Rajinder Parsad, Kaithal V. CIT, Karnal

ITA 257/CHANDI/2015

• Counselvise Citation: 25721514 RSA 2015
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 12-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: PARMIL GOEL
• Keywords: Question of law
• Section: 40A(3); 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT AND MRS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.257/CHD/2015 ASSESSMENT YEAR:2010-11 SH RAJINDER PARSAD, VS. CIT PROPRIETOR HIND AUTO CENTRE KARNAL KAITHAL PAN NO. AAMPP9126A (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PARMIL GOEL RESPONDENT BY : SH. S.K. MITTAL DATE OF HEARING : 14/09/2015 DATE OF PRONOUNCEMENT :24/09/2015 ORDER PER ANNAPURNA MEHROTRA, A.M THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 196 1, DT. 14/01/2015. 2. BRIEFLY STATED, ASSESSEE WAS AN AUTHORIZED DEALE R OF MRF TYRES AND DERIVED INCOME FROM DEALING IN TRADING OF TYRES AND TUBES. ASSESSMENT U/S 143(3) WAS FRAMED ON 07/02/2013, AT AN INCOME OF RS. 3,85,242/ -, AFTER MAKING ADDITION OF RS. 55,000/- ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWAL S AND RS. 46,822/- ON ACCOUNT OF FREIGHT, RENT, SALARY AND WAGES CLAIMED IN P&L ACCOUNT. LATER, ON EXAMINATION OF RECORDS IT WAS NOTICED BY THE LD. CI T THAT DURING THE YEAR THE ASSESSEE HAD MADE PAYMENTS EXCEEDING RS. 20,000/- T HROUGH CASH DEPOSITS DIRECTLY INTO MRF LTD. BANK ACCOUNT AMOUNTING TO RS . 12,61,728/-, ON VARIOUS 2 DATES, IN CONTRAVENTION OF THE PROVISIONS OF SECTIO N 40 A(3)OF THE INCOME TAX ACT, 1961, LD. CIT, HELD THAT SINCE THE ISSUE HAD N OT BEEN SCRUTINIZED DURING ASSESSMENT, INCOME AMOUNTING TO RS. 12,61,728/-, HA D NOT BEEN TAXED, AND THEREFORE HE FOUND THE ORDER OF ASSESSMENT ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. PROCEEDINGS U/S 263 WERE I NITIATED ON 27/10/2014, DURING THE COURSE OF WHICH THE ASSESSEE PLEADED THAT THE P ROVISIONS OF SECTION 40A(3) HAD NOT BEEN VIOLATED SINCE THE CASH OF RS. 12,61,7 28/-, HAD BEEN DEPOSITED BY THE ASSESSEE DIRECTLY IN THE BANK ACCOUNT OF MRF LT D., IN HDFC BANK. THE ASSESSEE RELIED UPON THE JUDGMENT OF THE PUNJAB & H ARYANA HIGH COURT IN THE CASE OF CIT VS. SHELLY PASSI 350 ITR 227 IN SUPPORT OF HIS CONTENTION. THE ASSESSEE FURTHER STATED THAT SINCE HE WAS FACING FINANCIAL C RISIS, CASH DEPOSIT WAS MADE DIRECTLY TO THE BANK ACCOUNT OF THE SUPPLIERS TO EN SURE UNINTERRUPTED SUPPLY OF TYRES WHICH ENABLED HIM TO RUN HIS BUSINESS PEACEFU LLY. THE ASSESSEE ALSO STATED THAT RTGS/NEFT FACILITIES WERE LIMITED IN APRIL 200 9, AND THEREFORE, THE ASSESSEE HAD MADE DIRECT CASH PAYMENT IN THE ACCOUNT OF MRF LTD. THE ASSESSEE THEREFORE CONTENDED THAT THE TRANSACTION WAS COVERE D UNDER RULE 6DD OF THE INCOME TAX RULES, 1962, BEING CASH PAYMENT MADE IN EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES AND PLEADED THAT IN VIEW OF THE SAME NO DISALLOWANCE UNDER SECTION 40A(3) COULD BE MADE. 3. LD. CIT DID NOT ACCEPT THE CONTENTION OF THE ASS ESSEE AND STATED THAT THE ASSESSEE HAD NOT GIVEN ANY SUPPORTING DOCUMENT OR E VIDENCES TO SUBSTANTIATE HIS CLAIM OF DENIAL OF SALE OF TYRES BY MRF LTD., A S A CONSEQUENCE OF WHICH THE ASSESSEE HAD TO ALLEGEDLY MAKE PAYMENT IN CASH TO M RF LTD. 4. THE LD. CIT FURTHER STATED THAT THE ASSESSEES E XPLANATION THAT RTGS/NEFT FACILITY WERE LIMITED IN APRIL 2009, WAS ALSO NOT A CCEPTABLE AND NEITHER WAS THE 3 SAME SUBSTANTIATED BY ANY EVIDENCE, THEREFORE, THE LD. CIT HELD THAT THE ASSESSEES CASE FOR PAYMENT OF CASH DIRECTLY INTO T HE BANK ACCOUNT OF MRF LTD. DID NOT GET COVERED IN THE EXCEPTIONS CONTAINED IN RULE 6DD OF THE INCOME TAX RULES, 1962. 5. THE LD. CIT DISTINGUISHED ON FACTS THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHELLY PASSI REPORTED IN 350 ITR 227, RELIED UPON BY THE ASSESSEE IN SUPPORT OF HIS CONTENTION THAT CASH PAY MENT MADE DIRECTLY INTO THE BANK ACCOUNT IS NOT COVERED UNDER THE PROVISIONS OF SECTION 40A(3), BY STATING THAT IN THE SAID CASE THE ASSESSEE WAS AN AGENT OF RCIL WHERE AS IN THE CASE OF THE ASSESSEE HE WAS AN AUTHORIZED DEALER OF MRF LTD . THE LD. CIT STATED THAT THE DEPOSIT OF AMOUNT DIRECTLY IN THE BANK ACCOUNT OF M RF LTD. DID NOT MAKE THE CASE ANY SHADE BETTER THAN A CASH PAYMENT FOR THE P URPOSE OF SECTION 40A(3) READ WITH RULE 6DD OF THE INCOME TAX RULES 1962. TH E LD. CIT THEREFORE HELD THAT SINCE THE AO FAILED TO SCRUTINIZE THE CASE PROPERLY DURING THE ASSESSMENT PROCEEDING, WITH REGARD TO THE ISSUE OF CASH DEPOSI T OF RS. 12,61,728/- IN THE BANK ACCOUNT OF MRF LTD. BY THE ASSESSEE, IN CONTRA VENTION OF THE PROVISION OF SECTION 40A(3) READ WITH RULE 6DD OF THE INCOME TAX ACT, THE ASSESSMENT ORDER HAD BEEN RENDERED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE THEREFORE SET ASIDE THE ASSESSMENT ORDER OF THE ASS ESSEE AND DIRECTED THE AO TO COMPLETE THE ASSESSMENT IN ACCORDANCE WITH LAW AFTE R CARRYING OUT NECESSARY ENQUIRIES AND PROVIDING REASONABLE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. 6. AGGRIEVED BY THE SAME THE ASSESSEE FILED THE PRE SENT APPEAL BEFORE US TAKING THE FOLLOWING GROUND: ORDER U/S 263 IS NOT BASED ON FACTS, ILLEGAL, ARB ITRARY & PASSED WITHOUT PROPERLY CONSIDERING REPLIES / CASE LAW FILED BY APPELLANT, & THEREFORE MAY PLEASE BE QUASHED. 4 7. BEFORE US THE LD. AR ARGUED THAT IN THE IMPUGNED CASE THE ASSESSEE HAD MADE PAYMENT IN CASH DIRECTLY INTO THE BANK ACCOUNT OF MRF LTD. AND SUCH PAYMENTS WERE NOT COVERED BY THE PROVISIONS OF SECT ION 40A(3). IN SUPPORT OF HIS CONTENTION THE LD. AR RELIED UPON THE ORDER OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SHELLY PASSI, [20 13] 350 ITR 227, AND THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ANUPAM TELE SERVI CES VS. ITO (GUJARAT HIGH COURT) [2014] 366 ITR 122. 8. THE LD. AR STATED THAT IN VIEW OF THE SAME THERE WAS NO ERROR IN THE ORDER OF THE AO AND THE PROCEEDING UNDER SECTION 263 WERE THEREFORE INVALID. 9. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF THE LD. CIT(A). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD PLACED BEFORE US. 11. THE ONLY ISSUE IN THE PRESENT APPEAL IS AGAINST THE EXERCISE OF REVISIONARY POWER U/S 263 OF THE INCOME TAX ACT, 1961, BY THE L D. CIT. 12. REVISIONARY POWERS UNDER SECTION 263, CAN BE RE SORTED BY THE LD. COMMISSIONER ONLY WHEN THE ORDER OF THE AO IS ERRON EOUS AND CAUSES PREJUDICE TO THE INTEREST OF THE REVENUE. THE LD. COMMISSIONE R MUST COME TO A CONCLUSION ON THIS POINT AFTER PROPER APPLICATION OF MIND AND THE CONCLUSION SHOULD BE BASED ON PROPER MATERIAL. IN THE PRESENT CASE WE FIND THAT NON EXAMINATION OF THE ISSUE OF CASH DEPOSIT OF RS. 12,61,728/- IN THE BANK ACCOUNT OF MRF LTD. BY THE ASSESSEE, ALLEGEDLY IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3), READ WITH RULE 6DD OF THE 5 INCOME TAX RULES, 1962, IS THE ERROR WHICH AS PER T HE LD. CIT HAS RESULTED IN PREJUDICE TO THE INTEREST OF THE REVENUE. WHILE THE LD. AR HAS ARGUED THAT THIS IS NOT AN ERROR AT ALL AND NO DISALLOWANCE UNDER SECTI ON 40A(3) COULD BE MADE IN THE CIRCUMSTANCES OF THE CASE, THE LD. DR ON THE OT HER HAND HAD ARGUED THAT SECTION 40A(3) HAS TO BE STRICTLY CONSTRUED AND ALL CASH PAYMENTS EXCEEDING RS. 20,000/- ARE TO BE DISALLOWED UNDER THE SECTION. 13. IN THE LIGHT OF THE ABOVE STATED FACTS IT IS TO BE EXAMINED WHETHER AT ALL THERE WAS ANY ERROR IN THE ORDER OF THE AO WHICH HA D CAUSED PREJUDICE TO THE INTEREST OF THE REVENUE. THE ISSUE WHETHER CASH DEP OSITED DIRECTLY IN THE BANK ACCOUNT RESULTS IN VIOLATION OF THE PROVISIONS OF S ECTION 40A(3) OF THE ACT HAS BEEN DEALT WITH BY THE HONBLE PUNJAB & HARYANA HIG H COURT IN THE CASE OF CIT VS. SHELLY PASSI (SUPRA) WHEREIN IT WAS HELD BY THE HONBLE HIGH COURT AT PARA 4,5,&7 OF THE ORDER AS FOLLOWS: 4. AFTER GIVING THOUGHTFUL CONSIDERATION TO THE SU BMISSION MADE BY LEARNED COUNSEL FOR THE APPELLANT, WE DO NOT FIND ANY MERIT IN THIS APPEAL. 5. THE TRIBUNAL WHILE ACCEPTING THE PLEA OF THE ASS ESSEE HAD CATEGORICALLY HELD THAT THE MONEY AMOUNTING TO RS. 60,19,000/- WA S DIRECTLY DEPOSITED IN THE BANK ACCOUNT OF RCIL. REFERENCE WAS ALSO MADE TO TH E PAPER BOOK WHICH HAD BEEN FILED BEFORE THE TRIBUNAL. ANOTHER FACTOR WHIC H WAS CONSIDERED BY THE TRIBUNAL WAS THAT THE ASSESSEE WAS ONLY AN AGENT OF RCIL AND THEREFORE QUESTION OF ANY DISALLOWANCE IN THE HANDS OF THE ASSESSEE WA S NOT ATTRACTED. THE AFORESAID FINDINGS HAVE NOT BEEN SHOWN TO BE PERVER SE OR ERRONEOUS IN ANY MANNER. 7. NO QUESTION OF LAW MUCH LESS SUBSTANTIAL QUESTIO N OF LAW ARISES IN THIS APPEAL AND ACCORDINGLY, THE SAME IS DISMISSED. 14. MOREOVER, THE HONBLE HIGH COURT IN THE CASE OF ANUPAM TELE SERVICES VS. ITO (2014) 366 ITR 122 GUJARAT ON THE FOLLOWING SUB STANTIAL QUESTION OF LAW: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT SECTION 40A(3) APPLIES TO THE PAYMENT OF RS. 33,10,194/- DEPOSITED BY THE APPELLANT IN THE BANK ACCOUNT OF TATA TELE SERVICES LIMITED? IT WAS HELD BY THE HONBLE HIGH COURT ARE AS UNDER : 6 WE WOULD FIND THAT THE PAYMENTS BETWEEN THE ASSES SEE AND THE TATA TELESERVICES LIMITED WERE GENUINE. THE TATA TELESER VICES LIMITED HAD INSISTED THAT SUCH PAYMENTS BE MADE IN CASH, WHICH TATA TELESERVI CES LIMITED IN TURN ASSURED AND DEPOSITED THE AMOUNT IN A BANK ACCOUNT. IN THE FACTS OF THE PRESENT CASE, RIGORS OF SECTION 40A(3) OF THE ACT MUST BE LIFTED. IN THE RESULT, THE QUESTION IS ANSWERED IN FAVOUR O F THE APPELLANT ASSESSEE AND AGAINST THE REVENUE. 15. IN VIEW OF THE ABOVE JUDGEMENTS WE FIND NO MERI T IN THE CONTENTION OF THE LD. CIT, THAT THE PROVISIONS OF SECTION 40A(3) ARE ATTRACTED IN CASE WHEN CASH IS DEPOSITED DIRECTLY INTO THE BANK ACCOUNT. AS A CONS EQUENCE WE FIND THAT NO ERROR HAS CREPT IN THE ORDER OF THE AO WHICH REQUIR ED REVISION BY THE LD. COMMISSIONER UNDER SECTION 263. IN VIEW OF THIS, TH E JURISDICTION ASSUMED BY THE LD. CIT U/S 263 OF THE ACT, IS HELD TO BE NOT AS PE R LAW. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 24/09/2015. SD/- SD/- (H.L. KARWA) (ANNAPURNA MEHROTRA) VICE PRESIDENT ACCOUNTANT MEMBER DATED :24/09/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR