ITO, CHENNAI V. Enterprising Enterprises, CHENNAI

ITA 338/CHNY/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86305 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Section: 40A(3); 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . ! '# , $ % BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ./ ITA NO.338/MDS/2013 $ # '# / ASSESSMENT YEAR : 2008-09 & ./ ITA NO.98/MDS/2013 $ # '# / ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER, BUSINESS WARD III(3), CHENNAI - 600 034. V. M/S ENTERPRISING ENTERPRISES, NO.9, 50 TH STREET, ASHOK NAGAR, CHENNAI - 600 083. PAN : AAAFE 0195 N ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT +,)* - . / RESPONDENT BY : SHRI PHILIP GEORGE, ADVOCATE ! - / / DATE OF HEARING : 13.01.2015 0' - / / DATE OF PRONOUNCEMENT: 20.02.2015 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THESE APPEALS FILED BY THE REVENUE ARE DIRECTED A GAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)- VIII, CHENNAI, DATED 27.11.2012 AND 16.10.2012 FOR THE ASSESSMENT YEARS 2008- 2 I.T.A. NO. 338/MDS/2013 I.T.A. NO. 98/MDS/2013 09 AND 2009-10 RESPECTIVELY. THE ASSESSEE HAS RAIS ED COMMON GROUNDS IN BOTH THESE APPEALS. I.T.A. NO. 338/MDS/2013 (ASSESSMENT YEAR 2008-09) 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS IN THE B USINESS OF MANUFACTURING AND EXPORTING OF GRANITE DIMENSIONAL BLOCKS AND CUTTING AND POLISHING MONUMENTS. THE ASSESSEE HAD FILED A RETURN OF INCOME BY DECLARING A TOTAL INCOME OF ` 5,52,020/- . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. AFTER DUE PROCESS, ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') BY DETERMINING THE T OTAL INCOME AT ` 1,33,34,124/-. 3. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED T HAT THE ASSESSEE MADE SUBSTANTIAL PURCHASES OF GRANITE BLOC KS FROM ITS SISTER CONCERNS AND PART OF THE PAYMENTS ARE MADE T HROUGH CASH. IT IS ALSO SEEN FROM THE LEDGE ACCOUNT OF ONE OF THE S ISTER CONCERNS (M/S MAGNUM INC) THAT THE ASSESSEE HAS MADE PAYMENT OF ` 19,500/- EVERYDAY INCLUDING HOLIDAYS. ON ENQUIRY B Y THE A.O., THE ASSESSEE EXPLAINED BY STATING THAT THE GRANITE QUAR RIES OWNED BY THE SISTER CONCERNS WERE SITUATED IN REMOTE PLACES WHERE THERE IS NO BANKS ARE SITUATED NEARBY AND THAT WAS THE REASON T HE CASH PAYMENTS HAD TO BE MADE. THE A.O. WAS NOT SATISFIE D WITH THE 3 I.T.A. NO. 338/MDS/2013 I.T.A. NO. 98/MDS/2013 EXPLANATION GIVEN BY THE ASSESSEE. HE INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND DISALLOWED THE ENTIRE AMOUNT OF CASH EXPENDITURES TOTALLING TO ` 1,25,19,000/-. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(APPEALS). THE LD. CIT(APPEALS) BY FOLLOWING TH E DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V. KATHARI SANITATION & TILES P. LTD. (2006) 282 ITR 117 (MAD) AND ALSO FOLLOWING THE DECISION OF THE ITAT IN ASSESSEE'S OW N CASE FOR THE ASSESSMENT YEAR 2007-08 IN I.T.A. NO. 1090/MDS/2010 DATED 16.3.2012, DELETED THE ADDITION MADE BY THE A.O. T HE RELEVANT PORTION OF THE ORDER OF THE LD. CIT(APPEALS) IS EXT RACTED AS UNDER:- 3.3 ON VERIFYING THE MATERIAL ON RECORD AS WELL AS THE SUBMISSIONS MADE BY THE AR OF THE APPELLANT, AS PER UN- AMENDED PROVISIONS OF SECTION 40A(3), IT ONLY SPECI FIES THE LIMIT OF ` 20,000/- PER TRANSACTION AND DOES NOT PUT ANY RESTR ICTION WITH REGARD TO NUMBER OF TRANSACTIONS IN A DAY. WE FIND AS NONE OF THE TRANSACTIONS EXCEED ` 20,000/- THEREFORE, THE PROVISIONS OF SECTION 40A(3) ARE NOT ATTRACTED IN THIS CASE. WE FIND THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DIV ISION BENCH JUDGMENT OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF CIT V. KATHARI SANITATION & TILES P. LTD. REPORTED AS (200 6) 282 ITR 117 (MAD), WHEREIN THE HON'BLE HIGH COURT CAME TO THE C ONCLUSION THAT SECTION 40A(3) OF THE INCOME-TAX ACT, 1961, O NLY SAYS THAT THE AMOUNT EXCEEDING THE PRESCRIBED LIMIT SHOULD NO T BE PAID EXCEPT BY WAY OF CHEQUE DRAWN ON A BANK OF BY A CRO SS BANK DRAFT AND, IF IT EXCEEDS THAT AMOUNT, THEN 20 PERCE NT OF THE EXPENDITURE SHALL NOT BE ALLOWED AS DEDUCTION. IT DOES NOT SAY THAT THE AGGREGATE OF THE AMOUNTS SHOULD NOT EXCEED THE LIMIT. THE WORDS USED ARE IN A SUM I.E. A SINGLE SUM. T HEREFORE IRRESPECTIVE OF ANY NUMBER OF TRANSACTIONS, WHERE T HE AMOUNT DOES NOT EXCEED THE LIMIT, THE RIGOUR OF SECTION 40 A(3) WILL NOT APPLY. THE AMOUNT SHOULD NOT EXCEED ` 20,000/-. THAT APART PRACTICABILITY OF THE PAYMENT HAS ALSO TO BE JUDGED FROM THE POINT OF VIEW OF BUSINESSMAN. RESPECTFULLY FOLLOWING T HE DECISION OF 4 I.T.A. NO. 338/MDS/2013 I.T.A. NO. 98/MDS/2013 THE HON'BLE MADRAS HIGH COURT, IRRESPECTIVE OF THE NUMBER OF TRANSACTIONS WHERE THE AMOUNT DOES NOT EXCEED ` 20,000/- THE APPLICATION OF SEC. 40A(3) WILL NOT ARISE. APART F ROM THAT PRACTICABILITY OF THE PAYMENT IS ALSO TO BE JUDGED FROM THE POINT OF VIEW OF A BUSINESS MAN AND ONE HAS TO SEE THE GENUI NENESS OF TRANSACTION SINCE THE ASSESSING OFFICER HAS NOT DOU BTED THE GENUINITY AND ALSO RESPECTABLY FOLLOWING RATIOS HEL D IN THE CASE OF CIT V. ASHOK IRON AND STEEL ROLLING MILLS 320 ITR 1 01 (ALL) 2010 WHICH FOLLOWED THE MADRAS HIGH COURT DECISION REFER RED ABOVE AS WELL AS THE RATIO HELD IN THE CASE OF MOHAMMED DHAR UAMUDEEN (TAX CASE NO.885 OF 2007) MADRAS HIGH COURT WHEREIN IT WAS HELD THAT THE DISALLOWANCE U/S 40A(3) SHOULD NOT BE APPLIED MECHANICALLY. THE AR OF THE APPELLANT HAS SUBMITTED THE ITAT ORD ER IN HIS OWN CASE FOR THE AY 2007-08 IN ITA NO.1090/MDS/2010 DAT ED 16.3.2012 WHEREIN THE ADDITION MADE BY THE A.O. AT ` 37,12,800/- U/S 40A(3) HAS BEEN DELETED BY THE HON' BLE ITAT, D- BENCH, CHENNAI. AS PER THE LEDGER ACCOUNT PRODUCED BY THE APPELLAN T IT IS OBSERVED THAT THE APPELLANT FIRM HAS NOT EXCEEDED A NY PAYMENT ABOVE ` 20,000/- IN CASH THEREFORE KEEPING IN VIEW OF THE DECISIONS OF HIGHER JUDICIAL AUTHORITIES AS MENTION ED ABOVE SEC. 40A(3) IS NOT APPLICABLE TO THE FACTS OF THE APPELL ANTS CASE AND THEREFORE, THE A.O. IS DIRECTED TO DELETE THE ADDIT ION OF ` 1,25,19,000/-. THE APPELLANT GETS RELIEF OF ` 1,25,19,000/-. THIS GROUND OF THE APPELLANT IS ALLOWED. 5. ON BEING AGGRIEVED, THE REVENUE CARRIED THE MATT ER BEFORE THE TRIBUNAL. AT THE TIME OF HEARING, THE LD.COUNS EL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN T HIS APPEAL IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN AS SESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 AND THE SAME MAY B E FOLLOWED. 6. ON THE OTHER HAND, THE LD. D.R. SUPPORTED THE OR DER PASSED BY THE A.O. 5 I.T.A. NO. 338/MDS/2013 I.T.A. NO. 98/MDS/2013 7. WE HAVE HEARD BOTH SIDES AND PERUSED THE RECORDS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE INVOLVED IN THIS APPEAL IS DISALLOWANCE UNDER SECTI ON 40A(3) OF THE ACT. THE VERY SAME ISSUE HAD COME FOR CONSIDERATIO N FOR ASSESSMENT YEAR 2007-08 AND THE TRIBUNAL HAS CONSID ERED THE ISSUE AND DELETED THE ADDITION MADE BY THE A.O. TH E RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IS EXTRACTED A S UNDER:- 13. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION OF ` 37,12,800/-. AS PER UNAMENDED PROVISIONS OF SECTION 40A(3), IT ONL Y SPECIFIES THE LIMIT OF ` 20,000/- PER TRANSACTION AND DOES NOT PUT ANY RESTRICTION WITH REGARD TO NUMBER OF TRANSA CTIONS IN A DAY. WE FIND AS NONE OF THE TRANSACTIONS EXCEED ` 20,000/-, THEREFORE, THE PROVISIONS OF SECTION 40A(3) ARE NOT ATTRACTED IN THIS CASE. WE FIND THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DIVISION BENCH JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. KO THARI SANITATION & TILES P.LTD., REPORTED AS (2006) 282 I TR 117(MAD), WHEREIN THE HONBLE HIGH COURT CAME TO TH E CONCLUSION THAT SECTION 40A(3) OF THE INCOME TAX A CT, 1961, ONLY SAYS THAT THE AMOUNT EXCEEDING THE PRESCRIBED LIMIT SHOULD NOT BE PAID EXCEPT BY WAY OF CHEQUE DRAWN ON A BANK OR BY A CROSS BANK DRAFT AND, IF IT EXCEEDS THAT AM OUNT, THEN 20 PERCENT OF THE EXPENDITURE SHALL NOT BE ALLOWED AS DEDUCTION. IT DOES NOT SAY THAT THE AGGREGATE OF TH E AMOUNTS SHOULD NOT EXCEED THE LIMIT. THE WORDS USED ARE IN A SUM I.E., A SINGLE SUM. THEREFORE, IRRESPECTIVE OF ANY NUMBER OF TRANSACTIONS, WHERE THE AMOUNT DOES NOT EXCEED THE LIMIT, THE RIGOUR OF SECTION 40A(3) WILL NOT APPLY. THE AM OUNT SHOULD NOT EXCEED ` 20,000/-. THAT APART, PRACTICALITY OF THE PAYMENT HAS ALSO TO BE JUDGED FROM THE POINT OF VIE W OF A BUSINESSMAN. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE MADRAS HIGH COURT CITED ABOVE, WE UPHOLD TH E DECISION OF THE LEARNED CIT(A) ON THIS ISSUE AND DI SMISS THE GROUND RAISED BY THE REVENUE. 6 I.T.A. NO. 338/MDS/2013 I.T.A. NO. 98/MDS/2013 8. BY KEEPING IN VIEW THE DECISION OF THE CO-ORDINA TE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE, WE UPHOLD THE ORDER PASSED BY THE LD. CIT(APPEALS). THE LD. D.R. HAS NOT BROU GHT ANY MATERIAL TO SHOW THAT THE ORDER PASSED BY THE TRIBUNAL HAS B EEN MODIFIED OR REVERSED BY ANY HIGHER FORUM. UNDER THESE CIRCUMST ANCES, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(APP EALS). 9. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. I.T.A. NO. 98/MDS/2013 (ASSESSMENT YEAR 2009-10) 10. IN THIS APPEAL THE FACTS ARE SIMILAR TO THOSE N ARRATED FOR ASSESSMENT YEAR 2008-09. THEREFORE, WE DECIDE THE MATTER IN FAVOUR OF ASSESSEE AND DISMISS THE REVENUES APPEAL . 11. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE IS ALSO DISMISSED. ORDER PRONOUNCED ON FRIDAY THE 20 TH OF FEBRUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( . ! '# ) (A. MOHAN ALANKAMONY) (V. DURGA RAO) /ACCOUNTANT MEMBER $ /JUDICIAL MEMBER /CHENNAI, = /DATED, THE 20 TH FEBRUARY, 2015. KRI. 7 I.T.A. NO. 338/MDS/2013 I.T.A. NO. 98/MDS/2013 > - +$/?@ A@'/ /COPY TO: 1. )* /APPELLANT 2. +,)* /RESPONDENT 3. ! B/ () /CIT(A)-VIII, CHENNAI 4. ! B/ /CIT-VI, CHENNAI-34 5. @D' +$/$ /DR 6. 'E# F /GF.