M/S SAGAR FILMS PVT LTD, MUMBAI V. THE ADDL CIT 11(1), MUMBAI

ITA 364/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71993 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 18-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Section: 40A(3)

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL E BEN CH, MUMBAI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.364/MUM/2011 ASSESSMENT YEAR:- 2006-07 M/S SAGAR FILMS PVT. LTD. SAGAR VILLA, ROAD NO. 12A, JVPD SCHEME, VILE PARLE (W), MUMBAI. VS. ADDITIONAL COMMISSIONER OF INCOME TAX 11(1) MUMBAI PAN:- AAICS3918A APPELLANT RESPONDENT APPELLANT BY SHRI K. GOPAL RESPONDENT BY SHRI M.L. PERUMAL ORDER PER I.P. BANSAL, JM THIS APPEAL IS FILED BY THE ASSESSEE. IT IS DIRECTE D AGAINST THE ORDER PASSED BY CIT(A) DATED 25 TH OCTOBER 2010 FOR ASSESSMENT YEAR 2006-07. GROUNDS OF APPEAL READS AS UNDER:- 1. THE LEARNED CIT(A) ERRED IN CONFIRMING ADDITION TO TOTAL INCOME OF RS. 19,42,045/- U/S 40A(3) 2. THE DISALLOWANCE U/S 40A(3) HAS BEEN MADE FOR PA YMENTS MADE IN CASH IN EXCESS OF RS. 20,000/-. LD. CIT(A) HAS CONFIRMED TH IS DISALLOWANCE MAINLY FOR THE REASON THAT AGGREGATE CASH PAYMENT MADE BY THE ASSESSEE IN A SINGLE DAY LQUOKBZ DH RKJH[K@ DATE OF HEARING 18-12-2013 ?KKS'K.KK DH RKJH[K@ DATE OF PRONOUNCEMENT 18-12-2013 - 2 - SHOULD NOT EXCEED RS. 20,000/- EVEN IF THEY ARE MAD E TO VARIOUS PARTIES. THIS OPINION IS EXPRESSED ON THE BASIS OF DECISION OF HO NBLE HIGH COURT OF HIMACHAL PRADESH IN THE CASE OF COMMISSIONER OF INCOME TAX V S DALIP CHAND AND SONS (301 ITR 276) . AS AGAINST THE AFOREMENTIONED ORDER OF LD. CIT(A) , IT IS THE CASE OF THE ASSESSEE THAT CASH PAYMENT ON A SINGLE DAY I N EXCESS OF RS. 20,000/- HAVE NOT BEEN MADE TO THE SAME PARTIES BUT TO THE DIFFER ENT PARTIES. IT IS THE CASE OF THE ASSESSEE THAT AFOREMENTIONED DECISION OF HIMACHAL P RADESH HIGH COURT COULD NOT BE APPLIED TO THE FACTS OF THE PRESENT CASE. AS ACCORDING TO THE OBSERVATION IN THE SAID CASE THE TRANSACTION IS IN RESPECT OF A SI NGLE PARTY. LD. AR HAS PLACED BEFORE US COPY OF THE SAID DECISION. HE SUBMITTED T HAT IN THE SAID DECISION IT WAS HELD THAT STATUTORY LIMIT U/S 40A(3) APPLIES TO THE AGGREGATE OF PAYMENTS MADE TO A PARTY IN THE COURSE OF A SINGLE DAY AND NOT TO TH E PAYMENT MADE AT ONE TIME UNLESS THE ASSESSEE IS ABLE TO SHOW THE SPECIAL CIR CUMSTANCES WHICH NECESSITATED THE PAYMENT BEING MADE SEPARATELY TWO OR THREE TIME S; ASSESSEE HAVING PURCHASED GOODS ON CREDIT, IT WAS WELL AWARE OF THE TOTAL AMOUNT PAYABLE BY IT TO THE DEALER AND THUS, THE EXPLANATION OF THE ASSESSE E FOR MAKING TWO SEPARATE PAYMENTS ON A SINGLE DAY CANNOT BE ACCEPTED. THEREF ORE, IT WAS HELD THAT MULTIPLE CASH PAYMENTS MADE BY THE ASSESSEE ON A S INGLE DAY EXCEEDING RS. 10,000/- IN AGGREGATE WERE RIGHTLY DISALLOWED U/S 40A(3). LD. AR SUBMITTED THAT DETAILS OF EACH AND EVERY PAYMENT HAS BEEN FILED AN D HAS ALSO BEEN PLACED IN THE PAPER BOOK. HE SUBMITTED THAT ON A SINGLE DAY THE P AYMENT DID NOT EXCEED RS. 20,000/- TO A SINGLE PARTY. LD. AR SUBMITTED THAT T HIS FACT COULD BE VERIFIED BY THE AO AND APPROPRIATE RELIEF SHOULD BE GIVEN TO TH E ASSESSEE. 3. THE LEARNED DR ON THE OTHER HAND SUBMITTED THAT LD. CIT(A) HAS RIGHTLY SUSTAINED THE ADDITION AND HIS ORDER SHOULD BE UPHE LD. - 3 - 4. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. IN THE AFOREMENTIONED DECISION RENDERED BY HONBLE HIGH COURT OF HIMACHAL PRADESH THE QUESTION BEFORE THE COURT WAS THAT WHETHER STATUTORY LIMIT PRESCRIBED U/S 40A(3) WILL APPLY TO A CASE WHERE MU LTIPLE CASH PAYMENTS MADE TO SAME PARTY ON A SINGLE DAY IN AGGREGATE EXCEEDING RS. 10,000/-. IT WAS OBSERVED BY HONBLE HIGH COURT THAT IT COULD NOT BE HELD THA T STATUTORY LIMIT U/S 40A(3) APPLIES TO PAYMENTS MADE TO A PARTY AT ONE TIME AND NOT TO THE AGGREGATE OF PAYMENTS MADE TO A PARTY IN THE COURSE OF A DAY AS RECORDED IN THE CASH BOOK. IT WAS FURTHER OBSERVED THAT IN THAT CASE IT WOULD BE VERY EASY FOR THE ASSESSEE TO SPLIT UP THE PAYMENTS OF MORE THAN THE SUMS PERMITT ED IN THE TWO OR THREE INSTALLMENTS DURING THE SAME DATE. THEIR LORDSHIPS FURTHER OBSERVED THAT IF THE ASSESSEE CAN SHOW TO THE IT AUTHORITIES THAT THERE WERE SPECIAL CIRCUMSTANCES WHICH NECESSITATED THE PAYMENT BEING MADE SEPARATEL Y N TWO OR THREE INSTALLMENTS THEN THERE CAN BE A GROUND TO ACCEPT S UCH EXPLANATION WHICH WILL DEPEND UPON THE FACTS AND CIRCUMSTANCES OF EACH CAS E. THIS VIEW WAS EXPRESSED AS A DISSENT VIEW TO THE DECISION OF HONBLE HIGH C OURT OF ORISSA IN THE CASE OF CIT VS. ALOO SUPPLY CO. (121 ITR 680) , IN WHICH IT WAS HELD THAT THE LIMIT OF RS. 2500/- ( THE THEN APPLICABLE LIMIT) IS APPLICABLE F OR EACH PAYMENT AND NOT TO THE AGGREGATE OF VARIOUS PAYMENTS MADE TO THE SAME PAYE E AT DIFFERENT TIMES DURING THE COURSE OF A DAY. THEREFORE, ONE VIEW OF THE MAT TER IS THAT IN CASE THE PAYMENTS MADE TO THE SAME PARTY DURING THE COURSE O F A DAY, IF EACH PAYMENT DOES NOT EXCEED THE PRESCRIBED LIMIT, THEN ALSO THE DISALLOWANCE COULD NOT BE MADE. THEREFORE, IN OUR VIEW THE EXPLANATION OF THE ASSESSEE IS ACCEPTABLE IN THE LIGHT OF DECISION OF HONBLE HIGH COURT OF HIMACHAL PRADESH IN THE CASE OF CIT VS. DALIP CHAND AND SONS (SUPRA) WHEREIN IT HAS BEEN HELD THAT AGGREGATE PAYMENTS MADE TO SAME PARTY DURING THE COURSE OF A DAY, IF EXCEED THE PRESCRIBED LIMIT THEN ONLY THEY ARE REQUIRED TO BE DISALLOWED. ON THE CONTRARY, IF - 4 - DURING THE COURSE OF A DAY THE CASH PAYMENTS MADE T O THE SAME PARTY DO NOT EXCEED THE PRESCRIBED LIMIT THEN DISALLOWANCE U/S 4 0A(3) CANNOT BE MADE. IN THIS VIEW OF POSITION OF LAW, WE REMIT THIS MATTER BACK TO THE FILE OF AO WITH THE DIRECTION TO EXAMINE THE CASH PAYMENTS MADE BY THE ASSESSEE. IF AFTER EXAMINATION IT IS FOUND THAT CASH PAYMENTS MADE TO THE SAME PARTY DURING THE COURSE OF SINGLE DAY EXCEED AGGREGATE OF RS. 20,000 /- THEN ONLY THE DISALLOWANCE CAN BE MADE OTHERWISE NO DISALLOWANCE U/S 40A(3) I S CALLED FOR, WE DIRECT ACCORDINGLY. 8. IN THE RESULT, FOR STATISTICAL PURPOSE THE APPEA L FILED BY THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 -12-2 013. SD/- SD/- (N.K. BILLAIYA) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER SKS SR. P.S, MUMBAI DATED 18-12-2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, E BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI