DCIT CORP CIRCLE 1, COIMBATORE V. M/S KPG COTTSPIN INDIA PVT LTD, COIMBATORE

ITA 456/CHNY/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5446 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 08-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G BASKAR
• Keywords: TDS
• Section: 40A(3); 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , , ' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER / .I.T.A. NO. 456/CHNY/2018 /ASSESSMENT YEAR : 2013-14 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -1, 63-A, RACE COURSE ROAD, COIMBATORE. VS. M/S. KPG COTTSPIN INDIA PVT LTD., 77, ANTHUPALAYAM ROAD, SOMANUR, COIMBATORE 641 668. [PAN: AACCK 6505H] ( /APPELLANT) ( /RESPONDENT) REVENUE BY : SHRI. CLEMENT RAMESH KUMAR, ADDL. CIT ASSESSEE BY : SHRI. G. BASKAR, ADVOCATE $ /DATE OF HEARING : 25.09.2018 $ /DATE OF PRONOUNCEMENT : 31.10.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI IN ITA NO 57/16-17 DATED 28.11.2017 FOR ASSESSMENT YEAR 2013-14 WITH F OLLOWING GROUNDS : 1. THE ORDER OF THE LD. CIT(A), COIMBATORE IS AGAI NST THE FACTS AND CIRCUMSTANCES OF THE CASE AND IS ERRONEOUS BY LAW. :- 2 -: ITA NO.456/CHNY/2018 2. THE LEARNED CIT(A) ERRED IN ALLOWING THE ASSESSE ES APPEAL MERELY RELYING ON THE PARAGRAPH 4 OF THE REMAND REPORT AND NOT TAKING INTO CONSIDERATION PARAGRAPH 5 OF THE REMAND REPORT. 3. THE LEARNED CIT(A) FAILED TO CONSIDER THAT THE A SSESSEE HAS FAILED TO SUBSTANTIATE THAT THE TRADE NAMES OF WEAVERS AS APP EARING IN THE LEDGER AND THE PROPRIETOR NAME AS APPEARING IN THE FORM 16 A ARE ONE AND THE SAME. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE LD. CIT(A), MAY BE CANCEL LED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE LD DR INVITED OUR ATTENTION TO THE FOLLOWING PO RTION OF THE ORDER OF THE CIT(A) : 5. THE APPELLANT MANUFACTURES COTTON CLOTH BY GIVI NG YARN TO WEAVING FACTORIES SITUATED OUTSIDE FACTORY ON CONTRACT BASI S. THEY HAVE 69 WEAVING CONTRACTORS. PAYMENTS WERE MADE TO THEM IN CASH. OU T OF THE TOTAL WEAVING CHARGES OF RS.4,65,08,554/- TO 6 WEAVERS, T HE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.3,20,53,900/- U/S 40A(3) OF THE ACT. THE APPELLANT SUBMITTED TDS RETURN TO EVIDENCE THAT THE PAYMENTS WERE IN FACT PAID AFTER DEDUCTING TAX. THE APPELLANT HAD DE BITED THE ENTIRE AMOUNT IN ONE PARTICULAR ACCOUNT BY NAME W.S.R.T, WHICH MADE THE ASSESSING OFFICER BELIEVE THAT IT IS PAYMENT TO ONE PERSON. SINCE, THE PAYMENTS WERE MADE TO 69 PERSONS, IT WAS FOUND APPR OPRIATE TO CALL FOR A REMAND REPORT FROM THE ASSESSING OFFICER VIDE THIS OFFICE LETTER DATED 24.03.2017. THE REMAND REPORT OF THE ASSESSING OFFI CER DATED 23. 10.2017 ALONG WITH THE COMMENTS OF THE RANGE HEAD W AS RECEIVED IN THIS OFFICE ON 30.10.2017. IN PARA 4.1 OF THE REMAND REP ORT, THE ASSESSING OFFICER STATED AS COULD BE SEEN FROM THE ABOVE, TH E ASSESSEES CASH PAYMENTS EXCEEDING RS.20,000/- ON A SINGLE DAY AMOU NTED TO RS.41,38,000/- OUT OF WHICH AN AMOUNT OF RS.10,04,0 00/- WAS PAID ON 27.10.2012 BEING A BANK HOLIDAY ON THE OCCASION OF BAKRID. AS PER RULE 6DD OF THE INCOME TAX RULES, 1962, WHERE PAYMENT WA S REQUIRED TO BE MADE ON A DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE, THEN DISALLOWANCE U/S 40A(3) OF THE ACT IS NOT CALLED FOR. :- 3 -: ITA NO.456/CHNY/2018 IN VIEW OF THE ABOVE, DISALLOWANCE U/S 40A(3) OF TH E ACT AMOUNTING TO RS. 31,34,000/- IS REQUESTED TO BE UPHELD. 5.1 ON GOING THROUGH THE REMAND REPORT AND THE WRIT TEN SUBMISSIONS MADE, I FIND THAT THERE IS NO DISPUTE REGARDING THE GENUINENESS OF THE PAYMENT. IT IS A PRACTICE IN THE MANUFACTURE OF COT TON CLOTH THAT CASH PAYMENTS ARE MADE TO SMALL WEAVERS. THE APPELLANT H AS EFFECTED TAX DEDUCTION FROM CONTRACT PAYMENTS. CONSIDERING ALL T HESE FACTS, I AM OF THE VIEW THAT THE PAYMENTS EXCEPT RS.31,34,000/- AS IDENTIFIED BY THE ASSESSING OFFICER ARE GENUINE CASH PAYMENTS WHICH W ILL NOT COME WITHIN THE AMBIT OF SECTION 40A(3) OF THE ACT. HENCE THE D ISALLOWANCE OF RS.2,89,19,900/- (RS.3,20,53,900/- MINUS RS.31,34,0 00/-) IS DELETED. 6. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. AND REITERATED THE GROUNDS OF APPEAL EXTRACTED , S UPRA, AND PLEADED THAT THE ORDER OF THE LD. CIT(A) IS AGAINST THE FACTS AN D CIRCUMSTANCES OF THE CASE AND IS ERRONEOUS IN LAW. 3. PER CONTRA, THE AR SUBMITTED AS UNDER: 1. THE RESPONDENT IS ENGAGED IN THE BUSINESS OF MA NUFACTURING OF TEXTILES, HANDLOOM AND POWERLOOM. ASSESSMENT WAS CO MPLETED BY DISALLOWING A SUM OF RS. 3,20,53,900/- U/S 40A(3) F OR ALLEGED CASH PAYMENTS EXCEEDING RS.20,000/- ON A SINGLE DAY. 2. IN THE COURSE OF THE APPEAL PROCEEDINGS BEFORE T HE CIT(A), THE RESPONDENT FURNISHED THE BOOKS OF ACCOUNTS, THE DET AILS OF CASH PAYMENTS, LEDGER EXTRACTS, CASH BOOK ETC AND ALSO T HE DETAILS OF THE TAX DEDUCTED IN RESPECT OF THE WEAVING CHARGES PAID DUR ING THE YEAR. THE LD. CIT(A) WAS PLEASED TO CALL FOR A REMAND REPORT FROM THE AC. BEFORE THE ASSESSING OFFICER, THE RESPONDENT SUBMITTED THE DET AILS OF PAYMENTS MADE, THE DETAILS OF THE PAYEES, LEDGER ACCOUNTS OF ALL THE PAYEES IN ITS BOOKS, DAY BOOK, FORM 16A AND PROVED THE FACT THAT THE PAYMENT OF RS. 2,89,19,900/- WAS PAID TO 69 DIFFERENT WEAVERS ON V ARIOUS DAYS, WITHOUTEXCEEDING CASH PAYMENT OF RS. 20,000/- ON A SINGLE DAY. AFTER VERIFYING THE SAME, THE AC SUBMITTED A REMAND REPOR T DATED 23.10.2017, :- 4 -: ITA NO.456/CHNY/2018 ACCEPTING THAT DISALLOWANCE U/S 40A(3) WAS WARRANTE D ONLY IN RESPECT OF RS.31,34,000I-. PARA 4.1 OF THE REMAND REPORT IS EX TRACTED BELOW: 4.1. AS COULD BE SEEN FROM THE ABOVE, THE ASSESSEE S CASH PAYMENTS EXCEEDING RS.20,000/- ON A SINGLE DAY AMOUNTED TO R S.41,38,000/- OUT OF WHICH, AN AMOUNT OF RS. 10,04,000/- WAS PAID ON 27. 10.2012 BEING A BANK HOLIDAY ON THE OCCASION OF BAKRID. AS PER RULE 6DD(J) OF THE INCOME TAX RULES, 1962, WHERE THE PAYMENT WAS REQUIRED TO BE MADE ON A DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE, THEN DISALLOWANCE U/S.40A(3) IS NOT CALLED FOR. IN VIEW OF THE ABOVE, DISALLOWANCE U/S.40A(3 AMOUNTING TO RS.31,34,000/- IS REQUESTED TO BE UPHELD. 3. HOWEVER, THE AD PROCEEDED TO STATE IN PARE 5 OF HIS REMAND REPORT, THE FOLLOWING: 5. HOWEVER ON PERUSAL OF THE INFORMATION CALLED FO R IT IS NOTICED THAT THE NAMES OF WEAVERS AS APPEARING IN THE LEDGER DIFFERS FROM THE NAME AS PER FORM 16A. IN ORDER TO VERIFY THIS THE ASSESSEE WAS ASKED TO FURNISH THE FOLLOWING DETAILS VIDE THIS OFFICE LETTER DT.4.9.20 17,: CONFIRMATION LETTERS FROM ALL THE WEAVERS [AS FUR NISHED BEFORE THE CIT(A)] - RECONCILIATION OF NAMES OF WEAVERS APPEARING IN THE CASH BOOK/LEDGER VIS-A-VIS COPIES OF FORMS 16A FILED. 5.1 IN RESPONSE THERETO, THE ASSESSEE COMPANY HAS E NCLOSED A LIST OF WEAVERS CONTAINING TRADE NAME; PROPRIETOR NAME AND PAN. A PERUSAL OF THE SAME REVEALS THAT MOST OF THE TRADE NAMES ARE N OT MATCHING WITH THAT OF THE PROPRIETOR NAMES. A COPY OF THE ASSESSEES L ETTER DATED 19.9.2017 IS ENCLOSED FOR KIND REFERENCE. 5.2 THUS IT IS SEEN THAT THOUGH THE NAMES OF SOME W EAVERS AS APPEARING IN THE LEDGER DIFFERS FROM THE NAME AS PER FORM 16A , THE ASSESSEE HAS STATED THE FORMER TO BE TRADE NAME AND THE LETTER T O BE PROPRIETOR NAME. HOWEVER THE ASSESSEE HAS NOT SUBSTANTIATED THE SAME BY CORRELATING BOTH. 5.3 REGARDING THE CONFIRMATION LETTERS FROM ALL THE WEAVERS, THE ASSESSEE COMPANY INSTEAD OF FILING CONFIRMATION LETTERS, MER ELY FILED COPIES OF STATEMENT PERTAINING TO THE INDIVIDUAL WEAVERS SIGN ED BY THE WEAVER 4. BASED ON THE REMAND REPORT OF THE AO, THE CIT(A) UPHELD THE DISALLOWANCE OF RS. 31,34,000/- AS REQUESTED BY THE AO AND DELETED RS. :- 5 -: ITA NO.456/CHNY/2018 2,89,19,900. THE FOLLOWING TABLE SIMPLIFIES THE PAY MENTS, DISALLOWANCE AND RELIEF GRANTED. TOTAL PAYMENTS MADE TO WEAVING CONTRACTORS RS. 4,65,08,554/ - TDS DEDUCTED BY ASSESSEE RS. 4,65,091/ - DISALLOWANCE MADE BY THE ASSESSING OFFICER FOR PAYMENTS IN CASH ABOVE RS.20,000/- PER DAY RS. 3,20,53,900/ - * AS PER REMAND REPORT PAYMENTS MADE IN CASH ABOVE RS.20,000/ - PER DAY RS.4138,000/ - PAYMENTS MADE ON BANK HOLIDAY/S RS. 10,04,000/ - BALANCE (TO BE SUSTAINED AS PER REMAND REPORT) RS. 31,34,000/ - ** CIT(A) ORDER RELIEF GRANTED BY COMMISSIONER OF INCOME TAX (APPEALS) (RS.3,20,53,900* - RS.31,34,000/-**) RS. 2,89,19,000/ - 5. THE ORDER OF THE CIT(A) IS FAIR, JUST, AND CORRE CT IN LAW CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. HE RIGHTLY REL IED ON THE AOS REMAND REPORT AND DELETED THE DISALLOWANCE OF RS.2,89,19,9 00/- BEING THE GENUINE PAYMENTS MADE TO VARIOUS WEAVERS WHICH DO N OT COME WITHIN THE AMBIT OF SECTION 40A(3) OF THE IT ACT. 6. THE DEPARTMENT HAS FAILED TO RAISE ANY VALID GRO UND IN RESPECT OF THE ABOVE APPEAL, INSOFAR AS PARAGRAPH 5 OF THE REMAND REPORT HAS NO RELEVANCE TO THE ISSUE AT HAND AND WOULD PLAY NO RO LE IN DETERMINING WHETHER OR NOT THE ASSESSEE HAS VIOLATED THE PROVIS IONS OF SECTION 40A(3) OF THE ACT. 7. WHETHER OR NOT THE TRADE NAMES OF THE WEAVERS AS IN THE LEDGER ARE THE SAME AS THE PROPRIETORS NAMES IN FORM-16A, HAS NO BEARING OR RELEVANCE IN DETERMINING WHETHER THE ASSESSEE HAD V IOLATED THE PROVISIONS OF SECTION 40A(3) OF THE ACT OR NOT. 8. THE AO ONCE HAVING FOUND THAT PAYMENTS IN CASH D ID NOT EXCEED RS.20,000/- PER WEAVER PER DAY, RIGHTLY RECOMMENDED DELETION OF THE :- 6 -: ITA NO.456/CHNY/2018 DISALLOWANCE MADE U/S. 40A(3) OF THE ACT; WHICH THE CIT(APPEALS) ACCEPTED. 9. THE AO HAVING ACCEPTED THAT THE PAYMENTS MADE TO EACH PAN-HOLDER DID NOT EXCEED RS.20,000I- PER DAY, OUGHT NOT TO HA VE PREFERRED THE APPEAL ON FRIVOLOUS GROUNDS BEFORE THIS HONBLE TRI BUNAL SUBJECTING THE ASSESSEE TO FURTHER LITIGATION AND GREAT HARDSHIP. 10. THE APPEAL OF THE DEPARTMENT IS AN ABUSE OF PRO CESS OF LAW, AND IS LIABLE TO BE DISMISSED. 4. WE HEARD THE RIVAL SUBMISSIONS. IT IS CLEAR FROM THE ABOVE FACTS AND CIRCUMSTANCES, PARTICULARLY FROM THE FACTS NARRATED IN THE LD ARS SUBMISSION IN THE TABLE IN PARA 4, SUPRA, WHICH A RE NOT DISPUTED BY THE REVENUE, THAT THE RELIEF ALLOWED BY THE LD CIT(A) IS CORRECT. THEREFORE, THE GROUNDS OF THE REVENUE FAIL AND HENCE ITS APPE AL IS DISMISSED. 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISS ED. ORDER PRONOUNCED ON WEDNESDAY, THE 31 ST DAY OF OCTOBER, 2018 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER /CHENNAI, ) /DATED: 31 ST OCTOBER , 2018 JPV $*+,-, /COPY TO: 1. / /APPELLANT 2. *0/ /RESPONDENT 3. 1 ) (/CIT(A) 4. 1 /CIT 5. ,* /DR 6. 4 /GF