ITO, BUNDI V. SHRI RAMESH KUMAR, BUNDI

ITA 408/JPR/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82871 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 30-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NEENA JEPH
• Assessee Lawyers: B V MAHESHWARI
• Keywords: Depreciation; Opportunity of being heard
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 408/JP/2012 ASSTT. YEAR- 2008-09 PAN NO. ABQPK 1350 A THE I.T.O. RAMESH KUMAR, BUNDI. VRS. PROP. M/S NEVAND RAM BHERUMAL, NEAR CHOGAN JAIN MANDIR, BUNDI. (APPELLANT) (RESPONDENT) I.T.A. NO. 292/JP/2012 ASSTT. YEAR- 2008-09 PAN NO. ABQPK 1350 A SHRI RAMESH KUMAR, THE I.T.O. S/O- SHRI NEVAND RAM VRS. BUNDI. M/S NEVAND RAM BHERUMAL, NEAR CHOGAN JAIN MANDIR, BUNDI. DEPARTMENT BY :- MRS. NEENA JEPH (J.C.I.T.). ASSESSEE BY :- SHRI B.V. MAHESHWARI (C.A.) DATE OF HEARING : 18/11/2014 DATE OF PRONOUNCEMENT : 31/12/2014 O R D E R PER: T.R. MEENA, A.M. THE ITA NO. 408/JP/2012 FILED BY THE REVENUE AS WELL AS CROSS APPEAL NO. 292/JP/2012 BY THE ASSESSEE ARE AGAINST THE ORDER DATED ITA 408 & 292/JP/2012 ITO VS. RAMESH KUMAR 2 29/02/2012 OF THE LEARNED C.I.T.(A), KOTA FOR THE A. Y. 2008-09. THE GROUNDS OF REVENUES APPEAL AS WELL AS THE ASSESSEE ARE AS UNDER:- GROUNDS OF ITA NO. 408/JP/2012 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A), KOTA HAS ERRED IN: (I) REDUCING THE DISALLOWANCE TO RS. 6,01,339/- I.E. 25% OUT OF TOTAL DISALLOWANCE MADE AT RS. 24,05,354/- U /S 40A(3) OF THE I.T. ACT, 1961 IN SPITE OF THE FACT TH AT THE PAYMENTS WERE MADE TO SIX TRANSPORT COMPANIES WITH WHOM THEY HAD REGULAR DEALINGS AND THUS THE PAYMENTS ARE NOT FALLING IN ANY EXCEPTION. GROUNDS OF ITA NO. 292/JP/2012 1. THAT THE LEARNED CIT(A) GROSSLY ERRED IN CONFIRM ING THE DISALLOWANCE OF RS. 6,01,339/- U/S 40A(3) BEING PAYMENT MADE TO TRANSPORTS IN THE CIRCUMSTANCES COVERED U/S 40A(3) AND RULE 6DD. THE LEARNED ASSESSING OFFICER MADE THE ADDITION OF RS. 24,05,354/- BY DISALLOWING THE PAYMENT MADE TO TRANSPORT DRIVERS IN CASH BY WRONGLY INVOKING AND INTERPRETING THE SEC. 40A(3), THE LEARNED CIT ALLOWE D 75% AND DELETED THE ADDITION TO THAT EXTENT. 2. THAT THE LEARNED ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A) GROSSLY ERRED IN MAKING AND CONFIRMI NG THE ADDITION OF RS. 28,000/- TOWARDS LOW WITHDRAWALS FOR HOUSE HOLD EXPENSES. 2. GROUND NO. 1 OF BOTH THE APPEALS FILED BY THE RE VENUE AND ASSESSEE IS AGAINST REDUCING THE DISALLOWANCE TO RS. 6,01,339 /- I.E. 25% OUT OF TOTAL ITA 408 & 292/JP/2012 ITO VS. RAMESH KUMAR 3 DISALLOWANCE MADE AT RS. 24,05,354/- U/S 40A(3) OF T HE I.T. ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) AS WELL AS CONFIRM ING THE DISALLOWANCE OF RS. 6,01,339/- U/S 40A(3) BEING PAYMENT MADE TO TRA NSPORTS IN THE CIRCUMSTANCES COVERED U/S 40A(3) AND RULE 6DD OF TH E INCOME TAX RULES, 1962 (IN SHORT THE RULES). THE ASSESSING OFFICER OBS ERVED THAT THE ASSESSEE DERIVED INCOME FROM TRADING OF SUGAR, OIL, GHEE, EDIBLE, OIL, KIRANA ETC. ON VERIFICATION OF BOOKS OF ACCOUNT PRO DUCED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER FOUND THAT THE CASH AND PURCHASE EXEMPT ACCOUNT THAT THE ASSESSEE HAD MADE NUMEROUS PAYMENTS EXCEEDING RS. 20,000/- AGGREGATIN G TO RS. 24,05,354/- AGAINST PURCHASE EXPENSES I.E. FREIGHT AND WAGES EXPENSES IN CASH. THE LEARNED ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE, WHICH WAS REPLIED BY THE ASSESSE E. THE DETAILS OF CASH PAYMENT TO THE TRANSPORTERS HAS BEEN MENTIONED BY T HE ASSESSING OFFICER FROM PAGE NOS. 2 TO 8 OF THE ASSESSMENT ORDER. THE A SSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE LIST OF PAYME NTS GIVEN BY THE ASSESSING OFFICER WAS MADE TO THE TRUCK DRIVERS, WHO DELIVERED THE GOODS IN THE PERIOD WHEN BANKS WERE CLOSED. THAT AS PER NO RMS OF THE CITY, THE HEAVY LOAD TRUCK WAS ALLOWED TO ENTER IN THE CITY IN NIGHT HOURS AND MOMENT GOODS WAS UNLOADED. THE DRIVERS TAKE CASH, SIN CE THEY HAD NO ITA 408 & 292/JP/2012 ITO VS. RAMESH KUMAR 4 ACCOUNT IN THE BANK AT THE BUSINESS PLACE OF THE AS SESSEE, THUS FOR SMOOTH RUNNING OF THE BUSINESS, THE ASSESSEE HAS NO ALTERNATIVE EXCEPT TO MAKE THE PAYMENT IN CASH. THE ASSESSEE ALSO PLACED R ELIANCE OF VARIOUS DECISIONS BEFORE THE ASSESSING OFFICER. AFTER CONSI DERING THE ASSESSEES REPLY, THE ASSESSING OFFICER HELD THAT THE DETAILS OF CASH PAYMENTS SHOWED THAT ALL THE PAYMENTS WERE MADE BY THE ASSESSEE IN C ASH TO SIX TRANSPORT COMPANIES ON THE WORKING DAY OF BANK. AS PER BUNDI C ITY NORMS, THE TRUCKS WERE ALLOWED TO ENTER IN THE CITY IN THE MORNI NG HOURS NOT IN NIGHT HOURS AS CLAIMED BY THE ASSESSEE. THE PAYMENTS MADE TO THESE SIX TRANSPORTERS REPEATEDLY AND IN SUBSTANTIAL AMOUNT, THE TRANSPORT COMPANIES WERE KNOWN TO THE ASSESSEE AS THEY TRANSPOR TED THE GOODS OF ASSESSEE NUMEROUS TIMES. THE ASSESSEE HAD NOT PRODUC ED ANY EVIDENCE THAT TRANSPORTS HAD FORCED TO PAY TRANSPORTATION CH ARGES IN CASH. THE ASSESSEES CASE ALSO WAS NOT COVERED UNDER RULE 6DD OF THE RULES. THE CASE LAW CITED BY THE ASSESSEE WERE NOT SQUARELY APPL ICATION IN THE CASE OF THE ASSESSEE AND EACH CASE DEPENDED ON ITS OWN FA CTS AND CLOSE SIMILARITY BETWEEN ONE CASE AND ANOTHER CASE WAS NOT ENOUGH BECAUSE EVEN A SINGLE SIGNIFICANT DETAIL MAY ALTER THE ENTI RE ASPECT OF THE CASE. ACCORDINGLY, HE DISALLOWED THE WHOLE CASH PAYMENT OF RS. 24,05,554/- U/S 40A(3) OF THE ACT. ITA 408 & 292/JP/2012 ITO VS. RAMESH KUMAR 5 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A ), WHO HAD ALLOWED ASSESSEES APPEAL PARTLY BY OBSERVING THAT THE TRUC KS WERE ALLOWED TO ENTER IN BUNDI CITY BETWEEN 8.00 P.M. TO 8.00 A.M. A ND BUSINESS PREMISES GENERALLY OPENS AT AROUND 11.00 A.M. AND ALL THE TR UCKS WERE UNLOADED ONLY AFTER 8.00 P.M. AS CLAIMED BY THE ASSESSEE BUT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE THAT ALL THE TRUCKS WERE UNLOAD ED ONLY IN NIGHT. THEREFORE, HE DECIDED THE CASE ON THE BASIS OF PREPO NDERANCE OF PROBABILITY. HE PRESUMED THAT 75% OF THE TRUCKS ENT ERED IN THE CITY IN NIGHT HOURS AND 25% OF TRUCKS ENTERED IN THE CITY I N MORNING HOURS. ON THE BASIS OF THIS PRESUMPTION, IT HAS BEEN HELD BY THE LEARNED CIT(A) THAT 75% OF PAYMENTS WERE MADE TO THE TRUCK DRIVERS IN T HE NIGHT HOURS WHEN THE BANKS WERE CLOSED AND 25% OF PAYMENTS WERE MADE T O THE TRUCK DRIVERS DURING THE DAY HOURS WHEN THE BANKS WERE OPEN ED. HE FURTHER RELIED ON THE DECISION OF HONBLE ITAT, JAIPUR BENCH , JAIPUR IN THE CASE OF SHRI SALASAR OVERSEAS PVT. LTD. VS. DCIT (ITA NO. 56 /JP/2010 AND 120/JP/2011) WHEREIN IT WAS HELD THAT THE PAYMENTS MA DE TO VILLAGERS AFTER BANKING HOURS IS COVERED BY EXCEPTION CLAUSE IN RULES 6DD. ACCORDINGLY, HE ALLOWED 75% CASH PAYMENT UNDER RULE 6DD OF THE RULES AND 25% NOT ALLOWED UNDER RULE 6DD. ITA 408 & 292/JP/2012 ITO VS. RAMESH KUMAR 6 4. NOW THE REVENUE AS WELL AS THE ASSESSEE ARE IN APP EAL BEFORE US. 5. THE LEARNED A.R. FOR THE ASSESSEE ARGUED THAT THE ASSESSEES CASE IS COVERED UNDER PROVISO TO SUB-SEC. (3A), WHICH MENTIO NED IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED, HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. AS PER RUL E 6DD OF THE RULES, THERE IS EXCEPTION I.E. A BANK HOLIDAY OR BANK CLOS ED AND PAYMENTS MADE TO THE AGENT. THE GOODS WERE UNLOADED IN THE NIGHT A ND PAYMENTS WERE MADE TO THE DRIVERS, WHO ARE AGENT OF THE TRANSPORT COMPANIES. THE LEARNED ASSESSING OFFICER SHOULD HAVE ADOPTED PRACT ICAL APPROACH NOT A TECHNALITY. THE GENUINENESS OF THE PAYMENT HAS NOT B EEN DOUBTED BY THE LEARNED ASSESSING OFFICER. HE FURTHER RELIED UPON T HE DECISION IN THE CASE OF TIRUPATI TRANSPORT CO. VS. CIT, 242 ITR 13 (CAL. HI GH COURT) WHEREIN AMOUNT PAID IN CASH IN EXCESS OF THE STIPULATED LIM IT FOR DISBURSEMENT OF THE SAME AMONGST LORRY DRIVERS SUCH PAYMENTS WERE RE FLECTED IN THE BOOKS OF ACCOUNTS NOT TO BE DISALLOWED U/S 40A(3) RE AD WITH RULE 6DD. HE FURTHER RELIED UPON THE DECISION IN THE CASE OF CIT VS. BANSWARA FABRICS, 267 ITR 398 (RAJ. HIGH COURT) AND CLAIMED THAT THES E EXPENSES ARE COVERED UNDER RULE 6DD OF THE RULES AND ALLOWABLE. TH E LEARNED AR ALSO SUBMITTED COPY OF A PAPER CUTTING OF RAJASTHAN PATR IKA WHEREIN IT HAS ITA 408 & 292/JP/2012 ITO VS. RAMESH KUMAR 7 BEEN RECORDED THAT FOUR WHEELERS AND HEAVY VEHICLES WERE NOT ALLOWED BY THE TRAFFIC POLICE FROM 10.00 A.M. TO 8.00 P.M. IN THE CITY. 6. AT THE OUTSET, THE LEARNED SR. DR VEHEMENTLY SUP PORTED THE ORDER OF THE LEARNED ASSESSING OFFICER. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. AS PER TRA FFIC RULE, THE HEAVY VEHICLES ARE NOT ALLOWED TO ENTER IN THE CITY AREA F ROM 10.00 A.M. TO 8.00 P.M., IT MEANS THAT THE HEAVY VEHICLES ARE ALLOWED T O ENTER IN THE CITY IN NIGHT HOURS. TRANSPORTERS GENERALLY COLLECT THE TRAN SPORT RECEIPTS THROUGH THE DRIVERS ON UNLOADING THE GOODS. THE PAYER ALSO VERIFIED THE GOODS BEFORE MAKING PAYMENT OF TRANSPORT CHARGES. IN THE LINE OF TRANSPORT BUSINESS, IT IS PRACTICED THAT GENERALLY THE DRIVER S ASKED TO PAY CASH OF TRANSPORT CHARGES AS THEY DO NOT HAVE FIXED PLACE T O TRANSPORT THE GOODS REGULARLY. THEREFORE, THE ASSESSEE HAS TO MAKE CASH PAYMENT TO THE DRIVERS AGAINST THE TRANSPORT CHARGES FOR BUSINESS EXPEDIENCY AND THE FACTS AND CIRCUMSTANCES OF THE ASSESSEE COMPELLED H IM TO PAY CASH TO MAINTAIN THE BUSINESS RELATION WITH THE TRANSPORTERS IN FUTURE. NO DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER IN THE PAST AND IN SUBSEQUENT YEAR UNDER THIS HEAD. THE GENUINENESS OF THE EXPENSES HAS NOT BEEN DOUBTED BY THE ASSESSING OFFICER. THE CASE LAWS RELIED BY THE ITA 408 & 292/JP/2012 ITO VS. RAMESH KUMAR 8 LEARNED A.R. FOR THE ASSESSEE ARE SQUARELY APPLICAT ION ON THE CASE OF THE ASSESSEE. THUS, WE ALLOW THE ASSESSEES APPEAL AND DIS MISS THE REVENUES APPEAL ON THIS GROUND. 8. THE SECOND GROUND OF ASSESSEES APPEAL IS AGAINST CONFIRMING THE ADDITION OF RS. 28,000/- TOWARDS LOW HOUSEHOLD WITHDRA WALS. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD SH OWN HOUSEHOLD EXPENSES AT RS. 54,000/-, WHICH WERE FOUND TO BE ON L OWER SIDE. THE LEARNED ASSESSING OFFICER GAVE REASONABLE OPPORTUNI TY OF BEING HEARD UNDER THE VARIOUS HEADS TO THE APPELLANT, WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 05/8/2010. THE ASSESSEE DID NOT FURNISH THE DETAIL OF HEAD WISE AS ASKED BY THE LEARNED ASSESSIN G OFFICER EVEN ON SUBSEQUENT QUERY. THUS, HE ESTIMATED THE HOUSEHOLD E XPENSES AT RS. 1,50,000/-, THE TOTAL HOUSEHOLD WITHDRAWALS ARE OF TH E ASSESSEE AT RS. 54,000/- AND OTHER FAMILY MEMBERS AT RS. 68,000/- I N TOTAL RS. 1,22,000/-. THUS THERE WAS A DIFFERENCE OF RS. 28,000/- IN HOUSEH OLD WITHDRAWALS ESTIMATED BY THE ASSESSING OFFICER. HE MADE ADDITIO N OF RS. 28,000/- ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS. 9. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASS ESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD CONFIRMED THE ADDITION BY OBSERVING THAT THE ASSESSEE HAD BEE N FURNISHED DETAILS AS ITA 408 & 292/JP/2012 ITO VS. RAMESH KUMAR 9 REQUIRED BY THE ASSESSING OFFICER AS PER ITEM-WISE. THE ESTIMATION MADE BY THE ASSESSING OFFICER IS ALSO REASONABLE. 10. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 11. THE AR FOR THE ASSESSEE SUBMITTED THAT THE ASSES SEES FAMILY LIVING STANDARD IS VERY SIMPLE. THE TOTAL WITHDRAWALS WERE MAD E BY THE ASSESSEE AND HIS FAMILY MEMBERS AT RS. 1,22,000/-. THE LEARNE D ASSESSING OFFICER ALSO DISALLOWED VEHICLE EXPENSES AND DEPRECIATION ON VEHICLE. THE ASSESSEE DID NOT HAVE CAR ONLY HAVE TWO TWO WHEELERS, THEREFORE, THE SAME MAY BE DELETED. 12. AT THE OUTSET, THE LEARNED SR. DR SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 13. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE ASSESSEE FAMILY CONSISTS OF FIVE MEMBERS. THE LEARNED ASSESSING OFFICER HAD GIVEN DET AILED REASONING FOR ESTIMATION OF HOUSEHOLD WITHDRAWALS. THE SPECIFIC DETA ILS ASKED BY THE ASSESSING OFFICER, DID NOT FURNISH HEADWISE, THE ES TIMATION MADE BY THE LEARNED ASSESSING OFFICER APPEARS TO BE REASONABLE IN VIEW OF THE LIVING STANDARD OF THE ASSESSEE. THUS, WE CONFIRM THE ORDER OF THE LEARNED CIT(A). ON THIS GROUND, THE ASSESSEES APPEAL IS DIS MISSED. ITA 408 & 292/JP/2012 ITO VS. RAMESH KUMAR 10 14. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED AND THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/12/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 31 ST DECEMBER, 2014 * RANJAN COPY FORWARDED TO :- 1. THE ITO, BUNDI. 2. SHRI RAMESH KUMAR, BUNDI. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 408 & 292/JP/2012) BY ORDER, AR ITAT JAIPUR.