Amaleswari Constructions, Hyd, Hyderabad V. Addl.CIT, Range-9, Hyderabad

ITA 546/HYD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74676 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 31-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S RAMA RAO
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 546/HYD/2011 ASSESSMENT YEAR: 2007-08 AMALESWARI CONSTRUCTIONS, HYDERABAD. PAN AADFA6609G) VS. ADDL. COMMISSIONER OF INCOME- TAX, RANGE 9, HYDERABAD. APPELLANT RESPONDENT ASSESSEE BY: SRI S. RAMA RAO REVENUE BY: SRI SOLGY JOSE T. KOTTARAM DATE OF HEARING: 04/03/2014 DATE OF PRONOUNCEMENT: 04/03/2014 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF THE CIT(A), VIJAYAWADA DATED 31/01/2011 FO R THE ASSESSMENT YEAR 2007-08 WHEREIN THE ASSESSEE HAS RAISED THE FO LLOWING SUBSTANTIAL GROUNDS: 1 ) THE ORDER OF THE LEARNED CIT(AS) IS ERRONEOUS BOT H ON FACTS AND IN LAW. 2) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS. 23,35,0 90/- BY APPLYING THE PROVISIONS OF SECTION 40A(3) OF THE IT ACT. 3. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE P AYMENTS ARE EITHER MADE THROUGH CROSSED DEMAND DRAFTS OR UNDER EXCEPTIONAL CIRCUMSTANCES AND, THEREFORE, THE PROVI SIONS OF SECTION 40A(3) HAVE NO APPLICATION. 4. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE EXPLANATIONS SUBMITTED AND HELD THAT THE PROVISIONS OF SECTION 40A(3) HAVE NO APPLICATION TO THE FACTS OF THE CASE . 2. BRIEFLY THE FACTS OF THE CASE ARE THAT ON VERIFI CATION OF THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD MADE PAYMENTS TO VARIOUS SUPPLIERS THROUGH BEARER D EMAND 2 ITA NO.546/H/ 2013 AMALESWARI CONSTRUCTIONS, HYD. DRAFTS/CHEQUES IN VIOLATION OF THE PROVISIONS OF SE CTION 40A(3) OF THE ACT. IN THE ABSENCE OF ANY SATISFACTORY EXPLANATION OR EVIDENCE FROM THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, A S UM OF 20% OF THE TOTAL PAYMENT OF RS. 1,16,75,451/- AMOUNTING TO RS. 23,35,090/- WAS DISALLOWED. 3. ON APPEAL, BEFORE THE CIT(A) THE AR OF THE ASSES SEE SUBMITTED THAT THE ASSESSEE BEING A CIVIL CONTRACTOR EXECUTIN G PROJECTS AT DIFFERENT PLACES IN THE STATE OF AP HAD TO PURCHASE MATERIALS FROM DIFFERENT PERSONS, DURING THE COURSE OF WHICH HE WA S COMPELLED TO MAKE THE PAYMENTS EITHER IN CASH OR THROUGH BEARER CHEQUES. IT WAS, THEREFORE, CONTENDED THAT THE EXCEPTIONS CIRCUMSTAN CES WARRANTING THE PAYMENT EITHER IN CASH OR THROUGH BEARER CHEQUE S BE CONSIDERED. IT WAS ALSO SUBMITTED THAT THE CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3) SHOULD BE REGARDED ONLY AS A TECHNIC AL BREACH AND NOT WITH AN INTENTION TO AVOID THE TAX. FINALLY HE ARGU ED THAT AS ALL THE TRANSACTIONS AND PAYMENTS ARE GENUINE, THE DISALLOW ANCE REQUIRES TO BE DELETED OR REDUCED SUBSTANTIALLY. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) OBSERVED THAT AS IS EVIDENT FROM THE SUBMISSIONS MA DE BY THE LEARNED AR, THERE IS NO DISPUTE OVER THE FACT THAT THE ASSE SSEE HAD CONTRAVENED THE PROVISIONS OF SECTION 40A(3) IN RES PECT OF THE PAYMENTS AMOUNTING TO RS. 1,16,75,451/- TOWARDS PUR CHASES FROM VARIOUS SUPPLIERS. HE WAS OF THE VIEW THAT THE ARGU MENT THAT THE TRANSACTIONS ARE GENUINE AND THEREFORE A TECHNICAL BREACH OF THE PROVISIONS SHOULD NOT GIVE RISE TO ANY LIABILITY IS NOT JUSTIFIED. IT WAS OBSERVED THAT THE ASSESSEE HAD NOT BEEN ABLE TO EST ABLISH THAT THE PAYMENTS MADE WERE COVERED BY EXCEPTIONAL CLAUSE UN DER THE RELEVANT RULES SO AS TO AVOID THE OPERATION OF THE PROVISIONS OF SECTION 40A(3). FURTHER, THE SUBMISSION THAT THE DISALLOWAN CE OF 20% BEING EXCESSIVE AND CONSEQUENTLY THE REQUEST FOR PARTIAL RELIEF IS NOT ACCEPTABLE AS SUCH A PROVISION IS NOT AVAILABLE IN THE STATUTE. THE 3 ITA NO.546/H/ 2013 AMALESWARI CONSTRUCTIONS, HYD. CIT(A) OBSERVED THAT THE DECISION OF THE HONBLE IT AT, HYDERABAD BENCH IN THE CASE OF M/S BDR PROJECTS (P) LTD., REL IED UPON BY THE ASSESSEE ALSO IS NOT IN FAVOUR OF THE ASSESSEE AS T HE ESTIMATED DISALLOWANCE OF EXPENDITURE OF 20% BY THE ASSESSING OFFICER BEING REDUCED TO 10% IN THAT CASE, IS DISTINGUISHABLE ON FACTS. WHEREAS THE IN THE PRESENT CASE, THE DISALLOWANCE IS A STATUTOR Y DISALLOWANCE OF 20% U/S 40A(3) OF THE ACT WHEREAS IN THE CASE CITED THE DISALLOWANCE WAS ON ESTIMATED BASIS FROM THE GENERAL EXPENDITURE CLAIMED. IN VIEW OF THE ABOVE OBSERVATIONS, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN INVOKING THE PROVISIONS OF SEC TION 40A(3). 5. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 6. BEFORE US, THE LEARNED AR OF THE ASSESSEE SUBMIT TED THAT THE PAYMENTS HAVE BEEN MADE TO GOVERNMENT/REPUTED ORGAN ISATIONS BY WAY OF CROSSED CHEQUES/DDS AND THE SAME MAY BE VERI FIED AT THE END OF THE ASSESSING OFFICER. 7. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT BEFORE THE CIT(A) THE ASSESSEE HAS ADMITTED THAT PAYMENTS WERE MADE EITHER IN CASH OR THROUGH BEARER CHEQUES AND NOT BY CROSSED C HEQUES/DDS. AND THEREFORE, THE ADDITION MADE TO BE SUSTAINED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE RE VENUE AUTHORITIES. IN OUR OPINION, THE PLEA OF THE ASSESSEE HAS TO BE ACCEPTED ON THE REASON THAT NEITHER THE ASSESSING OFFICER NOR THE C IT(A) HAVE VERIFIED PHYSICALLY THE MODE OF PAYMENT I.E., WHETHER THE PA YMENTS HAVE BEEN MADE BY WAY OF CROSSED CHEQUES/DDS OR NOT. THEREFOR E, TO MEET THE ENDS OF JUSTICE, WE REMIT THE ISSUE BACK TO THE FIL E OF THE ASSESSING OFFICER FOR VERIFICATION OF THE RECORD AND DECIDE T HE ISSUE IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE IN THE MATTER. 4 ITA NO.546/H/ 2013 AMALESWARI CONSTRUCTIONS, HYD. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 04/03/2014. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 04/03/2014. KV COPY FORWARDED TO: 1. M/S AMALESWARI CONSTRUCTIONS, HYDERABAD, C/O SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, DOOR NO. 3-6-643, SHRIYAS ELEGANCE, ST. NO. 9, HIMAYATNAGAR, HYDERABAD 500 029. 2. ADDL. CIT, RANGE 9, HYDERABAD 3. CIT(A), VIJAYAWADA. 4. CIT-VI, HYDERABAD. 5. THE DR, ITAT, HYDERABAD