M/S. Daw & Co., Hooghly V. I.T.O., Ward - 1(2), Hooghly, Hooghly

ITA 35/KOL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4576 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 09-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAWRABH KUMAR J
• Assessee Lawyers: MIRAJ D. SHAH
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH SMC KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER ITA NO.35/KOL/2015 ASSESSMENT YEAR:2005-06 M/S DAW & CO. STATION ROAD, SHEORAPULY, DIST. HOOGHLY, WEST BENGAL PIN-712 223 [ PAN NO.AADFD 8104 D ] / V/S . INCOME TAX OFFICER, WARD-1(2), HOOGHLY, AAYAKAR BHAWAN, KHADINAMORE CHINSURAH, HOOGHLY /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI MIRAJ D SHAH, AR /BY RESPONDENT SHRI SAWRABH KUMAR, JCIT-DR /DATE OF HEARING 13-07-2016 /DATE OF PRONOUNCEMENT 02-09-2016 /O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-XXXII, KOLKATA DATED 22.09. 2014. 2. GROUND NO. 1 AND 5 RAISED BY ASSESSEE IN THIS AP PEAL ARE GENERAL IN NATURE WHICH DO NOT CALL FOR ANY SPECIFIC ADJUDICATION. 3. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE HAS NOT PRESSED GROUND NO.4. THE SAME IS ACCORDINGLY DISMISSED AS NOT PRES SED. 4. THE ISSUE RAISED IN GROUND NO.2 RELATES TO THE D ISALLOWANCE OF 16.17 LAKH MADE BY ASSESSING OFFICER AND CONFIRMED BY LD. CIT( A) U/S. 40A(3) OF THE ACT. 5. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM WHICH IS ENGAGED IN THE BUSINESS OF JUTE TRADING. THE RETURN INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED ITA NO.35/KOL/2015 A.Y. 2005-06 M/S DAW & CO. VS. ITO WD-1(2) HG. PAGE 2 BY IT ON 19.09.2005 DECLARING TOTAL INCOME OF 2,29,650/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY AO THAT A SSESSEE HAS MADE PAYMENTS THROUGH BEARER CHEQUES EXCEEDING SUM OF 20,000/- AGAINST THE LOCAL PURCHASES MADE FROM DIFFERENT PARTIES. IN THIS REGARD, IT WAS EXPL AINED BY ASSESSEE THAT ALL THE RELEVANT PURCHASES WERE MADE FROM DIFFERENT PARTIES BUT THE PAYMENTS AGAINST THE SAME WERE MADE THROUGH THEIR AGENTS. ON EXAMINATION, THE AO H OWEVER FOUND THAT THE PURCHASES WERE MADE BY ASSESSEE DIRECTLY FROM THE CONCERNED P ARTIES AND NOT THROUGH THE AGENTS. HE ALSO FOUND THAT THE RELEVANT TRANSACTIONS WERE S HOWN BY THE SAID PARTIES IN THEIR PROFIT AND LOSS ACCOUNT AS SALES AND NOT COMMISSION OR BROKERAGE. ACCORDING TO HIM, THE PAYMENTS MADE BY ASSESSEE TO THE SAID NINE PART IES BY BEARER CHEQUES IN THE AMOUNT EXCEEDING 20,000/- THUS WERE IN VIOLATION OF THE PROVISION O F SEC. 40A(3) OF THE ACT AND THE ASSESSEE THEREFORE WAS CALLED UPON BY HIM TO OFFER ITS EXPLANATION IN THE MATTER. IN REPLY, THE FOLLOWING EXPLANATION WAS OFFERED BY ASSESSEE, REPRODUCED:- 1. ITEM OF PURCHASE IS AN AGRICULTURAL PRODUCE/PROD UCT RULE 6DD(F)(I) STATES WHERE THE PAYMENT IS MADE FOR THE PURCHASE OF AGRIC ULTURAL OR FOREST PRODUCE . THUS THE RULE FRAMED, ITSELF EXEMPTS THE AGRICUL TURAL PRODUCE FROM APPLICATION OF SECTION 40A(3). 2. WE PAY TO OUR AGENTS RULE 6DD(1) STATES WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAY MENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON. THE PAYMENTS WE RE MADE TO OUR AGENTS. IT IS LEARNT THAT YOU HAVE TAKEN STATEMENT OF MY OF THE A GENTS, BUT WE WERE NOT GIVEN THE OPPORTUNITY TO CROSS-EXAMINE THESE PERSONS. WE HAVE ALREADY PRODUCED BEFORE YOU THE COMPLETE SET OF BILLS RAISED BY THE AGENTS. EVEN THE INVOICE HEADS CLEARLY MENTIONS THEM AS AGENTS. HERE ALSO, T HE RULE FORMED EXEMPTS THE PAYMENTS MADE TO AGENTS FROM THE RIGOR OF SECTION 4 0A(3). 3. OUR PURCHASES PAYMENT ARE RECEIVED BY CULTIVATOR S RULE 6DD(H) STATES WHERE THE PAYMENT IS MADE IN A VILLAGE OR TOWN, WHI CH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK, TO ANY PERSON WH O ORDINARILY RESIDES, OR IS CARRYING ON ANY BUSINESS, PROFESSION OR VOCATION, IN ANY SUCH VILLAGE OR TOWN . YOU ARE TO LOOK INTO THE TRUE RECIPIENT OF THE P AYMENTS. IN OUR CASE ALL ARE CULTIVATORS OF JUTE. WE REQUEST YOU TO VERIFY T HE PAYMENTS MADE BY JUTE CORPORATION OF INDIA. EVEN JCI MAKES PAYMENTS IN CA SH OR IN BEARER CHEQUE. THE EXPLANATION OFFERED BY ASSESSEE WAS NOT FOUND A CCEPTABLE BY AO AND DISALLOWANCE OF 16.17 LAKH WAS MADE BY HIM U/S 40A(3) OF THE ACT BE ING 20% OF ITA NO.35/KOL/2015 A.Y. 2005-06 M/S DAW & CO. VS. ITO WD-1(2) HG. PAGE 3 PAYMENTS AGGREGATING TO 80,85 LAKHS MADE BY ASSESSEE BY BEARER CHEQUES IN THE ASSESSMENT YEAR COMPLETED U/S. 143(3) OF THE ACT VI DE ORDER DATED 31.12.2007. ON APPEAL, LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE. 6. I HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES O N THE ISSUE AND ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE PAYMENTS IN QUESTION, MADE BY THE ASSESSEE THROUGH BEARER CHEQUES WERE AGAINST THE PURCHASES OF RAW JUTE WHICH IS AN AGRICULTURAL PROD UCE. HE HAS CONTENDED THAT SAID PAYMENTS MADE BY ASSESSEE THROUGH AGENTS, THUS WERE EXEMPT FROM THE APPLICATION OF U/S 40A(3) OF THE ACT AS PER THE EXCEPTIONS / GIVEN IN THE RULE 6DD OF THE IT RULES, 1962. HE HAS CONTENDED THAT THE ASSESSING OFFICER, HOWEVER, REJECTED THE EXPLANATION OFFERED BY ASSESSEE IN THIS REGARD BY RELYING ON TH E ENQUIRE DIRECTLY MADE BY HIM TO THE CONCERNED PARTIES WITHOUT GIVING ANY OPPORTUNIT Y TO THE ASSESSEE TO CROSS-EXAMINE THE SAME. HE HAS INVITED MY ATTENTION TO THE COPIES OF BILLS ISSUED BY THE CONCERNED PARTIES PLACED IN HIS PAPER BOOK TO SHOW THAT THE S AID PARTIES WERE JUTE BROKERS AND COMMISSION AGENTS AND THE AMOUNT OF COMMISSION CHAR GED BY THEM WAS ALSO DULY REFLECTED IN THE BILLS ISSUED BY THEM. HE HAS CONTE NDED THAT THE ASSESSEE, HOWEVER, COULD NOT ESTABLISH ITS CASE ON THIS ISSUE IN THE A BSENCE OF PROPER AND SUFFICIENT OPPORTUNITY AFFORD EITHER BY THE ASSESSING OFFICER OR BY LD. CIT(A). HE THEREFORE HAS URGED THAT THIS ISSUE MAY BE RESTORED TO THE FILE O F AO FOR GIVING THE ASSESSEE SUCH AN OPPORTUNITY. ALTHOUGH LD. DR HAS RAISED THE OBJECTI ON, IN THIS REGARD, I FIND MERIT IN THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE KEEPING IN VIEW ALL THE RELEVANT FACTS OF THE CASE, I THEREFORE, CONSIDER IT FIT AND PROPER AND IN THE INTEREST OF JUSTICE TO RESTORE THIS ISSUE TO THE FILE OF AO WITH A DIRECTI ON TO DECIDE THE SAME AFRESH AFTER GIVING THE ASSESSEE PROPER AND SUFFICIENT OPPORTUNI TY OF BEING HEARD. 7. AS REGARDS THE ISSUE RAISED IN GROUND NO.3 RELAT ING TO DISALLOWANCE OF 1,10,308/- MADE BY AO U/S 40(A)(IA) OF THE ACT AND CONFIRMED BY LD. CIT(A) THE LIMITED RELIEF SOUGHT BY THE LD. COUNSEL FOR THE AS SESSEE IS THAT THE CONCERNED PAYEES HAVING INCLUDED THE AMOUNT IN QUESTION PAID BY ASSE SSEE IN THEIR RESPECTIVE INCOME AND HAVING ALSO PAID TAX THEREON, THE DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT FOR ITA NO.35/KOL/2015 A.Y. 2005-06 M/S DAW & CO. VS. ITO WD-1(2) HG. PAGE 4 THE FAILURE ON THE PART OF ASSESSEE TO DEDUCT TAX A T SOURCE (TDS) IS NOT SUSTAINABLE IN VIEW OF SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT INSERTED BY FINANCE ACT, 2012 WITH EFFECT FROM 01.04.2013 WHICH HAS BEEN HELD TO BE APPLICABLE RETROSPECTIVELY INTER ALIA BY THE TRIBUNAL IN THE CASE OF M/S ABHOY CHARAN BAKSHI VS. ACIT ( ITA NO. 1492/KOL/2015 ) DATED 06.04.2016. HE HAS SUBMITTED THAT THIS ISSU E MAY THEREFORE BE RESTORED TO THE FILE OF AO FOR DECIDING THE SAME, I N THE LIGHT OF THE SECOND PROVISO OF SEC. 40(A)(IA) OF THE ACT AFTER NECESSARY VERIFICAT ION. ACCORDINGLY, THIS ISSUE IS ALSO RESTORED TO THE FILE OF AO FOR DECIDING THE SAME AF RESH IN THE LIGHT OF SECOND PROVISO TO SEC. 40(A)(IA) OF THE ACT AFTER NECESSARY VERIFI CATION. GROUND NO.3 IS ACCORDINGLY TREATED AS ALLOWED FOR S TATISTICAL PURPOSE. 8. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS PART LY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 02/09/2016 SD/ - (P.M.JAGTAP) ACCOUNTANT MEM BER *DKP ! - 02/09/2016 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S DAW & CO. STATION RD, SHEORAPHULY, D IST. HOOGHLY, WEST BENGAL , PIN 712 223 2. /RESPONDENT- ITO WARD-1(2), HOOGHLY, AAYAKAR BHAWAN , KHADINAMORE CHINSURAH, HOO GHLY 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORD ER/ , /TRUE COPY/ / '#,