Ishtyaq Ahmed, Saharanpur V. ITO, Saharanpur

ITA 3039/DEL/2013

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 8520 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PREMJIT SINGH
• Keywords: Opportunity of being heard; Benefit of exemption
• Section: 40A(3); 80C; 13

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI C BEN CH, NEW DELHI (THROUGH VIDEO CONFERENCING] BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO. 3039/DEL/2013 [A.Y 2009-10] SHRI ISHTIYAQ AHMED VS. THE C.I.T. ANURAG MAHESHWARI & CO. MUZAFFARNAGAR 2 ND FLOOR, RAGHAV PLAZA, COURT ROAD, SAHARANPUR PAN : AGAPA 6158 P [APPELLANT] [RESPONDENT] DATE OF HEARING : 25.03.2021 DATE OF PRONOUNCEMENT : 25.03.2021 ASSESSEE BY : SHRI PREMJIT SINGH, C A REVENUE BY : SHRI MAHESH THAKUR, SR . DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS], MUZAFFARNAGAR DATED 05.03.2013 PERTAINING TO ASSESSMENT YEAR 2009-10. 2 2. THE GRIEVANCES OF THE ASSESSEE READ AS UNDER: 1. THAT THE LD. CIT(A) HAS EXCEEDED HIS JURISDICTION M AKING ADDITION THAT IN RESPECT OF THOSE ISSUES WHICH ARE NOT DOUBT ED BY THE ASSESSING OFFICER DURING THE COURSE; 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HA ERRED IN INVOKING THE PROVISIONS OF SECTION 40A( 3) FOR THE FIRST TIME IN APPELLATE PROCEEDINGS; 3. THE ADDITION MADE BY THE LD. CIT(A) SUO MOTO U/S 40 A(3) OF THE ACT IS BAD IN LAW AND IS BASED ON CONJECTURES AND S URMISES. 4. THE LD. CIT(A) HAS ERRED ON FACTS IN SUSTAINING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF HOUSEHOLD EX PENSES. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE APPELLANT IS RUNNING A TRADING BUSINESS OF LIVE STOCK I.E. MANUF ACTURING RAW BUFFALO MEAT ON WHOLE SALE BASIS. THE ASSESSEE ALSO MANUFA CTURED BONELESS MEAT. RETURN WAS FILED ELECTRONICALLY DECLARING IN COME OF RS. 2,87,042. RETURNED INCOME WAS ASSESSED AT RS. 115, 43,077/- AND COMPUTED AS UNDER: 3 NET PROFIT AS PER P/L ACCOUNT RS. 3,12,011 ADD: 1. ADDITION ON ACCOUNT OF GROSS PROFIT RS. 33,70,945 2. ADDITION ON ACCOUNT OF SUNDRY CREDITORS RS. 42,33, 236 3. ADDITION ON ACCOUNT OF UNACCOUNTED CASH PAID TO THE PARTIES. RS.33,64,728 4. ADDITION OUT OF TELEPHONE EXPENSES. RS. 22,1 57 ADDITION ON ACCOUNT OF HOUSE HOLD EXP. RS. 2 ,40,000 RS.L,12.31,066 B/F... RS. 1,15,43,077 2. SALARY FROM AL BABAR MARKETING PVT. LTD. RS. 1, 00,000 RS.1,16,43,077 LESS: DEDUCTION U/S 80C AS CLAIMED. RS. 1,00.000 TOTAL TAXABLE INCOME RS.L.15,43,077 4. THE ASSESSMENT WAS ASSAILED BEFORE THE LD. CIT(A ). 5. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. CIT(A) FOUND THAT THE ASSESSEE HAD MADE CASH PURCHASES EXCEEDING RS. 20,000/- IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE IN COME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT]. ACCORDINGLY, THE FIRST APPELLATE AUTHORITY SERVED A NOTICE ON THE ASSESSEE REQUIRING HIM TO SHOW CAUSE AS TO WHY PROVISIONS OF SECTION 40A(3) N OT BE INVOKED. 6. IN HIS REPLY, THE ASSESSEE SUBMITTED THAT RULE 6 DD STATES THAT NO DISALLOWANCE UNDER SECTION 40A OF THE ACT WILL BE M ADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF THE BUSINESS OR PROFESSION UNDER SUB SECTION (3A) OF SECTION 40A OF THE ACT WHERE THE 4 PAYMENT OR AGGREGATE OF THE PAYMENTS MADE TO A PERS ON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS RS. 20,000/- IN T HE CASES AND CIRCUMSTANCES SPECIFIED HEREUNDER, NAMELY: WHERE THE PAYMENT IS MADE FOR THE PURCHASE OF - (I) AGRICULTURAL OR FOREST PRODUCE; OR (II) THE PRODUCE OF ANIMAL HUSBANDRY (INCLUDING LIV ESTOCK, MEAT, HIDES AND SKINS) OR DAIRY OR POULTRY FARMING; OR (III) FISH OR FISH PRODUCTS; OR (IV) THE PRODUCTS OF HORTICULTURE OR AGRICULTURE, T O THE CULTIVATOR, GROWER OR PRODUCER OF SUCH ARTICLES, PR ODUCE OR PRODUCTS. 7. IN LIGHT OF THE AFOREMENTIONED PROVISIONS, IT WA S STRONGLY CONTENDED THAT NO DISALLOWANCE SHOULD BE MADE ON TH E FACTS OF THE CASE IN HAND. 5 8. AFTER CONSIDERING THE AFOREMENTIONED SUBMISSIONS , THE FIRST APPELLATE AUTHORITY DIRECTED THE ASSESSING OFFICER TO FURNISH DETAILS OF CASH PAYMENTS TOWARDS PURCHASES MADE IN VIOLATION O F SECTION 40A(3) OF THE ACT AFTER VERIFICATION FROM THE BOOKS OF ACC OUNTS. 9. VIDE LETTER DATED 25.02.2013, THE ASSESSING OFFI CER FURNISHED REQUISITE DETAILS AND POINTED OUT THAT IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT, FOLLOWING TWO PAYMENTS H AVE BEEN MADE: 1. AFTAB BROTHERS - RS. 2,19,87,102/- 2. TO OTHER PERSONS - RS. 22,72,54,229/- 10. REJECTING THE RELIANCE ON THE EXCEPTION PROVIDE D U/R 6DD TO SECTION 40A(3) OF THE ACT, THE LD. CIT(A) OBSERVED AS UNDER: ALL THESE FIRMS ARE TRADERS OF MEAT AND BY NO STRE TCH OF IMAGINATION THESE FIRMS MAY BE CALLED PRODUCERS OF MEAT. ONE OF SUCH FIRM, M/S AFTAB BROTHERS, GANGOH, PROP. SH. AF TAB AHMAD IS ASSESSED WITH THE SAME AO AND ITS APPEAL IS BEING A DJUDICATED SIMULTANEOUSLY. IT IS OBSERVED THAT SH. AFTAB AHMAD HAD MADE PURCHASES FROM 118 PERSONS AND FURTHER SOLD THE SAM E TO THE APPELLANT. IN THE CASE OF SH. /AFTAB AHMAD, IT IS O BSERVED THAT 6 ADMITTEDLY HE WAS ALSO BUYING MEAT FROM THE MIDDLEM EN ONLY BUT TOOK THE BENEFIT OF CIRCULAR NO.8/2006. THE APPELLA NT IS TRYING TO PROJECT SH. AFTAB AHMAD AS A MEAT PRODUCER JUST TO TAKE BENEFIT OF CIRCULAR NO.8/2006 DATED 06-10-2006 ALTHOUGH HE IS ADMITTEDLY A TRADER. SIMILAR IS THE CASE OF OTHER FIRMS WHOSE TURNOVER IS RUNNING IN CRORES. THE BENEFIT OF EXCEPTION TO RULE 6DD(E)(II) IS NOT EXTENDED TO THE TRADERS. HAD THAT BEEN THE SPIRIT O F THE STATUTE, ENTIRE TRADING IN ANIMAL HUSBANDRY PRODUCTS SHOULD HAVE BEEN KEPT OUTSIDE THE PURVIEW OF SECTION OF SECTION 40A(3) OF THE ACT. HOWEVER, IT IS NOT SO AND BENEFIT OF EXEMPTION IS A VAILABLE TO THE PRODUCERS ONLY AND NOT TO THE TRADERS. THUS PURCHAS ES MADE FROM THESE 10 FIRMS IS NOT COVERED BY EXCEPTION OF RULE 6DD AS WELL AS CIRCULAR NO.8/2006 DATED 06-10-2006. 11. THE LD. CIT(A) FINALLY CONCLUDED AS UNDER: THE FACTS OF THE CASE, SUBMISSIONS MADE BY THE APP ELLANT REMAND REPORT OF THE AO AND REJOINDER OF THE APPELLANT HAV E BEEN CAREFULLY CONSIDERED. IT IS OBSERVED THAT THE AO HA S MADE ADDITION OF RS.33,70,945/- ON THE GROUND THAT IN THE CASE OF SH. AFTAB AHMED, PROP. M/S AFTAB BROTHERS DEALING IN SIMILAR TRADE, FOR AY 2009-10, REASONABLE GP WAS ADOPTED AND ESTIMATED @ 2.50%. FURTHER IN THE CASE OF M/S ALM INDUSTRIES LTD., SAH ARANPUR, GP RATE OF 8.05% WAS DECLARED ON TOTAL TURNOVER OF RS.2,87,57,70,211/- DURING AY 2009-10. IT HAS BEEN ARGUED BY THE APPELLANT THAT THE CASE OF M/S A.L.M. INDUSTRIES LT D. SAHARANPUR COULD NOT BE COMPARED TO APPELLANTS CASE AS THE AF ORESAID 7 CONCERNED HAD HUGE TURNOVER AS AGAINST TURNOVER DEC LARED BY THE APPELLANT AT RS.28,57,61,124/-. THE AO IN THE REMAN D REPORT HAS MENTIONED THAT THE COMPARISON OF THE APPELLANTS CA SE TO THAT OF M/S A.L.M. INDUSTRIES LTD. SAHARANPUR WAS ACTUALLY NOT MADE BUT IT WAS CITED ONLY TO DRIVE HOME THE FACT THAT EVEN IN CASES OF HUGE TURNOVER OF THE ASSESSEES LINE OF TRADE GP RATE DE CLARED WAS AT 8% OR EVEN MORE. IT IS OBSERVED THAT THE ACTION OF THE AO IN CITING THE CASE OF M/S A.L.M. INDUSTRIES LTD. SAHARANPUR A ND AT THE SAME TIME ADOPTING GP RATE AT 2.50% IS HELD AS CONSERVAT IVE ESTIMATE. THE AO COULD HAVE ESTIMATED GP AT 8% OR NEAR TO THA T FIGURE. CONSEQUENTLY, THE ADDITION WOULD HAVE BEEN EVEN MOR E THAN WHAT THE AO HAD ESTIMATED. HOWEVER, IT IS OBSERVED THAT DISALLOWANCE U/S 40A(3) OF THE ACT HAS ULTIMATELY RESULTED IN IN CREASE IN THE INCOME OF THE APPELLANT. SINCE ADDITION ON ACCOUNT OF CASH PURCHASES AT RS.24,92,41,331/- HAVE ALREADY BEEN MA DE U/S 40A(3) OF THE ACT, THEREFORE THE ADDITION MADE BY THE AO A T RS.33,70,945/- IS HELD AS MERGED WITH THE ADDITION MADE U/S 40A(3) OF THE ACT AND NO SEPARATE ADDITION ON THIS COUNT IS CALLED FOR. ADDITION OF RS.33,70,945/- IS ACCORDINGLY DIRE CTED TO BE DELETED. GROUND OF APPEAL NO.3 IS ALLOWED. 12. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DRE W OUR ATTENTION TO THE CBDT CIRCULAR NO. 8 OF 2006 DATED 06.10.2006 AN D POINTED OUT THAT THE LOWER AUTHORITIES HAVE WRONGLY INTERPRETED THE MANDATORY CLAUSES OF THIS CIRCULAR. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESSEE THAT IF 8 THIS CIRCULAR IS INTERPRETED IN TRUE PERSPECTIVE, A DDITIONS MADE U/S 40A(3) GET DELETED. 13. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE F INDINGS OF THE LD. CIT(A). 14. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE IN SO FAR A S THE NATURE OF BUSINESS OF THE ASSESSEE IS CONCERNED. THE CBDT CI RCULAR REFERRED TO HEREINABOVE READS AS UNDER: CIRCULAR INCOME-TAX ACT CLARIFICATION REGARDING THE MEANING OF THE EXPRESSI ON THE PRODUCE OF ANIMAL HUSBANDRY USED IN SUB-CLAUSE (II) OF CLA USE (F) OF RULE 6DD OF THE INCOME-TAX RULES, 1962 CIRCULAR NO. 8/2006, DATED 6-10-2006 1. REFERENCE IS INVITED TO THE CLARIFICATION ISSUED VIDE CIRCULAR NO. 4/2006, DATED 29TH MARCH, 2006 ON THE ABOVE SUBJECT . VIDE THIS CIRCULAR, IT WAS CLARIFIED THAT THE EXPRESSION THE PRODUCE OF ANIMAL HUSBANDRY USED UNDER RULE 6DD( F )( II ) WOULD INCLUDE LIVESTOCK AND 9 MEAT AND IN A CASE WHERE PAYMENT EXCEEDING RUPEES TWENTY THOUSAND IS MADE TO A PRODUCER OF THE PRODUCTS OF A NIMAL HUSBANDRY (INCLUDING LIVESTOCK, MEAT, HIDES AND SKI NS) OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CR OSSED BANK DRAFT FOR THE PURCHASE OF SUCH PRODUCE, NO DISALLOW ANCE SHOULD BE ATTRACTED UNDER SECTION 40A(3) READ WITH RULE 6DD. IT WAS FURTHER CLARIFIED THAT THE ABOVE EXCEPTION WILL NOT BE AVAI LABLE IN RESPECT OF PAYMENT FOR THE PURCHASE OF LIVESTOCK, MEAT, HID ES AND SKINS FROM A PERSON WHO IS NOT PROVED TO BE THE PRODUCER OF THESE GOODS AND IS ONLY A TRADER, BROKER OR ANY OTHER MIDDLEMAN BY WHATEVER NAME CALLED. 2. REPRESENTATIONS HAVE BEEN RECEIVED FROM CERTAIN QU ARTERS SEEKING FURTHER CLARIFICATION AS TO WHO ARE THE PRO DUCERS OF LIVESTOCK AND MEAT AND THE EVIDENCE REQUIRED TO BE FURNISHED IN THIS REGARD BY THE PERSONS MAKING THE PAYMENTS. 3. THE BOARD AFTER EXAMINATION OF THE ISSUE IS OF THE VIEW THAT ANY PERSON, BY WHATEVER NAME CALLED, WHO BUYS ANIMALS F ROM THE FARMERS, SLAUGHTERS THEM AND THEN SELLS THE RAW MEA T CARCASSES TO THE MEAT PROCESSING FACTORIES OR TO THE TRADERS/RET AIL OUTLETS WOULD BE CONSIDERED AS PRODUCER OF LIVESTOCK AND ME AT. 4. THE BENEFIT OF RULE 6DD OF THE INCOME-TAX RULES, 1 952 SHALL BE AVAILABLE TO THE PERSON REFERRED TO AT PARA 3 ABOVE SUBJECT TO FURNISHING OF THE FOLLOWING : ( I ) A DECLARATION FROM THE PERSON RECEIVING THE PAYM ENT THAT HE IS A PRODUCER OF MEAT; 10 ( II ) A CONFIRMATION THAT THE PAYMENT, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT, WAS MADE ON HIS INSISTENCE; AND ( III ) A FURTHER CONFIRMATION FROM A VETERINARY DOCTOR CERTIFYING THAT THE PERSON SPECIFIED IN THE CERTIFICATE IS A PRODUC ER OF MEAT AND THAT SLAUGHTERING WAS DONE UNDER HIS SUPERVISION. 15. CLAUSES 3 AND 4 ARE VERY MUCH RELEVANT TO THE F ACTS OF THE CASE IN HAND. IT HAS BEEN SPECIFICALLY MENTIONED THAT ANY PERSON WHO BUYS ANIMALS FROM THE FARMERS, SLAUGHTERS THEM AND THEN SELLS THE RAW MEAT CARCASSES TO THE MEAT PROCESSING FACTORIES OR TO TH E TRADERS/RETAIL OUTLETS WOULD BE CONSIDERED AS PRODUCER OF LIVESTOC K AND MEAT. THIS MEANS THAT EVEN THE TRADERS AND RETAILERS ARE COVER ED BY THIS CIRCULAR. 16. AT CLAUSE 4, HOW THE BENEFIT OF RULE 6DD OF THE INCOME-TAX RULES, 1952 CAN BE DERIVED HAS BEEN MENTIONED. FOL LOWING THREE CONDITIONS HAVE TO BE FULFILLED BY THE APPELLANT: ( I ) A DECLARATION FROM THE PERSON RECEIVING THE PAYM ENT THAT HE IS A PRODUCER OF MEAT; 11 ( II ) A CONFIRMATION THAT THE PAYMENT, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT, W AS MADE ON HIS INSISTENCE; AND ( III ) A FURTHER CONFIRMATION FROM A VETERINARY DOCTOR CERTIFYING THAT THE PERSON SPECIFIED IN THE CERTIFICATE IS A P RODUCER OF MEAT AND THAT SLAUGHTERING WAS DONE UNDER HIS SUPERVISION. 17. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTEN TION TO THE RELEVANT DOCUMENTS OF THE PAPER BOOK AND STATED THA T THE ASSESSEE HAS FULFILLED ALL THE THREE MANDATORY CONDITIONS IN SUP PORT OF HIS CLAIM. HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT SINCE T HE LOWER AUTHORITIES HAVE NOT CONSIDERED THE CBDT CIRCULAR I N ITS TRUE PERSPECTIVE, THESE DOCUMENTS REMAINED UNVERIFIED. THEREFORE, IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO THE F ILE OF THE ASSESSING OFFICER. THE ASSESSEE IS DIRECTED TO FURNISH ALL EV IDENCES DEMONSTRATING THAT HE HAS FULFILLED THE MANDATORY CONDITIONS FOR GETTING BENEFIT OF RULE 6DD OF THE RULES AND THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE EVIDENCES AND DECIDE THIS ISSUE AFRESH AFTER GI VING REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE APPELL ANT. 12 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IN ITA NO. 3039/DEL/2013 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 25.03. 2021 IN THE PRESENCE OF BOTH THE REPRESENTATIVES. SD/- SD/- [ SUCHITRA KAMBLE ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 TH MARCH, 2021 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 13 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER