ITO, Ward - 41(2), Kolkata, Kolkata V. M/s. A.K. Trading, Kolkata

ITA 345/KOL/2011

• Counselvise Citation: 34523514 RSA 2011
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 01-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V A RAJU
• Assessee Lawyers: A N KESHARI
• Section: 40A(3); 194C; 68

Judgement Text

, , , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [ . . . . . . . . , ,, , , ,, , . . . . . .. . ! ! ! ! , ' ' ' ' ] [BEFORE HONBLE SHRI B. R. MITT AL, JM & HONBLE SHRI SHRI S.V. MEHROTRA, AM] #$ #$ #$ #$ / I.T.A NO. 345/KOL/2011 %& '() %& '() %& '() %& '()/ // / ASSESSMENT YEAR : 2007-08 INCOME TAX OFFICER/WARD-41(2) -VS.- M/S. A. K. TRADING KOLKATA. KOLKATA. [PAN : AAJFA 4330 Q ] (,- /APPELLANT ) (/0,-/ RESPONDENT ) ,- / FOR THE APPELLANT : 1 /SHRI V. A. RAJU /0,- / FOR THE RESPONDENT : 1 / SHRI A. N. KESHARI 2 /O R D E R [ . . . . . .. . ! ! ! ! , ] PER S.V. MEHROTRA, JM THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2007-08 AGAINST ORDER OF CIT(A)- XII, KOLKATA DATED 15.12.2010. 2. THE ASSESSEE FIRM, IN THE RELEVANT ASSESSMENT YE AR, CARRIED ON BUSINESS OF TRADING IN SCRAP IRON. IT HAD FILED ITS RETURN OF INCOME DECLARING T OTAL INCOME OF RS.55,880/-. THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS.25,22,955/- AFTER MAKING FOLLOWING ADDITIONS :- I) RS. 48,100/- II) RS.9,50,000/- III) RS.9,34,000/- IV) RS.5,34,975/- THE LD. CIT(A) ALLOWED THE ASSESSEES APPEAL. 3. BEING AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEF ORE US. ITA NO. 345/KOL/2011 2 4. THE FIRST GROUND TAKEN BY THE DEPARTMENT IS AS U NDER :- LD. CIT(A) HAD ERRED IN DELETING THE ADDITION OF R S.48,100/- WHICH WAS ADDED AS PER PROVISION OF SECTION 40A(3) OF I.T. ACT, 196 1. 5. BRIEF FACTS OF THE ISSUE ARE THAT ASSESSEE HAD M ADE PAYMENT TO M/S. MOTILAL CHOTELAL OF RS.48,100/- IN CASH. THE ASSESSING OFFICER ADDED A SUM OF RS.48,100/- U/S. 40A(3) OF THE ACT. THE LD. CIT(A) VERIFIED THE LEDGER ACCOUNT AND NOTED TH AT THE PAYMENT EXCEEDING RS.20,000/- WAS NOT MADE IN A SINGLE DAY, THEREFORE, THE PROVISIONS OF SECTION 40A(3) OF THE ACT WAS NOT ATTRACTED. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORDS OF THE CASE AND FIND THAT LD. CIT(A)S FINDINGS THAT PAYME NT EXCEEDING RS.20,000/- HAD NOT BEEN MADE IN A SINGLE DAY HAVE NOT BEEN CONTROVERTED BY THE DEPA RTMENT. THEREFORE, THERE WAS NO NEED TO MAKE ANY ADDITION U/S. 40A(3) OF THE ACT. THIS GROUND OF THE DEPARTMENT IS DISMISSED. 7. THE SECOND GROUND TAKEN BY THE DEPARTMENT IS AS UNDER :- THE LD. CIT(A) HAD ERRED IGNORING THE JURISDICTION AL HIGH COURTS DECISION THAT MERE PAYMENT IN ACCOUNT PAYEE CHEQUE DOES NOT ENDOR SE GENUINENESS OF THE TRANSACTION [CIT VS. PRECISION FINANCE (P) LTD. IN 208 ITR 465, CAL.] IN DELETING THE ADDITIONS OF RS.9,50,000/- & RS.9,34,000/- WHIC H WERE ADDED AS PER PROVISIONS OF SECTION 68 OF THE I.T. ACT, 1961. 8. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD BEEN PAYING BELOW RS.20,000/- IN CASH EACH DAY TO A CUSTOMER, S HRI G. RAMA RAJU IN ANDHRA PRADESH. HE NOTED THAT ASSESSEE HAD RECEIVED RS.9,50,000/- THROUGH CH EQUE ON 29.04.2006. THEN, HE STARTED REPAYMENT AT A STANDARD AMOUNT OF RS.19,500/- PER D AY IN CASH SINCE 14.09.2006 FOR ALMOST A MONTH. THEREAFTER, HE RECEIVED A CHEQUE OF RS.38,28 0/- ON 26.12.2006 FROM THAT CUSTOMER AND MADE SALE OF RS.36,192/-. FROM FEBRUARY, 2007, ASSE SSEE STARTED MAKING PAYMENT @ RS.19,500/- EACH DAY AND THUS, REPAID THE WHOLE DUES. THE ASSE SSING OFFICER DID NOT ACCEPT THE ASSESSEES PLEA POINTING OUT THAT WHEN ASSESSEE WAS ASKED AS TO HOW A PARTY OF ANDHRA PRADESH CAN BE PAID BACK, HE DID NOT GIVE ANY REPLY. THEREAFTER, HE GAVE A NA ME AT HOWRAH, TO BE RECEIVING THE AMOUNT. ASSESSING OFFICER OBSERVED THAT THIS DOES NOT APPEA L TO COMMON SENSE THAT A PERSON, WHO IS STILL A CREDITOR FOR SEVERAL LAKHS, WOULD STILL MAKE PAYMEN T OF RS.38,280/- FOR PURCHASE. HE, ACCORDINGLY, MADE ADDITION OF RS.9,50,000/- U/S. 68 OF THE INCOM E TAX ACT. ASSESSING OFFICER FURTHER NOTICED FROM THE STATEMENT OF ACCOUNT OF M/S. PARAMOUNT BUI LDERS IN ASSESSEES BOOKS THAT A SUM ITA NO. 345/KOL/2011 3 RS.9,34,000/- WAS RECEIVED FROM THAT CUSTOMER ON 15 .07.2006 THROUGH CHEQUE. THE ASSESSEE STARTED REPAYMENT FROM 14.09.2006 @ RS.19,500/- IN CASH ALM OST ON DAILY BASIS AND THIS CONTINUED FOR ABOUT A MONTH. HE FURTHER NOTICED THAT FURTHER A SU M OF RS.34,060/- WAS RECEIVED BY THE ASSESSEE THROUGH CHEQUE ON 21.02.2007. 9. THE ASSESSEE CONTENDED THAT THE CUSTOMER M/S. PA RAMOUNT BUILDERS MADE ADVANCES. HOWEVER, THERE WAS DISAGREEMENT OVER RATE AND, THER EFORE, ADVANCE WAS PAID OFF BY THE ASSESSEE. M/S. PARAMOUNT BUILDERS GAVE AN ADDRESS OF A LOCAL AGENT TO COLLECT CASH WHO WAS FROM WEST MIDANPORE. THE ASSESSING OFFICER OBSERVED THAT IT W AS HARD TO BELIEVE THE ASSESSEES STORY. HE POINTED OUT THAT IT WAS DIFFICULT TO ACCEPT THAT TH E PROPOSED BUYER WOULD GIVE MONEY AGAIN WHEN FULL AMOUNT WAS NOT PAID BACK TO HIM, ONLY TO BE RE TURNED TO HIM WITHOUT INTEREST THROUGHOUT THE YEAR. HE, ACCORDINGLY, ADDED A SUM OF RS.9,34,000/- U/S. 68 OF THE INCOME TAX ACT. BEFORE THE LD. CIT(A), IT WAS POINTED OUT THAT SHRI G. RAMA RAJU O F ANDHRA PRADESH & M/S. PARAMOUNT BUILDERS HAD GIVEN TRADE ADVANCES TO ASSESSEE FOR SUPPLY OF SCRAP. HOWEVER, DUE TO CERTAIN DIFFERENCES OF RATES FOR SUPPLY OF SCRAP, THE TRANSACTIONS COULD N OT BE MATERIALISED. BUT, THESE PARTIES HAD GIVEN SEPARATE PAYMENTS AGAINST SALES MADE TO THEM DURING THE YEAR ITSELF. IT WAS POINTED OUT THAT THE ASSESSING OFFICER HAD NOT DOUBTED ABOUT THE IDENTIT Y OF THE PARTIES AS WELL AS THE CREDIT WORTHINESS. THE ADDITION HAD BEEN MADE MERELY BECAUSE THE ASSES SEE HAD REPAID TRADE ADVANCES IN CASH OF RS.19,500/- ON VARIOUS DATES. THE LD. CIT(A) EXAMIN ED THE LEDGER ACCOUNT IN THE CASE OF SHRI G. RAMA RAJU AND M/S. PARAMOUNT BUILDERS MAINTAINED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AND OBSERVED THAT THE PROVISIONS OF SECTION 68 OF THE A CT WERE NOT ATTRACTED. HE POINTED OUT THAT MERELY FOR THE REASONS ASSESSEE HAD REPAID THE AMOUNT IN C ASH, THE PROVISIONS OF SECTION 68 COULD NOT BE INVOKED. 10. LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE O RDER OF THE ASSESSING OFFICER. 11. ON THE OTHER HAND, LD. COUNSEL APPEARING ON BEH ALF OF THE ASSESSEE RELIED ON THE ORDER OF LD. CIT(A). 12. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. IT IS NOT DISPUTED THAT ASSESSEE HAD RECEIVED TRADE ADVANCES FROM TWO PARTIES NOTED ABOVE. THESE ADVANCES WERE RECEIVED FOR SUPPLY OF SCRAP TH ROUGH CHEQUE. HOWEVER, SINCE THE TRANSACTIONS FOR SUPPLY OF SCRAP DID NOT MATERIALIZE ON ACCOUNT OF NON-AGREEMENT OVER THE RATES OF SUPPLY, THE ASSESSEE HAD RETURNED THE AMOUNT TO BOTH THE PARTIE S. THE AMOUNT WAS RETURNED IN CASH AND THE ITA NO. 345/KOL/2011 4 ASSESSEE HAD ALSO GIVEN THE DETAILS OF PERSONS WHO HAD COLLECTED THE CASH ON BEHALF OF THE ASSESSEE. BE THAT, AS IT MAY, ONCE THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENESS OF TRANSACTIONS BEING OF TRADE ADVANCES, MERE RETURNING OF AMOUNT I N CASH CAN NOT LEAD TO ADVERSE INFERENCES. IT WAS NOT IMPOSSIBLE TO RETURN THE ADVANCE IN CASH TH ROUGH SOME LOCAL AGENT OF THE PARTIES IN KOLKATA. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE LD. CIT(A). ACCORDINGLY, THIS GROUND OF THE DEPARTMENT IS DISMISSED. 13. THE GROUND NO.3 OF THE APPEAL IS AS UNDER :- LD. CIT(A) HAD ERRED IN DELETING THE ADDITION OF R S.5,34,975/- WHICH WAS ADDED AS PER PROVISION OF SECTION 40(A)(IA) READ WITH SEC TION 194C OF THE I.T. ACT, 1961. 14. BRIEF FACTS OF THE ISSUE ARE THAT ASSESSEE WAS REQUIRED TO EXPLAIN, IF ANY TDS WAS MADE OUT OF CARRIAGE INWARD AND, IF NOT, WHY. SINCE ASSESSEE DID NOT FILE ANY REPLY, ASSESSING OFFICER OBSERVED THAT ASSESSEE FAILED TO PROVE THAT HE COMP LIED WITH SECTION 194C WITH REGARD TO CARRIAGE INWARD OF RS.5,34,975/- AND THEREFORE, MADE ADDITIO N U/S. 40(A)(IA) OF THE ACT. BEFORE THE LD. CIT(A), IT WAS CONTENDED THAT THE PROVISION OF SECT ION 194C WAS NOT APPLICABLE BECAUSE THE ASSESSEE HAD NOT MADE PAYMENT TO ANY PERSON OF RS.2 0,000/- OR MORE IN ONE INSTANCE OR THERE WAS NO PERSON TO WHOM PAYMENT OF RS.50,000/- OR MORE IN AGGREGATE WAS MADE DURING THE YEAR. IT WAS CLARIFIED THAT SUM OF RS.5,34,975/- COMPRISES OF LO CAL LORRY HIRE CHARGES OF RS.1,21,730/- AND INTER- STATE LORRY HIRE CHARGES OF RS.4,13,245/-. IT WAS F URTHER POINTED OUT THAT AS FAR AS LOCAL LORRY HIRE CHARGES WERE CONCERNED, PAYMENTS WERE MADE TO INDIV IDUAL LORRY DRIVERS AS WELL AS TO THE HAND CART PULLER. IN NONE OF THE CASE, THERE WAS PAYMENT EVEN EXCEEDING RS.5000/- AND IN THE CASE OF INTER- STATE LORRY HIRE CHARGES, TO NONE OF THE PARTIES SI NGLE PAYMENT OF RS.20,000/- OR MORE OR AGGREGATE AMOUNT OF RS.50,000/- OR MORE. THE LD. CIT(A) AFTER VERIFYING THE LEDGER ACCOUNT OF EXPENSES INCURRED UNDER THE HEAD CARRIAGE INWARD FOUND THA T THE PLEA OF THE ASSESSEE WAS CORRECT AND, THEREFORE, THE PROVISIONS OF SECTION 194C WERE NOT APPLICABLE AND IT WAS NOT REQUIRED TO DEDUCT TAX ON THAT SOURCE FROM THE PARTIES. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. SINCE THE ASSESSEES SUBMISSION THAT IN NONE OF THE CASE, IN THE CASE OF LOCAL LORRY HIRE CHARGES, THE PAYMENT EVER EXCEEDED RS.5000/- AND IN THE CASE OF INTER-STATE LORRY HIRE CHARGES, TO NONE OF THE PARTIES, MADE PAYMENT OF RS.20,000/- OR MORE OR AGGREGATE AMOUNT OF RS.50,000/- OR MORE, WAS FOUND TO BE CORRECT, THEREFORE, THE LD. C IT(A) HAD RIGHTLY CONCLUDED THAT THE PROVISIONS ITA NO. 345/KOL/2011 5 OF SECTION 194C WERE NOT ATTRACTED. NO MATERIAL HAS BEEN BROUGHT BY THE DEPARTMENT TO CONTROVERT THE FINDINGS OF THE LD. CIT(A). THIS GROUND OF THE DEPARTMENT IS ALSO DISMISSED. 16. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. 2 2 2 2 '3 '3 '3 '3 4 44 4 3% 3% 3% 3% 5 5 5 5 6 6 6 6 7' 7' 7' 7' ORDER PRONOUNCED IN THE OPEN COURT ON 27. 0 5. 2011. SD/- SD/- [ . . , ] [ . . ! , ' ] [ B. R. MITTAL ] [ S.V. MEHROTRA ] JUDICIAL MEMBER ACCOUNTANT MEMBER 7' / DATED : 27TH MAY, 2011. 2 8 /9 :9(; - COPY OF THE ORDER FORWARDED TO: 1. ' /APPLICANT- INCOME TAX OFFICER/WARD-41(2), 18, RA BINDRA SARANI, 4 TH FLOOR, KOLKATA-700 001. 2 /0,- / RESPONDENT : M/S. A.K. TRADING, 147A, SOUTH SINTH EE ROAD, KOLKATA-700 050. 3. 2% / CIT 4. 2% ( )/ CIT(A) 5. '5 /% / DR, KOLKATA BENCHES, KOLKATA [ 09 / / TRUE COPY] 2%3 / BY ORDER < / #= /DEPUTY/ASSTT. REGISTRAR . [KKC '>? %@= A' /SR.PS]