ITO, New Delhi V. M/s. Setia Travels Pvt. Ltd., New Delhi

ITA 5147/DEL/2012

• Counselvise Citation: 514720114 RSA 2012
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 05-12-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 04-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K KEDIA SENIOR
• Assessee Lawyers: YOGESH SETIA
• Keywords: Additional evidence
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) SHRI I.C. SUDHIR, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.5147/DEL./2012 (ASSESSMENT YEAR : 2008-09) ITO, WARD 8 (1), VS. M/S. SETIA TRAVELS PVT. LTD ., NEW DELHI. 13 J, 13 TH FLOOR, GOPALA TOWER, 25, RAJENDRA PLACE, NEW DELHI 110 008. (PAN : AAFCS8232G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI YOGESH SETIA, AR REVENUE BY : SHRI R.K. KEDIA, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-XI, NEW DELHI DATED 02.07.2012 FOR THE AS SESSMENT YEAR 2008-09. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY. THE RETURN OF INCOME WAS FILED ON 29.09.2008 WHICH WAS SUBSEQUENTLY REVISED. 3. THE GROUNDS OF APPEAL TAKEN BEFORE US READ AS UN DER :- 1. THE LD. CIT (A), ON THE FACTS AND IN THE CIRCUM STANCES OF THE CASE, ERRED IN DELETING A SUM OF RS.6.74 LACS DISALLOWED UNDER SECTION 40A(3) OF THE ACT. 2. LD. CIT (A) ERRED IN LAW IN ADMITTING ADDITIONAL EVIDENCE U/R 46A OF THE INCOME-TAX RULES, 1962 AND FURTHER ERRED IN DEL ETING THE DISALLOWANCE ITA NO.5147/DEL./2012 2 OF RS.6.11 LACS UNDER SECTION 40A(2)(B) OF THE ACT WITHOUT AFFORDING THE OPPORTUNITY TO THE A.O. TO REBUT THE EVIDENCE SO AD MITTED. 3. THE APPELLANT (ASSESSEE) CRAVES LEAVE OR RESERVI NG THE RIGHT TO AMEND MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 4. IN GROUND NO.1, THE ISSUE INVOLVED IS DELETING T HE ADDITION OF RS.6.74 LACS MADE UNDER SECTION 40A(3) OF THE INCOME-TAX AC T, 1961. DURING THE YEAR, THE ASSESSEE HAS MADE CASH PAYMENTS OF RS.6,7 4,000/- TO VARIOUS AIRLINES, VIZ., INDIGO, SPICE JET AND DECCAN FOR PU RCHASE OF TICKETS. THE LD. DR SUBMITTED THAT THE ASSESSEE IS LOCATED IN DELHI. THE AIRLINES TO WHOM THE PAYMENTS WERE MADE ALSO LOCATED IN DELHI AND THEY A RE HAVING THEIR BANK ACCOUNTS. THE ASSESSEE ADMITTEDLY DEPOSITED THE AM OUNT IN THE ACCOUNTS OF THE AIRLINES. THE ASSESSEE WAS HAVING A RUNNING AC COUNT WITH THESE AIRLINES. THE AMOUNT HAS BEEN PAID ON ALL THE OCCASIONS AT RS .25,000/- EACH IN VIOLATION OF SECTION 40A(3) OF THE INCOME-TAX ACT, 1961. THE ISSUE IS NOT COVERED BY ANY OF THE EXCEPTIONS LAID DOWN IN RULE 6DD OF THE INCOME-TAX RULES. THEREFORE, THE CIT (A) IS NOT JUSTIFIED BY DELETING THE ADDITION ON THE BASIS THAT THE IDENTITY OF THE PAYEE AND THE GENUIN ENESS OF THE TRANSACTIONS IS NOT DOUBTED. SINCE THE ASSESSEE WAS HAVING RUNNING ACCOUNT WITH THE BANKS, THEREFORE, IT CANNOT BE SAID THAT THERE WAS BUSINES S EXPEDIENCY AND BUSINESS CONSIDERATION FOR MAKING THE CASH PAYMENTS TO THESE AIRLINES. LD. DR ALSO RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO 191 ITR 667 (SC) WHEREIN TH E HON'BLE SUPREME ITA NO.5147/DEL./2012 3 COURT HAS HELD THAT THE PROVISIONS OF SECTION 40A(3 ) OF INCOME-TAX ACT, 1961 READ WITH RULE 6DD OF INCOME-TAX RULES ARE NOT INTE NDED TO RESTRICT THE BUSINESS ACTIVITIES OF THE ASSESSEE AND THE PROVISI ONS OF SECTION 40A(3) ARE ATTRACTED FOR PAYMENTS MADE FOR ACQUIRING STOCK-IN- TRADE AND OTHER MATERIAL. RULE 6DD PROVIDES EXCEPTIONS BUT ASSESSEES CASE DO NOT FALL IN ANY OF THE EXCEPTIONS. HE VEHEMENTLY PLEADED TO SET ASIDE THE ORDER OF THE CIT (A). 5. ON THE OTHER HAND, LD. AR RELIED ON THE ORDER OF THE CIT (A) AND SUBMITTED THAT THE TRANSACTIONS WERE GENUINE AND TH E PERSONS TO WHOM THE PAYMENTS WERE MADE WERE IDENTIFIED. THE ASSESSEE W AS GETTING DISCOUNT BY MAKING THE CASH PAYMENTS IN THE CASE OF JET AIRLINE S. 6. WE HAVE HEARD BOTH THE SIDES. SECTION 40A(3) PR OVIDES THAT WHERE ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREG ATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAY EE CHEQUES DRAWN ON A BANK DRAFT, EXCEEDS RS.20,000/-, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH DEDUCTION. THE HEADING OF THE SECTION ITSELF SHOWS THAT SECTION 40A PROVIDES FOR EXPENSES OR PAYMENTS NOT DEDUCTIBLE IN CERTAIN CIRCUMSTANCES. RULE 6DD PROVIDES CERTAIN EXCEPTIONS WHERE NO DISAL LOWANCES U/S 40A SHALL BE MADE. IN OUR CONSIDERED VIEW, THE ASSESSEES CA SE IS NOT COVERED IN ANY OF THE EXCEPTIONS. THESE PAYMENTS WERE INDIGO, SPICE JET AND AIR DECCAN. IT IS NOT CLEAR HOW LD. AR JUSTIFIED IN QUOTING DISCOUNT FACILITY FOR CASH PAYMENT AT JET AIRLINES. THE EXPLANATION OFFERED IS NOT SUFFI CIENT TO TAKE OUT ASSESSEE ITA NO.5147/DEL./2012 4 FROM APPLICABILITY OF SECTION 40A(3) OF THE ACT. T HEREFORE, THE CIT (A) IS NOT JUSTIFIED IN DELETING THE ADDITION. IN OUR CONSIDE RED VIEW, THE PROVISIONS OF SECTION 40A(3) ARE CLEARLY ATTRACTED FOR MAKING THE PAYMENTS OF RS.25,000/- FOR PURCHASE OF THE TICKETS FROM VARIOUS AIRLINES. THEREFORE, THE ORDER OF THE CIT (A) IS SET ASIDE ON THIS ISSUE AND THE ASSESSIN G OFFICERS ORDER IS RESTORED ON THIS ISSUE. THIS GROUND IS ALLOWED. 7. IN THE GROUND NO.2, THE ISSUE INVOLVED IS DELETI NG THE ADDITION OF RS.6.11 LACS MADE U/S 40A(2)(B) OF THE INCOME-TAX A CT, 1961. BY ADMITTING THE ADDITIONAL EVIDENCE UNDER RULE 46A OF THE INCOM E-TAX RULES WITHOUT AFFORDING THE OPPORTUNITY TO THE ASSESSING OFFICER TO REVERT THE EVIDENCE SO ADMITTED. LD. DR RELIED ON THE ORDER OF THE DECIS ION OF HON'BLE SUPREME COURT IN THE CASE OF NUND & SAMONT CO. (P.) LTD. VS . CIT 78 ITR 268. 8. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. FRO M THE ORDER OF THE ASSESSING OFFICER, IT IS CLEAR THAT THE ASSESSEE HA S FAILED TO SUBMIT COMPLETE DETAILS SPECIFYING THE DUTIES ASSIGNED TO THE PERSO NS TO WHOM THE PAYMENTS WERE MADE. THE ASSESSING OFFICER HAS DOUBTED THE G ENUINENESS OF THE EXPENSES MADE IN THE SHAPE OF SALARY AND BONUS TO T HE RELATIVES OF THE DIRECTORS. ASSESSING OFFICER HAS ALSO RECORDED THA T THE ASSESSEE HAS FAILED TO PROVE THE REASONABLENESS OF THESE PAYMENTS. THE CI T (A) GRANTED THE RELIEF BY ADMITTING THE ADDITIONAL EVIDENCES FURNISHED BEF ORE HIM IN RESPECT OF THE DETAILS OF DUTIES ASSIGNED TO THE RELATIVES OF THE DIRECTORS OF THE COMPANY. THE ITA NO.5147/DEL./2012 5 CIT (A) HAS ALSO HELD THE PAYMENTS OF SALARY AND BO NUS AS REASONABLENESS WITHOUT GIVING ANY SPECIFIC REASON. THE HON'BLE SU PREME COURT IN THE CASE OF NUND & SAMONT CO. (P) LTD. HAS HELD AS UNDER :- UNDER THE ARTICLES OF ASSOCIATION, THE RATE OF REM UNERATION TO BE PAID TO THE MANAGING DIRECTOR AND DEPUTY MANAGING D IRECTOR WAS FIXED. THE ITO DISALLOWED PART OF THE REMUNERATION PAID TO THE MANAGING DIRECTOR AND THE DEPUTY MANAGING DIRECTOR UNDER SECTION 10(4A) OF THE 1922 ACT HOLDING THAT THE REM UNERATION PAID TO THE DIRECTORS WAS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE LEGITIMATE BUSINESS NEEDS OF THE COMP ANY AND THE BENEFIT DERIVED BY AND ACCRUING TO IT THEREFROM. T HE AAC AND THE TRI AGREED WITH THE ITO. THE HIGH COURT ALSO A FFIRMED THE ORDER OF THE TRIBUNAL. IN OUR CONSIDERED VIEW, IT IS FOR THE TAXPAYER TO E STABLISH BY EVIDENCE THAT A PARTICULAR PAYMENT IS JUSTIFIABLE. THE ASSESSEE HA S FAILED TO TENDER ANY EVIDENCE BEFORE THE ASSESSING OFFICER. THE ASSESSE E HAS SUBMITTED CERTAIN DETAILS WHICH HAVE BEEN BELIEVED BY THE CIT (A) WIT HOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER. IN THE INTER EST OF JUSTICE AND EQUITY, WE FIND IT APPROPRIATE TO SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING DE NOVO. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 14 TH DAY OF DECEMBER, 2012. SD/- SD/- (I.C. SUDHIR) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 14 TH DAY OF DECEMBER, 2012/TS ITA NO.5147/DEL./2012 6 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.