 08 19,950 CHEQUE NO. 176540 30 - MAY - 08 15,000 CASH 15 - JUN - 08 19,950 CASH 15 - JUL - 08 19,950 CHEQUE NO. 176575 7 - AUG_ - 08 20,000 CASH 15 - AUG - 08 19,950 CASH 15 - SEPT - 08 19,950 C ASH 15 - OCT - 08 19,950 CASH 15 - NOV - 08 19,950 CASH 1 5 - DEC - 08 19,950 CASH 15 - JAN - 09 19,950 CASH 15 - FEB - 09 19,950 CASH 15 - MAR - 09 19,414 TOTAL 3,23,864 NAME OF THE SALESMAN MODE OF PAYMENT DATE PAYMENT S.M. MANTRI CASH 6 - APR - 08 18,500 CASH 29 - APR - 08 18,000 CASH 4 - MAY - 08 17,500 CASH 31 - MAY - 08 19,000 CASH 1 - JUN - 08 19,500 CASH 30 - JUN - 08 19,000 CASH 6 - JUL - 08 18,500 CASH 31 - JUL - 08 19,000 CHEQUE NO. 106514 2 - AUG - 08 93,665 CASH 3 - AUG - 08 19,500 CASH 31 - AUG - 08 19,000 C ASH 7 - SEPT - 08 18,500 CASH 30 - SEPT - 08 19,000 CASH 5 - OCT - 08 19,500 CASH 31 - OCT - 08 19,000 CASH 9 - NOV - 08 18,500 CASH 30 - NOV - OS 19,000 CASH 7 - DEC - 08 19,500 CHEQUE NO. 119329 10 - DEC - 08 54,387 CASH 31 - DEC - 08 19,000 CASH 4 - JAN - 09 18,500 CHEQUE NO. 016513 22 - JAN - 09 1,295 CHEQUE NO. 016512 22 - JAN - 09 1,848 CASH 31 - JAN - 09 19,000 CASH 1 - FEB - 09 19,500 CASH 28 - FEB - 09 19,000 CASH 2 - MAR - 09 18,748 CASH 31 - MAR - 09 19,000 TOTAL 6,04,443 ITA NO.2498/PN/2012 KAPIL TRADERS 6 10. THE CLAIM OF THE ASSESSEE IN RELATION TO THE SAID EXP ENDITURE WAS THAT THE SAID PERSONS WERE COLLECTING THE SALES AMOUNT O N BEHALF OF THE ASSESSEE BUT WERE NOT EMPLOYEES OF THE ASSESSEE AND W ERE BEING PAID COMMISSION IN CASH ON DAY-TO-DAY BASIS AND EACH CASH P AYMENT DID NOT EXCEED RS.20,000/-. 11. THE FIRST ASPECT OF THE ISSUE IS WHETHER THE SAID EXP ENDITURE IS GENUINE EXPENDITURE ALLOWABLE UNDER SECTION 37(1) OF THE ACT AND SECOND ASPECT OF THE ISSUE IS WHETHER THE SAID EXPENDITU RE HAS BEEN MADE IN VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE A CT. ADMITTEDLY, THE ASSESSEE HAS NO WRITTEN CONTRACTUAL AGR EEMENT WITH THE PERSONS VIS--VIS THE ARRANGEMENT OF DUTIES AND THE RESPONSIBILITIES IN RELATION TO THE ASSESSEE. FURTHER, CASH PAYMENTS HAVE BEEN MADE ON VARIOUS DATES TO THE SAID PERSONS B Y THE ASSESSEE IN THE RANGE OF RS.17,500/- AND 19,950/-. THE ASSESSEE CLAIMS THAT IT HAD BOOKED THE SAID EXPENDITURE UNDER THE HEAD COMM ISSION ON WHICH IT HAD DEDUCTED THE TAX AT SOURCE. AT PAGE 7 O F THE PAPER BOOK, THE ASSESSEE HAS FURNISHED ON RECORD THE FORM NO.16A ISS UED TO SHRI S.M. MANTRI AND PAGE 5 HAS ALSO ENCLOSED THE SUMMARY OF S ALESMAN- WISE PAYMENTS DETAILS MADE FROM PETTY CASH LEDGER MADE TO SHRI S.M. MANTRI. THE PERUSAL OF THE DETAILS ON PAGE 5 OF THE PAPE R BOOK I.E. THE PETTY CASH LEDGER REFLECTS THAT IN THE MONTH OF APRIL, 20 08 TWO PAYMENTS WERE MADE TO THE SAID PERSON OF RS.18,500/- AN D RS.18,000/-. IN THE MONTH OF MAY, 2008 TWO PAYMENTS AG AIN WERE MADE OF RS.17,500/- AND RS.19,000/-. THE FORM NO.16A ON T HE OTHER HAND, REFLECTS A SUM OF RS.48,473/- BEING PAID / CREDITED ON 30.04.2008 AND RS.58,322/- BEING PAID / CREDITED ON 31.05.20 08 ON WHICH TAX WAS DEDUCTED AT SOURCE AND DEPOSITED ON 23.0 6.2008. THE ITA NO.2498/PN/2012 KAPIL TRADERS 7 LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE DURIN G THE COURSE OF HEARING WAS ASKED TO RECONCILE THE PAYMENTS SHOWN IN THE PETTY CASH REGISTER AND THE PAYMENTS REFLECTED IN THE TDS CER TIFICATE ON WHICH THE ASSESSEE CLAIMS TO HAVE DEDUCTED TDS. HOWEVE R, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS UNABLE TO RECONCILE THE FIGURES BETWEEN PETTY CASH REGISTER AND TH E TDS CERTIFICATE. SIMILAR, DIS-SIMILARITIES WERE IN THE OTHER MONTHS O F THE YEARS 2008 AND 2009. FOR ALLOWING THE CLAIM OF EXPENDITURE IN THE CASE OF THE ASSESSEE, THE FIRST STEP TO BE ESTABLISHED IS THAT THE EXPENDITURE HAD BEEN INCURRED FOR THE PURPOSE OF CARRYIN G ON THE BUSINESS. MERELY BECAUSE THE PAYMENT HAS BEEN MADE T O A PERSON DOES NOT ESTABLISH THE GENUINENESS OF THE EXPENDITURE BE ING RELATABLE TO THE BUSINESS CARRIED ON BY THE PERSON. THE ASSESSE E IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE HAS FAILED TO ESTA BLISH THE GENUINENESS OF THE SAID EXPENDITURE INCURRED BY IT ON ACC OUNT OF COMMISSION WHICH WAS BEING PAID TO NON-EMPLOYEES OF THE AS SESSEE FOR RECOVERY OF THE AMOUNTS. FURTHER, THE AMOUNT WAS B EING PAID IN ADVANCE TO THE SAID PERSONS AND IT HAD NO CONNECTION O R RELEVANCE TO THE COMMISSION EARNED BY THE SAID PERSONS. IN THE ABSE NCE OF REQUISITE ONUS BEING DISCHARGED BY THE ASSESSEE, WE FIND N O MERIT IN THE CLAIM OF THE ASSESSEE. FURTHER, THE BOOKING OF THE EX PENDITURE UNDER THE HEAD COMMISSION AND THE DEDUCTION BEING MAD E THROUGH PETTY CASH REGISTER WAS NOT RECONCILED BY THE ASSESSEE AND IN THE ABSENCE OF THE SAME, WE FIND NO MERIT IN THE CLAIM OF THE AS SESSEE. UPHOLDING THE ORDER OF CIT(A), WE HOLD THAT THE SAID AMOUN T IS NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE BEING NON-GENUINE EXPENDITURE UNDER THE PROVISIONS OF SECTION 37(1) OF THE ACT. ONCE THE EXPENDITURE IS HELD TO BE NON-GENUINE, WE ARE NOT ADDRESSING THE ISSU E OF ITA NO.2498/PN/2012 KAPIL TRADERS 8 APPLICABILITY OF SECTION 40A(3) OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF NOVEMBER, 2014. SD/- SD/- (G.S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 26 TH NOVEMBER, 2014. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, PUNE; 4) THE CIT-I, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE