ITO 6(1)(2), MUMBAI V. ALLCON ESTATE P. LTD, MUMBAI

ITA 3084/MUM/2012

• Counselvise Citation: 308419914 RSA 2012
• Duration Of Justice: 3 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 04-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E SHRIDHAR
• Section: 40A(3); 143(3)

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO. 3084 /MUM/2012 ( / ASSESSMENT YEAR : 2008-09 ITO 6 ( 1 ) - 2, R. NO. 503, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. / VS. M/S ALLCON ESTATES PVT. LTD, 396, KAMAT INDUSTRIAL ESTATE, VEER SAVARKAR MARG, PRABHADEVI, MUMBAI 400 025. ./ PAN : AAGCA2387R ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI E. SHRIDHAR R E SPONDENT BY : SHRI SALIL KAPOOR / DATE OF HEARING : 29-07-2015 / DATE OF PRONOUNCEMENT : 21-08-2015 [ !' / O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THIS IS DEPARTMENTS APPEAL FOR A.Y. 2008-09, CHALL ENGING THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION MADE U/S 40 A(3) OF THE INCOME TAX ACT, 1961 MADE BY THE A.O., BEING PAYMENT MADE TO M/S KS L INDUSTRIES LTD. BY M/S BRESCON REALITY PVT. LTD. 2. THE FACTS RELATING TO THE ABOVE ISSUE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN THE FABRICS. THE ASSESS EE COMPANY FILED ITS RETURN OF INCOME DECLARING INCOME OF RS. 4,064/- ON 25.09. 2008. ITA 3084/M/12 2 3. BROADLY, THE MAIN GROUND OF APPEAL RAISED BEFORE US IS WHETHER THE PURCHASES AMOUNTING TO RS. 33,45,772/- BY INVOKING THE PROVISIONS OF SECTION 40A(3) READ WITH CLAUSE (D) OF RULE 6D OF THE I.T. RULES, 1962 SHOULD BE ALLOWED AS EXPENSES OR NOT. DURING THE ASSESSMENT P ROCEEDINGS U/S 143(3) OF THE ACT, THE A.O. OBSERVED THAT THE ASSESSEE COMPAN Y PURCHASED FABRICS FROM ANOTHER COMPANY M/S KSL & INDUSTRIES LTD. DURING TH E CURRENT PREVIOUS YEAR AGGREGATING TO RS. 34,60,342/-. THE A.O. NOTICED T HAT THE SAID COMPANY M/S KSL & INDUSTRIES LTD. HAD RECEIVED CASH OF RS. 40,3 6,095/- OUT OF WHICH THE CASH RECEIVED IN RESPECT OF THE DEBIT ENTRY AGAINST THE ASSESSEE WAS RS. 33,45,772/-. THE A.O., ACCORDINGLY, ISSUED NOTICE T O THE ASSESSEE REQUIRING IT TO SHOW CAUSE AS TO WHY THE AMOUNT OF RS. 33,45,772 /- MAY NOT BE DISALLOWED IN VIEW OF PROVISIONS OF SECTION 40A(3) OF THE ACT. IN REPLY, THE ASSESSE SUBMITTED THAT ON ITS BEHALF, THE AMOUNT HA D BEEN PAID TO KSL & INDUSTRIES LTD. BY A THIRD PARTY NAMELY M/S BRESCON REALITY PVT. LTD. ON VARIOUS DATES AND ALL THE PAYMENTS WERE BELOW RS. 2 0,000/-. THE A.O. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE AND REL YING ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF KISHANCHAND MAHESHWARI DASS, 121 ITR 232, HELD THAT THE PROVISI ONS OF SECTION 40A(3) OF THE ACT IS APPLICABLE IN THE CASE OF THE ASSESSEE A ND ACCORDINGLY DISALLOWED THE SAID AMOUNT OF RS. 33,45,772/-. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) IN APPEAL AND SUBMITTED THAT THE AMOUNT HAS BEEN PAID TO M/S KSL & INDUSTRIES LTD. BY A THIRD PARTY M/S BRESCON REALITY PVT. LTD. ON VARIOU S DATES AND ALL PAYMENTS WERE BELOW AN AMOUNT OF RS. 20,000/-, HENCE, THE PR OVISIONS OF SECTION 40A(3) OF THE ACT WOULD NOT BE APPLIED. THE ASSESS EE FURTHER STATED THAT IT PURCHASED FABRICS FROM KSL & INDUSTRIES LTD. ON EIG HT OCCASIONS AND MADE PAYMENTS IN CASH ON 42 OCCASIONS AGGREGATING TO RS. 6,90,323/-. EACH TIME THE ASSESSEE MADE PAYMENT LESS THAN RS. 20,000/- IN CASH TO M/S KSL & INDUSTRIES LTD. THE FABRICS PURCHASED BY THE ASSESS EE WAS SOLD IN FULL TO M/S ITA 3084/M/12 3 BRESCON REALITY PVT. LTD. FOR A CONSIDERATION OF RS . 36,14,524/-. THE ASSESSEE HAD RECEIVED CASH PAYMENT FROM M/S BRESCON REALITY PVT. LTD. ON NINE OCCASIONS FOR AN AGGREGATE AMOUNT OF RS. 1,54,182/- . EACH TIME, THE CASH WAS RECEIVED LESS THAN RS. 20,000/-. DURING THE PR EVIOUS YEAR RELEVANT TO A.Y. 2008-09, M/S BRESCON REALITY PVT. LTD. TO WHOM THE FABRICS WAS SOLD HAD MADE PAYMENT TO M/S KSL & INDUSTRIES LTD. AGGREGATI NG TO A TOTAL AMOUNT OF RS. 33,45,772/- AND THE SAID M/S KSL & INDUSTRIES L TD. IN ITS BOOKS OF ACCOUNT HAS SHOWN THESE CASH RECEIPTS IN THE NAME O F ALLCON ESTATE PVT. LTD., I.E. THE ASSESSEE HEREIN. HOWEVER, THESE CASH PAYM ENTS MADE BY M/S BRISCON REALITY PVT. LTD. ON BEHALF OF THE ASSESSE WERE BEL OW RS. 20,000/-. THE ASSESSEE FURTHER STATED THAT THE A.O., IN HIS IMPUG NED ORDER, HAS MADE THE SAID ADDITION OF RS. 33,45,772/- BY WRONGLY INVOKI NG THE PROVISIONS OF SECTION 40A(3) OF THE ACT THINKING IT TO BE A SINGL E CASH PAYMENT TO M/S KSL & INDUSTRIES LTD. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION AND JUDICIAL PRONOUNCEMENTS CITED BY THE ASSESSEE OBSERVED THAT THE DISPUTE IN THIS ISSUE IS THE PAYMENT OF RS. 33,45,772/- MADE DIRECTLY BY M/S BRESCON REALITY PVT. LTD. TO M/S KSL INDUSTRIES ON BEHALF OF THE ASSESSE E. THE PAYMENT WAS MADE FROM DISCLOSED SOURCES AND EVERY TRANSACTION WAS EN TERED INTO THE BOOKS OF ACCOUNTS OF THE PARTIES. THE LD. CIT(A) FURTHER OBS ERVED THAT THE PARTIES HAD CONFIRMED THAT THE TRANSACTIONS INDIVIDUALLY MADE W ERE BELOW RS. 20,000/-, THEREFORE, HE HELD THAT NO DISALLOWANCE CAN BE MADE BY APPLYING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. REGARDING APPLICATION OF CLAUSE (D) OF RULE 6D OF I.T. RULES, 1962, THE LD. CIT(A) OBSERVE D THAT AS PER BOARDS CIRCULAR NO. 220 ISSUED ON 31 ST MAY, 1977, IN CERTAIN CONDITIONS, SECTION 40A(3) WILL NOT BE APPLICABLE, HOWEVER THEY ARE NOT EXHAUSTIVE. HE FURTHER OBSERVED THAT NO INDIVIDUAL PAYMENT MADE BY M/S BRE SCON REALITY PVT. LTD. TO M/S KSL & INDUSTRIES LTD., WAS IN EXCESS OF RS. 20,000/-, THEREFORE, THE LD. CIT(A) HELD THAT THE PAYMENTS WERE NOT HIT BY THE P ROVISIONS OF SECTION 40A(3) OF THE ACT AND, HENCE, THE DISALLOWANCE MADE BY THE A.O. WAS NOT JUSTIFIED. ITA 3084/M/12 4 AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVEN UE HAS PREFERRED THIS APPEAL BEFORE US. 5. THE LD. D.R. HAS STRONGLY RELIED ON THE ORDER OF THE A.O., WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDE R OF THE LD. CIT(A). 6. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE INTENTION OF THE LEGISLATURE AS IMBIBED IN THE PROV ISIONS OF SECTION 40A(3) OF THE ACT, WE FIND THAT THERE IS NO PAYMENT THAT WAS MADE IN A SINGLE DAY IN CASH WHICH EXCEEDED THE AMOUNT OF RS. 20,000/-. THE A.O. EVEN HAD LOOKED INTO THE JOURNAL ENTRIES OF THE VARIOUS TRANSACTION S INVOLVED IN THIS CASE AND THE TOTAL AMOUNT OF MONEY SPENT WAS ALL RECORDED IN THE BOOKS OF ACCOUNT. THE PROVISIONS OF SECTION 40A(3) OF THE ACT ARE APP LICABLE ONLY IF THERE HAD BEEN AGGREGATE CASH PAYMENT OF MORE THAN RS. 20,000 /- IN A SINGLE DAY, WHICH IS NOT THE CASE OVER HERE. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIRNESS, WE FEEL IT FIT AND PROPER TO SUSTAIN THE ORDER OF THE LD. CIT(A) ALLOWING THE EXPENSES MADE BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST, 2015. !' # $% &! ' 21-08-2015 ( ) SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER $ * MUMBAI ; &! DATED 21-08-2015 [ .+../ R.K. R.K. R.K. R.K. , SR. PS ITA 3084/M/12 5 ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. , () / THE CIT(A)- CONCERNED, MUMBAI 4. , / CIT- CONCERNED, MUMBAI 5. /0( ++12 , 12 , $ * / DR, ITAT, MUMBAI G BENCH 6. (45 6 / GUARD FILE. ' / BY ORDER, / + //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ * / ITAT, MUMBAI