MESERS INDIAN SKIN COMPANY, JALANDHAR V. INCOME TAX OFFICER WARD-1(2), JALANDHAR

ITA 272/ASR/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9142 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 10-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANPREET SINGH DUGGAL
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 40A(3); 191

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 272/Asr/2018 Assessment Year: 2009-10 M/s Indian Skin Company Dr. Ambedkar Marg, Bootan Mandi, Jalandhar, Punjab [PAN: AABFI 0744E] Vs. Income Tax Officer, Ward-1(2), Jalandhar (Appellant) (Respondent) Appellant by : Sh. Ashray Sarna, CA Respondent by: Sh. Manpreet Singh Duggal, Sr. DR Date of Hearing: 29.06.2022 Date of Pronouncement: 08.08.2022 ORDER Per Dr. M. L. Meena, AM: The appeal has been filed by the assessee against the impugned order dated 01.02.2018 passed by the Ld. Commissioner of Income Tax (Appeals)-1, Jalandhar in respect of the Assessment Year 2009-10. 2. The assessee has raised the following grounds of appeal: “1. That the order passed by the Hon’ble CIT(A) dated 01.02.2018 is against the law and facts of this case. ITA No. 272/Asr/2018 Indian Skin Company v. ITO 2 2. (i) That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making an addition of Rs. 16,25,000/- u/s 40(A)(3) and 40A(3A) of the Act on account of disallowance of payments incurred in cash without considering the provisions of rule 6DD(e) of the I.T. Rules and without observing the principles of natural justice. (ii) That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making disallowance of payments incurred in cash amounting to Rs. 16,25,000/- by holding the producers of skins as traders/suppliers of skin, is bad in law and against the facts and circumstances of case. 3. That having regard to the facts and circumstances of the case, Ld. C1T(A) has erred in law and on facts in modifying the order of Ld. AO without giving proper opportunity of being heard and without observing the principles of natural justice. 4. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.” 3. At the outset, the learned counsel for the assessee stated that the assessee firm is in the business of trading of hides and skins where cash payments of Rs.20,000 has been made to producers of hides and skins which are being alleged by Ld. AO as suppliers of hired and skins by holding that the nature of work of the business by the parties from whom the assessee purchased the skin, was not possible for ordinary skins peeler and accordingly the AO considered them suppliers and not as producers of hide and skin. 3.1 The Ld. Counsel submitted that Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making an addition of Rs. 16,25,000/- u/s 40(A)(3) and 40A(3A) of the Act on account of disallowance ITA No. 272/Asr/2018 Indian Skin Company v. ITO 3 of payments incurred in cash without considering the provisions of rule 6DD(e) of the I.T. Rules in violation of the principles of natural justice and that in view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making disallowance of payments incurred in cash amounting to Rs. 16,25,000/- by holding the producers of skins as traders/suppliers of skin, is bad in law and against the facts and circumstances of case. He further submitted that under the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in modifying the order of Ld. AO without giving proper opportunity of being heard and without observing the principles of natural justice. He placed reliance upon the Hon’ble High Court of Calcutta in the case of CIT versus CPL Tannery Source (2009) 31 ITR 179; Hon’ble Supreme Court in the case of Attar Singh Guru Mukh Singh Vs. ITO (1991) 191 ITR 667 and Amritsar Tribunal in ITA Appeal No. 53/ASR/2015 in the Royal Wood Furniture, Thus, he has submitted that there was no violation of section 40A(3) of the act by the assessee firm and addition may be deleted. 4. Per contra, the learned additional CIT DR supported the order of the authorities below. He contended that the appellant assessee has been in the business of trading of hides and skins and has made cash payments exceeding Rs.20,000 to the producers of hides and skins for the procurement of the same in violation of the provisions of section 40A(3) read with rule 6DD(e) of the act. The assessee has not been able to satisfy the AO or the CIT appeal that the assessee was compelled to make cash payments out of business expediency exceeding Rs. 20,000 to these two persons in order to avail the benefit of Rule 6 DD(e) of the income tax 1952. Accordingly, he pleads that the additions, made may be confirmed. ITA No. 272/Asr/2018 Indian Skin Company v. ITO 4 5. Having heard the rival contentions and perusal of the records, we find that the assessee firm has made cash payments exceeding Rs. 20,000 to the aforementioned two persons and that he has not produced supporting documentary evidences either before the authorities below or before us to satisfy the conditions/circumstances under which the payment in the manner prescribed in section 43A(3) was not practicable or would have caused genuine difficulty to the payee. The assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified in the Rule 6 DD of the income tax rules 1952 in order to avail the benefit provided under the law. The citations relied upon by the appellant, are distinguishable on the peculiar facts of the case as the assessee is required to explain the exceptional circumstances out of business expediency warranted the payment to be made by way of other than crossed cheques or crossed bank drafts to the suppliers. 6. Admittedly, the genuineness of the payment in cash, to the hide and skin suppliers, is not doubted either by the AO or CIT appeal. However, the assessee is required to explain that the disputed cash payments could not be made by way of cross checks or by crossed bank draft due to certain exceptional circumstances out of business expediency to claim the benefit of exemption under section 43A(3) read with rule 6DD to the satisfaction of the assessing officer. In our view, it is a fit case to be remanded back to the file of the AO, to enquire into the circumstances warranted the assessee to make the payments in cash to the suppliers of the hide and skin out of business expediency under the provisions of section 40A(3) of the act, with conjoint reading with rule six DD of the IT rules after granting adequate apportioned of being heard to the assessee and considering the material ITA No. 272/Asr/2018 Indian Skin Company v. ITO 5 evidence filed on record. The assessee is directed to cooperate in the fresh assessment proceedings before the AO. Accordingly, the matter is remanded back to the file of the AO, for the limited purpose to examine the claim of the assessee as regards to the benefit of rule 6DD in respect of the disputed payments made in cash to the hide and skin suppliers. 7. In the result, the appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on 08.08.2022 Sd- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T. True Copy By Order