ITO, S.K.Ward-2, Himatnagar V. M/s. Ramdev Profiles, Sabarkantha

ITA 2612/AHD/2014

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5660 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 23-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Retrospective amendment; Tax effect
• Section: 271(1)(c); 40A(3); 143(3); 201; 268A; 68; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER M/S. RAMDEV PROFILES, AT & PO TAJPUR (ORAN), TALUKA PRANTIJ, DIST: SABARKANTHA - 383205, PAN: AAJFR7443R (APPELLANT) VS THE IT O , S.K.WARD - 2 , HIMATNAGAR - 383001 (RESPONDENT) THE ITO, S.K.WARD - 2, HIMATNAGAR - 383001 (APPELLANT) VS M/S. RAMDEV PROFILES, AT & PO TAJPUR (ORAN), TALUKA PRANTIJ, DIST: SABARKANTHA - 383205, PAN: AAJFR7443R (RESPONDENT) REVENUE BY : S H RI MUDIT NAGPAL , SR. D . R. ASSESSEE BY: SHRI PARIMAL PARMAR, A.R. DATE OF HEARING : 01 - 11 - 2 018 DATE OF PRONOUNCEMENT : 29 - 11 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THESE TWO APPEALS FILED BY ASSESSEE AND REVENUE FOR A. Y. 2011 - 12 , ARI SE FROM ORDER OF THE CIT(A) - V III, AHMEDABAD DATED 14 - 07 - 2 014 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 2564 / A HD/20 14 A SS ESSMENT YEAR 2011 - 12 ITA NO. 2612/AHD/2014 ASSESS MENT YEAR 2011 - 12 I.T.A NO S . 256 4 & 2612 /AHD/20 14 A.Y. 2011 - 12 PAGE NO M/S. RAMDEV PROFILES VS. IT O 2 2. THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE IS AGAINST THE DISALLOWANCE OF RS. 3 , 73 , 455/ - U/S. 40A(3) OF THE ACT IN RESPECT OF LIGHT BILL PAID IN CASH TO UTTAR GUJARAT VIZ COMPANY LTD. 3. THE FACT IN BRIEF IS THAT DURING THE COURS E OF ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT FOR THE YEAR UNDER CONSIDERATION , THE ASSESSING OFFICER HAS MADE LIGHT BILL PAYMENT OF RS. 3 , 73 , 455/ - IN CASH. CONSEQUENTLY THE ASSESSING OFFICER HAS DISALLOWED THE SAID PAYMENT IN CONTRAVENTION OF THE PR OVISION OF SECTION 40A(3) OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSSEE. 4. AGGRIEVED ASSSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). T HE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE HOLDING THAT PAYMENT IN CASH WAS NOT COVERED IN ANY OF THE E XCEPTIONS PROVIDED IN RULE 6DD OF THE IT RULE. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS CONTENDED THAT CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF PAYMENT OF ELECTRICITY BILL TO UTTAR GUJARAT VIZ COMPANY LTD. HE HAS ALSO PLACED RELIANCE ON THE DECISION OF THE CO - ORDINATE BENCH OF IDENTICAL ISSUE AND ID ENTICAL FACT IN THE CASE OF M/S . SHIV KRUPA TIN CONTRACTORS VS. ITO IT A NO. 136/AHD/2016 ORDER DATED 09 - 06 - 2016. ON THE OTHER HAND, THE LD. DEPARTMENTAL R EPRESENTATIVE HAS SUPPORTED THE ORDER OF LD. CIT(A). 6 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE HAS MADE LIGHT BILL PAYMENT OF RS. 3 , 73 ,455/ - IN CASH TO UTTAR GUJARAT VIZ. COMPANY LTD AS THE ASSESSEE FIRM W AS SITUATED IN SMALL VILLAGE ORAM WHICH WAS NOT SERVED BY BANK. THIS UNDISPUTED FACT THAT ASSESSEE FIRM WAS SITUATED IN SMALL VILLAGE ORAM NOT SERVED BY BANK NOT DIPROVED BY THE REVENUE . IN THIS CONNECTION, WE HAVE PERUSED THE DECISION OF CO - ORDINATE BEN CH OF ITAT AHMEDABAD THE CASE OF M/S. SHIV KRUPA TIN CONTRACTORS VS. ITO ITA NO. 136/AHD/2016 . RELEVANT PART OF THE DECISION OF CO - ORDINATE BENCH THE CASE OF I.T.A NO S . 256 4 & 2612 /AHD/20 14 A.Y. 2011 - 12 PAGE NO M/S. RAMDEV PROFILES VS. IT O 3 M/S. SHIV KRUPA TIN CONTRACTORS VS. ITO ITA NO. 136/AHD/2016 IS REPRODUCED AS UNDER: - 3. BEFORE U S, LD.AR REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE AO HAS NOT DISPUTED THAT THE PAYMENTS MADE BY THE ASSESSEE IS NOT FOR THE PURPOSE OF BUSINESS. HE FURTHER SUBMITTED THAT THE PAYMENT WAS MADE TO ELECTRICI TY COMPANY IN CASH AS THERE WAS NO FACILITY MADE BY THEM TO ACCEPT THE PAYMENT IN CHEQUE OR DRAFT. HE FURTHER SUBMITTED THAT THE PRIMARY OBJECT OF ENACTING SECTION 40A(3) OF THE ACT WAS TO PUT A CHECK ON TRADING TRANSACTIONS TO AVOID THE LIABILITY TO TAX ON INCOME EARNED ON SUCH TRANSACTIONS. THE LD.AR SUBMITTED THAT WHILE UPHOLDING THE DISALLOWANCE U/S.40A(3), THERE IS NO FINDING OF LD.CIT(A) THAT AS TO WHETHER EACH PAYMENT IN A DAY MADE BY THE ASSESSEE EXCEEDED RS.20,000/ - . HE FURTHER SUBMITTED THAT PROVISIONS OF SECTION 40A(3) WAS INTENDED WITH THE OBJECTIVE OF AVOIDING TAX EVASION. HE SUBMITTED THAT WHEN THE PAYMENTS ARE GENUINE AND ARE MADE OUT OF INCOME FROM DISCLOSED SOURCES, NO DISALLOWANCE U/S.40A(3) CAN BE MADE. HE FURTHER PLACED RELIANCE O N THE JUDGEMENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF ANUPAM TELE SERVICES VS. ITO REPORTED AT (2014) 366 ITR 122 (GUJ.). HE ALSO PLACED RELIANCE ON THE DECISION OF HON BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. CHOUDHARY AND CO. REPORTED AT (1996) 216 ITR (ALL). LD.SR.DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AO AND LD.CIT(A). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO DISALLOWANCE U/S.40A(3) OF THE ACT. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAS MADE CASH PAYMENTS FOR EXPENSES AND THESE PAYMENTS HAVE BEEN MADE TO ELECTRICITY COMPANY FOR THE SUPPLY OF ELECTRICITY. THE PAYMENT OF ELE CTRICITY WAS THE PURPOSE OF BUSINESS, THE PAYEE TO WHOM THE ASSESSEE HAS MADE THE PAYMENT HAS NOT BEEN DOUBTED BY THE AO; MEANING THEREBY THAT THE GENUINENESS OF PAYMENT AND IDENTITY OF THE PAYEE ARE NOT IN DOUBT. IN SUCH A SITUATION, WE FIND THAT THE HO N BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ANUPAM TELE SERVICES VS. ITO REPORTED AT (2014) 366 ITR 122 (GUJ.) HAS HELD THAT THE PARAMOUNT CONSIDERATION OF SECTION 40A(3) IS TO CURB AND REDUCE THE POSSIBILITIES OF BLACK MONEY TRANSACTIONS AND SECTION DOES NOT ELIMINATE CONSIDERATIONS OF BUSINESS EXPEDIENCIES. BEFORE US, REVENUE HAS NOT PLACED ANY CONTRARY BINDING DECISION. IN VIEW OF THE AFORESAID FACTS AND AFTER PLACING RELIANCE ON THE AFORESAID DECISION OF HON BLE GUJARAT HIGH COURT, WE ARE OF THE VIEW THAT IN THE PRESENT CASE THE EXPENDITURE CANNOT BE DISALLOWED. THUS, THIS GROUND OF ASSESSEE IS ALLOWED. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH AND CONSIDERING THE UNDISPUTED FACT THAT NO BANKING FACILITY WAS AVAILABLE AT THE LOCATION OF THE ASSESSEE, WE ARE NOT INCLINED WITH THE FINDING OF LD. CIT(A), THEREFORE , THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS ALLOWED. 7. THE OTHER TWO GROUNDS OF APPEAL PERTAINING TO LEVYING OF INTEREST U/S. 234A, B AND C OF THE ACT IS MANDATORY AS PER RULE AND THE OTHER GROUNDS OF APPEAL FOR INITIATION OF PENALTY U/S. 271(1)(C) OF THE ACT IS PREMATURE AT THIS STAGE, THEREFORE, THE SAME ARE DISMISSED. I.T.A NO S . 256 4 & 2612 /AHD/20 14 A.Y. 2011 - 12 PAGE NO M/S. RAMDEV PROFILES VS. IT O 4 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 2612/AHD/2014 FILED BY REVENUE 9 . THE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HA S ERRED IN DELETING ADDITION OF RS. 37,35,300/ - AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT . 10 . AT THE OUTSET, AFTER GOING THROUGH THE GROUNDS OF APPEAL AND THE IMPUGNED ORDERS OF T HE REVENUE AUTHORITIES BELOW, A QUERY WAS RAISED BY THE BENCH AS TO APPLICABILITY AND MAINTAINABILITY OF THE APPEAL FILED BY THE REVENUE IN VIEW OF RECENT CBDT CIRCULAR NO.3/2018 DATED 11.7.2018 RESTRICTING THE FILLING OF THE APPEAL BY THE REVENUE WHERE TH E TAX EFFECT IS BELOW RS.20 LAKHS, THE LD. DR DID NOT DISPUTE THE SAME AND SUBMITTED THAT THE ISSUE IS LEFT TO THE TRIBUNAL TO BE DECIDED IN ACCORDANCE WITH LAW. 11 . WE FIND THAT THE APPEAL O F THE REVENUE IS PRESENTED ON 23.9.2014 . ON 11.7.2018 THE C BDT HAS ISSUED INSTRUCTIONS BEARING NO. 3 OF 2018 UNDER FILE NO.F.NO.279/MISC.142/2007 - ITJ(PT) PROHIBITING ITS SUBORDINATE AUTHORITIES FROM FILING OF THE APPEAL TO THE TRIBUNAL AGAINST THE ORDER OF THE CIT(A) WHERE THE TAX EFFECT BY VIRTUE OF THE RELIEF GI VEN BY THE CIT(A) IS LESS THAN RS.20 LAKHS. THE INSTRUCTIONS HAVE BEEN MADE APPLICABLE WITH RETROSPECTIVE EFFECT, MEANING THEREBY, THESE INSTRUCTIONS ARE APPLICABLE ON PENDING APPEALS ALSO. IN THE PRESENT CASE, TAX EFFECT ON THE TOTAL INCOME ASSESSED M INUS THE TAX THAT WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF THE ISSUE AGAINST WHICH APPEAL IS FILED, IS LESS THAN RS.20 LAKHS. FURTHER, THE CASE OF THE REVENUE DOES NOT FALL WITHIN THE AMBIT OF EXCE PTIONS PROVIDED IN THE CIRCULAR. THUS, KEEPING IN VIEW THE ABOVE CBDT CIRCULAR AND PROVISIONS OF SECTION 268A OF THE INCOME TAX ACT, WE ARE OF THE VIEW I.T.A NO S . 256 4 & 2612 /AHD/20 14 A.Y. 2011 - 12 PAGE NO M/S. RAMDEV PROFILES VS. IT O 5 THAT THE PRESENT APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. IT IS ACCORDINGLY DISMISSED. HOWEVER , IT IS OBSERVED THAT IN CASE ON RE - VERIFICATION AT THE END OF THE AO IT COMES TO THE NOTICE THAT THE TAX EFFECT IS MORE OR REVENUE S CASE FALLS WITHIN THE AMBIT OF EXCEPTIONS PROVIDED IN THE CIRCULAR, THEN THE DEPARTMENT WILL BE AT LIBERTY TO APPROACH THE TRIBUNAL FOR RECALL OF THIS ORDER. SUCH APPLICATION SHOULD BE FILED WITHIN THE TIME PERIOD PRESCRIBED IN THE ACT. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE IS DISMISSED DUE TO LOW TAX EFFECT. 12 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. 13. IN THE COMBINED RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 2 9 - 11 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL M EMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 29 /11 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,