The ITO, Ward-4(1), Ahmedabad V. Gyscoal Energy Pvt.Ltd., Ahmedabad

ITA 461/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76833 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-06-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 17-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: SUNIL TALATI AR
• Section: 40A(3)

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD .., ! '# '# '# '# $ %&, ! BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER #./ I.T.A. NO.461/AHD/2011 ( ( ')( ( ')( ( ')( ( ')( / / / / ASSESSMENT YEAR : 2005-06) THE INCOME-TAX OFFICER WARD-4(1) AHMEDABAD / VS. GYSCOAL ENERGY PVT.LTD. 2 ND FLOOR, MRUDUL TOWER, ASHRAM ROAD AHMEDABAD !* #./+, #./ PAN/GIR NO. : AAECS 6731 M ( *- / // / APPELLANT ) .. ( ./*- / RESPONDENT ) *- 0 / APPELLANT BY : SHRI K.C. MATHEWS, SR.DR ./*- 1 0 / RESPONDENT BY : SHRI SUNIL TALATI, AR $'2 1 & / / / / DATE OF HEARING : 05/06/2014 34) 1 & / DATE OF PRONOUNCEMENT : 13/06/2014 5 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-VIII, AHMEDA BAD (CIT(A) IN SHORT) DATED 16/12/2010 PERTAINING TO ASSESSMEN T YEAR (AY) 2005-06. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THE LD.CIT(A)-VIII, AHMEDABAD HAS ERRED IN LAW A ND ON FACTS IN DELETING THE ADDITION OF RS.14,81,711/- MADE BY THE AO U/S.40A(3) OF THE ACT, WITHOUT PROPERLY APPRECIATIN G THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 1.2 IN DOING SO, THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE AUDITORS IN THE TAX AUDIT REP ORT HAD ITA NO.461/AHD/ 2011 ITO VS. GYSCOAL ENERGY PVT.LTD. ASST.YEAR 2005-06 - 2 - SPECIFICALLY CERTIFIED THAT THE ASSESSEE HAD MADE P AYMENTS TO 18 PARTIES OTHER THAN BY CROSSED BANK DRAFT OR CHEQUE AND WORKED OUT THE INADMISSIBLE EXPENDITURE U/S.40A(3) OF THE ACT TO THE TUNE OF RS.14,81,711/-. 1.3. THE LD.CIT(A)-VIII, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE SAID ADDITION THOUGH HE HAS HIMSELF GI VEN A FINDING IN THE APPELLATE ORDER THAT THE PAYMENTS WERE NOT C OVERED BY EXEMPTION GIVEN UNDER RULE 6DD OF I.T. RULES. 1.4. IN DOING SO, THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE FACTS OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT REPORTED IN 260 ITR 64 AND THE HONBLE I TAT REPORTED IN 56 TTJ 580 (AHD.) RELIED UPON BY HIM IN THE APPELLATE ORDER ARE DISTINGUISHABLE FROM THE FACTS OF THE ASSESSEES CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D.CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 2. BRIEFLY STATED FACTS ARE THAT THE CASE THE ASSE SSEE-COMPANY FILED ITS RETURN OF INCOME DECLARING TOTAL LOSS OF RS.5,70,89 9/-. THE RETURN WAS PROCESSED U/S.143((1) OF THE ACT. SUBSEQUENTLY, TH E CASE WAS RE-OPENED AND THE ASSESSMENT U/S.147 R.W.S.143(3) OF THE INCO ME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED V IDE ORDER DATED 30/04/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE AD DITION OF RS.14,81,711/- BY INVOKING THE PROVISIONS OF SEC TION 40A(3) OF