Smt Ira Panja, Burdwan V. ITO, Wd-2(3), Asansol, Asansol

ITA 270/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4318 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 31-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 17-02-2014
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY AD DL CIT SR D
• Assessee Lawyers: T P ROY
• Keywords: Commercial expediency
• Section: 40A(3); 143(3)

Judgement Text

1 ITA NO. 270/KOL/2014 SMT. IRA PANJA, AY 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI WASEEM AHMED, AM & SHRI K. NARASIMHA CHARY, JM] I.T.A NO. 270/KOL/2014 ASSESSMENT YEAR: 2009-10 SMT. IRA PANJA (PAN:AKIPP2629Q) VS. INCOME-TAX OFF ICER, WD-2(3), ASANSOL ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 20.10.2016 DATE OF PRONOUNCEMENT: 27.10.2016 FOR THE APPELLANT: SHRI T. P. ROY, ADVOCATE FOR THE RESPONDENT: SHRI P. K. CHAKRABORTY, AD DL. CIT, SR. DR ORDER PER SHRI K. NARASIMHA CHARY, JM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A), ASANSOL VIDE APPEAL NO. 116/CIT(A)/ASL/W-2(3)/ASL/11-12 DATED 17.12.2013. ASSESSMENT WAS FRAMED BY ITO, WARD-2(3), KOLKATA U/S. 143(3) OF THE INCOME-TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2009-10 VIDE HIS ORDER DATED 27.10.20 11. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A RETAIL VENDOR OF COUNTRY SPIRIT, WHICH IS AN EXCISABLE COMMODITY. THE PURCHASE AND SALE AR E STRICTLY CONTROLLED BY THE STATE GOVERNMENT. EARLIER THE RETAIL DEALERS LIKE THE ASS ESSEE WERE DEPOSITING THE COST PRICE, EXCISE DUTY, BOTTLING CHARGES, ETC. IN THE TREASURY FOR GE TTING SUPPLIES FROM THE WHOLESALE LICENSEE. HOWEVER, THE EXCISE DEPARTMENT BY A NOTIFICATION DA TED 29.08.2005 CHANGED SUCH PROCEDURE, WHEREBY PRESCRIBING THAT FOR LIFTING COU NTRY SPIRIT, THE RETAIL VENDORS HAVE TO MAKE PAYMENT CONSISTING OF COST OF THE STOCK-IN-TRA DE, EXCISE DUTY AND BOTTLING CHARGES, ETC. ONLY TO THE WHOLESALE LICENSEE APPOINTED BY THE STA TE GOVERNMENT. PURSUANT TO THE SAID PROCEDURE, THE ASSESSEE MADE PAYMENTS IN THE BANK A CCOUNT OF M/S. ASANSOL BOTTLING AND PACKAGING PVT. LIMITED, BUT DURING THE ASSESSMENT Y EAR PROCEEDING, THE ASSESSING OFFICER DISALLOWED THE CASH DEPOSITS WHICH WERE IN EXCESS O F RS.20,000/- ON EACH OCCASION, MADE INTO THE BANK ACCOUNT OF M/S. ASANSOL BOTTLING AND PACKAGING PVT. LIMITED, UNDER SECTION 40A(3) OF THE INCOME TAX ACT. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(APPEALS), WHO BY WAY OF THE IMPUGNED ORDER DATE D 17.12.2013 DISMISSED THE SAME AND CONFIRMED THE ORDER OF THE ASSESSING OFFICER. CHALL ENGING THE SAME, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THIS TRIBUNAL ON THE FOLLOW ING GROUNDS:- 2 ITA NO. 270/KOL/2014 SMT. IRA PANJA, AY 2009-10 A. FOR THAT THE LD. CIT(A) HAS NOT BEEN JUSTIFIED BY CONFIRMING THE ADDITION OF RS.72,79,725 U/S. 40A(3) OF THE ACT. B. FOR THAT THE LD. CIT(A) HAS NOT BEEN JUSTIFIED B Y IGNORING THE FACTUAL POSITION OF THE CASE. C. FOR THAT THE LD. CIT(A) HAS NOT BEEN JUSTIFIED B Y IGNORING TRANSACTIONS THAT ARE GENUINE, AUTHENTIC AND IDENTIFIABLE. 3. IT IS THE ARGUMENT OF THE LD. A.R. THAT PURSUANT TO THE RULES FRAMED BY THE STATE GOVERNMENT, THE ASSESSEE DEPOSITED CASH IN THE ACCO UNT OF THE WHOLESALE LICENSEE, AS SUCH THE PROVISIONS UNDER SECTION 40A(3) ARE NOT ATTRACT ED IN VIEW OF THE EXEMPTION ALLOWED UNDER SECTION 6DD(A)(II) OF THE INCOME TAX RULES. H E FURTHER SUBMITTED THAT THE WHOLESALE LICENSEE, NAMELY M/S. ASANSOL BOTTLING AND PACKAGIN G PVT. LIMITED WAS APPOINTED BY THE STATE GOVERNMENT BY WAY OF A NOTIFICATION FOR COLLE CTION OF COST PRICE, BOTTLING CHARGES, ETC., AS SUCH THE PAYMENTS MADE TO THE BANK ACCOUNT OF SUCH WHOLESALE LICENSEE SHALL BE TREATED AS PAYMENTS MADE TO THE GOVERNMENT AND CONS EQUENTLY DISALLOWANCE IS NOT SUSTAINABLE IN VIEW OF THE PAYMENTS UNDER RULE 6DD( B) OF THE INCOME TAX RULES, WHICH PROVIDED FOR EXEMPTION, WHERE THE PAYMENT IS MADE T O GOVERNMENT. FURTHER HE CONTENDED THAT BECAUSE OF APPOINTMENT BY WAY OF NOTIFICATION, THE WHOLESALE LICENSEE SHALL BE TREATED AS AN AGENT OF THE STATE GOVERNMENT BECAUSE IT IS O NLY THROUGH HIM, THE GOVERNMENT RECEIVES THE AMOUNT FROM THE RETAIL VENDORS, AS SUC H THE PAYMENTS MADE BY THE ASSESSEE FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD(K) OF THE INCOME TAX RULES. HE, THEREFORE, PRAYED TO THE TRIBUNAL TO DELETE THE ADDITION MADE ON ACCOUNT OF APPLICATION OF SECTION 40A(3) OF THE ACT. 4. ON THE OTHER HAND, THE LD. D.R. CONTENDED THAT R ULE 6DD(B) ALSO REQUIRES THE PAYMENTS TO BE MADE IN LEGAL TENDER AS FRAMED BY TH E GOVERNMENT AND THE RULES FRAMED BY THE STATE GOVERNMENT IN THIS REGARD DO NOT COMPEL T HE ASSESSEE TO MAKE CASH PAYMENTS ONLY. HE FURTHER ARGUED THAT THE PAYMENTS MADE IN T HE GOVERNMENT ACCOUNT ARE SAVED, BUT NOT THE PAYMENTS, WHICH WERE MADE INTO THE CUSTOMER ACCOUNT. 5. BASING ON THE ABOVE CONTENTION, THE POINT THAT A RISES FOR OUR CONSIDERATION IS WHETHER THE LD. CIT(APPEALS) IS JUSTIFIED IN UPHOLDING THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. ISSUE: 3 ITA NO. 270/KOL/2014 SMT. IRA PANJA, AY 2009-10 6. AT THE OUTSET, WE MAY STATE THAT THERE IS NO DIS PUTE IN RESPECT OF THE GENUINENESS OF THE TRANSACTIONS MADE BY THE ASSESSEE. SO ALSO THE IDENTITY OF THE RECEIVER OF THE FUNDS IS NOT IN DISPUTE. APPOINTMENT OF M/S. ASANSOL BOTTLING AN D PACKAGING PVT. LIMITED, BY THE STATE GOVERNMENT BY WAY NOTIFICATION OR PAYMENTS MADE INT O THE BANK ACCOUNT OF THE WHOLESALE LICENSEE ARE ALSO NOT IN DISPUTE. NOW THE WHOLE ISS UE REVOLVES AROUND THE POINT WHETHER THE PAYMENTS MADE INTO THE ACCOUNT OF M/S. ASANSOL BOTT LING AND PACKAGING PVT. LIMITED, ARE HIT BY THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 7. IN THIS CONTEXT, IT IS USEFUL TO REFER TO RULE 6 (2) OF THE INCOME TAX RULES FRAMED BY THE STATE GOVERNMENT IN EXERCISE OF THE POWER CONFE RRED BY SECTION 85 AND SECTION 86 OF THE BENGAL EXCISE ACT, 1909 REGULATING THE ISSUE AND RE MOVAL OF COUNTRY SPIRIT ON PAYMENT OF DUTY IN LABELLED AND CAPSULE BOTTLES FROM COUNTRY S PIRIT BOTTLING PLANTS AND IN BULK FROM WAREHOUSES BY LICENSED WHOLESALE VENDORS OF THE SAM E FOR THE PURPOSE OF SELLING COUNTRY SPIRIT BY WHOLESALE. THIS RULE 6(2) STIPULATES THAT NO RETAIL VENDOR OF COUNTRY SPIRIT SHALL DEPOSIT DUTY DIRECT INTO THE LOCAL TREASURY FOR ISS UE OF COUNTRY SPIRIT TO BE TAKEN BY HIM FROM THE WAREHOUSE CONCERNED, DUTY, COST PRICE, BOTTLING CHARGES, IF THERE BE ANY, AT THE PRESCRIBED RATE AND OTHER IMPOSITION, AS MAY BE PRESCRIBED BY LAW, SHALL BE PAID BY THE RETAIL VENDOR TO THE CREDIT OF THE WHOLESALE LICENSEE CONCERNED. 8. NOW COMING TO THE APPLICATION OF SECTION 40A(3) IS CONCERNED, WE FIND FROM THE CBDT CIRCULAR NO. 6P DATED 06.07.1968 THAT THIS PRO VISION UNDER SECTION 40A(3) WAS DESIGNED TO COUNTER EVASION OF TAX THROUGH CLAIMS F OR EXPENDITURE SHOWN TO HAVE BEEN INCURRED IN CASH WITH A VIEW TO FRUSTRATING PROPER INVESTIGATION BY THE DEPARTMENT AS TO THE IDENTITY OF THE PAYEE AND REASONABLENESS OF THE PAY MENT. WHEN THIS IS THE PRIMARY OBJECT OF ENACTING SECTION 40A(3), WE WILL HAVE TO SEE WHETHE R THE PAYMENTS MADE BY THE ASSESSEE INTO THE ACCOUNT OF M/S. ASANSOL BOTTLING AND PACKA GING PVT. LIMITED, WOULD FRUSTRATE THE PURPOSE OF ENACTMENT OF SECTION 40A(3). BY VIRTUE O F PAYMENT THROUGH CASH DATED 04.09.2006, THE WHOLESALE LICENSEE WITH EXCLUSIVE P RIVILEGE FOR BOTTLING AND/OR SALE BY WHOLESALE COUNTRY SPIRIT IN SEALED OR CAPSULE BOTTL ES AND FOR MANUFACTURE AND WHOLESALE SUPPLY OF COUNTRY SPIRIT IN BULK LITTER ENJOYED NOW BY THE HOLDERS OF LICENSE IN TERMS OF SECTION 22 OF THE BENGAL EXCISE ACT, 1909 AND M/S. ASANSOL BOTTLING AND PACKAGING PVT. LIMITED, HAS BECOME AN ARM OF STATE GOVERNMENT. ON THIS ASPECT, FOR ALL PRACTICAL PURPOSES, THE RELATIONSHIP BETWEEN THE GOVERNMENT AND WHOLESA LE LICENSEE IN SO FAR AS DEALING WITH 4 ITA NO. 270/KOL/2014 SMT. IRA PANJA, AY 2009-10 THE COUNTRY MADE LIQUOR IS CONCERNED, I.E. THE PRIN CIPAL AND AGENT, SUBJECT TO THE TERRITORIAL LIMITATION PRESCRIBED IN SUCH NOTIFICATION. WE, THE REFORE, CAN SAFELY CONCLUDE THAT THE PAYMENTS MADE TO M/S. ASANSOL BOTTLING AND PACKAGIN G PVT. LIMITED, FOR ALL PRACTICAL PURPOSES ARE THE PAYMENTS TO BE REACHED TO THE STAT E GOVERNMENT AND ONCE THIS IS SO, THE SAID WHOLESALE LICENSEE SHALL BE CONSTRUED AS AN AG ENT OF THE STATE GOVERNMENT. WE, THEREFORE, CAN SAFELY CONCLUDE THAT ONCE SUCH PAYME NTS ARE MADE TO THE CREDIT OF M/S. ASANSOL BOTTLING AND PACKAGING PVT. LIMITED, THE SO URCE AND DESTINATION OF SUCH FUNDS CANNOT BE DOUBTED. THEREFORE, THE PROVISION OF SECT ION 40A(3) IS NOT FRUSTRATED BY THE ASSESSEE MAKING PAYMENTS INTO THE ACCOUNT OF M/S. A SANSOL BOTTLING AND PACKAGING PVT. LIMITED, . 9. COMMERCIAL EXPEDIENCY IN RELATION TO THE APPLICA TION OF SECTION 40A(3) IS WELL RECOGNIZED BY THE VARIOUS COURTS VIDE IN THE CASES AS UNDER:- (I) ATTAR SINGH GURMUKH SINGH VS.- ITO REPORTED IN (19 91) 191 ITR 667 (SC) (II) CIT VS.- CPL TANNERY REPORTED IN (2009) 318 ITR 17 9 (CAL.); (III) CIT VS.- CRESCENT EXPORT SYNDICATE IN ITA NO. 202 OF 2008 DATED 30.07.2008 (CALCUTTA HIGH COURT); (IV) ANUPAM TELE SERVICES VS.- ITO REPORTED IN (2014) 4 3 TAXMAN.COM 199 (GUJ.); (V) ASHOK MONDAL VS.- ITO IN ITA NO. 873/KOL/2012 (KO LKATA TRIBUNALS ORDER DATED 06.02.2014); 10. IN THE CASE OF ASHOK MONDAL (SUPRA), THE COORDI NATE BENCH OF THIS TRIBUNAL BY WAY OF AN ORDER DATED 06.02.2014 CONSIDERED THE ISSUE, WHICH IS IDENTICAL TO THE FACTS OF THIS CASE AND AFTER ELABORATING DISCUSSION REACHED A CONCLUSI ON THAT THE PAYMENTS MADE BY THE ASSESSEE FOR THE PURCHASE OF COUNTRY LIQUOR AND COU NTRY SPIRIT FROM THE TERRITORIAL LICENSEE BOTTLING PLANT, M/S. ASANSOL BOTTLING AND PACKAGING PVT. LIMITED, IS PROTECTED BY THE EXEMPTION IN TERMS OF RULE 6DD(B) OF THE INCOME TAX RULES, 1962. 11. IN VIEW OF THE ABOVE, WE FIND THAT THE ASSESSEE HAS A COMMERCIAL EXPEDIENCY UNDER RULE 6(2) OF THE WEST BENGAL RULES REFERRED TO ABOV E TO MAKE PAYMENTS TO THE CREDIT OF M/S. ASANSOL BOTTLING AND PACKAGING PVT. LIMITED, AND M /S. ASANSOL BOTTLING AND PACKAGING PVT. LIMITED, WHO IS DEEMED TO BE AN AGENT OF THE S TATE GOVERNMENT, AS SUCH IN TERMS OF RULE 6DD(B) AND RULE 6DD(K) OF THE INCOME TAX RULES , THEY ARE EXEMPTED AND THE DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT C ANNOT BE SUSTAINED. WE, THEREFORE, 5 ITA NO. 270/KOL/2014 SMT. IRA PANJA, AY 2009-10 ANSWER THIS ISSUE IN FAVOUR OF THE ASSESSEE AND THA T THE ORDER OF THE AUTHORITIES BELOW CANNOT BE SUSTAINED. 12. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27.10.201 6 SD/- SD/- (WASEEM AHMED) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :27TH OCTOBER, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT SMT. IRA PANJA, PROP. JEMEHARI, CS SHO P, J.K. NAGAR, BIDHANBAG (LINE PAR), BURDWAN-733337 2 RESPONDENT ITO, WARD-2(3), ASANSOL 3 . THE CIT(A), ASANSOL 4. 5. CIT ,ASANSOL DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .