Tarini Tea And Cold Storage Pvt. Ltd, Keonjhar V. ACIT(OSD), Bhubaneswar

ITA 414/CTK/2011

• Counselvise Citation: 41422114 RSA 2011
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 03-10-2011
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: D K SETHK SETH ARS
• Keywords: Assessment record
• Section: 40A(3)

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 414/CTK/2011 (ASSESSMENT YEAR 2006 - 07) TARINI TEA AND COLD STORAGE PVT. LTD., C/O. SANJIB KUMAR PANIGRAHI, AT: SANKARPUR, P.O.NETUNG, DIST.KEONJHAR 758 002 PAN: AACCT 0673 P VERSUS ASST.COMMISSIONER OF INCOME - TAX (OSD)RANGE 1, BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI D.K.SETH/K.SETH, ARS FOR THE RESPONDENT SHRI A.BHATTACHARJEE, DR DATE OF HEARING : 30.11.2011 DATE OF PRONOUNCEMENT : 22.12.2011 ORDER SHRI K.S.S.PRASAD RAO, JM : THIS APPEAL IS FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) DT. 24.8.2011 FOR THE ASSESSMENT YEAR 2006 - 07 IN THE CASE OF THE ASSESSEE. 2. THE SOLE ISSUE RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL IS CHALLENGING THE CONFIRMATION OF ADDITION OF 10,97,086 MADE UNDER THE HEAD DISALLOWANCE U/S.40A(3) AS ARBITRARY, UNCALLED FOR AND HIGHLY UNJUSTIFIED. 3. BOTH THE PARTIES WERE HEARD REGARDING THE ISSUE RAISED IN THE APPEAL AND ITS LEGAL IMPLICATIONS . 4. ON CAREFUL CONSIDERATION OF THE MATERIAL MAD E AVAILABLE TO THE TRIBUNAL AND ANALYZING THE SAME IN THE LIGHT OF THE SUBMISSIONS OF BOTH THE PARTIES, THE UNDISPUTED FACTS RELATING TO THE ISSUES ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY FILED ITS RETURN OF INCOME ON 29.11.2006 FOR THE ASSESSME NT YEAR 2006 - 07. THIS RETURN WAS PROCESSED U/S.143(1) ON 26.09.2006. LATER ON IT WAS TAKEN UP FOR SCRUTINY BY ISSUING NOTICES U/S.143(2) AND 142(1 OF THE INCOME - TAX ACT,1961 ON 12.09.2007. THERE BEING CONCURRENT JURISDICTION ASSIGNED, NOTICE U/S.142(1) WAS ISSUED ON 21.11.2008 AND SERVED ITA NO.414 /CTK/2011 2 ON THE ASSESSEE. AFTER HEARING THE ASSESSEE AND CONSIDERING THE MATERIAL AVAILABLE TO THE ASSESSING OFFICER, THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER DT.19.12.2008 BY MAKING ADDITIONS OF 12,00,600 AS UNEXPLA INED CASH CREDIT U /S.68 OF THE INCOME - TAX ACT,1961 AND DISALLOWANCE OF 20% OF THE CASH PAYMENTS MADE TO THE TRADERS TO THE TUNE OF 54,85,432 EQUAL TO 10,97,086 U/S.40A(3) OF THE INCOME - TAX ACT,1961. 5. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE C OMMISSIONER OF INCOME - TAX (APPEALS). THE LEARNED CIT AFTER CALLING THE REMAND REPORT FROM THE ASSESSING OFFICER AND CONSIDERING THE MATERIAL MADE AVAILABLE IN THE ASSESSMENT RECORD HAS DIRECTED THE DELETION OF THE ADDITION OF 12,00,600 MADE U/S.68 WHILE C ONFIRMING THE DISALLOWANCE OF 10,97,086 WHICH IS 20T OF THE CASH PAYMENT OF 54,85,432 MADE BY THE ASSESSEE TO THE TRADERS U/S.40A(3) OF THE ACT. HENCE, STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. DURING THE COURSE OF HEARING, THE L EARNED AR OF THE ASSESSEE HAS VEHEMENTLY ARGUED CONTENDING THAT AS CAN BE SEEN FROM THE DETAIL ACCOUNTS FILED BEFORE THE DEPARTMENT SHOWING CASH PAYMENTS, IT IS CLEAR THAT NO SINGLE PAYMENT HAS EXCEEDED 20,000. BUT, HOWEVER, THE DEPARTMENTAL AUTHORITIES H AVE BEEN OBSERVING THAT THERE ARE PAYMENTS IN CASH MADE BY THE ASSESSEE BEYOND 20,000 AND THEREBY DISALLOWED 20% OF THE AGGREGATE CASH PAYMENTS OF 54,85,432 WHICH COMES TO 10,97,086. THIS ACTION OF THE DEPARTMENT IS CONTRARY TO THE MATERIAL AVAILABLE BE FORE THEM. HENCE, HE SOUGHT FOR THE DELETION OF THE DISALLOWANCE MADE BY THE DEPARTMENT BY ALLOWING THE APPEAL OF THE ASSESSEE. 7. CONTRARY TO THIS, THE LEARNED DR HAS VEHEMENTLY ARGUED SUPPORTING THE ORDER OF THE LEARNED CIT AND ASSAILING THE CONTENTION O F THE ASSESSEE AND ITA NO.414 /CTK/2011 3 ACCORDINGLY SOUGHT FOR UPHOLDING THE SAME BY DISMISSING THE APPEAL OF THE ASSESSEE. 8. ON CAREFUL ANALYSIS OF THE IMPUGNED ORDER, IT IS SEEN THAT THE LEARNED CIT WHOLE EXAMINING THE MATERIAL FILED BY THE ASSESSEE AND CONSIDERING THE ISSU E HAS SOUGHT FOR THE REMAND REPORT FROM THE ASSESSING OFFICER ON THIS ASPECT. THE REMAND REPORT OF THE ASSESSING OFFICER IS EXTRACTED IN PARA 2.2. OF THE IMPUGNED ORDER WHICH CLEARLY STATES THAT THE ASSESSEE HAS POTATO BUSINESS. IN THAT TRADE THE SUPPLIER IS NEED OF QUICK CASH. HENCE, WHEN THE TRADERS MAKE PURCHASES, HE IS TO PAY CASH UP FRONT. HE FURTHER OBSERVED IN THE REMAND REPORT THAT A TREND IS NOTED WHICH POINTS TO THE FACT THAT THE BUYERS HAVE BEEN PREPARED AS AN ATTEMPT OF AFTERTHOUGHT. IT WAS F URTHER OBSERVED THAT IN THE LEDGER OF SHIVASHAKTI TRADING CENTRE , IT IS SEEN THAT FOR PURCHASE OF 36,594 ON 28.02.2006, ASSESSEE MAKES PAYMENT OF 19,000 (AROUND) ON 28.02.2006, 01.03.2006 AND 02.03.2006. SIMILARLY, FOR PURCHASE ON 03.03.2006, PAYMENTS H AVE BEEN MADE IN AMOUNTS BETWEEN 18,000 AND 19,900 ON 04.03.2006, 5.3.2006, 6.3.2006, 7.3.2006, 8.3.2006, 9.3.2006 AND 12.3.2006. BY LOGIC OF HUMAN PROBABILITY, A PERSON WILL NOT GOT OVER TO A SUPPLIER ON SIX CONSECUTIVE DAYS AND PAY AN AMOUNT JUST BELOW 20,000. HE F URTHER OBSERVED THAT THE ASSESSEE HAS NO EVIDENCE IN SUPPORT OF HIS ACCOUNTS. SAME TREND IS NOTICED IN THE LEDGER OF MAHALAXMI BHANDAR, NEHA ALLOO BHANDAR AND S. K. GHOSH. BASING ON THIS REMAND REPORT, THE LEARNED CIT HAS ACCEPTED THE OBSERVATION OF THE ASSESSING OFFICER BY OBSERVING THAT THERE IS A DELIBERATE EFFORT TO SIDE STEP THE PROVISIONS OF SECTION 40A(3) BY SHOWING PAYMENTS OF CASH ON SEVERAL DAYS WHICH AMOUNT BEING LESS THAN 20,000. WHILE OBSERVING SO, THE LEARNED CIT HAS OPIN ED THAT NO SELLER HAVING DELIVERED THE POTATO WILL VISIT THE BUYER FOR NEXT SIX CONSECUTIVE DAYS TO RECEIVE THE PAYMENT FOR THE AMOUNTS LESS THAN 20,000 AND THIS DOES NOT ITA NO.414 /CTK/2011 4 ACCORD WITH HUMAN PROBABILITY. THUS OBSERVING, HE CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 9. DURING THE COURSE OF HEARING THE LEARNED AR OF THE ASSESSEE HAS MADE AVAILABLE THE COPY OF THE LEDGER ACCOUNTS BEFORE THE TRIOBUNAL. ON PERUSAL OF THE LEDGER ACCOUNTS, NOWHERE IT IS FOUND THAT ANY PAYMENT IS MORE THAN 20,000 AT ONE TIME. THEREFORE, INVOCATION OF THE PROVISIONS CONTAINED IN SECTION 40A(3) OF THE INCOME - TAX ACT,1961 BY THE DEPARTMENTAL AUTHORITIES AGAINST THE CASH PAYMENTS MADE BY THE ASSESSEE IS NOT AT ALL SUSTAINABLE FOR LEGAL SCRUTINY AS NO PAYMENT MADE TO AN PA RTY BY THE ASSESSEE IS EXCEEDING THE PRESCRIBED LIMIT OF 20,000. BOTH THE AUTHORITIES ARE HAVING THEIR OWN SURMISES ON THE FACTS AVAILABLE BEFORE THEM IN MAKING THE DISALLOWANCE. SUCH ASSESSMENT IS NOT VALID IN LAW AS THE LAW DOES NOT ACCEPT ANY ASSESSMEN T ON SURMISES. THERE MUST BE COGENT EVIDENCE FOR THE ASSESSMENT MADE BY THE DEPARTMENTAL AUTHORITIES. AS CAN BE SEEN FROM THE LEDGER ACCOUNTS PRODUCED BY THE ASSESSEE AS WELL AS THE REMAND REPORT OF THE ASSESSING OFFICER ALSO DISCLOSED THAT NO SINGLE CASH PAYMENT IS EXCEEDING THE PRESCRIBED LIMIT OF 20,000. THEREFORE, THE INVOCATION OF SECTION 40?A(3) OF THE INCOME - TAX ACT,1961 BY BOTH THE DEPARTMENTAL AUTHORITIES FOR MAKING THE DISALLOWANCE IS NOT SUSTAINABLE FOR LEGAL SCRUTINY AND THE SAME IS HEREBY DIRE CTED TO BE DELETED BY ALLOWING THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. S D/ - S D/ - (K.K.GUPTA) ACCOUNTANT MEMBER ( K.S.S.PRASAD RAO) JUDICIAL MEMBER DATE: 22.12.2011 H .K.PADHEE, SENIOR PRIVATE SECRETARY. ITA NO.414 /CTK/2011 5 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: TARINI TEA AND COLD STORAGE PVT. LTD., C/O. SANJIB KUMAR PANIGRAHI, AT: SANKARPUR, P.O.NETUNG, DIST.KEONJHAR 758 002 2. THE RESPONDENT: ASST.C OMMISSIONER OF INCOME - TAX (OSD)RANGE 1, BHUBANESWAR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.