THE ACT. THE AO WHILE FRAMING THE ASSESSMENT OBSERVED THAT ON VERIFICATION OF THE AUDIT REPORT IN FORM 3CD, CLAUSE 17, IT WAS SEEN THAT AN AMOUNT OF RS.74,08,555/- WAS SHOWN AS PAID ON ACCOUNT OF P URCHASES. THE PAYMENT WAS MADE OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON BANK OR ITA NO.461/AHD/ 2011 ITO VS. GYSCOAL ENERGY PVT.LTD. ASST.YEAR 2005-06 - 3 - A CROSSED BANK DRAFT. THE ASSESSEE OBJECTED TO RE- OPENING OF THE ASSESSMENT. OBJECTION OF THE ASSESSEE WAS REJECTED BY THE AO AND THE EXPLANATION GIVEN WAS ALSO REJECTED. THE ASSESSEE FEELING DISSATISFIED WITH THE ACTION OF THE AO, PREFERRED AN APPEAL BEFO RE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS AND RELYING ON TH E JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. MRINALINI V.SARABHAI 265 ITR PAGE 64 (GUJ.) AND THE DECISION OF THE COORDINATE BENCH (ITAT AHMEDABAD) RENDERED IN THE CASE OF BOMB AY CONDUCTORS & ELECTRICALS LTD. VS. DY.CIT REPORTED AT 56 TTJ 58 0 (AHD.), PARTLY ALLOWED THE APPEAL AND DIRECTED THE AO DELETE THE A DDITION. NOW, THE REVENUE HAS CHALLENGED THE ORDER OF THE LD.CIT(A) I N THIS APPEAL. 3. GROUND NOS.1 TO 1.4 ARE INTER-CONNECTED. THE ON LY EFFECTIVE GROUND IN REVENUES APPEAL IS AGAINST DELETION OF A DDITION OF RS.14,81,711/- MADE BY THE AO U/S.40A(3) OF THE ACT . THE LD.SR.DR SHRI K.C.MATHEWS VEHEMENTLY ARGUED THAT THE LD.CIT( A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. HE RELIED ON T HE ASSESSMENT ORDER. 3.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S HRI SUNIL TALATI RELIED ON THE ORDER OF THE LD.CIT(A) AND REITERATED THE SU BMISSIONS AS WERE MADE BEFORE HIM. HE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT AS IT I S NOT THE CASE WHERE PAYMENT HAS BEEN MADE IN CASH BUT IT IS THE CASE WH ERE THE PAYMENTS HAVE BEEN MADE BY WAY OF CROSSED-CHEQUES MADE ON BE HALF OF THE ASSESSEE BY THIRD PARTY. HE SUBMITTED THAT THIRD P ARTY HAD CONFIRMED THE ITA NO.461/AHD/ 2011 ITO VS. GYSCOAL ENERGY PVT.LTD. ASST.YEAR 2005-06 - 4 - RECEIPT OF PAYMENT AND MAKING OF THE PAYMENT. THER EFORE, LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE AO REPRODUCED THE REPLY OF THE ASSESSEE IN THE ASSESSMENT ORDER AND REJECTED THE EXPLANATION. IN PARAGRAPH NO.5.2 OF H IS ORDER, THE AO OBSERVED THAT ON VERIFICATION OF THE DETAILS SUBMIT TED BY THE ASSESSEE- COMPANY AND THE INSTANCES NOTED BY THE ASSESSEE-COM PANY ARE DIFFERENT. THE ASSESSEE-COMPANY ALSO FAILED TO GIVE PROPER JUS TIFICATION WITH PROOF IN THIS REGARD, HENCE THE AO PROCEEDED TO MAKE ADDI TION OF RS.14,81,7811/-, I.E. 20% OF RS.74,08,555/-. HOWE VER, THE LD.CIT(A) IN PARAGRAPH NO.4 OF HIS ORDER HAS GIVEN ON FINDING TH AT THE FACTS ARE NOT IN DISPUTE WITH REGARD TO THE PURCHASES MADE BY THE AS SESSEE-COMPANY. THE ASSESSEE HAD MADE PURCHASES FROM DIFFERENT PARTIES BEING 18 TRANSACTIONS TOTALLING TO RS.74,08,555/- TO WHOM THE PAYMENTS WE RE NOT MADE OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR DRAFT BUT WERE MADE BY ACCOUNT PAYEE CHEQUES TO OTHER PARTIES. THE AO HAS NOT DISPUTED THESE FACTS THAT IN BANK STATEMENT, CHEQUE NUMBER AND AMO UNT CLEARLY MENTION THAT THE ASSESSEE HAD PAID ACCOUNT PAYEE CHEQUES TO THESE DIFFERENT PARTIES AS PER THE SPECIFIC DIRECTION AND REQUEST M ADE BY THESE VERY PARTIES FROM WHOM PURCHASES WERE MADE. COPIES OF T HE BANK STATEMENT FILED IN THE PAPER-BOOK PAGE NOS.16 TO 27 CONFIRM T HIS FACT. THE CONFIRMATION OF ALL THESE PARTIES CONFIRMING THAT P AYMENT IS MADE BY THE ASSESSEE-COMPANY TO OTHER PARTIES AS DIRECTED BY TH E PARTIES FROM WHOM THE PURCHASES ARE MADE, ARE FILED IN THE PAPER-BOOK PAGE NOS.33 TO 37, ITA NO.461/AHD/ 2011 ITO VS. GYSCOAL ENERGY PVT.LTD. ASST.YEAR 2005-06 - 5 - WHICH ARE ALSO NOT IN DISPUTE. THE LD.CIT(A) AFT ER CONSIDERING THE SUBMISSIONS AND FOLLOWING THE JUDGEMENT OF HONBLE HIGH COURT RENDERED IN THE CASE OF CIT VS. MRINALINI V.SARABHA I 265 ITR PAGE 64 (GUJ.) DELETED THE ADDITION. THE UNDISPUTED FACT E MERGES FROM THE RECORD AND SUBMISSIONS OF THE PARTIES THAT THE PURCHASES M ADE BY THE ASSESSEE ARE NOT IN DISPUTE. THE AO HAS NOT TREATED SUCH PU RCHASES AS NOT GENUINE, BUT HE HAD INVOKED THE PROVISIONS OF SECTI ON 40A(3) OF THE ACT FOR MAKING THE ADDITION. FOR THE SAKE OF CLARITY, SECTION 40A(3) OF THE ACT IS REPRODUCED BELOW:- SECTION 40A(3) :- WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWEN TY THOUSAND RUPEES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. 4.1. FROM THE PLAIN READING OF SECTION 40A(3) OF TH E ACT, IT IS EVIDENT THAT WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN R ESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK FOR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, NO DEDU CTION SHOULD BE ALLOWED IN RESPECT OF SUCH EXPENSES. IN THE PRESE NT CASE, THE ASSESSEE HAD MADE PURCHASES FROM FIVE PARTIES; NAMELY, YASMI N CORPORATION, SHAH STEEL TRADING CO., SAMRATH CORPORATION, SHREER AM INCORPORATION AND GANESH STEEL CORPORATION. THE ASSESSEE IN PLAC E OF MAKING PAYMENT BY WAY OF ACCOUNT PAYEE CHEQUES TO AFORESAID CONC ERNS, MADE THE PAYMENT TO DIFFERENT OTHER PARTIES AS PER THE DETAI LS GIVEN HEREUNDER:- SR.NO. DATE OF DEBIT NAME OF PARTY 1. 08/12/2004 SHREERAM INCORPORATION 2. 08/12/2004 SAI TRADELINKS ITA NO.461/AHD/ 2011 ITO VS. GYSCOAL ENERGY PVT.LTD. ASST.YEAR 2005-06 - 6 - 3. 09/12/2004 SAMARTH CORPORATION 4. 20/12/2004 SAI TRADELINKS 5. 22/12/2004 SAI TRADELINKS 6. 22/12/2004 SHREERAM INCORPORATION 7. 22/12/2004 SAMARTH CORPORATION 8. 07/01/2005 SAMARTH CORPORATION 9. 07/01/2005 SAI TRADELINKS 10. 09/02/2005 SHYAM STELS 11. 14/02/2005 SHYAM STELS 12. 14/02/2005 SHREERAM INCORPORATION 13. 16/02/2005 SHYAM STELS 14. 17/02/2005 SHAH STEELS 15. 04/03/2005 SAMARTH CORP 16. 11/03/2005 SAMARTH CORP 17. 30/03/2005 SAI TRADE 18. 30/03/2005 BARODA IND. 4.2. THE CONTENTION OF THE ASSESSEE IS THAT THE PRO VISIONS OF SECTION 40A(3) OF THE ACT NOT AT ALL APPLICABLE. THE PAR TIES FROM WHOM THE GOODS WERE PURCHASED REQUESTED THE ASSESSEE-COMPANY TO GIVE PAYMENTS TO THEIR SUPPLIERS/THEIR BORROWERS FOR EARLY AND IM MEDIATE SETTLEMENT OF THEIR DUES. THEREFORE, ON THE DIRECTION OF THESE S UPPLIERS THE ASSESSEE MADE THE PAYMENT BY ACCOUNT PAYEE CHEQUES TO THE OT HER PARTIES. THE ASSESSEE HAS PLACED CONFIRMATION TO THIS EFFECT ON RECORD. A LETTER FROM SHAH STEEL TRADING CO. DATED 6/12/2004 HAS BEEN PLA CED ON RECORD, WHEREIN A REQUEST IS MADE TO ASSESSEE-COMPANY TO MA KE THE PAYMENT OF THEIR DUES TO 2/3 DIFFERENT PARTIES. THE LD.SR.DR HAS DRAWN OUR ATTENTION TO PAGE NO.9 OF THE PAPER-BOOK SUBMITTED BY THE ASS ESSEE, WHEREIN THE PURCHASES MADE FROM SHAH STEEL TRADING CO. ON 8/12/ 2004, 9/12/2004 AND 20/12/2004. IT IS THE CONTENTION OF THE REVEN UE THAT AS PER THIS LETTER, A REQUEST WAS MADE WITH REGARD TO DUE PAYME NT, BUT WHEN THE PURCHASES ITSELF WERE MADE SUBSEQUENT TO THE LETTER HOW THE PAYMENT ITA NO.461/AHD/ 2011 ITO VS. GYSCOAL ENERGY PVT.LTD. ASST.YEAR 2005-06 - 7 - BECOME DUE. IT IS ALSO THE CONTENTION OF THE LD.SR .DR THAT THE ASSESSEE HAS ONLY PLACED THE LETTER FROM SHAH STEEL TRADING CO. AND THE PURCHASES ARE MADE FROM OTHER COMPANIES ALSO WHOSE LETTERS AR E NOT ENCLOSED BY THE ASSESSEE. AFTER CONSIDERING THE TOTALITY OF THE FA CTS, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS NOT JUSTIFIED IN IN VOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT, SINCE THE AO HAS NOT MADE ANY ENQUIRY WHETHER SUCH PAYMENTS WERE MADE AT THE INSTANCE OF THE PARTIES FROM WHOM THE ASSESSEE-COMPANY PURCHASED THE GOODS. MOR EOVER, THERE IS NOTHING PLACED ON RECORD THAT INSTEAD OF ACCOUNT PA YEE CHEQUES, THE ASSESSEE-COMPANY HAS MADE CASH PAYMENT TO THE PARTI ES FROM WHOM THE GOODS WERE PURCHASED. THEREFORE, UNDER THESE FACT S, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) HOLDING THA T THE AO WAS NOT JUSTIFIED IN INVOKING THE SECTION 40A(3) OF THE ACT . THEREFORE, GROUND NOS.1 TO 1.4 ARE REJECTED. 5. GROUND NOS.2 & 3 ARE GENERAL IN NATURE REQUIRE N O INDEPENDENT ADJUDICATION. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) ($ %&) ! ! ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 13/ 06 /2014 8.., '.../ T.C. NAIR, SR. PS ITA NO.461/AHD/ 2011 ITO VS. GYSCOAL ENERGY PVT.LTD. ASST.YEAR 2005-06 - 8 - 5 1 .&9 :9)& 5 1 .&9 :9)& 5 1 .&9 :9)& 5 1 .&9 :9)&/ COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. ## & $; / CONCERNED CIT 4. $;() / THE CIT(A)-VIII, AHMEDABAD 5. 9'%< .& , , / DR, ITAT, AHMEDABAD 6. <( =2 / GUARD FILE. 5$ 5$ 5$ 5$ / BY ORDER, /9& .& //TRUE COPY// > >> >/ // / #+ #+ #+ #+ ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 6/9.6.14 (DICTATION-PAD 15 -PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 6/9.6.14 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 D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.13.6.14 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.6.14 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER