M/s. Laxmi Narayan Jewellery, Balasore V. ITO, Ward-2, Balasore

ITA 250/CTK/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5080 (ITAT-CUTTACK)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 18-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P K MISHRA
• Keywords: Set aside
• Section: 40A(3); 250

Judgement Text

P A G E 1 | 7 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER ITA NO. 250 /CTK/201 8 ASSESSMENT YEA R: 2012 - 13 M/S. LAXMI NARAYAN JEWELLERY, VIVEKANANDA MARG, DIST: BALASORE. VS. ITO, WARD - 2, BALASORE PAN/GIR NO. AABFL 7440 A (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.K.MISHRA, AR REVENUE BY : SHRI SUBHENDU DUTTA, DR DATE OF HEARING : 25 / 0 4 / 201 9 DATE OF PRONOUNCEMENT : 13 / 0 5 / 201 9 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) - CUTTACK DATED 26.3.2018 IN I.T.APPEAL NO.0072/2015 - 16 FOR THE ASSESSMENT YEAR 201 2 - 13. 2. GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE UNDER: 1. FOR THAT, THE IMPUGNED ORDER SO PASSED BY THE FORUMS BELOW ARE NOT JUST AND PROPER UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS SUCH THE IMPUGNED ADDITIONS MADE THEREIN ARE LIABLE TO BE DELETED IN THE INTEREST OF JUSTICE. ITA NO.250/CTK/2018 ASSESSMENT YEAR: 2012 - 13 P A G E 2 | 7 2. FOR THAT, T HE LEARNED C.I.T.(A) SHOULD NOT HAVE CONFIRMED THE ADDITION OF RS.3,33,700.00 MADE BY THE LEARNED A.O BY APPLYING SECTION 40A(3) OF THE ACT, IGNORING THE EXPLANATION AND EVIDENCES OF THE ASSESSEE WHICH ARE SELF EXPLANATORY. THE IMPUGNED ADDITION BEING NOT SUSTAINABLE IN THE EYE OF LAW, NEEDS TO BE DELETED IN THE INTEREST OF JUSTICE. 3. FOR THAT, THE LEARNED C.I.T.(A) HAS COMMITTED GROSS ERROR OF LAW AS WELL AS FACT IN CONFIRMING THE ADDITION OF RS.3,33,700.00 U/S.40A(3) MADE BY THE LEARNED A.O., PARTIC ULARLY WHEN, THE CASH PAYMENTS WERE MADE DUE TO BUSINESS EXIGENCY UNDER THE EXCEPTIONAL CIRCUMSTANCES. THEREFORE, THE IMPUGNED ADDITION BEING NOT CORRECT, NEEDS TO BE DELETED IN THE INTEREST OF JUSTICE. 4. FOR THAT, THE LEARNED C.I.T.(A) SHOULD HAVE D ELETED THE ADDITION MADE BY THE LEARNED A.O BY APPLYING SECTION 40A(3) OF THE ACT, PARTICULARLY WHEN THE IMPUGNED ADDITION IS NOT SUSTAINABLE IN THE EYE OF LAW AND THE PROVISION HAS NO APPLICATION UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 5. FOR THAT, THE FINDINGS GIVEN BY THE LEARNED C.I.T.(A) ARE CONTRARY TO THE FACTS ON RECORD AND TO THE EXPLANATION OFFERED BY THE APPELLANT, AS SUCH THE SAME BEING NOT SUSTAINABLE IN THE EYE OF LAW IS LIABLE TO BE QUASHED IN THE INTEREST OF JUSTICE. 3 . T HE SOLE ISSUE INVOLVED IN TH ESE GROUNDS OF APPEAL IS THAT THE COMMISSIONER OF INCOME TAX(APPEALS), CUTTACK WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.3,33,700/ - MADE BY THE A SSESSING OFFICER BY APPLYING SECTION 40A(3) OF THE ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES INCOME FROM TRADING IN J EWELLERY AND ENJOYS THE STATUS OF A FIRM. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT CERTAIN PAYMENTS EXCEEDING RS. 20,000/ - WERE MADE I N CASH TO CERTAIN PARTIES FROM WHOM THE ASSESSEE ITA NO.250/CTK/2018 ASSESSMENT YEAR: 2012 - 13 P A G E 3 | 7 PURCHASED HIS TRADING GOODS. THE DETAILS OF PAYMENTS MADE ARE AS UNDER: NAME OF PARTY DATE OF PAYMENT VOUCH ER AMOUNT PAID BY CASH TOTAL IN(RS.) M/S. EPARI SADASHIV PVT. LTD. 16.04.2011 74 RS.34,750/ - RS.34,750/ - 02.01.2012 1382 RS.82,000/ - RS.82,000/ - M/S. ALANKAR JEWELLERS, MOTIGANJ, BALASORE. 09.05.2011 73 RS.17,992/ - RS.27,992/ - 71 10,000/ - DO - 06.02.2012 475 17,489/ - RS.34,978/ - 448 17,489/ - DO - 08.02.2012 453 17,000/ - RS.34,000/ - 455 17,000/ - DO - 09.02.2012 456 15,000 RS.30,000/ - 458 15,00/ DO - 10.02.2012 459 15,000 - RS.30,000/ - 461 15,000 DO - 11.02.2012 463 15,000 RS.30,000/ - 464 15,000 - DO - 13.02.2012 466 15,000/ 30,000/ - 468 15,000/ TOTAL: RS.3,33,720/ - 5. THE ASSESSING OFFICER OBSERVED THAT THE PAYMENTS WERE MADE IN CLEAR VIOLATION OF SECTION 40A(3) OF THE ACT AND, THEREFORE, ITA NO.250/CTK/2018 ASSESSMENT YEAR: 2012 - 13 P A G E 4 | 7 DISALLOWED RS.3,33,720/ - U/S. 40A(3) OF THE L.T ACT, AS THE ASSESSEE'S CASE DID NOT FALL UNDER ANY OF THE CIRCUMSTANCES PRESCRIBED UNDER RULE 6DD OF THE L. T RULE,1962 . 6. ON APPEAL, THE CIT(A) OBSERVED THAT THE MOST OF THE PAYMENTS MADE TO PARTIES FALLS ON WORKING DAY AND NOT ON SUNDAY OR BANKING HOLIDAYS , WHICH COULD HAVE PREVENTED THE ASSESSEE TO ROUTE THE TRANSACTIONS IN BANKING CHANNELS. THEREFORE, HE C ONFIRMED THE ACTION OF THE ASSESSING OFFICER. 7. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PAYMENTS WERE MADE DUE TO BUSINESS EXIGENCIES AND UNDER EXCEPTIONAL CIRCUMSTANCES . LD A.R. SUBMITTED THAT MOST OF THE PAYMENTS WERE MADE IN THE MONTH OF FEBRUA RY, 2012, WHEN MAXIMUM MARRIAGES WERE HELD AND, THEREFORE, THE ASSESSEE HAD TO MAKE URGENT PAYMENTS IN CASH ON THE SPOT. THEREFORE, CONSIDERING THE BUSINESS EXPEDIENCY AND COMPELLING BUSINESS DEMAND, THE DISALLOWANCE MADE BY THE AUTHORITIES BELOW SHOULD B E DELETED. LD A.R. ALSO RELIED ON THE DECISION OF CUTTACK BENCH OF THE TRIBUNAL IN THE CASE OF SUBHAM ESTCON PVT LTD VS JCIT IN ITA NO.183/CTK/2016 FOR A.Y.2011 - 12 ORDER DATED 12.10.2017, WHEREIN, THE TRIBUNAL AFTER CONSIDERING THE DECISION OF HONBLE P& H HIGH COURT IN THE CASE OF GURDAS GARG VS CIT, 63 TAXMAN 289 HAS HELD THAT WHERE GENUINENESS OF TRANSACTIONS IN EXCESS OF ITA NO.250/CTK/2018 ASSESSMENT YEAR: 2012 - 13 P A G E 5 | 7 RS.20,000/ - WAS NOT DISBELIEVED BY AUTHORITIES, THEN THE PAYMENTS IN EXCESS OF RS.20,000/ - CANNOT BE DISALLOWED U/S.40A(3) OF THE ACT . WHILE TAKING THIS VIEW, THE HONBLE HIGH COURT HAS ALSO TAKEN SUPPORT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS ITO, 191 ITR 667 (SC). 8. ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 9. I HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON THE RECORD OF THE TRIBUNAL AND ORDERS OF LOWER AUTHORITIES. FROM THE CHART AS REPRODUCED ABOVE, IT IS CLEAR THAT THE PAYMENTS WERE M ADE TO PARTIES I.E. EPARI SADASHIV PVT LTD., AND M/S. ALANKAR JEWELLERY, BALASORE. THE ASSESSEE IS IN BUSINESS OF JEWELLERY. IT IS NOT DISPUTED THAT IF AN ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT IN EXCESS OF RS.20,000/ - IS MADE IN A D AY TO A SINGLE PERSON, OTHER THAN BY AN ACCOUNT PAYEE CHEQUE OR AN ACCOUNT PAYEE BANK DRAFT, 100% OF SUCH EXPENDITURE WILL NOT BE ALLOWED AS DEDUCTION AND IN SUCH A SITUATION PROVISIONS OF SECTION 40A(3) WILL BE APPLICABLE. I FIND THAT ASSESSEES CLAIM IS NOT COVERED BY ANY OF THE EXCEPTIONS PROVIDED UNDER RULE 6DD. HOWEVER, THE FIRST PROVISO BELOW SECTION 40A(3) CLEARLY TAKES INTO CONSIDERATION THE NATURE OF EXPENSES, BANKING FACILITIES, CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT ITA NO.250/CTK/2018 ASSESSMENT YEAR: 2012 - 13 P A G E 6 | 7 FACTORS. RUL E 6DD IN INTENT AND PURPOSE TAKES INTO CONSIDERATION ALL THESE ASPECTS FOR PRESCRIBING VARIOUS EXCEPTIONAL CIRCUMSTANCES. THEREFORE, RULE 6DD CANNOT BE MECHANICALLY APPLIED AND I HAVE TO CONSIDER THE OVERALL EXPLANATION OF THE ASSESSEE HAVING REGARD TO T HE BUSINESS CONSIDERATION. THE ASSESSEES EXPLANATION IS THAT ASSESSEE HAD TO MAKE PAYMENT IN BUSINESS EXIGENCY AS DURING THE MONTH OF FEBRUARY, 2012, GENERALLY MARRIAGES TAKES PLACE AND DURING ODD HOURS, THE ASSESSEE MADE TRANSACTIONS AND IN SOME CASES SELLER WAS INSISTING FOR CASH PAYMENTS. THE PAYMENTS HAD BEEN MADE TO THE SELLER BECAUSE OF THAT REASON. THE GENUINENESS OF PURCHASES HAD NOT BEEN DOUBTED BY THE ASSESSING OFFICER. I FIND THAT IN THIS CASE, THERE IS NO DISPUTE TO THE FACT THAT THE GENU INENESS OF THE TRANSACTION AND THE PAYMENT AND IDENTITY OF THE RECEIVER ARE ESTABLISHED. THIS VIEW IS SUPPORTED BY THE DECISION OF HONBLE P&H HIGH COURT IN THE CASE OF GURDAS GARG (SUPRA) AND ALSO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ATT AR SINGH GURMUKH SINGH (SUPRA). UNDER SUCH CIRCUMSTANCES, I AM OF THE OPINION THAT THE DISALLOWANCE OF THESE EXPENSES BY APPLYING TO SECTION 40A(3) WOULD NOT BE JUSTIFIED. I , ACCORDINGLY, SET ASIDE THE ORDER OF LD CIT(A) ON THIS COUNT AND ALLOW THE GROUN DS OF APPEAL OF THE ASSESSEE. ITA NO.250/CTK/2018 ASSESSMENT YEAR: 2012 - 13 P A G E 7 | 7 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 13 / 0 5 /201 9 . S D/ - ( CHANDRA MOHAN GARG ) JUDICIALMEMBER CUTTACK; DATED 13 / 0 5 /20 9 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR. PVT. SECRETARY, ITAT, CUTTACK 1. THE APPELLANT : M/S. LAXMI NARAYAN JEWELLERY, VIVEKANANDA MARG, DIST: BALASORE 2. THE RESPONDENT. ITO, WARD - 2, BALASORE 3. THE CIT(A) - CUTTACK 4. PR.CIT - CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//