M/s Maa Jagdambay Enterprises, Muzaffarnagar V. ITO, Muzaffarnagar

ITA 2759/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81788 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 16-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 06-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKER
• Assessee Lawyers: PREM PRAKASH S; ROHITASH KUMAR
• Keywords: Opportunity of being heard
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH E EE E : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG, JUDICIAL , JUDICIAL , JUDICIAL , JUDICIAL MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 2759/DEL/2013 2759/DEL/2013 2759/DEL/2013 2759/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2009 2009 2009 2009 - -- - 10 1010 10 M/S MAA JAGDAMBAY M/S MAA JAGDAMBAY M/S MAA JAGDAMBAY M/S MAA JAGDAMBAY ENTERPRISES, ENTERPRISES, ENTERPRISES, ENTERPRISES, PURKAZI, PURKAZI, PURKAZI, PURKAZI, MUZAFFARNA MUZAFFARNA MUZAFFARNA MUZAFFARNAGAR. GAR. GAR. GAR. PAN : AAQFM2746K. PAN : AAQFM2746K. PAN : AAQFM2746K. PAN : AAQFM2746K. VS. VS. VS. VS. INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -2(1), 2(1), 2(1), 2(1), MUZAFFARNAGAR. MUZAFFARNAGAR. MUZAFFARNAGAR. MUZAFFARNAGAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHITASH KUMAR AND SHRI PREM PRAKASH, ADVOCATES. RESPONDENT BY : SHRI J.P. CHANDRAKER, SR.DR. ORDER ORDER ORDER ORDER PER G.D. AGRAWA PER G.D. AGRAWA PER G.D. AGRAWA PER G.D. AGRAWAL, VP L, VP L, VP L, VP : :: : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LEARNED CIT(A), MUZAFFARNAGAR DATED 11 TH FEBRUARY, 2013 FOR THE AY 2009-10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT ORDER IS AGAINST LAW & FACTS ON THE RECORD . 2. THAT LD.CIT(A) WAS WRONG IN DISALLOWING EXPENSES WITH OUT REJECTION OF A/C BOOKS. 3. THAT LD.CIT(A) WAS WRONG IN DISALLOWING PAYMENTS OF EXPENSES U/S 40A(3) AT RS.25,29,895.00 IN RESPECT O F PURCHASE MADE ON SUNDAYS/HOLIDAYS/BANK CLOSED DAYS. 4. THAT LD.CIT(A) WAS WRONG IN DISALLOWING PAYMENTS OF RS.38,84,575.00 ON SUNDAYS/HOLIDAYS/BANK CLOSED DAY S AGAINST PURCHASES MADE PREVIOUSLY ON CREDIT BASES. ITA-2759/D/2013 2 5. THAT LD.CIT(A), WAS WRONG IN DISALLOWING RS.28,10,102.00 BEING CASH PAYMENTS NOT EXCEEDING RS.20,000.00. 6. THAT LD.CIT(A) WAS WRONG IN NOT CONSIDERING THE WRITTEN SUBMISSIONS DT. 19.12.2012. 7. THAT LD.CIT(A) DID NOT CONSIDER THE WRITTEN SUBMISSIONS AND REJOINDERS AND EVIDENCING PAPERS PROPERLY AND CONFIRMED THE ADDITIONS OF RS.91,45,94 4.00 WRONGLY. 3. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT GROUND NOS.1 TO 6 AND 7 ARE OF GENERAL NATURE AND ONLY GROUND NOS.3, 4 & 5 REQUIRE ADJUDICATION BY THE ITA T WHICH ARE AGAINST THE DISALLOWANCE MADE U/S 40A(3) WHICH IS SUSTAINED BY THE LEARNED CIT(A). HE STATED THAT THE ASSESSING OFFICER MADE THE TOTAL DISALLOWANCE OF `95,96,883/-. IT IS THE ASSESSEES CONTENTION THAT THE SUM OF `64,12,470/- (25,29,895 + 38,84,575) ARE THE PAYMENTS MADE ON SUNDAYS/BANK HOLIDAYS AND, THEREFORE, THE SAME A RE SQUARELY COVERED BY RULE 6DDJ. IN SUPPORT OF THIS CONTENTIO N, HE ALSO REFERRED TO THE REMAND REPORT BY THE ASSESSING OFFICER IN WHICH THE ASSESSING OFFICER HAS CONFIRMED THAT THE PAYMENT HAS BEEN MAD E ON SUNDAYS/BANK HOLIDAYS. HE SUBMITTED THAT THE LEARN ED CIT(A) DID NOT ACCEPT THE ASSESSEES CONTENTION ON THE GROUND THAT THE PAYMENT IS NOT RECORDED ON SUNDAYS/BANK HOLIDAYS IN THE BOOKS OF M/S SIR SHADI LAL DISTILLERY & CHEMICAL WORKS, MANSURPUR. IT WAS EXPLAINED BY THE LEARNED COUNSEL THAT PAYMENT IS MADE BY THE ASSESSE E TO DEPOT-IN CHARGE SHRI PRAFFUL BHATNAGAR WHO IS MAINTAINING TH E SEPARATE BOOKS OF ACCOUNT IN RESPECT OF THE DEPOT. THAT THE SAID BOO KS OF SHRI PRAFFUL BHATNAGAR WERE PRODUCED DURING REMAND PROCEEDINGS A ND THE ASSESSING OFFICER HAS STATED IN THE REMAND REPORT T HAT THE PAYMENT HAS BEEN RECORDED IN THE BOOKS OF SHRI PRAFFUL BHAT NAGAR ON SUNDAYS/BANK HOLIDAYS. HE FURTHER SUBMITTED THAT A NOTHER GROUND ON WHICH LEARNED CIT(A) DID NOT ALLOW THE RELIEF UNDER RULE 6DDJ WAS THAT ITA-2759/D/2013 3 THE ASSESSEE HAS NOT PROVED BUSINESS EXIGENCY FOR M AKING THE PAYMENT ON SUNDAYS/BANK HOLIDAYS. HE STATED THAT A S PER RULE 6DDJ, THERE IS NO SUCH REQUIREMENT. THAT THE ASSESSEE HA D FURTHER CLAIMED THAT THE SUM OF `28,10,102/- WAS CASH PAYMENT NOT E XCEEDING `20,000/- AND THE ASSESSING OFFICER HAS WRONGLY CON SIDERED THE SAME TO BE IN VIOLATION OF SECTION 40A(3). IN THE REMAN D REPORT, THE ASSESSING OFFICER ACCEPTED THESE FACTS ALSO. THE L EARNED CIT(A) SUSTAINED THE DISALLOWANCE IN RESPECT OF PAYMENTS B ELOW `20,000/- ON THE GROUND THAT THE DEVICE HAS BEEN ADOPTED BY THE ASSESSEE SO AS TO CIRCUMVENT THE PROVISIONS OF LAW. HE STATED THAT S ECTION 40A(3) IS APPLICABLE ONLY WHEN THE PAYMENT MADE BY THE ASSESS EE EXCEEDED `20,000/-. IF THE PAYMENT MADE BY THE ASSESSEE AT A TIME DOES NOT EXCEED `20,000/-, SECTION 40A(3) IS NOT APPLICABLE AT ALL. HE, THEREFORE, SUBMITTED THAT THE ADDITION SUSTAINED BY THE LEARNE D CIT(A) UNDER SECTION 40A(3) MAY BE DELETED. 4. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF AUTHORITIES BELOW AND HE STATED THAT FROM THE ORDER OF CIT(A), IT IS EVIDENT THAT IN THE BOOKS OF ACCOUNT OF M/S SIR SHA DI LAL DISTILLERY & CHEMICAL WORKS, THE RECEIPT OF PAYMENT FROM THE ASS ESSEE IS NOT RECORDED ON SUNDAYS OR BANK HOLIDAYS AND THEREFORE, RULE 6DDJ WOULD NOT BE APPLICABLE. SIMILARLY, WITH REGARD TO THE P AYMENT BELOW `20,000/-, HE STATED THAT THE ASSESSEE HAS ONLY ADO PTED A DEVICE TO MAKE THE PAYMENT NOT EXCEEDING `20,000/- AT A TIME SO AS TO CIRCUMVENT THE PROVISIONS OF SECTION 40A(3) WHICH C ANNOT BE PERMITTED. HE, THEREFORE, SUBMITTED THAT THE ORDER OF LEARNED CIT(A) SHOULD BE SUSTAINED. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED RELEVANT MATERIAL PLACED BEFORE US. TH AT IN THE FIRST REMAND REPORT DATED 26.10.2012, THE ASSESSING OFFIC ER STATED AS UNDER:- ITA-2759/D/2013 4 (II) CASH PAYMENTS MADE ON BANK CLOSED DAYS RS.64,02,470/- ON EXAMINATION, IT HAS BEEN FOUND THAT THE PAYMENTS HAVE BEEN MADE IN CASH ON DAYS WHEN THERE WERE SUNDAYS OR OTHER BANK HOLIDAYS. ALL THE PAYMENTS H AVE DULY BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. SINCE THE TRANSACTIONS ARE COVERED BY RU LE 6DD(J) OF INCOME TAX RULES THEREFORE, NO ADVERSE COMMENT IS MADE REGARDING THE SAME. 6. THUS, THE ASSESSING OFFICER, AFTER EXAMINING THE NECESSARY DETAILS INCLUDING THE ASSESSEES BOOKS OF ACCOUNT, ARRIVED AT THE CONCLUSION THAT THE PAYMENTS HAVE BEEN MADE IN CASH ON SUNDAYS OR OTHER BANK HOLIDAYS AND, THEREFORE, SUCH TRANSACTIO NS ARE COVERED BY RULE 6DDJ OF THE INCOME-TAX RULES. AGAIN, IN THE R EMAND REPORT DATED 29.11.2012, THE ASSESSING OFFICER STATED AS UNDER:- (II) CASH PAYMENTS MADE ON BANK CLOSED DAYS RS.64,02,470/- ON EXAMINATION, IT HAS BEEN FOUND THAT THE PAYMENTS HAVE BEEN MADE IN CASH ON DAYS WHEN THERE WERE SUNDAYS OR OTHER BANK HOLIDAYS. ALL THE PAYMENTS H AVE DULY BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS OF SH. PRAFFUL BHATNAGAR. HOWEVER IT IS NOTICED THAT ON 13.11.2008 CASH PAYME NT OF RS.3,13,384/- HAS BEEN ENTERED IN THE BOOKS OF ACCO UNTS OF SH. PRAFFUL BHATNAGAR AND ALSO IN THE COPY OF AC COUNT SUBMITTED BY THE ASSESSEE BEFORE YOUR LD. SELF BUT IN THE WRITTEN SUBMISSION DATED 04.10.2012 AT SL.NO.17 REGARDING DATE 13.11.2008 (G. NANAK JAYANTI) THE AM OUNT IS SHOWN AT RS.3,03,384/-. 7. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OFFICER EXAMINED THE BOOKS OF ACCOUNT OF SHRI PRAFFUL BHATNAGAR AND FOUND THAT THE PAYMENTS TO THE EXTENT OF `64,02,470/- HAVE BEEN RE CORDED IN THE BOOKS MAINTAINED BY HIM ON SUNDAYS OR BANK HOLIDAYS . IT IS NOT IN DISPUTE THAT SHRI PRAFFUL BHATNAGAR WAS THE DEPOT-I N CHARGE OF M/S SIR SHADI LAL DISTILLERY & CHEMICAL WORKS. IN ONE MORE REMAND REPORT ITA-2759/D/2013 5 DATED 17.12.2012, THE ASSESSING OFFICER EXAMINED TH E BOOKS OF M/S SIR SHADI LAL DISTILLERY & CHEMICAL WORKS AND REPORTED THAT THE TRANSACTIONS ARE NOT FOUND RECORDED IN THE BOOKS OF M/S SIR SHADI LAL DISTILLERY & CHEMICAL WORKS. ON THE BASIS OF THE T HIRD REMAND REPORT, I.E., 17.12.2012, LEARNED CIT(A) SUSTAINED THE DISA LLOWANCE. HOWEVER, AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES A ND THE FACTS OF THE CASE, WE ARE UNABLE TO AGREE WITH THE LEARNED CIT(A ). WHEN THE ASSESSEE MADE THE PAYMENT TO THE DEPOT-IN CHARGE I. E., SHRI PRAFFUL BHATNAGAR AND HE HAS MAINTAINED SEPARATE BOOKS FOR THAT DEPOT AND HAS RECORDED THE PAYMENT IN THE BOOKS MAINTAINED AT THE DEPOT, THEN, SO FAR AS ASSESSEE IS CONCERNED, IT HAS BEEN ABLE T O PROVE THAT THE PAYMENTS HAVE BEEN MADE ON BANK HOLIDAYS. WHEN THE DEPOT INFORMS THE HEAD OFFICE AND WHEN AND HOW THE HEAD OFFICE RE CORDS THE PAYMENTS, IT IS THE MATTER BETWEEN THE DEPOT AND TH E HEAD OFFICE. THEREFORE, IN OUR OPINION, WHEN IN TWO REMAND REPOR TS I.E., THE REMAND REPORT DATED 26.10.2012 AND THE REMAND REPORT DATED 29.11.2012, THE ASSESSING OFFICER, AFTER EXAMINING THE BOOKS OF THE ASSESSEE AS WELL AS THE BOOKS OF THE DEPOT WHICH IS MAINTAINED BY SHRI PRAFFUL BHATNAGAR, HAS ARRIVED AT THE CONCLUSION THAT THE PAYMENTS HAV E BEEN MADE ON BANK HOLIDAYS, IT CANNOT BE DENIED THE BENEFIT OF R ULE 6DDJ MERELY BECAUSE THE PAYMENT IS NOT RECORDED IN THE HEAD OFF ICE ON THE SAID DATES. WE, THEREFORE, ALLOW GROUND NOS.2 & 3 OF TH E ASSESSEES APPEAL. INSOFAR AS GROUND NO.4 IS CONCERNED, I.E., PAYMENT NOT EXCEEDING `20,000/-, IN THE REMAND REPORT DATED 26.10.2012, T HE ASSESSING OFFICER REPORTED AS UNDER:- (IV) CASH PAYMENTS MADE NOT EXCEEDING RS.20,000/- RS.28,10,102/- ON EXAMINATION, THESE PAYMENTS HAVE ALSO BEEN FOUND DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. ITA-2759/D/2013 6 8. AGAIN, IN THE REMAND REPORT DATED 29.11.2012, TH E ASSESSING OFFICER REPORTED AS UNDER:- (IV) CASH PAYMENTS MADE NOT EXCEEDING RS.20,000/- RS.28,10,102/- ON EXAMINATION, THESE PAYMENTS HAVE ALSO BEEN FOUND DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS OF SH. PRAFFUL BHATNAGAR. 9. THUS, IN THESE TWO REMAND REPORTS, THE ASSESSING OFFICER HAS NOT DISPUTED THE ASSESSEES CLAIM THAT THE CASH PAYMENT TO THE EXTENT OF `28,10,102/- WAS NOT EXCEEDING `20,000/-. SECTION 40A(3) READS AS UNDER:- 40A. (3) WHERE THE ASSESSEE INCURS ANY EXPENDITU RE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, N O DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. 10. THUS, SECTION 40A(3) IS APPLICABLE WHERE THE PA YMENT FOR ANY EXPENDITURE OR THE AGGREGATE PAYMENT TO A PERSON IN A DAY OTHERWISE THAN ACCOUNT PAYEE CHEQUE OR BANK DRAFT EXCEEDED `2 0,000/-. THEREFORE, FOR APPLICABILITY OF SECTION 40A(3), IT IS ESSENTIAL THAT THE AGGREGATE PAYMENT MADE TO A PERSON ON ANY DAY SHOUL D EXCEED `20,000/-. NOW, IN THE CONTENTION OF THE ASSESSEE AS WELL AS REMAND REPORT, THERE IS NO DISCUSSION ABOUT THE AGGREGATE PAYMENT IN A DAY. THERE IS ONLY DISCUSSION WITH REGARD TO THE PAYMENT NOT EXCEEDING `20,000/-. WE, THEREFORE, SET ASIDE THIS ASPECT TO THE FILE OF THE ASSESSING OFFICER AND DIRECT HIM TO VERIFY THE AGGR EGATE PAYMENT MADE BY THE ASSESSEE ON EACH DAY AND IF THE PAYMENT IN A DAY DOES NOT EXCEED `20,000/-, THEN NO DISALLOWANCE UNDER SECTIO N 40A(3) WOULD BE MADE. THAT IF ASSESSEE MAKES THE PAYMENT NOT EXCEE DING `20,000/- EVERY DAY, IT CANNOT BE SAID THAT THE PAYMENT HAS B EEN MADE TO ITA-2759/D/2013 7 CIRCUMVENT THE PROVISIONS OF SECTION 40A(3). SECTI ON 40A(3) WOULD BE APPLICABLE WHEN THE ASSESSEE MAKES PAYMENT EXCEEDIN G `20,000/- IN A DAY. IF THERE IS NO PAYMENT EXCEEDING `20,000/- IN A DAY, THERE IS NO VIOLATION OF SECTION 40A(3), SO THERE IS NO QUESTIO N OF ANY CIRCUMVENTION OF THE PROVISIONS. WITH THIS REMARK, WE SET ASIDE THE ISSUE RAISED BY THE ASSESSEE VIDE GROUND NO.4 OF IT S APPEAL. THE ASSESSING OFFICER IS DIRECTED TO READJUDICATE THE I SSUE AFTER ALLOWING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DE EMED TO BE ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2014. SD/- SD/- ( (( ( CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG ) )) ) (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 30.09.2014 VK. COPY FORWARDED TO: - 1. APPELLANT : M/S MAA JAGDAMBAY ENTERPRISES, M/S MAA JAGDAMBAY ENTERPRISES, M/S MAA JAGDAMBAY ENTERPRISES, M/S MAA JAGDAMBAY ENTERPRISES, PURKAZI, MUZAFFARNAGAR. PURKAZI, MUZAFFARNAGAR. PURKAZI, MUZAFFARNAGAR. PURKAZI, MUZAFFARNAGAR. 2. RESPONDENT : INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -2(1), MUZAFFARNAGAR. 2(1), MUZAFFARNAGAR. 2(1), MUZAFFARNAGAR. 2(1), MUZAFFARNAGAR. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR