Shri Sahakari Marketing Society Ltd., Surendranagar V. The Income Tax Officer, Ward-4, Surendranagar

ITA 2999/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8464 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 26-10-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: USHA N SHROTE
• Assessee Lawyers: N C AMIN
• Keywords: Reasonable cause
• Section: 40A(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT [CONDUCTED THROUGH E COURT AT AHMEDABAD] BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.2999/RJT/2015 / ASSTT. YEAR: 2012-13 SHRI SAHAKARI MARKETING SOCIETY LTD. BAZAR, MULI, TAL. MULI DIST. SURENDRANAGAR. PAN : AAAAS 1590 C VS ITO, WARD - 4 SURENDRANAGAR. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI N.C. AMIN, AR REVENUE BY : SMT.USHA N. SHROTE, SR.DR / DATE OF HEARING : 01/02/2018 / DATE OF PRONOUNCEMENT: 11/04/2018 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-7, AHMEDABAD DATED 27.8.2015 PASSED FOR A SSTT.YEAR 2012-13. 2. GROUND NOS.1, 2 AND 3 ARE INTER-CONNECTED TO EA CH OTHER. IN THESE GROUNDS GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CI T(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF DEDUCTION OF RS.16,10,69 9/- UNDER SECTION 80P(2)(IV) OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY REGISTERED UNDER THE COOPERATIVE SOCIETY ACT. IT H AS FILED ITS RETURN OF INCOME ON 1.10.2013 DECLARING NIL INCOME. THE ASSESSEE-SO CIETY AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF PURCHASE OF FERTILIZ ERS, SEEDS ETC. TO BE ITA NO.2999/RJT/2015 2 SUPPLIED TO ITS MEMBERS. IT CLAIMED A DEDUCTION OF RS.16,10,699/- WHICH IS A PROFIT AROSE TO IT IN THIS ACTIVITY. THE LD.AO HAS OBSERVED THAT FOR CLAIMING DEDUCTION UNDER SECTION 80P(2)(A)(IV) OF THE ACT, T HE ASSESSEE HAS TO DEMONSTRATE THAT IT HAS PURCHASED AGRICULTURE IMPLE MENTS/SEEDS, LIVE-STOCKS OR OTHER ARTICLES INTENDED FOR AGRICULTURE PURPOSE FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS. HE DIRECTED THE ASSESSEE TO SUBMIT DETAILS OF PURCHASE AND SALES OF PESTICIDES, FERTILIZERS ETC. THE ASSE SSEE GAVE LIST OF ITS CO- OPERATIVE MEMBERS AND INDIVIDUAL MEMBERS. BUT IT C OULD NOT SUBMIT COMPLETE DETAILS OF PURCHASE AND SALE OF FERTILIZER S TO ITS MEMBERS AS WELL AS NON-MEMBERS. ACCORDINGLY, THE AO DISALLOWED THE CL AIM OF THE ASSESSEE. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 4. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE HAS ADMITTED BEFORE THE AO THAT IT HAS NOT MAINTAINED DETAILS OF SALES OR SUPPLIES OF FERTILIZ ERS EXCLUSIVELY TO ITS MEMBERS. IT ALSO NOT DISPUTED THAT CERTAIN SALES W ERE MADE TO NON-MEMBERS ALSO. ON PAGE NO.12 OF THE ASSESSMENT ORDER, THE AO HAS REPRODUCED WRITTEN SUBMISSIONS OF THE ASSESSEE, WHERE A CATEGORICAL AD MISSION AT THE END OF THE ASSESSEE IS AVAILABLE. ACCORDING TO THE ASSESSEE I T HAS NOT MAINTAINED SEPARATE LEDGER SHOWING SALES MADE TO THE MEMBERS OR NON-MEM BERS. THUS, WE ARE CONFRONTED WITH A SITUATION OF NON-AVAILABILITY OF RELEVANT FACTS AND CIRCUMSTANCES. THE LD.AO HAS DISALLOWED PROFIT EAR NED BY THE ASSESSEE ON SUCH ACTIVITY FROM THE CLAIM OF 80P(2)(A)(IV), HOWE VER, ENTIRE PROFIT CANNOT BE BRANDED AS EARNED FROM NON-MEMBERS ONLY. THE ASSES SEE GAVE LIST OF 86 MEMBERS; OUT OF WHICH CERTAIN MEMBERS ARE INDIVIDUA LS AND OTHERS ARE COOPERATIVE SOCIETIES ETC. CONSIDERING THIS LIST A ND VOLUME OF PROFIT EARNED BY THE ASSESSEE OR TURNOVER ACHIEVED BY IT, WE COULD E STIMATE THAT 75% SALES MUST BE TO ITS MEMBERS. THEREFORE, ENDS OF JUSTICE WOUL D BE MET, IF WE ALLOCATE PROFIT AT THE RATE OF 25% FROM THE TOTAL PROFIT REL ATABLE TO THE SALES MADE TO ITA NO.2999/RJT/2015 3 NON-MEMBERS. ACCORDINGLY, A DEDUCTION UNDER SECTIO N 80P(2)(A)(IV) BE ALLOWED TO THE ASSESSEE AT 75% OF RS.16,10,699/-. THE BALANCE WOULD BE DISALLOWED TO THE ASSESSEE. THUS, GROUND NOS.1, 2 AND 3 ARE PARTLY ALLOWED. 5. IN GROUND NO.4, GRIEVANCE OF THE ASSESSEE IS THA T THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,05,000/- WHI CH WAS DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT. A PERUSAL OF THE REC ORD WOULD INDICATE THAT THE ASSESSEE HAS MADE PAYMENT OF RS.1,05,000/- TO THREE INDIVIDUALS; VIZ. SHRI P.C. MEHTA, CHINUBHAI G. MEHTA AND SAJANBA HARISHCH ANDRA BHAI ON FIVE OCCASIONS. OUT OF FIVE OCCASIONS, THREE PAYMENTS W ERE MADE TO SHRI P.C. MEHTA. ACCORDING TO THE AO, THE ASSESSEE HAD INTER EST RECEIPT OF RS.2,23,634/-. IT HAS PAID INTEREST OF RS.1,05,000 /- TO THESE INDIVIDUALS. IT FAILED TO DEDUCT TDS ON THESE INTEREST PAYMENTS. A CCORDINGLY, THE LD.AO MADE DISALLOWANCE WITH THE HELP OF SECTION 40(A)(IA ) OF THE ACT. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSES SEE. 6. ON DUE CONSIDERATION OF THE ABOVE FACTS AND CIRC UMSTANCES, WE ARE OF THE VIEW THAT THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT VS. ANSAL LANDMARK TOWNSHIP P.LTD., 377 ITR 635 (DEL) HAS HEL D THAT IF RECIPIENTS HAVE SHOWN RECEIPTS IN THEIR TAXABLE INCOME, THEN N O DISALLOWANCE UNDER SECTION 40(A)(IA) IS TO BE MADE. WE, THEREFORE, RE MIT THIS ISSUE TO THE FILE OF THE AO. HE SHALL VERIFY WHETHER THESE INDIVIDUALS HAVE INCLUDED INTEREST INCOME IN THEIR TAXABLE INCOME OR NOT. OR IF THEY HAVE INCOME BELOW THE TAXABLE INCOME, THEN IT IS BE CONSIDERED THAT INTER EST INCOME HAS BEEN INCLUDED IN THE TAXABLE INCOME. IN BOTH THESE CASES, IF IT IS ESTABLISHED THAT THEY HAVE SHOWN THESE AMOUNTS IN THEIR RETURN OF INCOME OR TH EIR INCOME IS BELOW TAXABLE LIMIT, THEN NO DISALLOWANCE IS TO BE MADE I N THE HANDS OF THE ASSESSEE. THIS GROUND IS DISPOSED OF ACCORDINGLY. ITA NO.2999/RJT/2015 4 7. IN THE NEXT GROUND OF APPEAL, GRIEVANCE OF THE A SSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF R S.1,08,000/- WHICH WAS MADE BY THE AO UNDER SECTION 40A(3) OF THE INCOME T AX ACT. 8. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECORD T HAT ON FOUR OCCASIONS THE ASSESSEE HAS MADE PAYMENT OF RS.1,08,000/- TO TWO I NDIVIDUALS VIZ. MEHTA PRAKASHKUMAR CHINUBHAI AND PARMAR MAHIPATSINH SABAL SINH. IN OTHER WORDS, TWO PAYMENTS WERE MADE TO MEHTA P. CHINUBHAI AND TW O PAYMENTS WERE MADE TO PARMAR M. SABALSINGH. THESE PAYMENTS EXCEE DS RS.20,000/- EACH AND WERE MADE IN CASH. THE AO INVOKED SECTION 40A( 3) AND MADE DISALLOWANCE. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 9. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. SECTION 40A(3) CONTEMPLATES THAT WHERE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREG ATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAY EE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFTS EXCEEDS RS.20,000 /- NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. ONLY ARGUM ENT ADVANCED BY THE ASSESSEE IS THAT THIS PROVISO WAS INTRODUCED TO PUT A CHECK ON TRADE TRANSACTION WITH AN INTENTION TO EVADE LIABILITY TO PAY TAX ON AN INCOME EARNED OUT OF SUCH TRANSACTION. PAYMENTS MADE WERE TO THE EMPLOYEES, HENCE THEIR GENUINENESS IS NOT IN DOUBT. 10. ON DUE CONSIDERATION OF THE ABOVE EXPLANATIONS, WE FIND THAT THE ASSESSEE FAILED TO SHOW ANY REASONABLE CAUSE CONTEM PLATED UNDER RULE 6DD OF THE INCOME TAX RULES FOR JUSTIFYING THE REASONS FOR PAYMENT IN CASH. THERE COULD BE SOME EXCEPTIONAL SITUATIONS WHERE THE ASSE SSEE HAS TO MAKE PAYMENT IN CASH. BUT THESE ARE SALARY PAYMENTS WHICH SHOUL D NOT HAVE BEEN MADE IN CASH. THEREFORE, THE LD.REVENUE AUTHORITIES HAVE R IGHTLY DISALLOWED THE CLAIM ITA NO.2999/RJT/2015 5 OF THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION, THE GROUND OF APPEAL IS REJECTED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 11 TH APRIL, 2018 AT AHMEDABAD. SD/- SD/- ( PRAMOD KUMAR ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER