ACIT CIRCLE 1, VELLORE V. RAHAMATHULLA ASKAR, VELLORE

ITA 3050/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9800 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 09-11-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside; Bogus
• Section: 40A(3); 143(3); 14A; 40(a)(ia); 191

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . . , ! ' , # '$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.3050/CHNY/2018 % &% /ASSESSMENT YEAR: 2015-16 ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1, VELLORE. VS. SHRI RAHAMATHULA ASKAR, NO.F2 7B, BANGIKHAN STREET, AMBUT 635 802, VELLORE DISTRICT. [PAN: AGGPR 7294D] ( '( /APPELLANT) ( )*'( /RESPONDENT) '( + , / APPELLANT BY : SHRI R. CLEMENT RAMESH KUMAR, ADDL. CIT )*'( + , /RESPONDENT BY : SHRI K.BALASUBRAMANIAN, ADV. - + .# /DATE OF HEARING : 15.04.2019 /0& + .# / DATE OF PRONOUNCEMENT : 23.04.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGA INST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-13 , CHENNAI (HEREINAFTER CALLED AS CIT(A)) DATED 16.08.2018 F OR THE ASSESSMENT YEAR 2015-16. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPE AL: 1.THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO F ACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.3050/CHNY/2018 :- 2 -: 2.THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O . TO DELETE THE ADDITION/DISALLOWANCE OF RS.2,04,14,2351/- MADE U/S .40A(3) OF THE LT.ACT, 1961. 3. IT IS THE BUTCHER WHOSE ROLE IS PIVOTAL TO THE ENTIRE PROCESS, HIS ROLE AND ACTIVITY IS AN INEVITABLE PART OF THE ENTI RE GAMUT OF ACTIVITIES INVOLVED IN THIS LINE AND CHAIN OF PROCESS. THE ROL E AND FUNCTION OF THE CATTLE FARMER OR BREEDER OR SHEPHERD IS VERY LIMITE D, TO THAT OF REARING THE CATTLE, FEEDING THEM AND TAKING CARE OF THEM TI LL THEY REACH A PRE- DETERMINED STAGE UPON WHICH THEY ARE SOLD ALIVE AND HEALTHY. THEREUPON THE AFORESAID PERSON HAS NO ROLE TO PLAY IN THE ENTIRE SET UP. IT WILL BE NOT OUT OF CONTEXT TO MENTION THAT T HE PAYMENTS MADE BY THE BUTCHER OR THE AGENT OF BUTCHER OR BY A MIDDLE MAN TO THE CATTLE BREEDER OR SHEPHERD OR FARMER, DO NOT FALL UNDER TH E AMBIT OF 40A(3) EVEN IF MADE IN CASH. BEYOND THIS POINT OF TRANSACT ION ALL OTHER PAYMENTS MADE IN CASH ATTRACT AND FALL UNDER THE AM BIT AND HIT BY THE PROVISION OF SEC.40A(3). 4. THE ASSESSEE WAS ASKED TO FURNISH THE FULL PAR TICULARS OF THE PERSONS TO WHOM SUCH PAYMENTS ARE MADE. THE ASSESSE E WAS ASKED TO FURNISH THE FULL NAMES AND COMPLETE POSTAL ADDRESSES OF THE PERSONS CLAIMED TO BE DIRECT PRODUCERS OF THE PRODU CT OF SUCH ANIMAL HUSBANDARY. THE ASSESSEE HIMSELF EXPRESSED HIS INAB ILITY TO FUNISH THE POSTAL ADDRESS ON THE GROUNDS THAT THE SAME ARE NOT AVAILABLE TO HIM. UNDER THESE CIRCUMSTANCES, IT WAS NOT POSSIBLE TO CROSS VERIFY THE CLAIM OF THE ASSESSEE AS TO WHETHER THE PERSONS WHO ARE IN RECEIPT OF THE PAYMENTS (SELLERS OF THE PRODUCE) AR E THE PRODUCERS OF THE PRODUCE OR MERE MIDDLEMEN AS COULD BE APPARENT FROM THE PARTICULARS FILED. 5. THE ASSESSING OFFICER HAS GIVEN SUFFICIENT TIM E AND OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE PARTIES BEFORE HIM. THE ASSESSEE COULD NOT COMPLY WITH THE DIRECTIONS OF THE ASSESSING OFF ICER WHICH GIVES ROOM TO SURMISE THAT THE CLAIM OF THE ASSESSEE IS A BOGUS ONE. 6. THE LD CIT(A) HAS FAILED TO CONSIDER THAT THE DE TAILS OF THE PAYEES HAD RIOT BEEN PROVIDED AT THE TIME OF ASSESSMENT PR OCEEDINGS THAT A.O. IS NOT IN A POSITION TO VERIFY THE GENUINENESS OF THE PAYMENT MADE. FURTHER THE INTENTION OF PROVISION OF SECTION .40A(3) WAS TO. VERIFY THE GENUINENESS OF THE PC4EE. IN THE ABSENCE OF SUCH DETAILS, THE APPLICABILITY OF THE DECISION OF JURISDICTIONAL HONBLE MADRAS HIGH COURT IN THE CASE OF K.K.S.K.LEATHER PROCESSORS. PV T LTD IS FOUND TO BE DISTINGUISHABLE. 7.THE LD C1T(A) HAS FAILED TO NOTE THAT IN THE CASE OF K.K.S.K.LEATHER THE ASSESSEE HAS PRODUCED NECESSARY GROUNDS FOR MAKING CASH PAYMENTS AND IT WAS ALSO ESTABLISHED TH AT THE PAYMENTS WERE MADE TO SMALL TIME VENDORS WHO CAME FROM SURR OUNDING VILLAGES TO SELL THE, SKIN. WHEREAS IN THIS CASE TH E ASSESSEE HAS FAILED TO FURNISH THE DETAILS OF PAYEES. ITA NO.3050/CHNY/2018 :- 3 -: 8. THE LD.CIT(A) FAILED TO NOTE THAT THE AC RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ATTAR SINGH, G URMUKH SINGH VS LTO(1991) 191 ITR 667. THE HONBLE SUPREME COURT ALSO HELD THAT IT IS OPEN TO THE ASSESSEE TO IDENTIFY THE PER SONS WHO HAVE RECEIVED THE PAYMENTS IN CASH. RULE 6DD PROVIDES TH AT AN ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSSED BANK DRAFT IN THE CIRCUMSTANCES S PECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF S ECTION.40A(3) AND RULE 6DD THAT THEY ARE INTENDED TO REGULATE THE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE T HE CHANCES TO USE BLACK-MONEY FOR BUSINESS TRANSACTIONS. ANY REST RAINT INTENDED TO CURB THE CHANCES AND OPPORTUNITIES TO USE OR CREATE BLACK MONEY SHOULD NOT BE REGARDED AS CURTAILING THE FREEDOM OF TRADE OR BUSINESS. 9. THE AO RELIED ON THE CIRCULAR NO.4 DT.29.032006 AND CIRCULAR NO.8/2006 DT.21.10.2006, WHICH DEALS WITH RULE 6DD. FOR AVAILING THE BENEFIT OF RULE 6DDA PERSON SHALL FURNISH THE FOLLO WING: 1.A DECLARATION FROM THE PERSON RECEIVING THE PAYME NT THAT HE IS A PRODUCER OF MEAT. 2.A CONFIRMATION THAT THE PAYMENT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT, WAS MADE ON HIS INSISTENCE. 3.A FURTHER CONFIRMATION FROM A VETERINARY DOCTOR C ERTIFYING THAT THE PERSON SPECIFIED IN. THE CERTIFICATE IS A PRODUCER OF MEAT AND THAT AND THAT SLAUGHTERING WAS DONE UNDER HIS SUPERVISI ON. AS THE ASSESSEE COULD NOT ESTABLISH THAT PAYMENTS W ERE MADE ONLY TO PRODUCERS WHICH IS THE PRIME QUALIFICATION FOR C LAIMING EXEMPTION UNDER RULE 6DD, THE ADDITION WAS MADE. .THESE CIRCU LARS WERE NOT CONSIDERED BY LD.CIT(A). 10. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAYBE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS AN INDIVIDUAL ENGAGED IN THE BUSI NESS OF TRADING OF HIDES AND SKINS. THE RETURN OF INCOME FOR THE ASSE SSMENT YEAR 2015-16 WAS FILED DISCLOSING TOTAL INCOME OF RS. 13,79,640/ -. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY T HE ASST. CIT, CIRCLE-1, VELLORE (HEREINAFTER CALLED AO) VIDE OR DER DATED 27.12.2017 ITA NO.3050/CHNY/2018 :- 4 -: PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS. 2,25,42,580/- AFTER MAKING THE FOLLOW ING ADDITIONS: A) DISALLOWANCE ON ACCOUNT OF S. 40A(3) - RS. 2,00 ,54,235/- B) DISALLOWANCE ON ACCOUNT OF S. 40(A)(IA) - RS. 7,48,706/- C) DISALLOWANCE ON ACCOUNT OF S. 14A - RS. 3, 60,000/- 4. BEING AGGRIEVED BY THE ABOVE ADDITIONS, AN APPEA L WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER DELETED THE ADDITIONS. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US IN TH E PRESENT APPEAL CHALLENGING THE DECISIONS OF LD. CIT(A) TO DELETE T HE ADDITION OF RS. 2,00,54,235/- U/S. 40A(3) OF THE ACT. 5. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE INVOLVED IN THE PRESENT APPEAL R EVOLVES AROUND APPLICABILITY OF PROVISIONS OF RULES U/R. 6DD OF TH E INCOME TAX RULES, 1962 (HEREAFTER CALLED THE RULES), THE CASH PAYME NTS MADE TOWARDS PURCHASE OF HIDES AND SKINS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE RESPONDENT-ASS ESSEE MADE CASH PAYMENT TO THE SUPPLIERS OF HIDES AND SKINS, WHICH IS BEING USED IN HIS BUSINESS. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS THE FACTUM OF MAKING CASH PAYMENT EXCEEDING RS. 20,000/- IN A DAY TO A SINGLE PERSON WAS NOT DISPUTED. HOWEVER, THE APPELLANT HAD TAKEN THE PLEA BEFORE THE AO THAT CASH PAYMENTS MADE BY THE RESPONDENT-ASSESS EE ARE COVERED BY THE EXCEPTIONS ENUMERATED U/R. 6DD OF THE RULES. IT IS CONTENDED THAT THE CLAUSE (E) OF R. 6DD OF THE RULES IS APPLICABLE AS THE PAYMENTS WERE ITA NO.3050/CHNY/2018 :- 5 -: MADE TO PURCHASE LIVE STOCK OF HIDES AND SKINS HE A LSO PLACED RELIANCE ON CBDT CIRCULAR NO.4/16 DATED 29.03.2006. HOWEVER , THE AO TOOK THE VIEW THAT THE EXCEPTIONS ENUMERATED UNDER CLAUSE (E ) OF R. 6DD OF THE RULES IS NOT APPLICABLE AS THE PAYMENTS WERE NOT MA DE TO THE DIRECT PRODUCER OF THE LIVE STOCK , BUT TO THE MIDDLE MEN. THE ASSESSEE ALSO FAILED TO PRODUCE THE PAYEES FOR THE VERIFICATION A ND THEREFORE, HE DREW ADVERSE INFERENCE AND HELD THAT THE EXCEPTIONS ENUM ERATED UNDER CLAUSE (E) OF R. 6DD OF THE RULES ARE NOT APPLICABLE. 6. ON APPEAL BEFORE LD. CIT(A), THE LD. CIT(A) DELE TED THE ADDITION BY HOLDING THAT THE APPELLANT WAS COMPELLED TO MAKE TH E CASH PAYMENTS HAVING REGARD TO THE NATURE OF THE BUSINESS OF THE APPELLANT. 7. THE REVENUE IS CHALLENGING THE DECISION OF LD. C IT(A) ON THE GROUND THAT THE FINDING OF THE LD. CIT(A) IS NOT BA SED ON THE FACTS AND EVIDENCE OF THE CASE. ON THE OTHER HAND, THE COUNSE L FOR THE RESPONDENT- ASSESSEE PLEADED BEFORE US THAT NO SINGLE PAYMENT E XCEEDS RS. 20,000/- IN A DAY AND THEREFORE, THE QUESTION OF DI SALLOWANCE OF S. 40A(3) OF THE ACT DOES NOT ARISE. IN SUPPORT OF THIS COPY OF LEDGER WAS FILED BEFORE US. 8. ON PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIE S, IT IS CLEAR THAT THE PLEA THAT NO SINGLE PAYMENT EXCEEDING RS. 20,000/- IN CASH WAS NOT MADE BEFORE LOWER AUTHORITIES. FURTHER, NO EVIDENC E WAS FILED BEFORE THE ITA NO.3050/CHNY/2018 :- 6 -: AO TO SHOW THAT THE HIDES AND SKINS OF THE ANIMALS WAS PRODUCED DIRECTLY FROM THE PRODUCER SO AS TO COME WITHIN THE SCOPE OF THE EXCEPTIONS CULLED OUT IN CLAUSE (E) OF R. 6DD OF THE RULES. TH E ISSUE WHETHER THE ASSESSEE DIRECTLY BOUGHT HIDES AND SKINS FROM THE P RODUCER OR FROM MIDDLE MEN IS A QUESTION OF FACT, WHICH REQUIRES TO BE PROVED BY LEADING THE NECESSARY EVIDENCE. FROM THE PERUSAL OF THE AS SESSMENT ORDER, IT IS CLEAR THAT THE ASSESSEE HAD FAILED TO PRODUCE THE S UPPLIER OF THE HIDES AND SKINS BEFORE THE AO FOR THE PURPOSE OF VERIFYIN G WHETHER THE PURCHASES WERE MADE FROM THE DIRECT PRODUCER OR MID DLE MEN UNLESS, THIS ISSUE IS PROVED BEYOND THE DOUBT, THE QUESTION OF WHETHER OR NOT THE CASH PAYMENTS ARE COVERED BY EXCEPTIONS ENUMERATED U/R. 6DD OF THE RULES CANNOT BE DECIDED. SIMILARLY, THE PLEA TAKEN BEFORE US THAT NO SINGLE PAYMENT EXCEEDED RS. 20,000/- IN CASH CANNOT BE ACCEPTED AS IT IS A PURELY A FACTUAL MATTER, AS IT WAS NOT TAKEN B EFORE THE LOWER AUTHORITIES AND THEREFORE, IT CANNOT BE ADMITTED AT THIS STAGE, UNLESS THE MATERIAL IS BROUGHT ON RECORD IN ACCORDANCE WITH PR OCEDURE KNOWN TO THE LAW. THEREFORE, THE LD. CIT(A) WITHOUT EXAMINING TH E EVIDENCE WHETHER THE PURCHASES ARE MADE FROM THE MIDDLE MEN OR PRODU CER HAD SIMPLY DIRECTED THE AO TO DELETE THE ADDITION U/S. 40A(3). THEREFORE, THE ORDER OF THE LD. CIT(A) IS BALD CANNOT BE SUSTAINED IN TH E EYE OF LAW AND THE FINDINGS OF THE LD. CIT(A) TO THIS EXTENT ARE REVER SED. SINCE, THE RESPONDENT-ASSESSEE HAS FAILED TO PRODUCE THE SUPPL IERS OF HIDES AND ITA NO.3050/CHNY/2018 :- 7 -: SKINS BEFORE THE AO AND NOT EVEN DETAILS SUCH AS NA MES AND ADDRESSES OF SUCH SUPPLIERS WERE FURNISHED AND EVEN BEFORE US NO DETAILS WERE FILED, WE REVERSE THE ORDER OF LD. CIT(A) AND ALLOW THE APPEAL FILED BY THE REVENUE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED. ORDER PRONOUNCED ON THE 23 RD DAY OF APRIL, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! ' ) (INTURI RAMA RAO) # /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 23 RD APRIL, 2019. EDN, SR. P.S + ).23 43&. /COPY TO: 1. '( /APPELLANT 2. )*'( /RESPONDENT 3. - 5. ( )/CIT(A) 4. - 5. /CIT 5. 36 ). /DR 6. 7% 8 /GF