Sh. Pardeep Kumar, Kurukshetra V. ACIT, Circle , Kurukshetra

ITA 42/CHANDI/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5999 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 10-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: S B.S. MONGA
• Keywords: Bonafide belief; Source of fund
• Section: 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, SMC, CHANDIGARH , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO. 42/CHD/2019 / ASSESSMENT YEAR : 2015-16 SHRI PRADEEP KUMAR, H.NO. 2124, SECTOR 5, KURUKSHETRA, HARYANA VS. THE ACIT, CIRCLE KURUKSHETRA, KURUKSHETRA ./PAN NO: DMZPK9317 / APPELLANT /RESPONDENT ! /ASSESSEE BY : S/SHRI B.S. MONGA & SHRI ROHIT KAU RA, ADVOCATES ' ! / REVENUE BY : SH. MANJIT SINGH, CIT DR # $ % /DATE OF HEARING : 22.07.2019 &'() % / DATE OF PRONOUNCEMENT : 01.08.2019 / ORDER THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 25.10.2018 OF THE COMMISSIONER OF INCOM E TAX (APPEALS), KARNAL [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE ORDER OF LEARNED CIT(A), IS AGAINST THE LAW AND FACTS OF THE CASE. 2. THAT THE LD. CIT (A) IS NOT JUSTIFIED WHILE CONFIRMING THE ADDITION OF RS. 17,00,000/-, WITHOUT APPRECIATING THAT PAYMENTS ARE MADE TO GOVERNMENT ORGANIZATION AND TOTALLY IGNORING RULE 6DD AND THE PROVISO TO SECTION 40A(3). ITA NO. 42-CHD-2019- SHRI PARDEEP KUMAR, KURUKSHETRA 2 3. THAT THE LD. CIT (A) HAS ERRED WHILE CONFIRMING THE ADDITION OF RS. 17,00,000/-, MORE SO WHEN, NEITHER THE AO NOR THE CIT(A) HAS DISBELIEVED THE GENUINENESS OF THE TRANSACTIONS AND BUSINESS EXPEDIENCY. 4. THAT THE LD. CIT (A) IS NOT JUSTIFIED WHILE DISMISSING THE APPEAL OF THE ASSESSEE ON ACCOUNT OF MISMATCH OF PURCHASES OF RS. 6,64,108/- AS PER 26AS, TOTALLY IGNORING THE AUTHENTIC DOCUMENTARY EVIDENCES. 3. GROUND NO.1: GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 4. GROUND NOS. 2 & 3 : VIDE THESE GROUNDS, THE ASSESSEE HAS AGITATED THE ACTION OF THE LOWER AUTHORITIES IN MAKING / CON FIRMING THE ADDITION OF RS. 17,00,000/- U/S 40A(3) OF THE INCOME TAX ACT , 1961 (IN SHORT 'THE ACT') FOR MAKING IN THE PAYMENT IN CASH. 5. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE OF LIQUOR FOR THE STATE OF HARYANA. THE ASSESSEE DURING THE YEAR PURCHASED LIQUOR FROM RAJA STHAN STATE BEVERAGES CORPORATION LTD. (IN SHORT RSBCL), WHI CH IS A UNDERTAKING OF GOVERNMENT OF RAJASTHAN. THE LD. COUNSEL FOR TH E ASSESSEE HAS RELIED ON THE RULE 6DD(B) OF THE INCOME TAX RULES, 1962 TO SUBMIT THAT SINCE THE PAYMENTS WERE MADE TO A GOVERNMENT ORGAN IZATION, HENCE, THE DISALLOWANCE U/S 40A(3) OF THE ACT WAS NOT ATTR ACTED. IN THE ALTERNATIVE, IT WAS ARGUED THAT THIS WAS THE FIRST YEAR OF THE INCEPTION OF THE BUSINESS OF THE ASSESSEE. SINCE THE ASSESSEE I S IN THE RETAIL BUSINESS ITA NO. 42-CHD-2019- SHRI PARDEEP KUMAR, KURUKSHETRA 3 OF LIQUOR, THE AMOUNT ON THE SALE OF LIQUOR WAS REC EIVED IN CASH FROM THE CUSTOMERS WHICH WAS FURTHER DEPOSITED AS SUCH ON RE GULAR BASIS WITH RSBCL FOR UNRESTRICTED SUPPLY OF THE LIQUOR FOR F URTHER RETAIL SALE. SINCE THE AMOUNT WAS PAID TO THE GOVERNMENT ORGANIZ ATION AND THE NATURE OF THE BUSINESS WAS SUCH THAT IT REQUIRES IM MEDIATE PAYMENT FOR THE QUICK RELEASE OF THE LIQUOR FROM THE ORGANIZAT ION FOR FURTHER SALE TO THE CUSTOMERS, THE SOURCE OF THE AMOUNT DEPOSITED W ITH THE SELLER ORGANIZATION WAS OUT OF THE CASH SALE CONSIDERATION RECEIVED FROM THE CUSTOMERS, WHICH WERE PROMPTLY GOT DEPOSITED WITH THE RSBCL, HENCE, THE ASSESSEE UNDER THE COMPELLING CIRCUMSTAN CES HAD DEPOSITED THE AMOUNT IN CASH WITH THE SELLER ORGANIZATION WHI CH OTHERWISE IS A GOVERNMENT ORGANIZATION. 6. THE LD. DR, ON THE OTHER HAND, HAS SUBMITTED TH AT THE PAYMENT WAS MADE TO THE RSBCL WHICH IS A CORPORATION REGI STERED UNDER THE COMPANIES ACT, HENCE, IT CANNOT BE SAID TO FALL IN THE DEFINITION OF THE GOVERNMENT. THAT THE ASSESSEE, THUS, HAS VIOLATED T HE PROVISIONS OF SECTION 40A(3) IN MAKING THE PAYMENT IN CASH INSTEA D OF BANKING CHANNELS. 7. I HAVE CONSIDERED THE RIVAL CONTENTIONS. THOUGH THE RSBCL (SELLER) IS STATED TO BE GOVERNMENT ORGANIZATION BU T IT DOES NOT STRICTLY FALL IN THE DEFINITION OF THE GOVERNMENT AS IT IS A DISTINCT ENTITY REGISTERED AS COMPANY UNDER THE COMPANIES ACT. HOW EVER, IT IS NOT DISPUTED THAT THE SAID ORGANIZATION IS A GOVERNMENT UNDERTAKING FORMED ITA NO. 42-CHD-2019- SHRI PARDEEP KUMAR, KURUKSHETRA 4 UNDER THE EXCISE POLICY OF THE GOVT. OF RAJASTHAN T O REGULATE THE SOURCING / PRICING OF THE LIQUOR IN THE STATE OF R AJASTHAN. THE ASSESSEE, THUS, UNDER THE BONAFIDE BELIEF TAKING IT AS A GOVE RNMENT, MADE THE PAYMENT IN CASH. THERE IS ALSO FORCE IN THE CONTENT ION OF THE ASSESSEE THAT BECAUSE IT WAS THE FIRST YEAR OF THE INCEPTION OF BUSINESS OF THE ASSESSEE AND THE SOURCE OF FUNDS OF THE ASSESSEE WA S OUT OF THE SALE OF LIQUOR IN RETAIL, WHICH WAS RECEIVED IN CASH, AND W AS FURTHER DEPOSITED WITH THE SAID ORGANIZATION RSBCL TO ENSURE UNINTE RRUPTED AND QUICK SUPPLY OF LIQUOR TO THE ASSESSEE FOR FURTHER DISTRI BUTION AND SALE AT ITS RETAIL OUTLET. THAT THE NATURE OF THE BUSINESS OF THE ASSESSEE WAS SUCH THAT THE ASSESSEE WAS HAVING BUSINESS COMPULSION TO PROMPTLY DEPOSIT THE AMOUNT WITH RSBCL. FURTHER THAT THE GENUINEN ESS OF THE TRANSACTION BEING MADE WITH THE GOVERNMENT ORGANIZA TION WAS NOT DISPUTED. IT IS NOT A CASE WHERE EITHER THE SELLER CORPORATION OR THE ASSESSEE COULD HAVE CONCEALED THEIR INCOME OR AVOID ED THE PAYMENT OF TAXES RELATING TO THE TRANSACTION UNDER CONSIDERATI ON. 8. IN VIEW OF THE ABOVE CIRCUMSTANCES, AND CONSIDE RING THE BONAFIDE OF THE ASSESSEE AS WELL AS COMPULSION OF THE ASSESS EE IN MAKING THE PAYMENTS IN CASH, I DO NOT THINK IT A FIT CASE FOR DISALLOWANCE U/S 40A(3) OF THE ACT AND THE SAME IS ACCORDINGLY ORDERED TO B E DELETED. 9. GROUND NO.4 : VIDE THIS GROUND THE ASSESSEE HAS AGITATED THE ACTION OF THE LOWER AUTHORITIES IN MAKING THE ADDIT ION OF RS. 6,64,108/- ON AMOUNT OF MISMATCH OF PURCHASES AS PER FROM 26AS . ITA NO. 42-CHD-2019- SHRI PARDEEP KUMAR, KURUKSHETRA 5 10. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS RECONCILED THE PURCHASES AND HAS DULLY TALLIED THE SAME WITH THE BOOKS OF ACCOUNT. THE LD. COUNSEL HAS SUBMITTED THA T THE ASSESSEE MAY BE GIVEN OPPORTUNITY TO PRESENT THE RECONCILED STAT EMENTS BEFORE THE ASSESSING OFFICER FOR FURTHER VERIFICATION. 11. CONSIDERING THE INTEREST OF JUSTICE, THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRESH AF TER CONSIDERING THE RECONCILED STATEMENTS SUBMITTED BY THE ASSESSEE IN THIS RESPECT. IN VIEW OF THIS, THE APPEAL OF THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 01.08.2019. SD/- ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 01.08.2019 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR ITA NO. 42-CHD-2019- SHRI PARDEEP KUMAR, KURUKSHETRA 6