Sanjay Kumar agrawal, Cuttack V. ITO, Cuttack

ITA 459/CTK/2012

• Counselvise Citation: 45922114 RSA 2012
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 21-09-2012
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: D K SHETH KETUL SHETH ARS
• Section: 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 459 /CTK/2012 / ASSESSMENT YEAR 20 08 - 09 SANJAY KUMAR AGARWAL, PROP. JAGANNATH & JAGANNATH, JOBRA ROAD, COLLEGE SQUARE, CUTTACK 753 003 PAN: AASPA 3785 E - - - VERSUS - ITO, WARD 1(1), CUTTACK. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI D.K.SHETH/ KETUL SHETH, ARS / FOR THE RESPONDENT: / SHRI N.K.NEB, DR / DATE OF HEARING: 30.10.2012 / DATE OF PRONOUNCEMENT: 02.11.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE IS ON THE SOLITARY ISSUE THAT A SUM OF 7,73,533 HAS BEEN DISALLOWED UNDER THE PROVISIONS OF SECTION 40A(3) BEING FREIGHT CHARGES INCURRED BY THE ASSESSEE ON PURCHASES FOR THE PURPOSE OF DEALING IN PLYWOOD, GLASS AND HARDWARE. 2. THE FACTS ARE THAT THE ASSESSEE DERIVES INCOME FROM SALE OF PLYWOOD, GLASS AND HARDWARE FILED RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR AT 1,82,120. THE ASSESSEE ACHIEVED A TURNOVER OF 3.90 CRORES WHEN THE ASSESSING OFFICER VERIFIED THE PAYMENTS OF FREIGHT CHARGES PAID FOR THE PURCHASES HOLDING A VIEW THAT TDS WAS DEDUCTED ON FREIGHT AMOUNT CHARGED BY THE TRANSP ORTERS BUT WAS PAID IN CASH IN INSTALMENTS ON DIFFERENT DATES BEING LESS THAN 20,000 EACH. THE TOTAL CLAIM OF AMOUNT OF FREIGHT INWARDS WAS 14,64,878 OUT OF WHICH A SUM OF 7,73,533 WAS COMPUTED BY THE ASSESSING OFFICER APPROPRIATE FOR DISALLOWANCE U/S.4 0A(3) IN VIEW OF THE I.T.A.NO. 459 /CTK/2012 2 ASSESSEE SPECIFICALLY AGREEING TO THE PROPOSITION THAT PAYMENT IN CASH WAS MADE . 3. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY, WHO CONFIRMED THE DISALLOWANCE ON THE OBSERVATION THAT THE ASSESSEE FAILED TO FIL E THE DETAILS IN THE PRESCRIBED FORMAT IN SO MUCH AS A BILL RAISED ON THE ASSESSEE FOR MORE THAN 20,000 WAS PAID BY THE ASSESSEE BY SPLITTING THE PAYMENTS WHICH PAYMENT BEING LESS THAN 20,000 WAS TO CIRCUMVENT THE RIGOR OF THE PROVISIONS OF SECTION 40A(3 ) INSOFAR AS THE TAX AT SOURCE WAS DEDUCTED ON THE BILLED AMOUNT. 4. THE LEARNED COUNSEL OF THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THAT IT WAS NOT THE CASE OF THE ASSESSEE TO INVITE DISALLOWANCE U/S.40(A)(IA) HAS BEEN SPECIFIED BY THE ASSESSING OF FICER INSOFAR AS HE HAS HIGHLIGHTED THE ACCOUNT OF THE CASH PAYMENTS MADE AGAINST A BILL RAISED ATTRACTING THE PROVISIONS OF SECTION 40A(3). THE ASSESSING OFFICER THEREFORE HELD THAT WHEN THE TAX DEDUCTION AT SOURCE HAS BEEN MADE ON THE BILLED AMOUNT THERE WAS NO NECESSITY FOR THE ASSESSEE TO SPLIT THE CASH PAYMENT CIRCUMVENTING THE PROVISIONS OF SECTION 40A(3). HE ARGUED THAT THE BILLS WERE RAISED ON THE ASSESSEE BY TRUCK OWNERS WHO DO NOT REQUIRE PAYMENTS IN CHEQUE AS THEY WERE APPOINTED BY THE SELLERS OF THE GOODS TO THE ASSESSEE. IN OTHER WORDS, THE GOODS WERE TRANSPORTED BY THE TRUCK OWNERS AT THE BEHEST OF THE THIRD PARTY AND NOT THE ASSESSEE REQUIRING THE ASSESSEE TO PAY THE FREIGHT CHARGES IN CASH AS AND WHEN THE GOODS ARE DELIVERED. THE GOODS WERE D ELIVERED ALONG WITH THE BILL OF PURCHASE WHICH PURCHASE HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THEREFORE, IT CLINCHES THE ISSUE THAT THE SPLITTING OF THE PAYMENT TO THE TRUCK OWNERS WAS NOT TO CIRCUMVENT THE PROVISIONS OF SECTION 40A(3) INSOFAR AS NO PARTICULAR BILL WAS LESS THAN 20,000. THE ACCOUNTING FOR THE PURCHASES AND FREIGHT WAS ON THE BASIS OF I.T.A.NO. 459 /CTK/2012 3 CREDITING THE PARTY AND DEBITING THE EXPENDITURE COULD NOT BE DISALLOWED U/S.40A(3) INSOFAR AS PAYMENTS MADE IN CASH HAVE BEEN ACTUALLY DONE ON THE BASIS OF EACH TRIPS WHEN EACH TRIP DID NOT INVOLVE PAYMENT OF MORE THAN 20,000. THEREFORE, THE ASSESSING OFFICER HAVING VERIFIED THE EXPENDITURE OF 14,64,868 OUGHT NOT TO HAVE CONSIDERED THE PROVISIONS OF SECTION 40A(3) FOR THE VERY PURCHASE BILLS ON WHI CH FREIGHT CHARGES EXCEEDED 20,000 INSOFAR AS PAYMENTS IN CASH HAVE BEEN MADE TO TRUCK OWNERS IN CASH WHETHER THE TRIP INVOLVED FREIGHT OF MORE THAN 20,000 OR NOT. THE LEARNED CIT(A) THEREFORE CONFIRMED THE DISALLOWANCE ONLY ON THE PREMISE THAT THE ASSES SEE FAILED TO PRODUCE THE CASH BOOK AND THE CORRESPONDING VOUCHERS BEFORE THE ASSESSING OFFICER BY PLACING RELIANCE ON CITATIONS WHICH RELATES TO ONUS TO BE DISCHARGED BY THE ASSESSEE. FOR THIS PROPOSITION, HE SUBMITTED A PAPER BOOK WHICH WAS BEFORE THE AS SESSING OFFICER, WHEREIN THE LEDGER COPIES OF THE EXPENSES CLAIMED WERE GIVEN TO THE ASSESSING OFFICER INDICATING THAT THE CASH BOOK CAN ONLY BE VERIFIED WHEN THE AMOUNT IN CASH WAS NOT AVAILABLE ON THAT DAY WHEN THE BILL WAS ACCEPTED BY THE ASSESSEE WAS A CREDIT TO THE EXPENSES PAYABLE AMOUNT AND NOT THE TRUCK OWNERS. THEREFORE, UNDER NO CIRCUMSTANCES CAN THE SPLITTING OF PAYMENT OF A CONSOLIDATED BILL OF MORE THAN 20,000 BE DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40A(3) SPECIALLY WHEN THE ASSESS ING OFFICER HAS NOT DISALLOWED THE SAME UNDER THE DEEMING PROVISIONS OF SECTION 40(A)(IA). 5. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE SUB MITTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN AS TO WHY TAX WAS DEDUCTED ON THE CONSO LIDATED AMOUNT WHEN THE PAYMENT WAS EFFECTED BY SPLITTING THE PAYMENT EACH BELOW 20,000 WAS APPROPRIATELY CONSIDERED BY THE ASSESSING OFFICER FOR DISALLOWANCE U/S.40A(3) AS PER THE CHART GIVEN IN PAGES 2 AND 3 OF HIS ORDER, WHICH MAY KINDLY BE PERUSED. HA VING DEDUCTED I.T.A.NO. 459 /CTK/2012 4 TAX AT SOURCE ON THE CONSOLIDATED AMOUNT, THE PAYMENT IN CASH IS ESTABLISHED BEYOND DOUBT WAS FIT FOR DISALLOWANCE U/S.40A(3) INSOFAR AS OUT OF THE TOTAL AMOUNT OF 14,64,868, THE ASSESSING OFFICER HAS DISALLOWED 7,73,533. HE PRAYED THAT THE ORDER OF THE LEARNED CIT(A) BE CONFIRMED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND ALSO THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INC LINED TO FIND JUSTIFICATION IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE SIMPLE REASON THAT BUSINESS TRANSACTIONS ARE NOT TO BE CONDUCTED TO CIRCUMVENT CERTAIN RIGOR PROVISIONS, SUCH AS SECTION 40A(3) AND SECTION 40(A)(IA). THE ASSESSEE HAD INCURRED EX PENDITURE IN CASH FOR THE PURPOSE OF MAKING PAYMENTS TO THE TRANSPORTERS WHICH TRANSPORTERS WERE ENGAGED BY THE SELLERS BEING THIRD PARTIES. ON THE SAFE DELIVERY OF GOODS WHICH PURCHASES HAVE BEEN BOOKED BY THE ASSESSEE ALONG WITH THE FREIGHT WAS THE COST OF SALE WHICH CANNOT BE DISALLOWED INSOFAR AS THE ASSESSING OFFICER CONSIDERED THAT TAX AT SOURCE HAD BEEN DEDUCTED ON THE PAYMENTS MADE TO THE TRANSPORTERS WHEN BY WAY OF A JOURNAL ENTRY THE AMOUNT PAYABLE TO THE TRUCK OWNER/DRIVER WAS TO BE MADE IN CASH WAS NOBODYS CASE. THE TAX DEDUCTION THEREFORE ENFORCED THE COMPLIANCE TO LAW INSOFAR AS THE ASSESSING OFFICER HAS VERIFIED THAT THE TAX AT SOURCE WAS DEDUCTED AT THE TIME OF FREIGHT TO BE PAID TO THE TRUCK OWNERS/DRIVERS BUT WAS TO BE PAID IN CASH AS AND WHEN THE TRIPS WERE UNDERTAKEN. IT CLEARLY MEANS THAT THE TOTAL CONSOLIDATED BILLS AGAINST PURCHASE FOR THE VARIOUS TRIPS UNDERTAKEN WAS TO BE ACCOUNTED FOR AS AND WHEN CASH PAYMENT WAS TO BE MADE TO ENSURE OVER DELIVERY OF THE REMAINING TRIPS . THE ASSESSI NG OFFICER HAS MENTIONED THAT THE CASH HAS BEEN PAID ON THREE CONSECUTIVE DAYS THEREAFTER THEREFORE DID NOT REQUIRE A CREDIT FOR THE SAME TO BE GIVEN TO THE PAYEE INSOFAR AS THE TDS CERTIFICATE WAS I.T.A.NO. 459 /CTK/2012 5 GIVEN TO THE PAYEE ONLY. THERE IS NO SPLITTING OF FREIGHT WHICH THE ASSESSING OFFICER HAS HELD PAID IN DEFUSED MANNER ON DIFFERENT DATES PIECEMEAL BASIS EACH BEING BELOW 20,000 APPEARS TO BE FRAGMENTATION OF THE ASSESSING OFFICER ONLY. HAVING AGREED TO THE PROPOSITION THAT THE SAID SUM CANNOT BE DISALLOWED U/S.4 0(A)(IA), THE INVOCATION OF SECTION 40A(3) WAS DIRECTLY OUT OF QUESTION ON THE FACTS AS NARRATED ABOVE. IN FACT HE HIMSELF HAS NOTED THAT THE TDS CAN ONLY BE DEDUCTED AT THE TIME OF CREDIT OR PAYMENT WHICH CREDIT OR PAYMENT NEVER OCCURRED AT THE TIME OF PA YMENT IN CASH. SINCE THE ASSESSEE HAS NOT GOT REIMBURSEMENT FROM THE SELLERS OF THE GOODS FOR THE FREIGHT PAID BY THE ASSESSEE TO THE TRUCK OWNERS/DRIVERS WOULD BE GIVEN CREDIT TO BY THE SELLERS WHEN THE NAME OF THE PAYEE HAS BEEN INSCRIBED BY THE ASSESSIN G OFFICER BEING THE SELLERS. THIS CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE THAT THE EXPENDITURE ON FREIGHT COULD BE PAID TO THE TRUCK OWNERS/DRIVERS IN ACCORDANCE WITH THE NUMBER OF TRIPS MADE EACH BEING LESS THAN 20,000 WAS NOT TO CIRCUMVENT RIGOR OF THE PROVISIONS OF SECTION 40A(3 ) . IN VIEW OF THE ABOVE, THE DISALLOWANCE OF 7,73,533 U/S.40A(3) MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED CIT(A) CANNOT BE SUSTAINED AND AS SUCH, WE DIRECT DELETION OF THE SAME. 7. IN THE RESULT, THE APPEA L OF THE ASSESSEE IS ALLOWED. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 02.11.2012 ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 459 /CTK/2012 6 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : 2 / THE RESPONDENT: 3 . / THE CIT, 4 . ( )/ THE CIT( A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 30.10.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 31.10.2012 OTHE R MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 02.11.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON T HE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..