The ACIT, Circle-1(1)., Guntur V. Sri Rajesh Kumar, Guntur

ITA 289/VIZ/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7278 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-11-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 04-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Keywords: Unexplained expenditure
• Section: 69C

Judgement Text

ITA NO.289 OF 2007 RAJESH KUMAR GUNTUR PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 289/VIZAG/2007 ASSESSMENT YEAR: 2003-04 ACIT CIRCLE-1(1) GUNTUR VS. RAJESH KUMAR, GUNTUR (APPELLANT) (RESPONDENT) PAN NO:ABAPV 6762 B APPELLANT BY: SHRI D.S.SUNDER SINGH, SR DR RESPONDENT BY: SHRI G.V.N. HARI, CA ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 27.3.2007 PASSED BY LD. CIT(A), GUNTUR AND IT RELAT ES TO THE ASSESSMENT YEAR 2003-04. 2. THE GROUNDS RAISED BY THE REVENUE GIVE RISE TO A SINGLE ISSUE VIZ., WHETHER THE LEARNED CIT (A) IS JUSTIFIED IN DELETIN G THE ADDITION OF RS.13,84,925/- MADE UNDER SECTION 69C OF THE ACT. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS THE PROPRIETOR NAMED M/S KUMAR SPICES GUNTUR AND IS ENG AGED IN CHILLI COMMISSION AGENCY BUSINESS. THE ASSESSING OFFICER N OTICED FROM THE BALANCE SHEET OF THE ASSESSEE THAT THE TRADE CREDIT ORS BALANCE WAS OUTSTANDING TO THE TUNE OF RS.1.03 CRORES. THE SAID CREDITORS MAINLY COMPRISED OF FARMERS WHO HAVE SOLD CHILLIS THROUGH THE ASSESSEE. THE ASSESSING OFFICER CONDUCTED INQUIRIES FROM ABOUT 12 FARMERS. THE AGGREGATE AMOUNT THAT WAS OUTSTANDING IN THE NAME O F 12 FARMERS WAS RS.13,84,925/-. OUT OF THE PERSONS SO ENQUIRED, 8 FARMERS STATED THAT THEY DID NOT SELL THEIR PRODUCE THROUGH THE ASSESSEE AND FURTHER 4 PERSONS WERE FOUND TO BE NON EXISTENT IN THE RESPECTIVE VILLAGES . HENCE THE ASSESSING ITA NO.289 OF 2007 RAJESH KUMAR GUNTUR PAGE 2 OF 4 OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE WO ULD HAVE MADE THE PAYMENT TO THE REAL SELLERS FROM OUT OF HIS UNACCOU NTED MONEY AND HAS SHOWN BOGUS NAMES IN HIS BOOKS OF ACCOUNT AS IF TH EY ARE OUTSTANDING AS ON THE DATE OF BALANCE SHEET. ACCORDINGLY THE ASSE SSING OFFICER TREATED THE UNACCOUNTED PAYMENT SO ASSUMED TO HAVE BEEN MADE TO THE REAL SELLERS AS UNEXPLAINED EXPENDITURE AND ADDED THE SAME UNDER SE CTION 69C OF THE ACT. IN THE APPEAL PREFERRED BY THE ASSESSEE, THE LEARNED CIT (A) DELETED THE SAID ADDITION. HENCE THE REVENUE IS IN APPEAL BEFOR E US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSU E. THERE IS NO DISPUTE THAT THE ASSESSEE IS A COMMISSION AGENT AND HE ONLY FACILITATES SALE OF CHILLIES BETWEEN THE SELLERS AND BUYERS. ACCORDI NG TO THE ASSESSEE THERE IS NO LIABILITY IMPOSED UPON HIM IN RESPECT OF THE TRANSACTION SO CARRIED OUT THROUGH HIM. AS A COMMISSION AGENT HE ONLY UNDERTAK ES TO COLLECT THE PAYMENTS FROM THE BUYERS AND SETTLE THEM TO THE SEL LERS. IT WAS STATED THAT IN ORDER TO FACILITATE SUCH COLLECTION AND PAYMENT, HE HAS RECORDED THE NAMES OF SELLERS AS TOLD BY HIM AT THE TIME OF SALE . IT WAS FURTHER STATED THAT THE ENTIRE TRANSACTION TAKES PLACE IN THE WHOL ESALE MANDI AND THE ASSESSEE RECORDS THE NAME AS IT WAS TOLD BY THE FAR MERS. IT WAS ALSO STATED THAT THE ENTIRE TRANSACTIONS ARE REGULATED BY THE G OVERNMENT AGENCIES. FURTHER IT WAS STATED THAT THE PAYMENTS ARE SETTLED NORMALLY BETWEEN 2 TO 3 WEEKS. ACCORDINGLY IT WAS CONTENTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE SAID ADDITION CANNOT BE MAD E IN THE HANDS OF THE ASSESSEE AS HE IS ACTING ONLY IN A FIDUCIARY CAPACI TY BETWEEN THE BUYERS AND SELLERS. HOWEVER, ACCORDING TO LEARNED D.R. THE CR EDITORS HAVE BEEN PROVED TO BE BOGUS AND HENCE THE ASSESSING OFFICER WAS RIGHT IN MAKING THE ADDITION RELATING TO THE BOGUS CREDITORS. 5. WE NOTICE THAT THE CLAIM THAT THE ASSESSEE IS ACTING IN A FIDUCIARY CAPACITY AS A FACILITATOR OF SALE BETWEEN THE PARTI ES HAS NOT BEEN DISPROVED. AS STATED EARLIER THE ASSESSING OFFICER HAS MADE TH E ADDITION UNDER SECTION 69C OF THE ACT. HOWEVER, THE LEARNED CIT (A) HAS CA TEGORICALLY HELD THAT THE PROVISIONS OF SECTION 69C CANNOT BE INVOKED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. EVEN ON MERITS THE LEARNED CIT (A) FO UND THAT THE SAID ITA NO.289 OF 2007 RAJESH KUMAR GUNTUR PAGE 3 OF 4 ADDITION IS NOT WARRANTED AND HIS OBSERVATIONS IN T HIS REGARD ARE EXTRACTED BELOW: 09.04 CONSIDERING FACTS IN THE APPELLANTS CASE IT CAN BE OBSERVED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY DOCUMENTARY EVIDENCE O RECORD TO PROVE THAT THE APP ELLANT HAD INCURRED UNEXPLAINED EXPENDITURE IN THE FINANCIAL Y EAR UNDER APPEAL. THEREFORE, THE ASSESSING OFFICER HAS NOT DI SCHARGED ONUS CASTS BY THE PROVISIONS OF SECTION 69C OF THE I.T. ACT AND ACCORDINGLY, ADDITION MADE BY THE ASSESSING OFFICER IS REQUIRED TO BE DELETED. 09.05 IN CASES OF COMMISSION AGENT (KATCHHA ARAHTIYA ) ETC., FOR APPLICABILITY OF PROVISIONS OF SEC.44AB, THE CBDT V IDE CIRCULAR NO.422 DATED 19.6.1985 HAD CLARIFIED THAT SO FAR AS KATCHHA ARAHTIYAS ARE CONCERNED, THE TURNOVER DOES NOT INCL UDE THE SALES EFFECTED ON BEHALF OF PRINCIPLES AND ONLY THE GOES COMMISSION HAS TO BE CONSIDERED FOR THE PURPOSE OF SEC.44AB. CONSIDERING THE EXPLANATION GIVEN IN THE BOARDS CI RCULAR, IT WOULD BE CLEAR THAT THE APPELLANT WAS SHOWING OUTST ANDING LIABILITY IN ITS BOOKS OF ACCOUNT IN THE FIDUCIARY CAPACITY AND THEREFORE, EVEN PROVISIONS OF SEC.68 OF THE I.T. ACT ARE ALSO NOT APPLICABLE. 09.06 CONSIDERING PRACTICE IN THE BUSINESS OF COMMI SSION AGENT WHICH DOES NOT REQUIRE TO BE TAKEN EVIDENCE FROM TH E FARMERS FOR THEIR NAME AND ADDRESSES, THE APPELLANT HAD NOT ED DOWN IN THE TAK PATTI NAME STATED BY THE FARMERS WHO BROUGH T THE PRODUCE IN MARKET YARD AND THE PAYMENT WAS MADE TO THE SAID FARMER WHO BROUGHT TAK PATTI TO THE APPELLANT AND S IGNATURE FOR PAYMENT HAD BEEN TAKEN ON THE ABOVE VOUCHERS. THE A SSESSING OFFICER HAS MENTIONED THAT ONE COPY OF TAK PATTI AL SO SUBMITTED TO THE AMC WHICH IS AN ADMINISTRATIVE BODY FOR THE PURPOSE OF AGRICULTURAL PRODUCTS. THE ASSESSING OFFICER FURTHE R MENTIONED THAT ONLY THE FARMERS ARE ALLOWED TO BRING THEIR PR ODUCTS TO SALE IN THE AGRICULTURAL MARKET YARD AND NO TRADERS CAN SALE AGRICULTURE IN MARKET YARD. IT IS ALSO FACT THAT PA YMENT TO THE FARMERS GENERALLY IS MADE WITHIN PERIOD OF 15 DAYS TO 30 DAYS, IN SPITE OF SPECIFIC RULE IN THE AGRICULTURAL MARKE T PRODUCTS AND LIVESTOCK RULE, 1969. IN THE PRESENT CASE, THE OUTST ANDING LIABILITY SHOWN HAS BEEN BY AND LARGE PAID IN THE M ONTH OF APRIL, 2003 WHICH IS A NORMAL TIME GAP AND THERE WAS NO MO NETARY BENEFIT TO THE APPELLANT TO INCUR UNEXPLAINED EXPEN DITURE. 09.07 IT IS FURTHER OBSERVED THAT MISMATCHING OF NAM E APPEARING IN THE TAK PATTI SALE INVOICE IS MIGHT BE ON ACCOUNT OF WORK PRESSURE. IT IS FURTHER OBSERVED THAT SIMILAR T YPE OF IRREGULARITIES HAVE OCCURRED IN BETWEEN OF THE YEAR , WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. ITA NO.289 OF 2007 RAJESH KUMAR GUNTUR PAGE 4 OF 4 09.08 KEEPING IN VIEW THE ABOVE FACTS AND CIRCUMSTA NCES, NATURE OF BUSINESS AND MINOR IRREGULARITIES IN MAIN TAINING OF RECORDS AND FURTHER, CONSIDERING THE PROVISIONS OF SEC.69C OF THE I.T. ACT AND IN ABSENCE OF DOCUMENTARY EVIDENCE TO PROVE THAT IN THE FINANCIAL YEAR UNDER THE APPEAL THE APP ELLANT INCURRED UNEXPLAINED EXPENDITURE, I ACCOUNTANT MEMBE R OF THE OPINION THAT THE ASSESSING OFFICER WAS NOT JUSTIFIE D IN MAKING ADDITION OF RS.13,84,925/-. ACCORDINGLY THE APPELLA NT GETS RELIEF OF RS. 13,84,925/-. 6. WE HAVE CAREFULLY CONSIDERED THE ORDER OF THE LE ARNED CIT (A) AND FIND IT TO BE REASONABLE ONE IN THE FACTS AND CIRCU MSTANCES SURROUNDING THE CASE. ACCORDINGLY WE UPHOLD THE ORDER OF THE LEARNE D CIT (A). 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. PRONOUNCED IN THE OPEN COURT ON 18 TH JANUARY, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:18-01-2011 COPY TO 1 THE ACIT CIRCLE-1(1) GUNTUR 2 SHRI RAJESH KUMAR, PROP. KUMAR SPICES, BANDLA BAZ AR, GUNTUR 3 4. THE CIT GUNTUR THE CIT(A), GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM