Ramla Sabadukutty, Kayamkulam V. ITO, Alappuzha

ITA 341/COCH/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69008 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-09-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 26-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: R KRISHNAN
• Keywords: Unexplained expenditure
• Section: 40A(3)

Judgement Text

1 ITA NO. 340 & 341/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 340 & 341/COCH/2010 (ASSESSMENT YEARS 2004-05 & 2005-06) RAMLA SABADKUTTY A VS THE ITO, WD.3 OSK STORES ALAPPUZHA KAYAMKULAM PAN : ABVPA6961A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R KRISHNAN RESPONDENT BY : SHRI K.K. JOHN DATE OF HEARING : 10-09-2013 DATE OF PRONOUNCEMENT : 25-10-2013 O R D E R PER N.R.S. GANESAN (JM) BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAI NST THE COMMON ORDER PASSED BY THE CIT(A)-IV, KOCHI DATED 30-03-20 10 FOR THE ASSESSMENT YEAR 2004-05 AND 2005-06. SINCE COMMON ISSUES ARISE FOR CONSIDERATION, WE HEARD BOTH THE APPEALS TOGETHER A ND DISPOSE OF THEM BY THIS COMMON ORDER. 2. SHRI R KRISHNAN, THE LD.REPRESENTATIVE FOR THE A SSESSEE SUBMITTED THAT HE DOES NOT WANT TO PRESS FIRST GROUND OF APPE AL IN BOTH THE APPEALS 2 ITA NO. 340 & 341/COCH/2010 PERTAINING TO UNEXPLAINED EXPENDITURE AND UNACCOUNT ED SALES REPRESENTING PEAK PURCHASES DURING THE YEARS UNDER CONSIDERATION . THE LD.REPRESENTATIVE HAS ALSO MADE AN ENDORSEMENT TO T HIS EFFECT. IN VIEW OF THE ABOVE, THE GROUND RAISED BY THE ASSESSEE WITH R EGARD TO UNEXPLAINED EXPENDITURE AND UNACCOUNTED SALES REPRESENTING PEAK PURCHASES FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION ARE DISMIS SED AS NOT PRESSED. 3. THE NEXT COMMON GROUND OF APPEAL IS WITH REGARD TO DISALLOWANCE MADE U/S 40A(3) OF THE ACT. 4. SHRI R KRISHNAN, THE LD.REPRESENTATIVE FOR THE A SSESSEE SUBMITTED THAT THE ASSESSING OFFICER REJECTED THE BOOKS OF AC COUNT FOR BOTH THE ASSESSMENT YEARS AND ESTIMATED THE PROFIT ON THE UN ACCOUNTED SALES. ONCE THE PROFIT WAS ESTIMATED ON THE UNACCOUNTED SA LES, ACCORDING TO THE LD.REPRESENTATIVE, THE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE; THEREFORE, THERE CANNOT BE ANY DISALLOWANCE U/S 40A (3) OF THE ACT. THE LD.REPRESENTATIVE PLACED HIS RELIANCE ON THE JUDGME NT OF THE PUNJAB & HARYANA HIGH COURT IN CIT VS SMT. SANTOSH JAIN (200 8) 296 ITR 324 (P&H) AND SUBMITTED THAT WHEN THE PROFIT WAS COMPUT ED BY APPLYING A GROSS PROFIT RATE, THERE IS NO NEED TO LOOK INTO TH E PROVISIONS OF SECTION 40A(3) OF THE ACT. ACCORDING TO THE LD.REPRESENTAT IVE, WHEN THE PROFIT WAS ESTIMATED ALL THE EXPENSES AND DISALLOWANCES ARE DE EMED TO BE MADE. 3 ITA NO. 340 & 341/COCH/2010 THEREFORE, THERE IS NO QUESTION OF MAKING ANY FURTH ER DISALLOWANCE. A SIMILAR VIEW WAS TAKEN BY THE CHENNAI BENCH OF THIS TRIBUNAL IN AN UNREPORTED DECISION IN AMMAN STEEL & ALLIED INDUSTR IES ITA NOS 2057 TO 2060/MADS/2010 ORDER DATED 23-08-2011, COPY OF WHI CH IS FILED BY THE LD.REPRESENTATIVE FOR THE ASSESSEE. 5. ON THE CONTRARY, SHRI K.K. JOHN, THE LD.DR SUBMI TTED THAT FOR THE ASSESSMENT YEAR 2004-05, THE ASSESSEE MADE PURCHASE S TO THE EXTENT OF RS.29,94,401 BY MAKING CASH PAYMENTS. THE ASSESSEE HIMSELF DISALLOWED PART OF THE PURCHASES MADE EXCEEDING RS. 20,000. THE ASSESSING OFFICER DISALLOWED RS.4,75,912. SIMILARL Y FOR THE ASSESSMENT YEAR 2005-06 THE ASSESSING OFFICER MADE A DISALLOWA NCE OF RS.5,13,605. ACCORDING TO THE LD.REPRESENTATIVE, ADMITTEDLY, THE ASSESSEE MADE PURCHASES BY MAKING PAYMENT IN CASH EXCEEDING RS.20 ,000. THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE CL AIM OF THE ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE QUES TION ARISES FOR CONSIDERATION IS WHETHER SECTION 40A(3) COULD BE IN VOKED FOR MAKING DISALLOWANCE WHEN THE PROFIT OF THE ASSESSEE WAS ES TIMATED ON THE UNACCOUNTED SALES. THE PUNJAB & HARYANA HIGH COURT HAS EXAMINED THIS ISSUE IN SMT. SANTOSH JAIN (SUPRA). AFTER FOLLOWIN G THE JUDGMENT OF THE 4 ITA NO. 340 & 341/COCH/2010 ALLAHABAD HIGH COURT IN CIT VS BANWARI LAL BANSHIDH AR (1998) 229 ITR 229 (ALL), THE PUNJAB & HARYANA HIGH COURT FOUND TH AT NO DISALLOWANCE COULD BE MADE U/S 40A(3) WHEN THE GROSS PROFIT WAS ESTIMATED. A SIMILAR VIEW WAS TAKEN BY THE MADRAS HIGH COURT IN THE CASE OF CIT VS MOHAMMED DHURABUDEEN 4 DTR 218. THE CHENNAI BENCH OF THIS TRIBUNAL IN THE CASE OF AMMAN STEEL & ALLIED INDUST RIES (SUPRA) HAS TAKEN A SIMILAR VIEW BY FOLLOWING THE JUDGMENT OF THE MAD RAS HIGH COURT IN MOHAMMED DHURABUDEEN (SUPRA). IN VIEW OF THESE JUD ICIAL DECISIONS, MORE PARTICULARLY, THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF MOHAMMED DHURABUDEEN (SUPRA) AND THE JUDGMENT OF TH E PUNJAB & HARYANA HIGH COURT IN THE CASE OF SANTOSH JAIN (SUP RA), THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE PROFIT WAS EST IMATED, THERE CANNOT BE ANY DISALLOWANCE U/S 40A(3) OF THE ACT. IN THIS CA SE, UNFORTUNATELY, THE PROFIT WAS ESTIMATED ON THE UNACCOUNTED SALES, THER EFORE, AS PER THE BASIS OF THE JUDGMENTS OF THE PUNJAB & HARYANA HIGH COURT IN SANTOSH JAIN (SUPRA) AND THE MADRAS HIGH COURT IN MOHAMMED DHURA BUDEEN (SUPRA)NO FURTHER INDIVIDUAL DISALLOWANCE CAN BE MADE. 7. IN VIEW OF THE ABOVE, THE ORDERS OF THE LOWER AU THORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE MADE U/S 40A(3) FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDER ATION. 5 ITA NO. 340 & 341/COCH/2010 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH OCTOBER, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 25 TH OCTOBER, 2013 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH