Cortex Enterprises, CHENNAI V. ITO Non Corporate WArd 1(5), CHENNAI

ITA 3377/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6566 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 10-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN
• Assessee Lawyers: T PRAMODKUMAR CHOPDA
• Keywords: Reassessment proceedings
• Section: 271(1)(c); 40A(3); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NOS.3377, 3378, 3379 & 3380/CHNY/2018 ( )( / ASSESSMENT YEARS : 2011-12, 2012-13, 2013-14 & 201 4-15 M/S CORTEX ENTERPRISES, NO.23, 2 ND STREET, EAST ABHIRAMPURAM, MYLAPORE, CHENNAI - 600 004. PAN : AAHFC 4636 K V. THE INCOME TAX OFFICER, NON CORPORATE WARD 1(5), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SH. T. PRAMODKUMAR CHOPDA, ADVOCA TE -.+, / 0 / RESPONDENT BY : SHRI B. SAGADEVAN, JCIT 1 / 2% / DATE OF HEARING : 03.04.2019 3') / 2% / DATE OF PRONOUNCEMENT : 30.04.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : ALL THE FOUR APPEALS OF THE ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) -2, CHENNAI, PERTAINING TO ASSESSMENT YEARS 2011-12, 20 12-13, 2013- 14 AND 2014-15. SINCE COMMON ISSUE ARISES FOR CONS IDERATION IN ALL 2 I.T.A. NOS.3377 TO 3380/CHNY/18 THESE APPEALS, WE HEARD THESE APPEALS TOGETHER AND DISPOSING THE SAME BY THIS COMMON ORDER. 2. SHRI T. PRAMODKUMAR CHOPDA, THE LD.COUNSEL FOR T HE ASSESSEE, SUBMITTED THAT THE ASSESSEE IS CHALLENGIN G THE REASSESSMENT PROCEEDINGS FOR ASSESSMENT YEARS 2011- 12 AND 2012-13. HOWEVER, ACCORDING TO THE LD. COUNSEL, FO R ASSESSMENT YEARS 2013-14 AND 2014-15, THE ASSESSEE IS CHALLENG ING REGULAR ASSESSMENTS. REFERRING TO THE ASSESSMENTS FOR ASSE SSMENT YEARS 2011-12 AND 2012-13, THE LD.COUNSEL SUBMITTED THAT THE ASSESSEE, A PARTNERSHIP FIRM, FILED ITS RETURNS OF INCOME FOR THE ASSESSMENT YEARS 2011-12 AND 2012-13 ON 30.09.2011 AND 25.09.2 012 RESPECTIVELY. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT' ) ON 02.03.2016 FOR BOTH THE ASSESSMENT YEARS. REFERRING TO THE RE ASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSME NTS, THE LD.COUNSEL SUBMITTED THAT THE ASSESSING OFFICER FOU ND DURING SCRUTINY PROCEEDING FOR THE ASSESSMENT YEARS 2012-1 3 AND 2013- 14, THAT PAYMENTS WERE MADE EXCEEDING 20,000/- ON VARIOUS DATES TO VARIOUS PERSONS FOR PURCHASE AS WELL AS FOR OTHE R EXPENDITURES. ON A QUERY FROM THE BENCH, THE LD.COUNSEL SUBMITTED THAT THE 3 I.T.A. NOS.3377 TO 3380/CHNY/18 ASSESSMENTS WERE REOPENED WITHIN FOUR YEARS FROM TH E DATE OF THE RELEVANT ASSESSMENT YEARS. ACCORDING TO THE LD. CO UNSEL, EVEN THOUGH FOR ASSESSMENT YEAR 2011-12, THE ASSESSING O FFICER FOUND THAT THE INCOME ESCAPED TO THE EXTENT OF 1,06,27,437/-, THE ASSESSMENT WAS COMPLETED BY MAKING DISALLOWANCE OF 1,16,32,981/-. THEREFORE, THE ASSESSING OFFICER, A CCORDING TO THE LD. COUNSEL, EXCEEDED THE REASONS RECORDED TO REOPE N THE ASSESSMENT, THEREFORE, THE REASSESSMENT CANNOT STAN D IN THE EYE OF LAW. 3. COMING TO THE MERIT OF THE APPEALS FOR ALL THE A SSESSMENT YEARS, SHRI T. PRAMODKUMAR CHOPDA, THE LD.COUNSEL F OR THE ASSESSEE, SUBMITTED THAT M/S CORTEX AGENCIES, A REL ATED PARTNERSHIP FIRM OF THE ASSESSEE-FIRM, WAS ESTABLIS HED IN 17.09.2008. M/S CORTEX AGENCIES WAS ENGAGED ITSELF AS WHOLESALE DEALER OF ITC PRODUCTS. AS PER THE AGREEMENT, ACCO RDING TO THE LD. COUNSEL, THE ASSESSEE-PARTNERSHIP FIRM WAS TO DEPOS IT CASH IN UNION BANK OF INDIA ACCOUNT OF M/S CORTEX AGENCIES. THE MONEY WAS DIRECTLY DEPOSITED IN THE BANK ACCOUNT OF M/S CORTE X AGENCIES. ACCORDING TO THE LD. COUNSEL, THE MONEY WAS DEPOSIT ED FOR THE PURPOSE OF FACILITATING M/S CORTEX AGENCIES TO HONO UR THE RTGS 4 I.T.A. NOS.3377 TO 3380/CHNY/18 PAYMENTS TO ITC LTD. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE PURCHASED STOCK FROM M/S CORTEX AGENCIES BY PAYING CASH. ACCORDING TO THE LD. COUNSEL, THE PAYMENT WAS DIREC TLY DEPOSITED INTO BANK ACCOUNT OF M/S CORTEX AGENCIES, THEREFORE , THE PROVISIONS OF SECTION 40A(3) OF THE ACT IS NOT APPLICABLE AT A LL. THE LD.COUNSEL PLACED HIS RELIANCE ON THE JUDGMENT OF PUNJAB & HAR YANA HIGH COURT IN CIT V. SMT. SHELLY PASSI (2013) 31 TAXMANN .COM 173 AND SUBMITTED THAT THE PAYMENT WAS GENUINE, THEREFORE, THE PROVISIONS OF SECTION 40A(3) OF THE ACT IS NOT APPLICABLE AT A LL. WHEN THE ATTENTION OF THE LD.COUNSEL WAS DRAWN TO THE PROVIS IONS OF SECTION 40A(3) OF THE ACT AND RAISED A QUERY HOW A GENUINE PAYMENT COULD NOT BE DISALLOWED UNDER SECTION 40A(3)? THE LD.COU NSEL COULD NOT CLARIFY THE POSITION. IT WAS ALSO BROUGHT TO THE N OTICE OF THE LD.COUNSEL THAT ONLY GENUINE PAYMENT HAS TO BE DISA LLOWED BY APPLYING PROVISIONS OF SECTION 40A(3) OF THE ACT. WHEN THE PAYMENT IS NOT GENUINE, THE PROVISIONS OF SECTION 4 0A(3) ITSELF IS NOT APPLICABLE. WHEN A QUERY WAS RAISED, THE LD.COUNSE L COULD NOT CLARIFY THE POSITION AND HE SIMPLY PLACED HIS RELIA NCE ON THE JUDGMENT OF GAUHATI HIGH COURT IN WALFORD TRANSPORT (EASTERN INDIA) LTD. V. CIT (240 ITR 902). THE LD.COUNSEL F URTHER SUBMITTED 5 I.T.A. NOS.3377 TO 3380/CHNY/18 THAT THE IDENTITY OF THE PAYER IS ALSO NOT DISPUTED , THEREFORE, THERE CANNOT BE ANY DISALLOWANCE. 4. WHEN THE ATTENTION OF THE LD.COUNSEL FOR THE ASS ESSEE WAS DRAWN TO THE JUDGMENT OF APEX COURT IN ADI (INVESTI GATION) V. KUM. A.B. SHANTHI (2002) 255 ITR 258 WHEREIN THE APEX CO URT FOUND THAT THE PROVISIONS WERE ENACTED TO REGULATE THE PAYMENT AND TO CURB BLACK MONEY CIRCULATION IN THE COUNTRY AND UNDUE HA RDSHIP IS VERY MUCH MITIGATED. THE ATTENTION OF THE LD.COUNSEL WA S ALSO INVITED TO RULE 6DD OF INCOME-TAX RULES, 1962 WHICH MITIGATE T HE UNDUE HARDSHIP. THE LD.COUNSEL COULD NOT CLARIFY THE LEG AL POSITION. THE LD.COUNSEL FURTHER SUBMITTED THAT SINCE THE M/S COR TEX AGENCIES HAS TO MAKE PAYMENT TO ITC LTD. BY RTGS, THEY REQUI RE THE MONEY URGENTLY, THEREFORE, THE PAYMENT WAS MADE IN CASH I NTO THE BANK ACCOUNT OF M/S CORTEX AGENCIES. REFERRING TO RULE 6DD OF THE INCOME-TAX RULES, 1962, THE LD.COUNSEL VERY FAIRLY SUBMITTED THAT THE PROVISIONS RULE 6DD MAY NOT BE STRICTLY APPLICA BLE TO THE TRANSACTIONS IN THE APPEAL BEFORE THIS TRIBUNAL. 5. WE HEARD SHRI B. SAGADEVAN, THE LD. DEPARTMENTAL REPRESENTATIVE ALSO. FOR THE ASSESSMENT YEARS 2011 -12 AND 2012- 13, THE ASSESSEE IS CHALLENGING THE REOPENING OF AS SESSMENT UNDER 6 I.T.A. NOS.3377 TO 3380/CHNY/18 SECTION 147 OF THE ACT. NO DOUBT, FOUR YEARS PERIO D HAS NOT EXPIRED. BUT, WHEN THE RETURN WAS SCRUTINIZED FOR THE ASSESS MENT YEAR 2013- 14, THE ASSESSING OFFICER CAME TO KNOW THAT THERE W AS CASH PAYMENT EXCEEDING 20,000/- FOR THE ASSESSMENT YEARS 2011-12 AND 2012-13. THIS WAS THE INFORMATION AVAILABLE BE FORE THE ASSESSING OFFICER. ON THE BASIS OF THIS INFORMATIO N, THE ASSESSING OFFICER DECIDED TO REOPEN THE ASSESSMENTS AND ISSUE D NOTICE UNDER SECTION 148 OF THE ACT FOR REOPENING THE ASSESSMENT S. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS RIGHTLY REOPENED THE ASSESSMENTS. 6. THE NEXT CONTENTION OF THE ASSESSEE IS THAT REAS ON RECORDED FOR REOPENING THE ASSESSMENT WAS FOR ESCAPEMENT OF INCOME TO THE EXTENT OF 1,06,27,437/-. HOWEVER, THE ASSESSING OFFICER MADE ADDITION OF 1,16,32,981/- FOR ASSESSMENT YEAR 2011-12. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 14 7 OF THE ACT. SECTION 147 CLEARLY SAYS THAT AFTER REOPENING OF AS SESSMENT, IF THE ASSESSING OFFICER CAME TO KNOW THAT ANY OF THE INCO ME ESCAPED ASSESSMENT, HE CAN VERY WELL MAKE ADDITION / DISALL OWANCE WITH REGARD TO THE SAME. IN THIS CASE, DURING THE COURS E OF REASSESSMENT PROCEEDING, THE ASSESSING OFFICER CAME TO KNOW THAT THE PAYMENT 7 I.T.A. NOS.3377 TO 3380/CHNY/18 WAS MADE IN VIOLATION OF SECTION 40A(3) OF THE ACT TO THE EXTENT OF 1,16,32,981/-, THEREFORE, HE MADE THE DISALLOWANCE. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTE RFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SA ME IS CONFIRMED. 7. NOW COMING TO THE MERIT OF THE APPEALS, IT IS NO T IN DISPUTE THAT THE ASSESSEE MADE PAYMENT IN CASH EXCEEDING 20,000/- IN VIOLATION OF SECTION 40A(3) OF THE ACT. THE ASSESS EE CLAIMS THAT THE PAYMENT WAS MADE DIRECTLY TO THE BANK ACCOUNT OF TH E M/S CORTEX AGENCIES WHICH IS A RELATED PARTNERSHIP FIRM OF THE ASSESSEE-FIRM. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF RU LE 6DD OF THE INCOME-TAX RULES, 1962. THE PAYMENT MADE TO RESERV E BANK OF INDIA OR ANY BANKING COMPANY OR OTHER BANKS LIKE CO -OPERATIVE BANK, AGRICULTURAL CREDIT SOCIETY AND PAYMENT MADE TO LIC ARE EXEMPTED FROM DISALLOWANCE FOR CASH PAYMENT. THE M ADRAS HIGH COURT IN CIT V. VENKATADHRI CONSTRUCTIONS (2013) 31 TAXMANN.COM 71 HAD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE. THE MADRAS HIGH COURT FOUND THAT WHEN THE ASSESSEE DEPOSITED A MOUNT EXCEEDING PRESCRIBED LIMIT IN THE BANK ACCOUNT OF T HE SUPPLIER IN A DAY, PROVISIONS OF SECTION 40A(3) OF THE ACT WOULD APPLY. IN VIEW OF THE JUDGMENT OF THE MADRAS HIGH COURT, THIS TRIBUNA L IS OF THE 8 I.T.A. NOS.3377 TO 3380/CHNY/18 CONSIDERED OPINION THAT THE JUDGMENT OF PUNJAB & HA RYANA HIGH COURT IN SMT. SHELLY PASSI (SUPRA) MAY NOT BE APPLI CABLE AT ALL. 8. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THE PAYMENT WAS GENUINE, THEREFORE, IT CANNOT BE DISALLOWED. SECTI ON 40A(3) OF THE ACT IS APPLICABLE ONLY FOR GENUINE PAYMENTS. IF TH E PAYMENT IS NOT GENUINE, THEN IT WOULD BE TREATED AS BOGUS PAYMENT AND THE ASSESSEE MAY BE PENALIZED UNDER SECTION 271(1)(C) O F THE ACT FOR CONCEALING OR FURNISHING INACCURATE PARTICULARS OF INCOME. UNLESS THE PAYMENT MADE BY THE ASSESSEE IN CASH FALLS ANY OF THE CLAUSES UNDER RULE 6DD, GENUINENESS OF PAYMENT CANNOT EXCLU DE FROM THE CLUTCHES OF SECTION 40A(3) OF THE ACT. THIS TRIBUN AL IS OF THE CONSIDERED OPINION THAT SECTION 40A(3) OF THE ACT W OULD APPLY ONLY TO THE GENUINE PAYMENT / TRANSACTION AND NOT TO THE BOGUS TRANSACTION. THEREFORE, THE JUDGMENT OF GUJARAT HI GH COURT IN WALFORD TRANSPORT (EASTERN INDIA) LTD. (SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. IN VIEW OF TH E ABOVE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 9. IN THE RESULT, ALL THE FOUR APPEALS FILED BY THE ASSESSEE STAND DISMISSED. 9 I.T.A. NOS.3377 TO 3380/CHNY/18 ORDER PRONOUNCED IN THE COURT ON 30 TH APRIL, 2019 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESA N) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 30 TH APRIL, 2019. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-2, CHENNAI-34 4. PRINCIPAL CIT, CHENNAI-1, CHENNAI 5. 7: -2 /DR 6. ;( < /GF.