Rajendra Kumar Sahoo, Keonjhar V. ACIT, Circle-1(1), Cuttack

ITA 53/CTK/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2369 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 12-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: B R PANDASATYAJIT NANDA ADVS
• Keywords: Condonation of delay; Set aside
• Section: 40A(3); 143(3); 143(1); 201; 191; 48; 13; 22

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK . . , . . , BEFORE SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM . / ITA NO. 53 /CTK/201 8 ( / A SSESSMENT Y EAR : 201 2 - 201 3 ) MR. RAJENDRA KUMAR SAHOO, PROP. OF NEW KANAK JEWELLERY & KANAK TRANSPORT, AT/PO: NEW MARKET, KEONJHAR - 758001 VS. ACIT, CIRCLE - 1(1), CUTTACK ./ PAN NO. : A RKPS 2114 G ( / APPELLANT ) . . ( / RESPONDENT ) /ASSESSEE BY : SHRI B.R.PANDA/SATYAJIT NANDA , ADVS . /REVENUE BY : SHRI SUBHENDU DUTTA , DR / DATE OF HEARING : 22 / 0 1 /20 20 / DATE OF PRONOUNCEMENT : 1 6 / 03 /2020 / O R D E R PER L.P.SAHU, AM : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST ORDER OF CIT(A) , CUTTACK , DATED 18.10.2017 FOR THE ASSESSMENT YEAR 201 2 - 201 3 . 2. AS PER THE OFFICE NOTE/ORDER SHEET ENTRY, THE APPEAL OF THE ASSESSEE IS BARRED BY 48 DAYS. IN THIS REGARD, THE LD. AR OF THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY ALONG WITH AN AFFIDAVIT. CONSIDERING THE APPLICATION ALONG WITH THE AFFIDAVIT OF THE ASSESSEE FOR CONDONATION OF DELAY , TO WHICH LD. DR DID NOT OBJECT TO THE SAME, WE CONDONE THE DELAY IN FILING THE APPEAL AND THE APPEAL IS HEARD FINALLY. ITA NO. 53 /CTK/201 8 2 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : - I. FOR THAT THE ADDITION OF RS.21,46,046/ - FOR ALLEGED VIOLATION SEC.40A(3) OF THE IT. ACT, WITHOUT CONSIDER ING THE EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES INVOLVED FOR PURCHASING THE GOLD AND SILVER AND WHEN THE GENUINENESS OF THE PAYMENTS AND THE IDENTITY OF THE PAYEE HAD NOT BEEN DOUBTED THEN SUCH PAYMENTS CANNOT BE DISALLOWED IN MECHANICAL MANNER, HENCE ENT IRE ADDITION SHOULD BE DELETED. II. FOR THAT THE NATURE OF THE GOLD BUSINESS AND THE NECESSITY FOR EXPEDITIOUS SETTLEMENT THEREOF SHOULD HAVE BEEN LOOKED INTO AND THE EVIDENCE ALSO FURNISHED TO THE SATISFACTION OF THE REVENUE AS THE GENUINENESS OF THE P AYMENT AND THE IDENTITY OF THE PAYEE, IT CAN NOT BE SAID THAT THE PAYMENTS VIOLATING THE PROVISION OF SEC.40A(3) OF THE IT. ACT. HENCE THE ADDITION MADE OUGHT TO HAVE BEEN QUASHED. III. FOR THAT, BOTH THE PAYER AND THE PAYEE ARE KNOWN AND THE TRANSACTION S ARE GENUINE EVEN THE PAYMENT EXCEED TO THE STATUTORY LIMIT THAT SHOULD NOT BE TREATED AS VIOLATING THE SEC.40A(3) OF THE I.T. ACT, HENCE THE ADDITION OF RS.21,46,046/ - SHOULD HAVE BEEN DELETED. IV. FOR THAT, IN THIS CASE SINCE THE TRANSACTION IS RE LATING TO PURCHASES AND NOT FOR THE EXPENDITURE AND THE PERSONS ARE IDENTIFIED, THEN THE PAYMENT SHOULD NOT BE CONSIDERED AS THE EXPENDITURE INCURRED FOR RECURRING. HENCE THE ADDITION SUSTAINED U/S.40A(3) OF THE I.T. ACT BY THE ID. CIT(APPEALS) IS BAD IN L AW. V. FOR THAT, THE VERY CONCEPT OF SEC.40A(3) AND RULE 6DD(J) HAVE BEEN INCORPORATED IN THE ACT IN ORDER TO CHECK THE INCURRING OF BOGUS AND FICTITIOUS EXPENSES TO NON - EXISTING PARTIES. BUT WHERE THE GENUINENESS OF THE PAYMENT HAS NOT BEEN DOUBTED SUCH ADDITION U/S.40A(3) OF THE IT ACT CAN NOT BE MADE IN MECHANICAL MANNER. THUS THE ORDERS OF THE FORUM BELOW ARE ERRED IN LAW. VI. FOR THAT THE DISALLOWANCE/ADDITION OF EXPENSES APPLYING THE PERCENTAGE RATE BY THE ID. ASSESSING OFFICER AND THEREAFTER THE ID.CIT(A) REDUCED THE PERCENTAGE RATE FROM 25% AND 10% TO 10% AND 5% RESPECTIVELY AND SUSTAIN THE ADDITION OF RS.8,22,175/ - UNDER THE HEADS TRAVELLING EXPENSES AND BUSINESS PROMOTION EXPENSES AND RS.2,47,507/ - UNDER THE HEADS REPAIR AND MAINTENANCE, PRI NTING AND STATIONARY ETC. ALLEGING FAILED TO PRODUCE THE DOCUMENTS AND THE PROPOSITION TAKEN FOR ARRIVING SUCH METHOD OF COMPUTATION IS TOTALLY PREJUDICE TO THE FACTS OF THE CASE. VII. FOR THAT SINCE EXPENSES ARE MADE EXTENSIVELY FOR BUSINESS PURPOSES TO FACILITATING AND FUNCTIONING OF THE BUSINESS IN GOOD AND POSITIVE MANNER TO ACHIEVE THE BUSINESS OBJECTS AND WERE RECORDED IN THE ITA NO. 53 /CTK/201 8 3 BOOKS OF ACCOUNTS ON DAY TO DAY BASIS, THE PERCENTAGE RATE CANNOT BE APPLIED IN THIS CASE. HENCE THE ADDITIONS MADE ON PRESUM PTION BASIS ARE ILLEGAL AND LIABLE TO BE DELETED. THE OTHER GROUNDS WILL BE URGED AT THE TIME OF HEARING. 4 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 02.03.2013 DECLARING TOTAL INCOME OF RS.37,75,199/ - . THE ASSESSEE DERIVES INCOME FROM RETAIL SALE OF GOLD & SILVER AND TRANSPORT CONTRACT. THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE. DUE TO CHANGE OF INCUMBENCY THE CASE WAS TRANSFERRED TO OTHER AO. ON PERUSAL OF THE PROFIT AND LOSS ACCO UNT AND LEDGER FURNISHED BY THE ASSESSEE, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS PURCHASED ORNAMENTS FROM VARIOUS DEALERS, AMONG THESE DEALERS HE HAS MADE PURCHASE FROM M/S LILY ALANKAR, CUTTACK AND M/S MAA SANTHOSI JEW E LLERS, CUTTACK . ON VERIFICAT ION OF LEDGER OF PURCHASES MADE FROM THESE TWO JEWELLERS, THE AO FOUND THAT THE ASSESSEE HAS MADE PURCHASE BY CASH EXCEEDING RS.20,000/ - ON VARIOUS DATES IN ONE BILL IN VIOLATION OF SECTION 40A(3) OF THE ACT. THEREFORE, THE AO INVOKED THE PROVISIONS OF SEC TION 40A(3) OF THE ACT AGAINST THE CASH PAYMENTS MADE BY THE ASSESSEE. FOR PROPER UNDERSTANDING, THE DETAILS OF CASH PAYMENTS AS INCORPORATED BY THE AO IN THE ASSESSMENT ORDER, ARE AS UNDER : - S.NO DATE MODE OF PAYMENT AMOUNT S.NO DATE MODE OF PAYMEN T AMOUNT 1 1.4.2011 CASH RS.23,955 13 18.7.2011 CASH RS.21,685 2 5.4.2011 - DO - RS.24,644 14 2.8.2011 - DO - RS.23,190 ITA NO. 53 /CTK/201 8 4 3 9.4.2011 - DO - RS.26,788 15 16.8.2011 - DO - RS.30,542 4 19.4.2011 - DO - RS.25,897 16 22.8.2011 - DO - RS.27,714 5 2.5.2011 - DO - RS.21,761 17 7.9.2011 - DO - RS.23,409 6 7.5.2011 - DO - RS.21,665 18 17.10.2011 - DO - RS.24,725 7 23.5.2011 - DO - RS.23,735 19 24.10.2011 - DO - RS.22,304 8 1.6.2011 - DO - RS.22,691 20 29.10.2011 - DO - RS.22,666 9 4.6.2011 - DO - RS.21,409 21 3.11.2011 - DO - RS.43,178 10 1 4.6.2011 - DO - RS.22,786 22 5.12.2011 - DO - RS.23,230 11 20.6.2011 - DO - RS.22,167 23 13.12.2011 - DO - RS.21,680 12 12.7.2011 - DO - RS.24,813 TOTAL: RS. 5,66,634/ - PURCHASE: M/S MAA SANTHOSI JEWELLERS, CUTTACK. S.NO DATE MODE OF PAYMENT AMOUNT S.NO DATE MODE OF PAYMENT AMOUNT 1 3.4.2011 CASH RS.24,570 17 10.9.2011 CASH RS.25,805 2 10.4.2011 - DO - RS.25,482 18 15.9.2011 - DO - RS.25,209 3 16.4.2011 - DO - RS.27,869 19 20.9.2011 - DO - RS.37,725 4 3.5.2011 - DO - RS.20,412 20 26.9.2011 - DO - RS.41,492 5 9. 5.2011 - DO - RS.21,331 21 30.9.2011 - DO - RS.40,389 6 18.5.2011 - DO - RS.22,192 22 29.10.2011 - DO - RS.33,596 7 2.6.2011 - DO - RS.20,846 23 30.10.2011 - DO - RS.65,318 8 9.6.2011 - DO - RS.24,002 24 31.10.2011 - DO - RS.98,809 9 21.6.2011 - DO - RS.20,705 25 15.11. 2011 - DO - RS.21,548 1 0 20.7.2011 - DO - RS.22,369 26 20.11.2011 - DO - RS.25,189 11 24.7.2011 - DO - RS.32,137 27 26.11.2011 - DO - RS.36,085 12 26.7.2011 - DO - RS.24,240 28 30.11.2011 - DO - RS.37,723 13 31.7.2011 - DO - RS.33,986 29 13.12.2011 - DO - RS.24,179 14 12.8.2011 - DO - RS.24,371 30 21.12.2011 - DO - RS.31,120 15 19.8.2011 - DO - RS.24,497 31 27.12.2011 - DO - RS.73,284 16 26.8.2011 - DO - RS.27,145 TOTAL: RS.10,13,625/ - PURCHASE REGISTER: S.NO DATE MODE OF PAYMENT AMOUNT S.NO DATE MODE OF PAYMENT AMOUNT 1 13.04.2011 CASH RS.27,000 10 27.09.2011 CASH RS.35,620 2 18.06.2011 - DO - RS.35,525 11 01.10.2011 - DO - RS.22,176 3 14.08.2011 - DO - RS.64,000 12 12.10.2011 - DO - RS.22,688 4 20.08.2011 - DO - RS.54,210 13 07.02.2012 - DO - RS.45,336 5 24.08.2011 - DO - RS.2 7,030 14 11.02.2012 - DO - RS.30,618 ITA NO. 53 /CTK/201 8 5 6 25.08.2011 - DO - RS.20,655 15 16.02.2012 - DO - RS.44,469 7 04.09.2011 - DO - RS.36,947 16 18.02.2012 - DO - RS.25,840 8 16.09.2011 - DO - RS.23,543 17 19.02.2012 - DO - RS.27,702 9 18.09.2011 - DO - RS.22,428 18 TOTAL : RS.5,65 ,787/ - 5 . FURTHER, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE CASH PAYMENTS MADE MORE THAN RS.20,000/ - SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IN THIS REGARD, THE ASSESSEE SUBMITTED HIS WRITTEN SUBMISSIONS AS UNDER : - 'THOSE BILLS A RE PAID TO M/S LILY ALANKAR, CTC AND M/S MAA SANTOSHI WORKS WHO ACT AS AGENT TO THE PETITIONER WHO PROCURES GOLD AND SILVER FOR THE PETITIONER FROM THE MARKET , SO IN THIS CASE SECTION 40A$3) WILL NOT BE APPLICABLE AS PER RULE 6DD(K) AND CITED THE CAS E LAW OF SRI SHANMUGA GINNING FACTORY (2013)218, TAXMAN 76' THE AO OBSERVED THAT THE CASE LAW RELIED ON THE BY THE ASSESSEE IS NOT APPLICABLE IN THE PRESENT CASE IN HAND BECAUSE IN THIS CASE THE FACTORY HAS ENGAGED AGENT FOR THE PURCHASE OF COTTON WHERE ALL THE AGENTS HAVE CHARGED 1% COMMISSION FROM THE ASSESSEE WHICH MEANS THAT SUCH PERSONS WERE ACTING ON BEHALF OF THE ASSESSEE IN THE PROCESS OF COTTON. THIS IS NOT SAME IN THE PRESENT CASE AS THE ASSESSEE WAS NOT CHARGED ANY COMMISSION BY THE AGENTS AND WITHOUT ANY COMMISSION PAYMENT ASSESSEE CANNOT CLAIM THAT THEY ACTED AS AGENT AND DISTINGUISHED THE CASE LAW RELIED ON BY THE ASSESSEE. ACCORDINGLY, THE AO MADE ADDITION OF RS.21,.46,046/ - . 6 . FURTHER, ON SCRUTINY OF ACCOUNTS, THE AO NOTED THAT THE ASSESSE E HAS DEBITED AN AMOUNT OF RS.42,65,200/ - AND RS.39,56,550/ - TOWARDS BUSINESS PROMOTION EXPENSES AND TRAVELLING EXPENSES, RESPECTIVELY. IN ITA NO. 53 /CTK/201 8 6 THIS REGARD, THE ASSESSEE WAS ASKED TO PRODUCE THE DETAILS OF SUCH EXPENSES AND EVIDENCE TO SUBSTANTIATE THE CLAIM O F EXPENSES. IN RESPONSE TO THIS, THE ASSESSEE PRODUCED LEDGER FOR THESE EXPENSES AND SOME HANDMADE VOUCHERS IN SUPPORT OF THE CLAIM. THE AO FURTHER NOTICED THAT THE ASSESSEE CLAIMING SAME EXPENDITURE IN BOTH THE HEADS I.E. BUSINESS PROMOTION EXPENSES AND T RAVELLING EXPENSES AND FOR BETTER UNDERSTANDING THE CHART INCORPORATED BY THE AO IN THE ASSESSMENT ORDER IS REPRODUCED AS UNDER : - TRAVELLING EXPENSES: DATE PARTICULARS MODE OF PAYMENT AMOUNT 28.4.2011 AMOUNT PAID FOR HIRING 4 BOLERO CASH RS.35,800/ - 29 .4.2011 - DO - - DO - RS.36,800/ - 5.5.3011 - DO - - DO - RS.35,000/ - 9.5.2011 - DO - - DO - RS.35,600/ - 30.6.2011 - DO - - DO - RS.36,500/ - BUSINESS PROMOTION EXPENSES: DATE PARTICULARS MODE OF PAYMENT AMOUNT 28.4.2011 AMOUNT PAID FOR HIRING 4 BOLERO CASH RS.45,835 / - 29.4.2011 AMOUNT PAID FOR HIRING 1 BOLERO - DO - RS.9,000/ - 5.5.3011 - DO - - DO - RS.9,000/ - 9.5.2011 - DO - - DO - RS.9,000/ - 30.6.2011 - DO - - DO - RS.9,000/ - THE AO FURTHER NOTICED THAT UNDER THE BUSINESS PROMOTION THE ASSESSEE HAS MADE PAYMENTS FOR PURCHA SE OF BLANKETS FOR TRUCK DRIVERS TO PROMOTE THE TRANSPORTING BUSINESS AND THE PAYMENTS HAVE BEEN MADE THROUGH CASH. THE ASSESSEE WAS CONFRONTED AND THEN THE ASSESSEE ITA NO. 53 /CTK/201 8 7 PRODUCED SELF - MADE VOUCHERS AND CLAIMED PURCHASES WERE MADE FROM DIFFERENT PLACES WHICH IS NOT FULLY VERIFIABLE. THE AO NOTICED THAT THE NATURE OF THE BUSINESS IS NOT CHANGED FROM THE EARLIER YEARS AND THE ASSESSEE HAS ALSO NOT CLAIMED THESE EXPENSES IN THE PREVIOUS YEAR. ACCORDINGLY, THE AO DISALLOWED 25% OF THE TOTAL EXPENSES CLAIMED I.E. RS. 20,55,438/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 7 . FURTHER ON SCRUTINY OF PROFIT AND LOSS ACCOUNT, THE AO FOUND THAT THE ASSESSEE HAS CLAIMED EXPENSES UNDER THE DIFFERENT HEADS WHICH READS AS UNDER : - HEADS OF EXPENSES AMOUNT REPAIR & MAI NTENANCE RS. 4,93,325/ - PRINTING & STATIONARY RS. 2,49,231/ - FUEL & LUBRICANT RS. 14,70,500/ - TELEPHONE CHARGES RS. 2,62,010/ - RS. 24,75,066/ - IN REGARD TO THE ABOVE EXPENSES DEBITED INTO THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE WAS ASKE D TO PRODUCE THE DETAILS OF SUCH EXPENSES AND SUBSTANTIATED THE CLAIM OF EXPENDITURE . IN SUPPORT OF THIS, THE ASSESSEE FURNISHED THE LEDGER COPIES OF SOME EXPENSES BOOKED UNDER THE ABOVE HEADS AND COULD NOT PRODUCE ALL THE BILLS AND VOUCHERS FOR VERIFICATI ON. THE ASSESSEE SUBMITTED THAT ALL THESE EXPENSES WERE INCURRED DULLY FOR THE PURPOSE OF BUSINESS, THEREFORE, THE AO IN ABSENCE THE DETAILS, LIKE BILLS AND VOUCHERS AND MOST OF THE EXPENSES WERE PAID IN CASH, CONCLUDED THAT THE LEAKAGE OF REVENUE CANNOT BE DENIED IN SUCH CIRCUMSTANCES, THEREFORE, HE DISALLOWED LUMPSUM 10% ITA NO. 53 /CTK/201 8 8 OF THE ABOVE EXPENSES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE AT RS.2,47,507/ - . 8 . FEELING AGGRIEVED FROM THE ORDER OF AO, THE ASSESSEE APPEALED BEFORE THE CIT(A) AND THE CIT(A) AF TER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, UPHELD THE DISALLOWANCE MADE BY THE AO U/S.40A(3) OF THE ACT AND IN RESPECT OF ADHOC ADDITION, THE CIT(A) REDUCED TO 10% OF THE ABOVE ADDITION IN CASE OF BUSINESS PROMOTION EXPENSES AND TRAVELLING EXPENSES, AND IN CASE OF DISALLOWANCE OF RS.2,47,507/ - THE AO RESTRICTED TO 5% OF THE TOTAL ADDITION MADE BY THE AO I.E. RS.1,23,753/ - . ACCORDINGLY, THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 9. AGGRIEVED FROM THE ABOVE ORDER OF CIT(A), THE ASSESSEE IS I N FURTHER APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. 10. LD. AR BEFORE US REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND FILED WRITTEN SUBMISSIONS AS UNDER : - 1. THAT THE ASSESSEE FILED HIS I.T. RETURN DISCLOSING TOTAL INCOME AT RS.37,75,199/ - DERIVES FROM RETAIL SALE OF GOLD AND SILVER ORNAMENTS AND THE TRANSPORTING CONTRACT WORKS. THE RETURN WAS PROCESSED U/S. 143(1) OF THE I.T. ACT AND THEREAFTER IT WAS TAKEN UP FOR SCRUTINY UNDER COMPULSORY SCRUTINY AND THE APPELLANT APPEARED IN THE ASSESSMENT PROCEEDINGS AND PRODUCED THE BOOKS OF ACCOUNT AND OTHER INFORMATION AS WAS CALLED FOR TIME TO TIME. 2. THAT, THE ID. ASSESSING OFFICER PASSED THE ASSESSMENT ORDER U/S. 143(3) OF THE IT ACT AND INFLATED THE INCOME TO RS.82,24,190/ - BY WAY OF ADDITIONS/ DISALLOWANCE MADE AS UNDER: - (I) ADDITIONS MADE AT RS.21,46,046/ - U/S.40A(3) OF THE I.T. ACT ON ACCOUNT OF CASH PAYMENT FOR PURCHASE OF GOLD ORNAMENTS. ITA NO. 53 /CTK/201 8 9 (II) DISALLOWANCE OF RS.20,55,438/ - I.E. 25% OF RS.82,21,750/ - TOWARDS THE EXPE NSES CLAIMED UNDER HEAD TRAVELLING & BUSINESS PROMOTION EXPENSES. (III) DISALLOWANCE OF RS.2,47,507/ - I.E. 10% OF RS. 24,75,066/ - TOWARDS THE EXPENSES CLAIMED UNDER HEADS REPAIR AND MAINTENANCE, PRINTING & STATIONARY, FUEL & LUBRICANTS, ETC. THUS THE ASS ESSED INCOME DETERMINED AT RS.82,24,190/ - AS AGAINST THE RETURNED INCOME SHOWN AT RS.37,75,190/ - . 3. THAT THE ADDITION MADE AT RS.21,55,438/ - U/S.40A(3) OF THE IT. ACT FOR VIOLATION OF PROVISION TOWARDS PURCHASE OF GOLD ORNAMENTS AND OLD GOLD IN CASH PAY MENT. IT WAS SUBMITTED THAT GENERALLY IN GOLD BUSINESS MARKET PRICE STABILITY ARE NOT ALWAYS IN CONSTANT RATE. SO IT HAS WAITED TO PROCURE * THE GOLD FROM MARKET TO GET GOOD PROFIT IN SUCH STIFF MARKET COMPETITION. FURTHER THE ASSESSEE WHO IS STAYING FAR A WAY FROM THE SUPPLIER ESTABLISHMENT, IT WAS NOT PREFERABLE FOR PAYMENT IN CHEQUES OR DRAFTS DUE TO FLUCTUATION OF PRICE RATE. FURTHER NON - AVAILABILITY OF SPECIFIED DESIGN OF ORNAMENTS IN THE MARKETS, THE SELLER DEMANDED FOR CASH PAYMENT INSTEAD OF DEMAND D RAFT OR CHEQUES, AND THE ASSESSEE FOR PROTECTION OF BUSINESS SO ALSO NON - AVAILABLE OF SPECIFIC ITEMS AGREED FOR CASH TRANSACTIONS IN COMPULSION. THEREFORE CONSIDERING THE EXIGENCY OF BUSINESS AND GENUINENESS OF PAYMENT AND IDENTITY OF BOTH PAYER AND PAYEES , THE ADDITION MADE FOR VIOLATION OF SEC.40A(3) OF THE IT. ACT SHOULD NOT HAVE BEEN APPLIED AND IN THE CASE OF ATTAR SINGH GURMUKH SINGH V. INCOME TAX OFFICER (1991) 191 ITR 667, THE SUPREME COURT CONSIDERING SUB - RULE (J) OF RULE 6DD OBSERVED THAT WHERE TH E ASSESSEE FURNISHES EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER AS TO THE GENUINENESS OF THE PAYMENTS AND THE IDENTITY OF THE PAYEE, SUCH PAYMENTS CANNOT BE DISALLOWED. 4. THAT SO FAR THE DISALLOWANCE OF RS.20,55,438/ - I.E. 25% OF RS.82,21,750 / - CLAIMED TOWARDS THE EXPENSES UNDER HEADS OF TRAVELLING AND BUSINESS PROMOTION EXPENSES, AND RS.2,47,507/ - I.E. 10% OF RS.24,75,066/ - CLAIMED THE EXPENSES UNDER THE DIFFERENT HEADS SUCH AS REPAIR AND MAINTENANCE, PRINTINGS AND STATIONARY, ETC. AND THEREA FTER IT HAS REDUCED TO 10% AND 5% BY THE 1 ST APPELLATE AUTHORITY AND REWORKED THE ADDITION OF RS.8,22,175/ - AND RS.2,47,507/ - ALLEGING NON - PRODUCTION DOCUMENTARY EVIDENCE IN SUPPORT OF SUCH CLAIMS HOLD VERY MUCH CONFUSION AND THE PROPOSITION TAKEN FOR ARRI VING SUCH COMPUTATION IS TOTALLY INCONVENIENCE AND CITING THE FACTS ALSO HAVE NO BASIS FOR DISALLOWANCE OF EXPENSES. HENCE THE ADDITIONS MADE ARE REQUIRED TO BE DELETED ENTIRELY. 5 . THAT THE ASSESSEE DESPITE OF EXPLAINING THE FACTS VIS - A - VIS THE DOCUM ENTS/INFORMATION FILED, THE ID. CIT(A) ALTHOUGH CONSIDERING THE MATTER REDUCED THE PERCENTAGE RATE APPLIED FOR DISALLOWANCE OF THE EXPENSES, BUT NOT AGREED FULLY WITH THE EXPLANATION FILED BY THE APPELLANT. ITA NO. 53 /CTK/201 8 10 FURTHER IN SUPPORT OF HIS ARGUMENTS, LD. AR REL IED ON THE DECISION OF THE SMC BENCH OF THIS TRIBUNAL IN THE CASE OF M/S LAXMI NARAYAN JEWELLERY IN ITA NO.250/CTK/2018, ORDER DATED 13.05.2019. HE ALSO SUBMITTED THAT THE PAYMENTS TO WHOM HAVE BEEN MADE ARE GENUINE PERSONS, THEREFORE, THE AO SHOULD NOT DI SALLOW THE PAYMENTS MADE BY CASH EXCEEDING RS.20,000/ - . THE PARTIES ARE GENUINE AND THE PURCHASE HAVE ALSO NOT BEEN DOUBTED BY THE AO. IN SUPPORT OF THIS, HE ALSO RELIED ON THE JUDGMENT RELIED ON BY THE COUNSEL OF THE ASSESSEE IN THE CASE OF DECISION OF TH E SMC BENCH OF THE TRIBUNAL AS CITED SUPRA. 10. FURTHER IN RESPECT OF ADHOC DISALLOWANCE, LD. AR SUBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED TO MAKE LUMPSUM DISALLOWANCE WITHOUT POINTING OUT ANY SPECIFIC BILLS AND VOUCHERS WHICH ARE NOT GENUINE . ALL THE BOOKS OF ACCOUNTS WERE PRODUCED BY THE ASSESSEE AND THE BOOKS OF ACCOUNTS HAVE ALSO BEEN AUDITED BY THE CHARTERED ACCOUNTANT WHICH HAS NOT BEEN FORMED ANY MISTAKE IN THIS REGARD. THEREFORE, THE ORDER OF THE CIT(A) DESERVES TO BE DISMISSED. 11. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF CIT(A) AND IN RESPECT OF GROUND N O .1, SUBMITTED THAT THE AO HAS DISCUSSED THE ISSUE IN DETAILS AND THE ASSESSEE COULD NOT SUBSTANTIATE THAT THERE WAS ANY BUSINESS EXIGENCY AND HE WAS ALSO UNABLE TO SUBSTANTIAT E THAT UNDER WHICH RULE OF RULE 6DD OF I.T.RULES, 1962, THE ASSESSEE WAS COMPELLED TO MAKE PAYMENT IN CASH . BOTH THE CREDITORS ARE BELONGED TO CUTTACK ITA NO. 53 /CTK/201 8 11 WHERE THERE ARE AMPLE BANKING FACILITIES AVAILABLE. THE CIT(A) HAS ALSO DISCUSSED THE ISSUE IN VERY JUDIC IAL MANNER. THE CASE LAWS RELIED ON BY THE LD. AR OF THE ASSESSEE ARE NOT APPLICABLE IN THE PRESENT CASE IN HAND. LD.AR OF THE ASSESSEE ALSO UNABLE TO SUBSTANTIATE THAT THESE PAYMENTS HAVE BEEN INCORPORATED IN THE LEDGER ACCOUNT OF THE CREDITORS AND HAS PA ID DUE TAXES THEREON. FURTHER IN RESPECT OF GROUND NOS.2&3, LD. DR RELIED ON THE ORDER OF CIT(A) AND SUBMITTED THAT THE ASSESSEE COULD NOT PRODUCE EXTERNAL VOUCHERS AND SOME OF THE ENTRIES WERE SUPPORTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY WAY OF I NTERNAL VOUCHERS, WHICH CANNOT BE RELIED ON FULLY THAT GENUINE EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE FOR SMOOTH RUNNING OF THE BUSINESS. THEREFORE, THE CIT(A) HAS RIGHTLY RESTRICTED THE ADDITION MADE BY THE AO. 12. AFTER HEARING BOTH THE SIDES AND PE RUSING THE ENTIRE MATERIAL AVAILABLE ON RECORD AND THE ORDERS OF AUTHORITIES BELOW, IN RESPECT OF GROUND NO.1, THE AR OF THE ASSESSEE HAS TRIED TO JUSTIFY THAT HE MAY GET THE BENEFIT OF RULE 6DD OF INCOME TAX RULES, 1962, BUT HE WAS UNABLE TO JUSTIFY BEFOR E US THAT UNDER WHICH CLAUSE OF RULE 6DD OF I.T.RULES, THE ASSESSEE WANTED TO GET BENEFITS. THE CASH PAYMENTS HAVE BEEN MADE TOWARDS PURCHASE OF GOLD ORNAMENTS, PARTIES ARE BELONGED TO CUTTACK WHERE BANKING FACILITIES ARE AVAILABLE. FURTHER ON PERUSAL OF T HE DETAILS OF PAYMENTS MADE AS NARRATED ABOVE, AS PER CHART, IT IS CLEAR THAT THE ASSESSEE HAS MADE PAYMENT IN CASH IN DIFFERENT DATES. WE ALSO OBSERVE ITA NO. 53 /CTK/201 8 12 FROM THE ORDER OF THE AO AS WELL AS SUBMISSIONS MADE BEFORE THE CIT(A), HE HAS TAKEN DIFFERENT VIEW BEFO RE THE AO AND SUBMITTED THAT THE ASSESSEE HAS PURCHASED GOODS WITH THE HELP OF COMMISSION AGENT BUT HE HAS NOT DEBITED ANY COMMISSION IN HIS PROFIT AND LOSS ACCOUNT AS OBSERVED BY THE AO IN HIS ORDER. THEREFORE, IN THESE CIRCUMSTANCES, THE CASE LAW RELIED ON BY THE LD. AR IS NOT APPLICABLE IN THE PRESENT CASE AND HE HAS ALSO RELIED ON THE DECISION OF SMC BENCH OF THE TRIBUNAL AS CITED SUPRA IN ITA NO.250/CTK/2018, ORDER DATED 13.05.2019, WHEREIN IT IS HELD AS UNDER : - 9. I HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON THE RECORD OF THE TRIBUNAL AND ORDERS OF LOWER AUTHORITIES. FROM THE CHART AS REPRODUCED ABOVE, IT IS CLEAR THAT THE PAYMENTS WERE MADE TO PARTIES I.E. EPARI SADASHIV PVT LTD., AND M/S. ALANKAR JEWELLERY, BALASORE. THE A SSESSEE IS IN BUSINESS OF JEWELLERY. IT IS NOT DISPUTED THAT IF AN ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT IN EXCESS OF RS.20,000/ - IS MADE IN A DAY TO A SINGLE PERSON, OTHER THAN BY AN ACCOUNT PAYEE CHEQUE OR AN ACCOUNT PAYEE BANK DRA FT, 100% OF SUCH EXPENDITURE WILL NOT BE ALLOWED AS DEDUCTION AND IN SUCH A SITUATION PROVISIONS OF SECTION 40A(3) WILL BE APPLICABLE. I FIND THAT ASSESSEES CLAIM IS NOT COVERED BY ANY OF THE EXCEPTIONS PROVIDED UNDER RULE 6DD. HOWEVER, THE FIRST PROVISO BELOW SECTION 40A(3) CLEARLY TAKES INTO CONSIDERATION THE NATURE OF EXPENSES, BANKING FACILITIES, CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. RULE 6DD IN INTENT AND PURPOSE TAKES INTO CONSIDERATION ALL THESE ASPECTS FOR PRESCRIBING VAR IOUS EXCEPTIONAL CIRCUMSTANCES. THEREFORE, RULE 6DD CANNOT BE MECHANICALLY APPLIED AND I HAVE TO CONSIDER THE OVERALL EXPLANATION OF THE ASSESSEE HAVING REGARD TO THE BUSINESS CONSIDERATION. THE ASSESSEES EXPLANATION IS THAT ASSESSEE HAD TO MAKE PAYMENT I N BUSINESS EXIGENCY AS DURING THE MONTH OF FEBRUARY, 2012, GENERALLY MARRIAGES TAKES PLACE AND DURING ODD HOURS, THE ASSESSEE MADE TRANSACTIONS AND IN SOME CASES SELLER WAS INSISTING FOR CASH PAYMENTS. THE PAYMENTS HAD BEEN MADE TO THE SELLER BECAUSE OF TH AT REASON. THE GENUINENESS OF PURCHASES HAD NOT BEEN DOUBTED BY THE ASSESSING OFFICER. I FIND THAT IN THIS CASE, THERE IS NO DISPUTE TO THE FACT THAT THE GENUINENESS OF THE TRANSACTION AND THE PAYMENT AND IDENTITY OF THE RECEIVER ARE ESTABLISHED. THIS VIEW IS SUPPORTED BY THE DECISION OF HONBLE P&H HIGH COURT IN THE CASE OF GURDAS GARG (SUPRA) AND ALSO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ATTAR SINGH GURMUKH ITA NO. 53 /CTK/201 8 13 SINGH (SUPRA). UNDER SUCH CIRCUMSTANCES, I AM OF THE OPINION THAT THE DISALLOWANCE OF THESE EXPENSES BY APPLYING TO SECTION 40A(3) WOULD NOT BE JUSTIFIED. I, ACCORDINGLY, SET ASIDE THE ORDER OF LD CIT(A) ON THIS COUNT AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. FROM THE ABOVE OBS ERVATIONS OF THE TRIBUNAL, IT IS CLEAR THAT THE DECISION CITED BY THE LD. AR IS A DECISION RENDERED BY THE SMC BENCH OF THIS TRIBUNAL, WHICH IS NOT BOUND TO FOLLOW BY THE DIVISION BENCH. FURTHER WE NOTICE THAT IN THE ABOVE CASE THE ASSESSEE HAS PROVED THAT THERE WAS BUSINESS EXIGENCY WHICH IS CLEAR FROM THE ABOVE FINDINGS RECORDED BY THE TRIBUNAL. BUT IN THE PRESENT CASE IN HAND, THE ASSESSEE HAS MADE PAYMENT FROM APRIL, 2011 TO SEPTEMBER, 2011 ON DIFFERENT DATES. FURTHER THE CASE LAWS RELIED ON BY THE LD. AR OF THE ASSESSEE IS ALSO NOT APPLICABLE IN THE PRESENT CASE IN HAND BECAUSE MERELY ACCEPTING THE PURCHASE BY THE AO, IT WAS DUTY OF THE ASSESSEE TO PROVE AS TO WHETHER PARTICULAR PAYEES HA VE INCORPORATED IN THEIR BOOKS FOR COMPUTING THEIR PROFITS ON TH E RESPECTIVE SALES OR NOT AND WE ALSO NOTED FROM THE SUBMISSION OF THE ASSESSEE THAT THERE ARE CONTRADICTORY SUBMISSIONS BEFORE THE AUTHORITIES BELOW. CONSIDERING TO THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS RIGHTLY DISMISSED THE APPEAL OF THE ASSESSEE. 13. IN RESPECT TO GROUND NOS.2&3, ON PERUSAL OF THE ORDERS OF AUTHORITIES BELOW, IT IS CLEAR THAT THE ASSESSEE HAS INSERTED SOME ENTRIES IN BOOKS OF ACCOUNTS WITH THE SUPPORT OF SOME INTERNAL VOUCHERS AND ITA NO. 53 /CTK/201 8 14 COMPLETE BILLS AND VOUCHERS WERE NOT PRODUCED BY THE ASSESSEE BEFORE THE REVENUE AUTHORITIES. THEREFORE, WE ARE IN AGREEMENT WITH THE FINDINGS RECORDED BY THE CIT(A). IN VIEW OF THIS, THE GROUNDS RAISED BY THE ASSESSEE IN RESPECT OF ADHOC ADDITIONS I.E. GROUND NO.2 & 3 ARE DISMISSED . 14 . IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 1 6 / 0 3 /2020 . SD/ - ( C.M.GARG ) SD/ - (L.P.SAHU) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK; DATED 1 6 / 0 3 /2020 PRAKASH KUMAR MISHRA, SR.P.S. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - MR. RAJENDRA KUMAR SAHOO, PROP. OF NEW KANAK JEWELLERY & KANAK TRANSPORT, AT/PO: NEW MARKET, KEONJHAR - 758001 2. / THE RESPONDENT - ACIT, CIRCLE - 1(1), CUTTACK 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//