M/s Chandni commercials Private Limited, Kolkata V. ITO, Ward 7(4), Kolkata, Kolkata

ITA 304/KOL/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0149 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 15-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MANOJ KATARUKA
• Keywords: Business income
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI A.T.VARKEY, JM &DR. A.L.SAINI, AM ./ITA NO.304/KOL/2017 ( / ASSESSMENT YEAR:2012-13) M/S CHANDNI COMMERCIALS PVT. LTD. 1, SAROJINI NAIDU SARANI, 6 TH FLOOR, KOLKATA-700017. VS. ITO, WARD-7(4), KOLKATA ./ ./PAN/GIR NO.: AACCC 2811 Q (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI MANOJKATARUKA, ADVOCATE RESPONDENT BY : SHRI A.K. SINGH, CIT DR / DATE OF HEARING : 31/01/2019 /DATE OF PRONOUNCEMENT : 29/03/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAI NING TO ASSESSMENT YEAR 2012-13, IS DIRECTED AGAINST AN ORDER PASSED BY T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-16, KOLKATA (IN SHORT THE LD. CIT(A)], WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) DATED 29 .03.2015. 2. IN THE PRESENT APPEAL, HOWEVER THE ASSESSEE HAS RAISED A MULTIPLE GROUNDS OF APPEAL BUT AT THE TIME OF HEARING, THE SOLITARY GRI EVANCE OF THE ASSESSEE HAS BEEN M/S CHANDNI COMMERCIALS PVT. LTD. ITA NO.304/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 2 CONFINED TO THE ADDITION MADE BY THE ASSESSING OFFI CER TO THE TUNE OF RS. 390,19,10,000/- UNDER SECTION 40A (3)/ 40A(3A) OF T HE ACT. 3. THE BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSES SEE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN TRADING OF ELECTRONICS GOODS. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13 ON 30. 09.2012, DECLARING TOTAL LOSS OF RS. 4,92,16,725/-. THE ASSESSEES CASE WAS SELEC TED FOR SCRUTINY U/S 143(3) OF THE ACT ON 29.03.2015. DURING THE ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER NOTED FROM THE DETAILS OF PURCHASES MADE BY THE ASS ESSEE FROM 01.04.2011 TO 31.03.2012, THAT THE ASSESSEE MADE PAYMENT OF RS.39 0,19,10,000/- TO VARIOUS PARTIES AGAINST THE GOODS PURCHASED BY IT.THAT IS, THE ASSESSING OFFICER NOTED THAT SINCE THE COMPANY HAD PURCHASED GOODS WORTH RS. 390 ,19,10,000/- FOR WHICH PAYMENTS WERE MADE IN EXCESS OF RS. 20,000/- OTHERW ISE THEN ACCOUNT PAYEE CHEQUE DRAWN BY A BANK OR ACCOUNT PAYEE BANK DRAFTS . SUCH PAYMENT WASNOT MADE BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DRAFT BUT MADE THROUGH BOOK ENTRY BY ENDORSING THROUGH JOURNAL, THEREFORE THE AO WAS OF THE VIEW THAT ASSESSEE COMPANY VIOLATED THE PROVISIONS OF SECTION 40A(3A) OF THE INCOME TAX ACT,1961.THEREFORE, THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THAT WHY THE AMOUNT OF RS.390,L9,10,000/- SHOULD NOT BE ADDE D TO ITS BUSINESS INCOME U/S 40A(3A) OF THE ACT. IN RESPONSE, THE ASSESSEE SUBMI TTED THAT NO ANY PAYMENT IN CONTRAVENTION TO PROVISIONS OF SECTION 40A(3)/40A(3 A), HAS BEEN MADE TO DIFFERENT PARTIES. THE PAYMENT HAS BEEN MADE THROUGH JOURNAL ENTRY OR BY BANKING CHANNELS THEREFORE, THE PROVISIONS OF SECTION 40A(3)/40A(3A) DOES NOT APPLY. THE ASSESSEE FURTHER CONTENDED THAT AS THE TRANSACTIONS WERE GEN UINE AND THE IDENTITY OF THE CREDITORS / PAYEE IS ALSO NOT DOUBTED, THE MISCHIEF OF SECTION 40A(3A) IS NOT ATTRACTED. THE ASSESSEE ALSO EXPLAINED THE BUSINESS EXPEDIENCY FOR PAYMENT OTHERWISE THAN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYE E DRAFT. HOWEVER, THE AO NOTED THAT ASSESSEE COULD NOT SHOW ANY BUSINESS EXPEDIENCY AT ALL. IN FACT, IT DID NOT DISCLOSE THE REASON AS TO WHY IT HAD TO PASS SUCH JOURNAL ENTRY AMOUNTING TO RS.390,L9,10,000/-. HENCE, THE ASSESSI NG OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND MADE ADDITION TO THE TUNE OF RS. 390,19,10,000/-. M/S CHANDNI COMMERCIALS PVT. LTD. ITA NO.304/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 3 4. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE I S IN APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFOR E US THE LEDGER ACCOUNT OF VISAGE EQUIPMENTS PVT. LTD., JESSOP & CO. LTD. AND MONOTOME TYRES LTD. THE LD. COUNSEL STATED THAT IN CASE OF VISAGE EQUIPMENT PVT . LTD. THE PAYMENT OF PURCHASES OF COTTON KNITTED FABRIC HAS BEEN MADE BY JOURNAL ENTRY THEREFORE, PROVISIONS OF SECTION 40A(3) DOES NOT APPLY. THE CO UNSEL STATED THAT THERE IS NO CASH INVOLVED IN THIS TRANSACTION. THE ENTRY HAD BE EN PASSED THROUGH JOURNAL ENTRY AND SINCE THERE IS NO CASH INVOLVEMENT THEREFORE TH E PROVISION OF SECTION 40A(3) DOES NOT APPLY TO THE ASSESSEES CASE UNDER CONSIDE RATION. IN CASE OF OTHER PARTIES, THE PAYMENT HAVE BEEN MADE THROUGH BANKING CHANNEL THEREFORE, THE PROVISIONS OF SECTION 40A(3) DOES NOT APPLY. 6. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SU BMITTED BEFORE US THAT THE ASSESSEE IS ENGAGED IN PROVIDING ACCOMMODATION ENTR IES AND ALL THE PAYMENT HAD BEEN MADE THROUGH GENERAL ENTRY WHICH IS NOT ACCEPT ABLE. THE LD. DR FURTHER POINTED OUT THAT THIS IS THE UNACCOUNTED MONEY OF T HE ASSESSEE IN THE SYSTEM THROUGH GENERAL ENTRIES AND BY MAKING ENDORSEMENT O F CHEQUES AVAILABLE FOR OTHER PERSONS. THE LD. DR FURTHER POINTED OUT THAT IN THI S TRANSACTION THE IDENTITY OF THE TRANSACTION I.E. WHO IS THE BENEFICIARY OF THIS GEN ERAL ENTRY IS NOT KNOWN THEREFORE IT IS A PLANNING OF THE ASSESSEE TO AVOID THE TAX H ENCE THE PROVISION OF SECTION 40A(3) IS SQUARELY APPLICABLE TO THE ASSESSEE. 7.WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. WE NOTE THAT IN CASE OF PURCHASES FROM PARTIES NAMEL Y, M/S JESSOP AND CO. LTD, M/S MONOTONA TYRES LTD AND M/S DUNLOP INDIA LTD, THE AS SESSEE COMPANY PURCHASED M/S CHANDNI COMMERCIALS PVT. LTD. ITA NO.304/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 4 44 4 THE GOODS AND MADE THE PAYMENT BY ACCOUNT PAYEE CHE QUES THROUGH BANKING CHANNEL, HENCE PROVISIONS OF SECTION 40A(3)/ 40A(3 A) DOES NOT APPLY TO THE ASSESSEE COMPANY. HOWEVER, ON EXAMINATION OF LEDGER ACCOUNT OF M/S VI SAGE EQUIPMENTS PVT LTD IN THE BOOKS OF THE ASSESSEE FOR THE PERIOD 01.04.2011 TO 31.03.2012 WHICH RELATES TO ASSESSMENT YEAR 2012-13, WE FIND THAT THE PAYMENT H AS BEEN MADE THROUGH JOURNAL ENTRY. FROM THE SAID LEDGER ACCOUNT, IT APPEARS THA T ASSESSEE HAS PAID TO M/S VISAGE EQUIPMENTS PVT LTD, THROUGH JOURNAL ENTRY ON 31.03.2012 AT RS.116,15,50,960/-. THE SAID JOURNAL ENTRY IS GIVEN BELOW FOR READY REFERENCE: M/S VISAGE EQUIPMENTS PVT LTD 116, 15,50,960 TO GIRISH COMMERCIAL PVT LTD 17,15,75,480 TO ADHIRATH COMMERCIALS PVT LTD 40,00,00,000 TO ADHIRATH COMMERCIALS PVT LTD 30,00,00,000 TO ADHIRATH COMMERCIALS PVT LTD 28,99,75,480 WE NOTE THAT THE JOURNAL ENTRY MENTIONED ABOVE DOES NOT CONTAIN ANY CASH ELEMENT THEREFORE, PROVISIONS OF SECTION 40A(3)/ 40A(3A) DO ES NOT APPLY TO THE ASSESSEE COMPANY. HOWEVER, THE LD DR FOR THE REVENUE DISPUTE D THE GENUINENESS OF THE TRANSACTION, THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY WE REMIT THIS TRANSACTION BACK TO THE FILE OF THE ASSESSING OFFIC ER FOR LIMITED PURPOSE, TO VERIFY THE GENUINENESS OF THE TRANSACTION. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 29.03.2019 SD/- ( A.T.VARKEY ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; / DATE: 29/03/2019 ( SB, SR.PS ) M/S CHANDNI COMMERCIALS PVT. LTD. ITA NO.304/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 5 55 5 COPY OF THE ORDER FORWARDED TO: 1. M/S CHANDNI COMMERCIALS PVT. LTD., 2. ITO, WARD-7(4), KOLKATA 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES