M/s S.P enterprises, Jamshedpur V. DCIT, Jamshedpur

ITA 34/RAN/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9592 (ITAT-RANCHI)
• Duration Of Justice: 3 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 18-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHANDAN DAS J
• Keywords: Unexplained cash credit; Question of law
• Section: 40A(3); 143(3); 271E; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI BENCH, RANCHI BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 34 / RAN / 201 6 ASSESSMENT YEAR :2010-11 M/S S.P. ENTERPRISES 55, MAHTO PARA ROAD, JUGSALAI, JAMSHEDPUR- 831006 [ PAN NO.AATFS 9150 L ] V/S . DCIT, RANGE-3, JAMSHEDPUR /APPELLANT .. / RESPONDENT ITA NO.309 - 310/RAN/2016 ASSESSMENT YEAR: 2009-10 M/S S.P. ENTERPRISES PLOT NO. 251 TATA-KANDRA MAIN ROAD, ADITYAPUR, JAMSHEDPUR-831013 [ PAN NO.AATFS 9150 L ] V/S . INCOME TAX OFFICE, WARD-1(5) JAMSHEDPUR /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI DEVESH PODDAR, ADVOCATE /BY REVENUE SHRI CHANDAN DAS, JCIT-DR /DATE OF HEARING 10-01-2019 /DATE OF PRONOUNCEMENT 15-02-2019 / O R D E R PER BENCH:- THESE THREE ASSESSEES APPEALS FOR ASSESSMENT YEAR (S) 2010-11 & 2009-10 ARISE AGAINST THE COMMISSIONER OF INCOME T AX (APPEALS)- ITA NO.34, 309-310/RAA/2067 A.YS . 10-11 & 09-10 M/S S./P. ENTERPRISES VS. DCIT RJ-3 JSR/ITO WD- 1(5) JSR PA GE 2 JAMSHEDPURS SEPARATE ORDERS DATED 27.11.2015 & 16. 08.2016 PASSED IN CASE NOS.97.JSR/2013-14; 07, 72/JSR/2015-16 INVOLVI NG PROCEEDINGS U/S 143(3) R.S. 263 R.S. 271E OF THE INCOME TAX ACT, 19 61; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILES PERUSED 2. WE COME TO ASSESSEES APPEAL ITA NO. 309/RAN/201 6. ITS FIRST SUBSTANTIVE GROUND CHALLENGES CORRECTNESS OF BOTH T HE LOWER AUTHORITIES ACTION INVOKING SEC.40A(3) DISALLOWANCE OF RS.69.91 LAC RE GARDING PURCHASES AND OTHER TRANSACTION WITH EIGHT PAYEES. WE NOTICE FROM THE CIT(A)S ORDER UNDER CHALLENGE IN PARA 4.2 THAT HE HAS SIMPLY BRUSHED AS IDE ASSESSEES EXPLANATION ON THE GROUND THAT CIT HAD EXERCISED HI S SEC. 263 REVISIONAL DIRECTION ISSUED TO THE ASSESSING OFFICER FOR FRAMI NG THE AFRESH ASSESSMENT YEAR. HE HAS FAILED TO APPRECIATE THE FACT THAT THE INSTANT SECOND ROUND OF LITIGATION IS ON MERITS. 3. IT FURTHER EMERGES FROM THE CASE FILE THAT THE A SSESSEE HAS NOT PAID ANY AMOUNT EXCEEDING RS.20,000/- IN THE COURSE OF A DA Y IN CASE OF M/S K.S. ENTERPRISES INVOLVING DISALLOWANCE OF RS.10 LAC. R EGARDING OTHER PAYEES, WE FIND THAT PAYMENTS IN ISSUE HAD BEEN MADE ON THE LA ST DAY OF THE RELEVANT ACCOUNTING PERIOD. ALTHOUGH WE DO NOT STRESS THE FA CT THAT THERE ARE NO TRANSACTION ON THE SAID DATE BUT AT THE SAME TIME I T CANNOT BE RULED OUT THAT ACCOUNTS ARE SQUARED OFF ON CLOSING DAY OF THE YEAR ONLY. HON'BLE CALCUTTA HIGH COURTS DECISION IN ITA NO.202 OF 2008 CIT VS. CRESCENT EXPORT SYNDICATE DATED 30.07.2008 ALSO CONCLUDES SEC. 40A (3) CASH PAYMENT DISALLOWANCE AS FOLLOWS: THE LEARNED COUNSEL APPEARING FOR THE APPELLANT ARG UED THAT THE ASSESSEE IS 100% EXPORT ORIENTED FIRM, EXPORTING LE ATHER GOODS VIZ. WALLETS AND DIFFERENT TYPES OF BAGS. THE TOTAL EXPO RT TURNOVER DURING THE YEAR (FOB VALUE) RS.19,51,73,720/- AND PURCHASES SH OWN AT RS.11,65,97,523/-. OUT OF THE SAID PURCHASE, THE PU RCHASE FROM 15 PARTIES AMOUNTING TO RS.83,44,822/- AND THE SELLER COULD NOT BE PRODUCED IN ASSESSMENT, HENCE THE A.O. DISALLOWED T HE ENTIRE PURCHASE AND ADDED RS.83,44,822/-. IN APPEAL, BEFORE THE ID. CIT(A)-XIX, KOLKATA THE APPELLANT SUBMITTED THAT IT MAINTAINS STOCK BOO K INVENTORISED THE PURCHASE OF LEATHER, LEATHER ISSUED FOR CUTTING, AN D ISSUED TO FABRICATOR FINALLY FOR FINISHING THE GOODS AS PER EXPORT ORDER . THE ID. C!T(A) DIRECTED THE A.O TO EXAMINE THOSE BOOKS AND TO SUBM IT THE REMAND ITA NO.34, 309-310/RAA/2067 A.YS . 10-11 & 09-10 M/S S./P. ENTERPRISES VS. DCIT RJ-3 JSR/ITO WD- 1(5) JSR PA GE 3 REPORT. IN THE REMAND REPORT THE A.O. HAS ADMITTED 'ON VERIFICATION OF THE PURCHASE DETAILS, IT IS SEEN THAT THE PURCHASES AMO UNTING TO RS.83,44,822/- MADE FROM DIFFERENT PARTIES ARE ENTE RED IN THE STOCK REGISTER AND PUT TO THE VARIOUS STAGES OF MANUFACTU RING PROCESS. THE ASSESSEE ALSO PRODUCED BILLS IN RESPECT OF ALL PURC HASE MADE FROM THESE 15 PARTIES AND FINALLY THE ID. CIT(A) HAS HEL D AS REGARDS THE PURCHASE, IT IS SEEN THAT THESE WERE RECORDED IN TH E STOCK REGISTER, THEIR CONSUMPTION IS ALSO RECORDED THEREIN, UP TO THE STA GE OF FINAL PRODUCTION. ALL THESE RECORDS ARE AUDITED. THEY ARE PRODUCED BEFORE THE ASSESSING OFFICER FOR EXAMINATION WHO HAD NOT BEEN ABLE TO POINT OUT ANY DEFECT IN IT. UNDER THE CIRCUMSTANCES THE PURCH ASES ARE CONSIDERED TO BE GENUINE. SO THE PURCHASES HAVE BEEN HELD TO B E GENUINE. IT ALSO APPEARS THAT THE PURCHASES HAVE BEEN HELD TO BE GEN UINE BY THE LEARNED CIT (APPEAL) BUT THE LEARNED CIT(APPEAL) HA S INVOKED SECTION 40A(3) FOR PAYMENT EXCEEDING RS.20,000/- SINCE IT I S NOT MADE BY CROSSED CHEQUE OR BANK DRAFT BUT BY HEARER CHEQUES AND HAS COMPUTED THE PAYMENTS FALLING UNDER PROVISIONS TO SECTION 40 A(3) FOR RS.78,45,580/- AND DISALLOWED @ 20% THEREON RS.15,6 9,116/-. IT IS ALSO MADE CLEAR THAT WITHOUT THE PAYMENT BEING MADE BY B EARER CHEQUE THESE GOODS COULD NOT HAVE BEEN PROCURED AND IT WOU LD HAVE HAMPERED THE SUPPLY OF GOODS WITHIN THE STIPULATED TIME. THE REFORE, THE GENUINENESS OF THE PURCHASE HAS BEEN ACCEPTED BY TH E ID. CIT (APPEAL) WHICH HAS ALSO NOT BEEN DISPUTED BY THE DEPARTMENT AS IT APPEARS FROM THE ORDER SO PASSED BY THE LEARNED TRIBUNAL. IT FUR THER APPEARS FROM THE ASSESSMENT ORDER THAT NEITHER THE ASSESSING OFFICER NOR THE CIT (APPEAL) HAS DISBELIEVED THE GENUINENESS OF THE TRA NSACTION. THERE WAS NO DISPUTE THAT THE PURCHASES WERE GENUINE. ACCORDINGLY, IN OUR OPINION, THE LEARNED TRIBUNAL H AS CORRECTLY CAME TO THE CONCLUSION BY DELETING THE ADDITION OF RS.15,69 ,116/- UNDER SECTION 40A(3) OF THE ACT. ON THE OTHER GROUND AS IT APPEAR S THAT THE CIT (APPEAL) HAS BEEN DIRECTED TO RECONSIDER THE MATTER . IN VIEW OF THAT WE DO NOT THINK THAT ANY SUBSTANTIAL QUESTION OF LAW I S INVOLVED IN THIS MATTER. HENCE THE APPEAL BEING ITA NO. 202 OF 2008 IS DISMISSED. 4. WE ADOPT THE ABOVE DETAILED REASONING MUTATIS MUTANDIS TO DELETE THE IMPUGNED SEC. 40A(3) DISALLOWANCE OF RS.69.91 LAC. THE ASSESSEES SOLE GROUND AS WELL AS ITS MAIN APPEAL ITA 309/RAN/2016 SUCCEEDS. ITS SECOND APPEAL ITA NO.310/RAN/2016 INVOLVES CONSEQUENTIAL P ENALTY PROCEEDINGS U/S 271E OF THE ACT. THE SAME IS ALSO ACCEPTED SINCE TH E IMPUGNED PENALTY HAS NO LEGS TO STAND. ITA NO.34, 309-310/RAA/2067 A.YS . 10-11 & 09-10 M/S S./P. ENTERPRISES VS. DCIT RJ-3 JSR/ITO WD- 1(5) JSR PA GE 4 5. COMING TO ASSESSEES THIRD APPEAL ITA NO. 34/RAN /2016, ITS FIRST SUBSTANTIVE GROUND CHALLENGING SEC. 40A(3) DISALLOW ANCE OF 1 LAC IS ACCEPTED AS PER OUR FOREGOING DETAILED DISCUSSION. 6. THE ASSESSEES SECOND SUBSTANTIVE GROUND SEEKS T O DELETE 20% DISALLOWANCE ON VARIOUS EXPENSES IN THE NATURE OF F REIGHT CHARGES, JOB CONTRACT EXPENSES AND SITE EXPENSES TO THE TUNE OF RS.12.51 LAC MADE IN LOWER PROCEEDINGS. IT TRANSPIRES DURING THE COURSE OF HEARING THAT NEITHER THE ASSESSEE HAS BEEN ABLE TO PROVE THE IMPUGNED EXPEND ITURE BY WAY OF SUFFICIENT COGENT EXPLANATION NOR THE LOWER AUTHORI TIES HAVE QUOTED ANY COMPARABLE INSTANCE IN PRECEDING AND SUCCEEDING ASS ESSMENT YEARS. WE THEREFORE RESTRICT THE IMPUGNED DISALLOWANCE OF 20% TO THE TUNE OF 8% ON ESTIMATING BASIS WITH A RIDER THAT THE SAME SHALL N OT BE TREATED AS PRECEDENT. THE ASSESSEES INSTANT SECOND SUBSTANTIVE GROUND IS PARTLY ACCEPTED. 7. NEXT COMES COMMISSION DISALLOWANCE OF RS.6,71,21 2/- CLAIMED @ 400 PER TONE IN IRON PRODUCTS BUSINESS. THERE IS NO DIS PUTE THAT THE LEARNED ASSESSING OFFICER HAD HIMSELF ACCEPTED SIMILAR COMM ISSION EXPENSE IN EARLIER ASSESSMENT YEAR(S). HIS CASE IN THE IMPUGNED ASSESS MENT YEAR APPEARS TO BE THAT THE ASSESSEES TURNOVER HAS BEEN REDUCED AS COMPARED TO SAID EARLIER ASSESSMENT YEARS. ALL THE RELEVANT DETAILS OF THE P AYEE PARTY(IES) HAVE ALREADY PLACED ON RECORD. WE CONCLUDE IN THESE FACTS THAT I MPUGNED DISALLOWANCE IN ABSENCE OF ANY GENUINENESS ISSUE PER SE CANNOT BE S USTAINED. WE THEREFORE DELETE THIS COMMISSION EXPENDITURE DISALLOWANCE OF RS.6,71,212/-. 8. LASTLY COMES THE ASSESSEES CHALLENGE TO SECTION 68 UNEXPLAINED CASH CREDITS ADDITION OF RS.41 LAC MADE IN BOTH THE LOWE R AUTHORITIES IN CASE OF M/S BIHAR FOUNDRY AND CASTING LTD.. THE CLINCHING FACT THAT EMERGES FROM A PERUSAL OF CASE FILE IS THAT THIS AMOUNT FORMS CLOS ING BALANCE FIGURE OF PRECEDING ASSESSMENT YEAR AND OPENING FIGURE OF THE IMPUGNED ASSESSMENT YEAR. MEANING THEREBY THAT THE SAME STOOD ACCEPTED IN THE EARLIER ITA NO.34, 309-310/RAA/2067 A.YS . 10-11 & 09-10 M/S S./P. ENTERPRISES VS. DCIT RJ-3 JSR/ITO WD- 1(5) JSR PA GE 5 ASSESSMENT YEAR. BE THAT AS IT MAY, WE DELETE THE I MPUGNED ADDITION SINCE THE ASSESSEES BOOKS HAVE NOT BEEN CREDITED THE IMP UGNED SUM IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESSEES FIRST APPE AL ITA NO.34/RAN/2016 IS PARTLY ALLOWED. 9. THE ASSESSEES TWO APPEALS ITA NO.309 AND 310/RA N/2016 ARE ALLOWED & ITA NO.34/RAN/2016 IS PARTLY ALLOWED IN ABOVE TER MS. ORDER IS PRONOUNCED IN ACCORDANCE WITH RULE 34(4) O F THE ITAT RULES BY PUTTING ON NOTICE BOARD ON 15/02/2019 SD/- SD/- ( ) ($% ) (DR. A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) RANCHI, *DKP &- 15 / 02 /2019 RANCHI / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE-M/S S.P. ENTERPRISES 55, MAHTO PARA, RD, JUGSALAI JAMSHEDPUR-831006/ M/S S.P. ENTERPRISES PL NO.251 TATA-KAND RA MAIN RD. ADITYAPUR,JAMSHEDPUR-831013 2. /REVENUE-DCIT,RANGE-3,/ITO WD-1(5), JAMSHEDPUR 3. 2 4 / CONCERNED CIT RANCHI 4. 4- / CIT (A) RANCHI 5. 7 %%2, 2, / DR, ITAT, RANCHI 6. = / GUARD FILE. BY ORDER/ , /TRUE COPY/ / 2,