The Gudas Vyavasaya Seva Sahakari Sangh Niyamit., Belgaum V. Income Tax Officer Ward-1(3), Belgaum

ITA 372/PAN/2013

• Counselvise Citation: 37224114 RSA 2013
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 29-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONAL L SONKAVDE
• Assessee Lawyers: ASHOK G MU DNUR
• Section: 43B; 40A(3); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 372 /PNJ/2013 (ASSESSMENT YEAR - 2009 - 10 ) THE GUDAS VYAVASAYA SEVA SAHAKARI SANGH NIYAMIT GUDAS, TAL: HUKKERI DIST BELGAUM (KARNATAKA STATE) 591310 PAN: AAAAG0957F (APPELLANT) THE INCOME TAX OFFICER, WARD - 1(3) , BELGAUM (RESPONDENT) APPELLANT BY : SHRI ASHOK G . MU DNUR, CA. RESPONDENT BY : SMT. SONAL L . SON KAVDE , DR. DATE OF HEARING : 11/2 /2014 DATE OF PRONOUNCEMENT : 11/2 /2014 O R D E R PER: D.T. GARASIA THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), BELGAUM DATED 16.09.2013 FOR THE ASSESSMENT Y EAR 2009 - 10 . 2. THE FOLLOWING GROUNDS ARE RAISED BY THE ASSESSEE IN THIS APPEAL. 1. THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS), BELGAURN HAS E RRED IN UPHOLDING THE ASSESSING OFFICER ORDER DISALLOWING THE GOVERNMENT AUDIT FEES RS 42,000/ - WHICH IS CONTRARY TO DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SHRI WARNA SAHAKARI SAKHAR KARKHANA 253 ITR 226 WHEREIN IT WAS HELD THAT U/S 43B OF TH E INCOME TAX OFFICER ,1961 IS NOT APPLICABLE TO GOVERNMENT AUDIT FEES. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS),BELGAUM HAS ERRED IN UPHOLDING THE ASSESSIN G OFFICER ORDER DISALLOWING THE ADVERTISEMENT EXPENSE OF RS 12,424/ - U/S 37(2B) OF THE INC OME TAX ACT 1961 WHICH IS CONTRARY TO FACTS AND HAD BEEN INCURRED TOWARDS ACTIVITY OF THE SOCIETY. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS),BELGAUM HAS ERRED IN UPHOLDING THE DISALLOWANCE U/S 40A(3) OF RS 7,71,488/ - BEING PURCHASES OF KEROSENE 2 . ITA NO.372/PNJ/2013 (A.Y.2009 - 10 ) THE G.V . S. SAHAKARI SANGH NIYAMIT VS. ITO FO R PUBLIC DISTRIBUTION SYSTEM (PDS) UNDER EXCEPTIONAL AND UNAVOIDABLE C IRCUMSTANCES EVEN WHEN GENUINENESS OF THE TRANSACTIONS IS NOT DOUBTED BY AO. WE FIND SUPPORT IN THE CASES OF (I) CIT VS CHAUDHARY & CO (1996) 217 ITR 431 (ALL) WHEREIN IT WAS HELD ASSE SSEE PRODUCED EVIDENCE THAT PAY EE INSISTED FOR CASH PAYMENT, I DENTITY OF PAYEE WAS DISCLOSED AND GENUINE NE SS OF PAYMENT ALSO ESTABLISHED - DISALLOWANCE U/S 40A(3) WAS NOT CALLED FOR - OBJECT IS THAT NO FICTITIOUS AMOUNT SHOULD BE ALLOWED AS REVENUE EXPENSES AND THAT CASH PAYMENT CAN NEVER BE MADE. (II) CIT VS SATYAM GINNING PRESSING OIL MILLS (1996) 217 ITR 688 (MP) IT WAS HELD PAYER AND PAYEE IS IDENTIFIABLE SO IS THE PURPOSE - ASSERTION IS VERIFIABLE FROM THE RECORDS OF BOTH THE SIDES - DISALLOWANCE U/S 40A(3) WAS ILLOGICAL AND ILLEGAL IN VIEW OF THE FACTS (III) TAM TAM PEDDA GURUVA REDDY VS JT COMM OF INCOME TAX & ANS (2007) 291 ITR 44 (KAR) IT WAS HELD ASSESSEE HAS EXPLAINED THAT HE MADE CASH PAYMENT TO AN OIL COMPANY WHICH DID NOT ACCEPT CHEQUE AND WAS MAKING ONLY CASH SALES - EXPLANATION GIVEN BY THE ASSESSEE IS SATISFACTORY IN VIEW OF 6DD(J) - DISALLOWANCE IS NOT JUSTIFIED (IV) KANTILAL PURSHOTTAM & CO., VS CIT (1985) 155 ITR 519 (RAJ) IT WAS HELD THAT RIGOUR OF RESTRICTION LOOSENED BY RULE 6DD AND ITO HAS DISCRETION POWER TO ALL GENUINE CASH PAYMENT - GENUINENESS OF. PAYMENT AND IDENTITY OF PAYEE NOT DISPUTE D - DISALLOWANCE UNDER SEC. 40A.(3) NOT JUSTIFIED 3. GROUND NO. 1. THE ASSESSEE IS A CO - OPERATIVE REGISTERED UNDER THE KARNATAKA CO - OPERATIVE SOCIETIES ACT, 1959. THE OBJECTS OF THE CO - OPERATIVE SOCIETIES IS TO PROMOTE THE ECONOMIC INTEREST OF ITS MEMBE RS AND TO ENCOURAGE THRIFT, SAVINGS, CO - OPERATION AND SELF HELP AMONG THEMSELVES AND TO CREATE FUNDS BY MEANS OF DEPOSITS AND BORROWINGS HEREAFTER TO LEND TO MEMBERS OF THE SOCIETY AT MODERATE RATE OF INTEREST. THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 16.09.2009 FOR A.Y 2009 - 10. THE AO HAS DISALLOWED THE AUDIT FEES OF RS. 42,000/ - ON THE GROUND THAT ASSESSEE HAS SHOWN PROVISIONS OF AUDIT FEES OF RS. 42,000/ - IN B ALANCE S HEET. AS THERE IS PROVISION FOR AUDIT FEES BUT ACTUALLY NOT PAID BEFORE DUE DATE OF FILING THE RETURN OF INCOME U/S. 139 (1), THE SAME WAS DISALLOWED U/S. 40B OF THE INCOME TAX ACT AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3.1. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS CONFIRMED THE SAME. 3 . ITA NO.372/PNJ/2013 (A.Y.2009 - 10 ) THE G.V . S. SAHAKARI SANGH NIYAMIT VS. ITO 3.2. THE LEARNED AR SUBMITTED THAT THE AS SESSING OFFICER HAS DISALLOWED THE GOVERNMENT AUDIT FEES OF RS. 42,000/ - WHICH IS CONTRARY TO DECISION OF HONBLE BOMBA Y HIGH COURT IN THE CASE OF SHR EE WARNA SAHAKARI SAKHAR KARKHANA 253 ITR 226, WHEREIN IT WAS HELD THAT SEC. 43B OF THE INCOME TAX ACT IS NOT APPLICABLE TO THE GOVT. AUDIT FEES. 3.3. ON THE OTHER HAND, LEARNED D R RELIED UPON THE ORDER OF THE R EVENUE. 3.4. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE HAS PAID GOVT. AUDIT FEES OF RS. 42,000/ - . WE FIND THAT AS PER THE DECISION OF HONBLE BOMBAY HIGH IN THE CASE OF CIT VS. SHR EE WARNA SAHAKARI SAKHAR KARKHANA LTD. 253 ITR 226 WHEREIN IT IS HELD THAT CONCEPT OF FEES REFERRED TO IN SECTION 43B CANNOT BE EQUATED WITH LEVY OF AUDIT CHARGES PAYABLE FOR GETTING THE AUDIT OF THE ACCOUNTS DONE. THE WORD FEES HAD BEEN USED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE LOOSELY, IN GENERAL COMMERCIAL SENSE AS NORMALLY UNDERSTOOD IN THE TRADING SOCIETY, SINCE PAYMENTS WERE MADE TO THE CO - OPERATIVE DEPARTMENT OF THE STATE THROUGH THE REGISTRAR IN EXCHANGE FOR THE SERVICES OF THE AUDITORS AV AILED OF BY THE ASSESSEE. LEVY OF AUDIT CHARGES WAS NOTHING BUT THE PRICE REQUIRED OR DEMANDED FOR THE SERVICES RENDERED BY GOVERNMENT AUDITORS. THE PROVISIONS OF SECTION 43B DO NOT APPLY TO GOVT. AUDIT CHARGES. WE RESPECTFULLY FOLLOWING THE ABOVE DECISIO N WE ALLOW THE GOVT. AUDIT FEES OF RS. 42,000/ - . IN THE RESULT, APPEAL IS ALLOWED ON THIS GROUND. 4. GROUND NO. 2 RELATES TO DISALLOWING THE ADVERTISEMENT EXPENSES OF RS. 12,424/ - U/S. 37(2B) OF THE INCOME TAX ACT 1961. THE AO HAS DISALLOWED THE ADVERTISEMENT EXPENSES OF RS. 12,424/ - . THE AO HAS VERIFIED THE SAME AND WAS OF A VIEW THAT THE SAID ADVERTISEMENT EXPENDITURE INCURRED OTHER THAN 4 . ITA NO.372/PNJ/2013 (A.Y.2009 - 10 ) THE G.V . S. SAHAKARI SANGH NIYAMIT VS. ITO REGULAR BUSINESS ACTIVITY OF THE ASSESSEE, THEREFORE, IT WAS DISALLOWED U/S. 37(2B) OF THE INCOME TAX AC T AND ADDED BACK TO THE ASSESSEES INCOME. 4.1. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS CONFIRMED THE SAME. 4.5. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT ASSESSEE HAS INCURRED THIS ADVERTISEMENT EXPENDITURE TOWARDS THE ADVERTISEMENT OF ACTIVITIES OF SOCIETY. IN OUR OPINION, THIS IS ALLOWABLE EXPENDITURE, THEREFORE, WE ALLOW THE SAME. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED ON THIS GROUND. 5. GROUND NO.3: - DURING THE COURSE OF ASSESSMENT THE ASSESSEE HAS MADE PURCHASE OF KEROSENE, FOOD GRAINS, SUGAR, SALT, TEA POWDER FOR THE RATION BUSINESS. THE PAYMENTS ARE MADE TOWARDS PURCHASE OF KEROSENE ARE AS UNDER: S.NO. DESCRIPTION OF COMMODITY DATE OF PAYMENT AMOUNT RS. 1. KEROSENE 24.04.08 66,323 2. KEROSENE 15.05.08 66,323 3 . KEROSENE 12.06.08 66,323 4. KEROSENE 16.07.08 66,323 5. KEROSENE 16.08.08 66,038 6. KEROSENE 17.09.08 66,038 7. KEROSENE 13.10.08 66,038 8. KEROSENE 10.11.08 66,038 9. KEROSENE 13.12.08 66,038 10. KEROSENE 16.01.09 65,174 11. KEROSENE 16.02.09 49,057 12. KEROSENE 18.03.09 61,775 TOTAL 7,71,488 THE AO WAS OF THE VIEW THAT THE PAYMENTS TOWARDS PURCHASE OF KEROSENE IS MADE IN CASH, WHICH IS IN CONTRAVENTION OF THE PROVISIONS OF SEC. 40A(3) OF THE ACT, THEREFORE, THE SAME WAS DISALLOWED AND ADDED BACK TO THE ASSESSEES TRADING INCOME. 5.2. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS CONFIRMED THE SAME. 5 . ITA NO.372/PNJ/2013 (A.Y.2009 - 10 ) THE G.V . S. SAHAKARI SANGH NIYAMIT VS. ITO 5.3. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMS TANCES OF THE CASE, DURING THE COURSE OF HEARING WE FIND T HAT ASSESSEE HAS MADE PAYMENT FOR PURCHASE OF KEROSENE OF RS. 7,71,488/ - IN CASH. DURING THE COURSE OF HEARING THE ASSESSEES CONTENTION IS THAT PAYMENT HAS BEEN MADE TO GOVT. BUT THE PAYMENT HAS BEEN MADE TO PRIVATE PARTY AND NOT TO THE GOVT. WE FIND THAT ASSESSEE COULD NOT ESTABLISH ANY EXCEPTIONAL CIRCUMSTANCES WHICH RENDERED MAKING OF PAYMENTS BY CHEQUE IMPRACTICA BLE. IT IS ALSO NOT THE CASE OF ASSESSEE THAT BANK FACILITIES ARE NOT AVAILABLE IN TH IS AREA . THEREFORE, WHEN ASSESSEE HAS MADE PAYMENT TO PRIVATE PARTIES, IT CANNOT BE ALLOWED. THE ASSESSEE HAS FILED THE LETTER FROM THE SUPPLIER OF KEROSENE DATED 19.11.2 011 AT PAGE 15 OF THE PAPER BOOK WHEREIN IT IS SUBMITTED THAT ASSESSEE HAS PAID THIS AMOUNT TO GOVT. CONCERN ONLY AND T HEREFORE, IT MAY BE A LLOWED BUT WE FIND THAT THIS S.B. SHIRKOLI, SANKESHWAR, BELGAUM IS A GOVT AGENT OR NOT AND IF IT IS GOVT. AGENT , THEN WHY THE CHEQUE HAS NOT BEEN ACCEPTED BY THE SUPPLIER. THEREFORE, WE REVERSE THE FINDING OF CIT AND RESTORE THIS MATTER BACK TO THE FILE OF AO TO DECIDED THE MATTER AFRESH AND TO VERIFY WHETHER THIS PAYMENT HAS BEEN MADE TO GOVT. COMPANY OR NOT AND I F IT HAS BEEN PAID TO THE GOVT. COMPANY THEN IT MAY BE DECIDED AS PER LAW. THE AO IS DIRECTED TO GIVE OPPORTUNITY OF HEARING TO THE ASSESSEE. 6. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 11.2 .2014. SD/ - SD/ - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 14 .2 .2014 P.S. - *PK* 6 . ITA NO.372/PNJ/2013 (A.Y.2009 - 10 ) THE G.V . S. SAHAKARI SANGH NIYAMIT VS. ITO COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER SR. PRIVATE SECRETARY, ITAT, PANAJI, GOA