ITO Non Corporate Ward 13(3), CHENNAI V. Enterprising Enterprises, CHENNAI

ITA 2804/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4001 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 28-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D PALANIVEL
• Keywords: Business expenditure
• Section: 40A(3); 143(1)

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . , BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I T.A. NO. 2804/CHNY/2018 / ASSESSMENT YEAR :2010-11 THE INCOME TAX OFFICER, NON CORPORATE WARD 13(3), CHENNAI. VS. M/S. ENTERPRISING ENTERPRISES, NO. 9, 50 TH STREET, ASHOK NAGAR, CHENNAI 600 083. [PAN:AAAFE0195N] ( /APPELLANT ) ( / RESPONDENT) / APPELLANT BY : SHRI AR.V. SREENIVASAN, JCIT / RESPONDENT BY : SHRI D. PALANIVEL, ADVOCATE / DATE OF HEARING : 23.01.2019 /DATE OF PRONOUNCEMENT : 06.02.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 14, CHENNAI DATED 28.06.2018 RELEVANT TO THE ASSESSMENT YEAR 2010-11. THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE UNDER SECTION 40A(3) OF THE INCOME TAX ACT, 1961 [ACT IN SHORT] TO THE EXTENT OF .1,68,79,246/-. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING LOSS OF .1,66,10,688/-. THE RETURN WAS PROCESSED UNDER SECTION I.T.A. NO. 2804/CHNY/18 2 143(1) OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY. IN RESPONSE TO THE STATUTORY NOTICES, THE ASSESSEE FURNISHED VARIOUS DETAILS. ON EXAMINATION OF THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS BOOKED CASH PAYMENTS OF .19,500/- CONSISTENTLY IN ALMOST ALL THE DAYS OF THE YEAR. THE ASSESSEE HAS NOT PRODUCED ANY CASH VOUCHERS FOR THE ABOVE PAYMENTS. THE PURCHASE BILLS FURNISHED BY THE ASSESSEE SHOW THAT THE TAX INVOICE PRODUCED AGAINST THE PURCHASE FROM ITS SISTER CONCERNS HAVE NO PROPER SIGNATURE OF ISSUING PERSON. THE ASSESSEE HAS NOT FURNISHED ANY PLAUSIBLE EVIDENCE FOR PAYMENT OF .19,500/- IN ALL THE DAYS OF THE YEAR, WHICH SHOWS THAT THE ASSESSEE BOOKED .19,500/- FOR ALL THE TRANSACTIONS IN ORDER TO BY-PASS THE PROVISIONS OF SECTION 40A(3) OF THE ACT BY SPLITTING A FEW ACTUAL PAYMENTS IN CASH OVER A LONGER PERIOD OF TIME AND TRIED TO INFLATE THE CASH PURCHASES FROM THE GROUP CONCERNS AND OTHER CONCERN TO REDUCE THE TAX LIABILITY. THEREFORE, THE ASSESSING OFFICER DISALLOWED THE ENTIRE AMOUNT OF .1,68,79,246/- UNDER SECTION 40A(3) OF THE ACT AND BROUGHT TO TAX. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). BY CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 AND 2009-10, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION MADE UNDER SECTION 40A(3) OF THE ACT. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR I.T.A. NO. 2804/CHNY/18 3 HAS SUBMITTED THAT IN ORDER TO AVOID THE RIGORS OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT, THE ASSESSEE HAS SPLIT THE PAYMENT AS HAVING BEEN MADE ON DIFFERENT DAYS, THOUGH IN REALITY, IT HAS NOT BEEN PROVED THAT SUCH PAYMENTS ARE MADE ON DIFFERENT DATES AND ALSO THAT SUCH PAYMENTS ARE MADE OUT OF BUSINESS EXIGENCY. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A), WHEREIN, THE DECISION OF THE TRIBUNAL HAS BEEN FOLLOWED. 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROCESSING AND EXPORTING OF GRANITE STONES. ON VERIFICATION OF THE DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAD NOT ONLY MADE PAYMENTS BY CASH, BUT, ALSO BY WAY OF CHEQUES, WHICH WERE REFLECTED IN THE STATEMENT OF ACCOUNTS FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. IT IS ALSO NOT IN DISPUTE THAT THE CONCERNS TO WHICH PAYMENTS HAVE BEEN MADE WERE ASSESSED TO INCOME TAX AND THE SAID PAYMENTS WERE SHOWN AS RECEIPTS IN THEIR BOOKS OF ACCOUNT. THE PROVISIONS OF SECTION 40A(3) OF THE ACT ENVISAGES ON THE SIZE AND MANNER OF THE PAYMENT. WHAT IS PERTINENT TO THE ENQUIRY UNDER THE SECTION IS WHETHER THE PAYMENT FOR AN ITEM OF BUSINESS EXPENDITURE IS IN A SUM EXCEEDING .20,000/- IN CASH. ADMITTEDLY, IN THE ASSESSEES CASE NONE OF THE PAYMENT MADE BY CASH EXCEEDS .20,000/-. BY FOLLOWING THE DECISION I.T.A. NO. 2804/CHNY/18 4 OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 & 2009-10, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE AFORESAID ADDITION UNDER SECTION 40A(3) OF THE ACT. WE HAVE ALSO PERUSED THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WHEREIN THE COORDINATE BENCHES OF THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 7. WE HAVE HEARD BOTH SIDES AND PERUSED THE RECORDS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE INVOLVED IN THIS APPEAL IS DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. THE VERY SAME ISSUE HAD COME FOR CONSIDERATION FOR ASSESSMENT YEAR 2007-08 AND THE TRIBUNAL HAS CONSIDERED THE ISSUE AND DELETED THE ADDITION MADE BY THE A.O. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IS EXTRACTED AS UNDER:- 13. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION OF .37,12,800/-. AS PER UNAMENDED PROVISIONS OF SECTION 40A(3), IT ONLY SPECIFIES THE LIMIT OF .20,000/- PER TRANSACTION AND DOES NOT PUT ANY RESTRICTION WITH REGARD TO NUMBER OF TRANSACTIONS IN A DAY. WE FIND AS NONE OF THE TRANSACTIONS EXCEED .20,000/-, THEREFORE, THE PROVISIONS OF SECTION 40A(3) ARE NOT ATTRACTED IN THIS CASE. WE FIND THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DIVISION BENCH JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. KOTHARI SANITATION & TILES P.LTD., REPORTED AS (2006) 282 ITR 117(MAD), WHEREIN THE HONBLE HIGH COURT CAME TO THE CONCLUSION THAT SECTION 40A(3) OF THE INCOME TAX ACT, 1961, ONLY SAYS THAT THE AMOUNT EXCEEDING THE PRESCRIBED LIMIT SHOULD NOT BE PAID EXCEPT BY WAY OF CHEQUE DRAWN ON A BANK OR BY A CROSS BANK DRAFT AND, IF IT EXCEEDS THAT AMOUNT, THEN 20 PERCENT OF THE EXPENDITURE SHALL NOT BE ALLOWED AS DEDUCTION. IT DOES NOT SAY THAT THE AGGREGATE OF THE AMOUNTS SHOULD NOT EXCEED THE LIMIT. THE WORDS USED ARE IN A SUM I.E., A SINGLE SUM. THEREFORE, IRRESPECTIVE OF ANY NUMBER OF TRANSACTIONS, WHERE THE AMOUNT DOES NOT EXCEED THE LIMIT, THE RIGOUR OF SECTION 40A(3) WILL NOT APPLY. THE AMOUNT SHOULD NOT EXCEED `20,000/-. THAT APART, PRACTICALITY OF THE PAYMENT HAS ALSO TO BE JUDGED FROM THE POINT OF VIEW OF A BUSINESSMAN. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE MADRAS HIGH COURT CITED ABOVE, WE I.T.A. NO. 2804/CHNY/18 5 UPHOLD THE DECISION OF THE LEARNED CIT(A) ON THIS ISSUE AND DISMISS THE GROUND RAISED BY THE REVENUE. 8. BY KEEPING IN VIEW THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE, WE UPHOLD THE ORDER PASSED BY THE LD. CIT(APPEALS). THE LD. D.R. HAS NOT BROUGHT ANY MATERIAL TO SHOW THAT THE ORDER PASSED BY THE TRIBUNAL HAS BEEN MODIFIED OR REVERSED BY ANY HIGHER FORUM. UNDER THESE CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(APPEALS). 9. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. 6. THE LD. DR COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE TRIBUNAL AND BROUGHT ON RECORD ANY ORDER OF HIGHER FORUM HAVING MODIFIED OR REVERSED THE DECISION OF THE TRIBUNAL. THE LD. CIT(A) RIGHTLY FOLLOWED THE DECISION OF THE TRIBUNAL. WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 06 TH FEBRUARY, 2019 AT CHENNAI. SD/ - SD/ - (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, THE 06.02.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.