Income Tax Officer Ward-6(2)(4), Bangalore V. Smt Chandra Moolchand Jain , Bangalore

ITA 3217/BANG/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4542 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 30-11-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: R K SINGHVI
• Keywords: Opportunity of being heard; Additional evidence; Set aside
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.3217/BANG/2018 ASSESSMENT YEAR : 2014-15 THE INCOME TAX OFFICER, WARD-6(2)(4), BANGALORE. VS. SMT. CHANDRA MOOLCHAND JAIN, NO.1101, II FLOOR, TRIVENI ROAD, YESHWANTPUR, BANGALORE-560 022. PAN ACYPJ 2331 B APPELLANT RESPONDENT APPELLANT BY : DR. P.V PRADEEP KUMAR, ADDL. CIT (DR) RESPONDENT BY : SHRI R.K SINGHVI, C.A DATE OF HEARING : 22.08.2019 DATE OF PRONOUNCEMENT : 28.08.2019 O R D E R PER N.V VASUDEVAN, VICE PRESIDENT : THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 27/9/2018 OF CIT(A)-13 BANGALORE RELATING TO ASST. YEAR 2014-15. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ S AS FOLLOWS:- 1. THE ORDER OF THE CIT (APPEALS) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 2,10,74,291/- MADE BY THE ASSESSING OFFICER U/S 40A(3) OF THE ACT? ITA NO.3217/BANG/2018 PAGE 2 OF 8 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD CIT(A) IS JUSTIFIED IN HOLDING THAT THE CLAUSE (K) OF RULE 6DD IS APPLICABLE IN THE CAS E OF ASSESSEE? 4. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT(A), IN SO FAR AS IT RELAT ES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 3. THE ASSESSEE IS A AN INDIVIDUAL AND IS A WHOLESA LE DEALER IN GOLD AND SILVER BULLION. THE ASSESSEE FILED HER RET URN OF INCOME FOR THE ASST. YEAR 2014-15 ON 08.01.2015 DECLARING A TO TAL INCOME OF RS.4,40,250/-. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO PROPOSED TO THE ASSESSEE THAT THE AMOUNT PA ID FOR PURCHASES IN EXCESS OF RS.20,000/- WILL BE DISALLOW ED U/S 40A(3) OF THE ACT. THE ASSESSEE SUBMITTED THAT A. SHE HAS COMMENCED HER BUSINESS NEW AND TO GET CREDIBILITY, SHE HAD TO MAKE PAYMENTS IN CASH. B. THE BUSINESS IN GOLD WAS MOSTLY AFTER THE BANKIN G HOURS AND HENCE, PAYMENTS HAD TO BE MADE IN CASH. C. THE SELLERS HAD GIVEN DISCOUNT FOR CASH PAYMENTS , WHICH CAN BE SEEN FROM THE DIFFERENCE IN RATES BETW EEN ACTUAL RATE AND THE RATE AT WHICH SHE HAD MADE PURC HASES. D. THE PERSONS TO WHOM SUCH PAYMENTS ARE MADE ARE A LL IDENTIFIABLE AND THE SOURCE OF PAYMENTS ARE DULY RE CORDED IN THE BOOKS OF ACCOUNT. ITA NO.3217/BANG/2018 PAGE 3 OF 8 4. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE PLEA OF THE ASSESSEE AND BY HIS ORDER 19.12.2016 DISALLOWED A S UM OF RS.2,10,75,191/- WHICH WAS CASH PAYMENTS IN EXCESS OF RS.20,000/- UNDER SECTION 40A(3) OF THE ACT. ACCOR DING TO THE AO, THE ASSESSEE HAS NOT PROVED THAT THE TRANSACTIONS T OOK PLACE AFTER BANKING HOURS AND THAT THE CASE OF THE ASSESSEE IS NOT COVERED UNDER ANY OF THE CIRCUMSTANCES MENTIONED IN RULE 6D D OF THE I T RULE, 1962. 5. BEFORE CIT(A), THE ASSESSEE SUBMITTED THAT THE A SESSEE HAD STARTED THE BUSINESS OF BULLION, IN THE ASSESSMENT YEAR 2014-15 AND THAT THE ASSESSEE WAS NEW TO THIS BUSINESS AND HAD NO CONTACTS IN THE MARKET. THE ASSESSEE SUBMITTED THAT IT IS A PRACTICE IN GOLD/SILVER BULLION BUSINESS THAT THE SALE/PURCH ASES ARE MADE IN CASH AS THE MARKET IS VOLATILE. SINCE THE ASSESS EE WAS NEW ENTRANT IN THIS LINE OF BUSINESS, SHE HAD NOT CONTA CTS IN THE MARKET. SHE WAS NOT ABLE TO PURCHASE THE GOLD / SIL VER IN THE MARKET AGAINST CHEQUE/DD/RTGS. THAT THE PRICES OF G OLD, & SILVER BU1LION ARE CONTROLLED BY INTERNATIONAL MARK ET, WHICH OPEN BY 11.30 A.M. AND CLOSES BY MIDNIGHT. BECAUSE O F THE VOLATILE NATURE OF THE MARKET, THE ASSESSEE HAD TO CONFIRM T HE PRICES AND QUANTITY ONLY BY GIVING CASH AND THAT MOST OF PURCH ASES ARE MADE FROM THE PEOPLE/DEALERS, WHO HAS REPUTATION AND QUA LITY & QUANTITY. SO THE GUARANTEE COULD BE TAKEN FOR THE PURCHASE OF GOLD/SILVER. THE ASSESSEE SUBMITTED THAT CASH PURCH ASE ARE MADE WITHIN THE PURVIEW OF SEC. 40A(3) AND THE SAID SECT ION OUGHT NOT TO HAVE BEEN INVOKED IN THE CASE OF ASSESSEE. ITA NO.3217/BANG/2018 PAGE 4 OF 8 6. THE ASSESSEE ALSO PLACED RELIANCE ON CERTAIN JUD ICIAL PRONOUNCEMENTS: AND IN PARTICULAR THE DECISION OF T HE ITAT BANGALORE BENCH IN THE CASE OF SHRI VENKATESHKABADE VS. DCIT IN ITA NO.313/BANG/2012 ORDER DATED 30/5/2012. THE AS SESSEE FILED THE FOLLOWING ADDITIONAL EVIDENCES BEFORE THE CIT(A). 1. CASH BOOK FOR VERIFICATION 2. REASONS FOR RATE VARIATION 3. SALES REGISTER WHICH CONTAINED PARTY'S TIN NUMBE RS 4. VAT RETURNS WHICH CONFIRMS THE TURNOVER DECLARED TO THE COMMERCIAL TAX DEPORTMENT. 5. BANK STATEMENT. 7. THE CIT(A) ON A CONSIDERATION OF THE SUBMISSIONS OF THE ASSESSEE AND OTHER DETAILS, DELETED THE ADDITION MA DE BY THE AO BY OBSERVING AS FOLLOWS:- I HAVE EXAMINED THE FACTS OF THE CASE. I HAVE GONE THROUGH THE ASSESSMENT ORDER. IN THE ASSESSMENT ORDER, THE. AO HAS CATEGORICALLY RECORDED THE SUBMISSIONS MADE BY THE ASSESSEE AT PARA 4.5 AND 6. HOWEVER, IT IS STATED IN THE ASSESSMENT ORDER THAT ASSESSEE DID NOT FURNISH ANY DOCUMENTARY PROOF THAT THE TRANSACTIONS WERE DONE AFTER BANKING HOURS. THIS VIEW OF THE ASSESSING OFFICER APPEARS T O FAR FROM REALITY. EXCEPT IN SUPERMARKETS AND BIG MALLS WHICH ARE UTILIZING BILLING MACHINES, THE TIM E OF SALE IS NOT EVIDENT FROM THE BILL. SO, THE APPELLAN T STATED HER INABILITY TO FURNISH THE TIME OF TRANSACTIONS, BEING NEW INTO THE BULLION BUSINESS. THERE IS NO CONCLUSION DRAWN BY THE AO THAT I. THERE IS A SUPPRESSION OF TURN OVER II. THERE IS INFLATION OF PURCHASES. III. THE PARTIES TO WHOM PAYMENTS ARE MADE ARE NOT IDENTIFIABLE OR NON EXISTENT ITA NO.3217/BANG/2018 PAGE 5 OF 8 IV. THERE ARE IN FACT NO REAL PURCHASES AT ALL V. THERE IS AN ATTEMPT TO USE THE UNACCOUNTED MONEY OR BLACK MONEY. IN THE ABSENCE OF THE ABOVE FACTORS, I AM OF THE CONSIDERED OPINION THAT THE CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF HON'BLE ITAT IN THE CASE OF SHRI VENKAETSH KABADE VS. DCIT IN ITA NO.313/BANG/2012 DATED 30.5.2012, WHICH WAS CONFIRMED BY THE HON'BLE KARNATAKA HIGH COURT IN 223 TAX.MANN 116. 8. APART FROM THE ABOVE OBSERVATIONS, THE CIT(A) AL SO MADE REFERENCE TO THE DECISION OF THE JAIPUR BENCH OF IT AT IN THE CASE OF A. DAGA ROYAL ARTS VS. ITO (2018) 94 TAXMANN.COM 40 1 (JAIPUR - TRIB.). THE AFORESAID DECISION WAS RENDERED IN THE CONTEXT OF ERSTWHILE RULE 6DD(J) OF THE ITAT RULES 1963 WHICH DID NOT EXIST FOR AY 2014-15, WHICH IS THE AY INVOLVED IN THIS AP PEAL. FOLLOWING THE SAME, THE CIT(A) DELETED THE ADDITION MADE BY T HE AO. 10. AGGRIEVED BY THE AFORESAID ORDER OF THE CIT(A), THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNA L. 11. AT THE TIME OF HEARING IT WAS AGREED BY THE PAR TIES THAT THE ADDITIONAL EVIDENCE BASED ON WHICH THE CIT(A) CAME TO THE CONCLUSION THAT WERE EXCEPTIONAL CIRCUMSTANCES FOR MAKING PAYMENT IN CASH IN VIOLATION OF SEC.40A(3) OF THE A CT WERE BASED ON THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFOR E CIT(A). IT IS ADMITTED BY THE PARTIES BEFORE US THAT THE ADDITION AL EVIDENCE RELIED UPON BY THE CIT(A) WAS NO NOT CONFRONTED TO THE AO AND THE REMAND REPORT OBTAINED IN TERMS OF 46A OF THE RULE S. THE PARTIES AGREED THAT THE MATTER SHOULD BE RESORTED TO THE FI LE OF THE AO FOR ITA NO.3217/BANG/2018 PAGE 6 OF 8 DENOVO CONSIDERATION IN THE LIGHT OF THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE BEFORE THE CIT(A). 12. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIE S AND ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) SHOULD BE SET ASIDE AND THE ISSUE OF DISALLOWANCE U/S 40A(3) OF THE ACT HAS TO BE REMANDED TO THE AO FOR CONSIDERATION AFRESH IN THE LIGHT OF THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE CIT(A). WE ALSO FIND THAT THE FINDINGS OF THE CIT(A) ON WHICH SPECIFIC RULE O F RULE 6DD UNDER WHICH THE CASH PAYMENT IN QUESTION CONTRARY TO SEC. 40A(3) COULD BE PERMITTED IS NOT CLEAR. IN THE CIRCUMSTANCES, WE ARE UNABLE TO COMMENT OR GIVING FINDING WITH REGARD TO THE CORREC TNESS OF THE CONCLUSIONS OF THE CIT(A). 13. WE ARE THEREFORE OF THE VIEW THAT THE MATTER S HOULD BE REMANDED TO THE CIT(A) FOR CONSIDERATION AFRESH. TH E CIT(A) WILL EXAMINE THE CLAIM OF THE ASSESSEE FOR NON APPLICABI LITY OF SEC. 40A(3) OF THE ACT IN THE LIGHT OF THE PROVISIONS OF RULE 6DD OF THE RULES. THE AO WILL AFFORD AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE DECIDING THE ISSUE. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST, 2019. SD/- SD/- ( JASON P BOAZ ) ( N.V. VASUDEV AN) ACCOUNTANT MEMBER VICE P RESIDENT BANGALORE DATED, THE 28 TH AUGUST, 2019../VMS/ ITA NO.3217/BANG/2018 PAGE 7 OF 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ASSISTANT R EGISTRAR, ITAT, BANGALORE ITA NO.3217/BANG/2018 PAGE 8 OF 8 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. DICTATION NOTE ENCLOSED . 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SECTION FOR DISPATCH OF THE TRIBUNAL ORDER .