ITO, Erode V. Shri B. Kamaraj, Erode

ITA 2598/CHNY/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4947 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 04-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 06-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN ACIT
• Assessee Lawyers: S SRIDHAR ADV ERODE

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , . , ! BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER , AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2532/MDS/2016 & ITA NO.2598/MDS/2016 /ASSESSMENT YEARS: 2013-14 & 2012-13 THE INCOME TAX OFFICER, WARD-1(1), INCOME TAX OFFICE, NO.15, GANDHIJI ROAD, ERODE 638 001. VS. SHRI B.KAMARAJ, NO.118, JINNAH STREET, ERODE-638 001. [PAN: BJUPK 9323 G ] ( % /APPELLANT) ( &'% /RESPONDENT) DEPARTMENT BY : MR. N.MADHAVAN, ACIT ASSESSEE BY : MR. S.SRIDHAR, ADV., ERODE ) /DATE OF HEARING : 17.01.2018 ) /DATE OF PRONOUNCEMENT : 17.01.2018 / O R D E R PER GEORGE MATHAN , JUDICIAL MEMBER : ITA NO.2532/MDS/2016 IS AN APPEAL FILED BY THE REV ENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-3, COIMBATORE, IN ITA NO.378/15-16 DATED 27.05.2016 FOR THE AY 2013-1 4 & ITA NO.2598/MDS/2016 IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, COIMBAT ORE, IN ITA NO.160/15-16 DATED 27.05.2016 FOR THE AY 2012-13. 2. AS BOTH THE APPEALS ARE RELATED TO THE SAME ASSE SSEE AND BEING INTER-CONNECTED, BOTH THE APPEALS ARE DISPOSED OFF BY THIS COMMON ORDER. ITA NO.2532/MDS/2016 & ITA NO.2598/MDS/2016 :- 2 -: 3. SHRI N.MADHAVAN, ACIT REPRESENTED ON BEHALF OF T HE REVENUE AND SHRI S.SRIDHAR, ADV., ERODE, REPRESENTED ON BEHALF OF THE ASSESSEE. 4. IT WAS SUBMITTED BY THE LD.DR THAT THE ASSESSEE IS AN INDIVIDUAL WHO IS DEALING IN TRADING OF RICE. IT WAS A SUBMIS SION THAT FOR THE AY 2013-14, THE ASSESSEE HAD A TURNOVER OF NEARLY RS.1 .04 CRS. AND FOR THE AY 2012-13, A TURNOVER OF NEARLY RS.59.00 LAKHS. I T WAS A SUBMISSION THAT IN THE COURSE OF THE ASSESSMENT, IT WAS NOTICE D THAT THE ASSESSEE HAD MADE PURCHASES OF THE RICE FROM VARIOUS RICE MILLS AS HAS BEEN SPECIFIED IN THE ASSESSMENT ORDER, IN CASH. IT WAS A SUBMISSION THAT THE AO HAD CONSEQUENTLY, DISALLOWED THE PAYMENT IN RESPECT OF THE PURCHASE OF THE RICE BY APPLYING THE PROVISIONS OF SEC.40A(3) OF TH E ACT. IT WAS A SUBMISSION THAT CONSEQUENT ADDITION FOR THE RELEVAN T AY 2013-14 WAS RS.89.31 LAKHS AND FOR THE AY 2012-13 WAS RS.50.82 LAKHS. IT WAS A SUBMISSION THAT THE ASSESSEE HAD CLAIMED THAT THE A SSESSEE HAD PURCHASED THE RICE FROM THE RICE MILLS THROUGH HIS AGENTS TO WHOM HE HAD TO PAY CASH. IT WAS A SUBMISSION THAT THE AGENTS H AVE BEEN IDENTIFIED AS THE WIFE OF THE ASSESSEE, THE MOTHER OF THE ASSESSE E AND SOME OF THE EMPLOYEES OF THE ASSESSEE. IT WAS A SUBMISSION THA T THE LD.CIT(A) HAD DELETED THE ADDITION ON THE GROUND THAT THE PROVISI ONS OF RULE 6DD(K) OF THE ACT, APPLIED. IT WAS A FURTHER SUBMISSION THAT THE LD.CIT(A) HAD CONSEQUENTLY, REJECTED THE ASSESSEES BOOKS OF ACCO UNTS AND HAD ESTIMATED THE INCOME OF THE ASSESSEE AT 2.5% OF THE TURNOVER. IT WAS A SUBMISSION THAT THE ESTIMATION AS DONE BY THE LD.CI T(A), IN FACT, BROUGHT ITA NO.2532/MDS/2016 & ITA NO.2598/MDS/2016 :- 3 -: THE INCOME OF THE ASSESSEE BELOW THE RETURNED INCOM E. IT WAS A SUBMISSION THAT THE ORDER OF THE LD.CIT(A) WAS LIAB LE TO BE REVERSED. 5. IN REPLY, LD.AR SUBMITTED THAT THE REVENUE HAS C HALLENGED ONLY THE FACT THAT THE LD.CIT(A) HAS ACCEPTED THE RULE 6DD(K ) OF THE ACT APPLIED IN RESPECT OF THE PURCHASES IN SO FAR AS THE PAYMENT H AD BEEN MADE TO THE AGENTS OF THE ASSESSEE FOR THE PURPOSE OF THE PURCH ASE OF THE RICE FROM THE RICE MILLS. IT WAS A SUBMISSION THAT THE RICE MILLS WERE SITUATED ABOUT ONE HOUR DRIVE FROM ERODE. IT IS ADMITTED THAT TWO OF THE AGENTS WERE THE ASSESSEES MOTHER AND ASSESSEES WIFE, BUT NONE OF THE ASSESSEES EMPLOYEES WERE ACTING AS AGENTS OF THE ASSESSEE AND THIS IS NOT THE CLAIM IN THE ASSESSMENT ORDER. IT WAS A FURTHER SUBMISSI ON THAT THE PURCHASES ARE ALL BELOW RS.20,000/- AND ONLY BECAUSE THE TOTA L PURCHASES DURING A PARTICULAR DAY HAS EXCEEDED RS.20,000/-, THE AO HAS INVOKED THE PROVISIONS OF SEC.40A(3) OF THE ACT. IT WAS A SUBM ISSION THAT THE ORDER OF THE LD.CIT(A) WAS LIABLE TO BE SUSTAINED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMIT TEDLY, THE ASSESSEE IS A DEALER OF RICE. RICE IS A COMMODITY WHICH ONC E SOLD, IT WOULD BE DIFFICULT TO RECOVER BACK. RICE MILL OWNERS, THEMS ELVES, ARE IN PRECARIOUS FINANCIAL POSITION AND IT IS A KNOWN FACT THAT THEY DEMAND CASH. THE GENUINENESS OF THE PURCHASE IS NOT IN DISPUTE. IN FACT, BY MAKING THE DISALLOWANCE, THE AO HAS PRACTICALLY DISALLOWED AND MADE AN ADDITION OF 80% OF THE PURCHASE OF THE ASSESSEE. THE AO HAS AL SO DISALLOWED THE ITA NO.2532/MDS/2016 & ITA NO.2598/MDS/2016 :- 4 -: COMMISSION PAID TO THE AGENTS. THE INSPECTOR OF TH E AO HAS EXAMINED THE COMMISSION AGENTS SUBSTANTIALLY AND THEY HAVE A LL CONFIRMED HAVING RECEIVED THE COMMISSION PAYMENT AND THEY HAVE ALSO IDENTIFIED THE RICE MILLS FROM WHERE THE PURCHASES HAVE BEEN MADE. THE SE ARE ALSO FOUND TO BE GENUINE. THIS BEING SO, IT CANNOT BE SAID THAT THE PROVISIONS OF RULE 6DD(K) DOES NOT APPLY TO THE ASSESSEES CASE. HOWE VER, A PERUSAL OF THE ORDER OF THE LD.CIT(A) SHOWS THAT AFTER DELETING TH E DISALLOWANCE MADE BY THE AO BY INVOKING THE PROVISIONS OF SEC.40A(3) OF THE ACT, THE LD.CIT(A) HAS ESTIMATED THE INCOME OF THE ASSESSEE AT 2.5% OF THE TURNOVER, WHICH HAS RESULTED IN THE ASSESSED INCOME GOING BELOW THE RETURNED INCOME. THIS IS NOT PERMISSIBLE. IN THESE CIRCUMSTANCES, T HE FINDINGS OF THE LD.CIT(A) IN RESPECT OF THE DELETION OF THE ADDITIO N MADE BY THE AO BY INVOKING THE PROVISIONS OF SEC.40A(3) BY APPLYING P ROVISIONS OF RULE 6DD(K) OF THE ACT, IS UPHELD. HOWEVER, THE ESTIMAT ION AS DONE BY THE LD.CIT(A) OF THE INCOME OF THE ASSESSEE AT 2.5% OF THE TURNOVER OF THE ASSESSE IS REVERSED AND RETURNED INCOME IS RESTORED . 7. IN THE RESULT, THE APPEALS FILED BY THE REVENUE IN ITA NO.2532 & 2598/MDS/2016 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 17, 2018, AT CHENNAI. SD/- SD/- ( . ) ( A. MOHAN ALANKAMONY ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ITA NO.2532/MDS/2016 & ITA NO.2598/MDS/2016 :- 5 -: /CHENNAI, / /DATED: JANUARY 17, 2018. TLN ) &01 21 /COPY TO: 1. % /APPELLANT 4. 3 /CIT 2. &'% /RESPONDENT 5. 1 & /DR 3. 3 ( ) /CIT(A) 6. /GF