Shri Shankar S. Koliwad, Hubli V. ITO, Hubli

ITA 273/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9413 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 02-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K P RAO
• Assessee Lawyers: RAVI PRASAD
• Section: 40A(3); 15

Judgement Text

ITA.273/B/09 PAGE - 1 IN THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B' BEFORE SHRI. K. P. T. THANGAL, VICE PRESIDENT AND SHRI. N. L. KALRA, ACCOUNTANT MEMBER I.T.A.NO.273/BANG/2009 (ASSESSMENT YEAR : 2005-06 ) SHRI. SHANKER S. KOLIWAD, PROP : KOLIWAD MARBLES & GRANITES, OPP : BVB COLLEGE, VIDYANAGAR, HUBLI .. APPELLANT V. INCOME TAX OFFICER, WARD -1(1), HUBLI .. RESPONDENT APPELLANT BY : SHRI. RAVI PRASAD RESPONDENT BY : SHRI. K. P. RAO O R D E R PER K. P. T. THANGAL, VICE PRESIDENT : THIS APPEAL BY THE ASSESSEE IS FOR THE ASSESSMENT YEAR 2005-06 AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A). WHEN THE MATTER WAS TAKEN UP FOR HEARING, THE LEARNED REPRES ENTATIVE FOR THE ASSESSEE SOUGHT THE PERMISSION OF THE BENCH TO WITH DRAW GROUND NOS.2, 3, 4 AND 8. THE PERMISSION IS GRANTED AND T HESE GROUNDS ARE WITHDRAWN AS WITHDRAWN. ITA.273/B/09 PAGE - 2 2. COMING TO THE FIRST GROUND NO.6, IT IS AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) IN DISALLOWING RS.1,0 2,886/- U/S.40A(3), ALTHOUGH ACCORDING TO THE ASSESSEE, THE ASSESSEE HAD GENUINE REASON FOR MAKING PAYMENT IN CASH. THE FAC TS LEADING TO THE DISPUTE, BRIEFLY IS AS UNDER. THE ASSESSEE FILED T HE RETURN ON 30.10.2005 DECLARING INCOME AT RS.2,64,403/- AND AG RICULTURAL INCOME AT RS.1,19,900. THE CASE WAS SELECTED FOR SCRUTINY . WHILE FRAMING THE ASSESSMENT ORDER THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD MADE CASH PAYMENT EXCEEDING RS.20,000/- TOWARDS TRANSPORTATION OF MARBLES, GRANITE ETC., AMOUNTING TO RS.5,14,432/ -, AS DETAILED IN PAGE 4 OF THE ASSESSMENT ORDER. INVOKING THE PROVI SIONS OF SECTION 40A(3), THE ASSESSING OFFICER DISALLOWED THE AMOUNT EXCEEDING RS.20,000/- WHICH COMES TO THE IMPUGNED AMOUNT OF R S.1,02,886/-. AGGRIEVED BY THE ABOVE DISALLOWANCE, THE ASSESSEE A PPROACHED THE FIRST APPELLATE AUTHORITY. 3. THE ORDER OF THE ASSESSING OFFICER WAS CONFIRMED BY THE COMMISSIONER OF INCOME-TAX(A). THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA.273/B/09 PAGE - 3 4. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE REIT ERATED THE SUBMISSION MADE BEFORE THE COMMISSIONER OF INCOME-T AX(A) AND SUBMITTED THAT THE ASSESSEE MADE THE PAYMENTS IN CA SH IN 15 INSTANCES AND IN EXCESS OF RS.20,000/-. OUT OF THE TOTAL PAY MENT OF RS.5,14,432/-, ONLY RS.2,14,432/- I.E., THE EXCESS OVER RS.20,000/- IN EACH TRANSACTION IS ALLOWABLE AND NOT 20% OF THE EN TIRE AMOUNT. IN SUPPORT OF THE ABOVE, HE RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF TECHNOART CONSTRUCTION P. LTD., IN ITA.103 /BANG/2003. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED T HAT THE ORDER OF THE TRIBUNAL IN MP.102/BANG/2003 IN ITA.574/BANG/1999, IN M/S. TECHNOART CONSTRUCTION P. LTD.,, DT.16.10.03, FOR T HE ASSESSMENT YEAR 1996-97. IN THE ABOVE MENTIONED CASE, THE TRIBUNAL HELD THAT WHILE MAKING DISALLOWANCE U/S.40A(3), ONLY THE AMOUNT IN EXCESS OF RS.10,000/- ( AS IT THEN STOOD) SHOULD BE DISALLOWE D AND NOT THE ENTIRE AMOUNT AS A SINGLE TRANSACTION. AS AGAINST THIS, T HE LEARNED DR PRODUCED A COPY OF THE ORDER OF THE TRIBUNAL, PUNE BENCH IN THE CASE OF R. S. NAYYAR (2007) 108 ITD 424, WHEREIN THE TRI BUNAL HELD THAT 20% OF THE AMOUNT PAID IN CASH TO A PARTY HAS TO BE DISALLOWED UNDER THE AMENDED PROVISIONS OF SECTION 40A(3) IRRESPECTI VE OF THE FACT THAT CASH PAYMENT WAS MADE AT THE INSTANCE OF THE PAYEE. ITA.273/B/09 PAGE - 4 5. IN THE CASE OF TECHNOART CONSTRUCTION P. LTD., ( SUPRA), THE ASSESSMENT YEAR INVOLVED IS 1996-97 AND IN THE DECI SION RELIED ON BY THE LEARNED DR ALSO, THE ASSESSMENT YEAR WAS 1996-9 7. WE FIND THAT IN THE ORDER RELIED BY THE ASSESSEE THE BENCH HAD N OT DISCUSSED THE ISSUE IN DETAIL AND MOREOVER IT WAS AN ORDER ON A M ISCELLANEOUS PETITION, WHEREAS IN THE DECISION RELIED BY THE DR IN THE CASE OF R. S. NAYYAR (SUPRA), THE ISSUE HAS BEEN DISCUSSED IN GRE AT DETAIL AND THEY SPECIFICALLY HELD THAT AS UNDER : 'IN THE INSTANT CASE, THE SUBSTANTIVE RULE 6DD(J) W AS OMITTED ON 25.7.1995. THE FIRST ASSESSMENT YEAR AF TER THAT DATE STARTED ON 1.4.1996, I.E., IT WAS ASSESSMENT Y EAR 1996- 97. THEREFORE, THE OMISSION WOULD TAKE EFFECT IN COMPUTATION OF INCOME FOR THE ASSESSMENT YEAR 1996- 97 AS PER LAW EXISTING ON 1.4.1996. CONSEQUENTLY, RULE 6DD(J) AS IT STOOD PRIOR TO ITS OMISSION ON 25.7.1995 WAS NOT APPLICABLE FOR MAKING ASSESSME NT FOR THE ASSESSMENT YEAR 1996-97. ACCORDINGLY, THE COMMISSIONER (APPEALS) WAS RIGHT IN COMING TO THE CONCLUSION THAT 20 PER CENT OF THE AMOUNT PAID IN CASH TO THE PARTY CONCERNED HAD TO BE DISALLOWED IN COMPUTI NG THE INCOME OF THE ASSESSEE FOR THAT ASSESSMENT YEAR.' WHILE COMING TO THE ABOVE CONCLUSION, THE TRIBUNAL NOTED THAT VIDE PARA 2.6 OF ITS ORDER AS UNDER : ITA.273/B/09 PAGE - 5 ' SECTION 40A(3) WAS AMENDED BY THE FINANCE ACT, 1995 WITH EFFECT FROM 1.4.1996. EARLIER, ALL CASH PAYME NTS COVERED UNDER THIS SECTION, WERE LIABLE TO BE DISAL LOWED IN TOTO, SUBJECT TO THE PROVISIONS CONTAINED IN RULE 6 DD. HOWEVER, BY THIS AMENDMENT, IF THE PAYMENTS ARE GEN UINE, ONLY 20 PER CENT THEREOF CAN BE DISALLOWED. THEREF ORE, THIS PROVISION NECESSARILY DEALS WITH COMPUTATION OF THE INCOME OF THE ASSESSEE. THE MATTER OF AMENDMENT IS NOT WI TH REFERENCE TO THE PENAL PROVISIONS. IT IS ALSO NOT WITH REFERENCE TO THE PROCEDURAL LAW. SINCE THE AMENDME NT AFFECTS THE COMPUTATION OF INCOME, THE SAID AMENDME NT MADE BY THE FINANCE ACT, 1995 CONSTITUTES SUBSTANTI VE LAW. IT IS AN ACCEPTED PROPOSITION THAT THE INTRODUCTION OF SUBSTANTIVE PROVISION OR AMENDMENT IN A SUBSTANTIVE PROVISION RELATES TO THE ASSESSMENT YEAR AND NOT TO THE YEAR IN WHICH INCOME IS EARNED, WHICH IS KNOWN AS THE PR EVIOUS YEAR. THUS, THE AMENDMENT IN SECTION 40A(3), EFFEC TIVE FROM 1.4.1996, SHALL BE APPLICABLE WHILE COMPUTING INCOM E FOR THE ASSESSMENT YEAR 1996-97. THIS IS ALSO CLEAR FR OM THE NOTES ON CLAUSES OF THE FINANCE BILL, 1995.' IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE CASE RELIED BY THE LEARNED REPRESENTATIVE FOR THE ASSESS EE IS NOT APPLICABLE. ITA.273/B/09 PAGE - 6 6. IN THE RESULT, APPEAL BY THE ASSESSEE FAILS AND IT IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 7TH DAY OF A UGUST, 2009. SD/- SD/- (N. L. KALRA) (K. P. T. THANGAL) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE DATED : 7TH AUGUST, 2009 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, NEW DELHI 7. GF, ITAT, BANGALORE