Abhay Chandmal Jain, Nashik V. Dy. CIT, Circle-1, Nashik

ITA 551/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84870 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S PRAVEENA
• Keywords: Commercial expediency
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO . 551 / P N/ 20 1 3 ASSESSMENT YEAR : 200 9 - 10 ABHAY CHANDMAL JAIN, 4, JEEVAN PRAK ASH, GOPAL NAGAR, ARTILLERY CENTRE ROAD, NASHIK ROAD, NASHIK VS. DY. CIT, CIRCLE - I, NASHIK (APPELLANT) (RESPONDENT) PAN NO. AAPPJ3192H APPELLANT BY: SHRI PRAMOD SHINGTE RESPONDENT BY: S MT. S. PRAVEENA DATE OF HEARING : 03 - 0 7 - 2014 DATE O F PRONOUNCEMENT : 25 - 0 8 - 2014 ORDER P ER R.S. PADVEKAR , JM : - IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER OF THE LD. CIT(A) - I , NASHIK DATED 14 - 01 - 2013 FOR THE A.Y. 2009 - 10. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS IN THE APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) - I, NASHIK IS NOT JUSTIFIED IN RETAINING THE ADDITION OF RS.3,61,290 UNDER SECTION 40A(3), WHEN THE PAYMENT WAS MADE IN PECULIAR CIRCUMSTANCES AS BUSINESS EXPEDIENCY. THE ADD ITION MAY PLEASE BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) - I, NASHIK IS NOT JUSTIFIED IN RETAINING THE ADDITION OF RS.3,61,290 UNDER SECTION 40A(3), IGNORING THE BOARDS CIRCULAR NO. 6 - P (LLXXIV - 66) OF 1968 DATED 6 TH JULY 1968 WHEN THERE IS NO ELEMENT OF TAX EVASION. THE ADDITION MAY PLEASE BE DELETED. 2. THE SHORT ISSUE IN CONTROVERSY IS THE ADDITION MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SEC. 40A(3) OF THE INCOME - TAX ACT. THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN DOING THE 2 ITA NO . 551 /PN/2013, ABHAY CHANDMAL JAIN, NASHIK BUSINESS OF SUB - CONTRACT OF GOVT. BODIES AND ALSO UNDERTAKES THE SUB - CONTRACT WORK FROM THE PRIVATE ORGANIZATION/CONCERN. THE MAJOR NATURE OF WORK CARRIED OUT BY THE ASSESSEE IS OF PIPELINE DRAINAGE AND EXCAVATION WORK. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE A.Y. 2009 - 10 DECLARING TOTAL INCOME OF RS.37,72,670/ - . THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY BY THE ASSESSING OFFICER AND ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE ACT. IT W AS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD MADE THE CASH PAYMENT TO TWO PARTIES NAMELY M/S. YOG CEMENT PRODUCT AND M/S. HINDUSTAN OIL COMPANY ON ACCOUNT OF PURCHASE OF CEMENT PIPES WHICH DETAILS ARE AS UNDER: SR. NO. NAME OF THE PARTY DATE AMOUNT 1 YOG CEMENT PRODUCT 18/06/2008 80,000/ - 2 - DO - 19/06/2008 70,000/ - 3 - DO - 20/06/2008 40,000/ - 4 - DO - 21/06/2008 20,000/ - 5 - DO - 22/06/2008 40,000/ - 6 - DO - 23/06/2008 20,000/ - 7 - DO - 24/06/2008 30,000/ - TOTAL 3,00,000/ - 9 HINDUSTAN OIL CO MPANY 29/11/2008 49,300/ - 10 - DO - 15/12/2008 51,920/ - TOTAL 1,01,220/ - 3. AS THE PAYMENTS MADE TO THE ABOVE PARTIES THERE WERE MORE THAN RS.20,000/ - . THE ASSESSING OFFICER SOUGHT THE EXPLANATION OF THE ASSESSEE WHY DISALLOWANCE SHOULD NOT BE MADE U/S. 40A(3) OF THE INCOME - TAX ACT ? THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT IT WAS BUSINESS EXPEDIENCY AND HENCE, THE ASSESSEE WAS REQUIRED TO MAKE THE PAYMENT IN CASH. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION OF THE A SSESSEE AND HE MADE THE ADDITION TO THE INCOME TO THE EXTENT OF RS.4,01,290/ - I.E. THE CASH PAYMENT OF RS.20,000/ - OR MORE. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LD. CIT(A) AND THE ASSESSEE COULD GET THE PART RELIEF TO THE EXTENT OF 3 ITA NO . 551 /PN/2013, ABHAY CHANDMAL JAIN, NASHIK RS.40,000/ - UNDER RULE 6DD(J) AS 22 - 06 - 2008 WAS THE BANK HOLIDAY. THE LD. CIT(A) CONFIRMED THE BALANCE ADDITION OF RS.2,40,000/ - WHICH WAS THE CASH PAYMENT TO M/S. YOG CEMENT PRODUCT AND ALSO CONFIRMED THE ADDITION IN RESPECT OF M/S. HINDUSTAN OIL COMPANY. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE HAS FILED THE PAPER BOOK CONTAINING THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AS WELL AS COPY OF LEDGER EXTRACT IN ASSESSEES BOOKS OF ACCOUNT. NO OTHER DOCUMENTARY EVIDENCE IS FILED. THE LD. COUNSEL RELIED ON THE FOLLOWING DECISIONS: (I). R.C. GOEL VS. CIT, 259 CTR (DEL) 15. (II). ANUPAM TELE SERVICES VS. ITO, TAX APPEAL NO. 556 OF 2013 JUDGMENT DATED 22 - 01 - 2014 (HON'BLE HIGH COURT OF GUJARAT). (III). E MPEE DISTILLERIES LIMITED VS. ACIT, 82 CCH 119 (CHEN. HC) (IV). CIT VS. ASHOKA STEEL INDUSTRIES & FLOOR MILLS, 293 ITR 192 (P&H) (V). GOENKA AGENCIES VS. CIT, 263 ITR 145 (CAL) 5. THE MAIN PLANK OF THE ARGUMENT OF THE LD. COUNSEL IS THAT THE ASSESSEE WAS FORCED TO MAKE THE CASH PAYMENT AND IT WAS HIS BUSINESS EXPEDIENCY. PER CONTRA , THE LD. DR SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. IN THIS CASE , WE FIND THAT SO FAR AS THE DETAILS GIVEN BY THE ASSESSING OFFICER , THE TWO PAYMENTS MADE TO M/S. YOG CE MENT PRODUCT WHICH ARE NOT MORE THAN RS.20,000/ - WHICH ARE AS UNDER: DATE AMOUNT 21 - 06 - 2008 RS.20,000/ - 23 - 06 - 2008 RS.20,000/ - 6. AS PER THE LANGUAGE USED BY THE LEGISLATURE IN SEC. 40A(3) FOR INVOKING THE SAID PROVISIONS THE PAYMENT SHOULD EXCEED MORE THAN RS.20,000/ - IN A DAY. ADMITTEDLY, THE PAYMENTS ARE MADE IN TWO 4 ITA NO . 551 /PN/2013, ABHAY CHANDMAL JAIN, NASHIK DIFFERENT DATES TO M/S. YOG CEMENT PRODUCT HENCE, PRIMA - FACIE THOSE TWO PAYMENTS ARE OUT OF THE PURVIEW OF SEC. 40A(3). ACCORDINGLY, WE, DELETE THE ADDITION IN RESPECT OF TWO PAYMENTS R EFERRED HERE - IN - ABOVE AND THE ASSESSEE GET THE RELIEF OF RS.40,000/ - . IN RESPECT OF THE BALANCE PAYMENTS WHICH HAVE BEEN SUSTAINED BY THE LD. CIT(A) EXCEPT THE ORAL ARGUMENT NOTHING HAS BEEN PLACED BEFORE US IN THE FORM OF CONFIRMATION LETTERS OR ANY OTHE R DOCUMENTARY EVIDENCE TO SHOW THAT THE ASSESSEE WAS FORCED TO MAKE THE SAID PAYMENTS AS HIS BUSINESS EXPEDIENCY. IT IS ALSO NOTICED THAT IN RESPECT OF M/S. YOG CEMENT PRODUCT THE ASSESSEE HAS MADE DAILY PAYMENTS IN CASH FROM 18 - 06 - 2008 TO 24 - 06 - 2008 THAT SUGGEST THAT THE ASSESSEE HAD REGULAR DEALING WITH THE SAID FIRM O R PARTY. 7. IN THE CASE OF R.C. GOEL (SUPRA) THE FACTS ARE TOTALLY DIFFERENT AS THE ASSESSEE IN THE SAID CASE WAS A MOBILE RAILWAY CATERING CONTRACTOR AND HE HAS TO MAINTAIN A CERTAIN SUPP LIERS IN THE TRAINS. FOR THAT PURPOSE HE WAS REQUIRED TO MAKE THE CASH PURCHASES AND SUPPLIERS TO THE SAID ASSESSEE NAMELY M/S. SHRUTI ENTERPRISES INSISTED FOR PAYMENT IN CASH AGAINST DELIVERY OF ITEMS AND ON THE SAID FACTS THE HON'BLE HIGH COURT HELD THAT IT WAS DEMONSTRATED THAT THE ASSESSEE IN THE SAID CASE WAS REQUIRED TO MAKE THE PAYMENT IN CASH AS COMMERCIAL EXPEDIENCY . 8. IN THE CASE OF ANUPAM TELE SERVICES (SUPRA) THE SAID ASSESSEE WAS PURCHAS ING RECHARGE VOUCHERS FROM TATA TELESERVICES LIMITED. THE SAID COMPANY ISSUED A CIRCULAR DATED 22 ND AUGUST, 2005 AND INSTRUCTED THE ASSESSEE TO DEPOSIT CASH AT ITS OFFICE AT SURAT. YET ANOTHER LETTER WAS ALSO WRITTEN TO THE ASSESSEE ON 1 ST SEPTEMBER, 2005 INSTRUCTING THE ASSESSEE TO DEPOSIT CASH AND NOT TO MAKE PAYMENTS BY CHEQUE OR DEMAND DRAFT. THE TATA TELESERVICES LIMITED WERE NOT ACCEPTING PAYMENT BY BANKER S CHEQUE OR DEMAND DRAFT FOR THE REASON THAT THE ASSESSEE HAD AN ACCOUNT WITH A CO - OPERATIVE BANK. THE SAID ASSESSEE ASSURED THAT THE CASH PAYMENT WOULD BE DEPOSITED IN THE BANK ON BEHALF OF THE ASSESSEE. IT WAS ALSO STATED BEFORE THE HON'BLE HIGH COURT THAT NOT ONLY THE SAID 5 ITA NO . 551 /PN/2013, ABHAY CHANDMAL JAIN, NASHIK ASSESSEE BUT ALL THE CHANNEL PARTNER/DISTRIBUTORS OF TATA TELESERVICES LIMITED IN GUJARAT WERE REQUIRED TO MAKE SUCH CASH PA YMENTS. IN THIS BACK DROP OF THE FACTS , THE HON'BLE HIGH COURT HELD THAT THERE WAS NO OPTION TO THE ASSESSEE BUT TO MAKE THE CASH PAYMENTS. IT IS PERTINENT TO NOTE HERE THAT ONLY IN RESPECT OF THE CASH PAYMENT TO TATA TELESERVICES LIMITED THE RELIEF WAS GIVEN TO THE ASSESSEE. IN RESPECT OF OTHER TWO AGENCIES I.E. RAJVI ENTERPRISES AND R.D. INFOCOM NO RELIEF WAS GIVEN. 9. IN THE CASE OF EMPEE DISTILLERIES LIMITED (SUPRA) THE SAID ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF INDIAN MAD E FOREIGN LIQUOR (IMFL). SOME HUGE ADDITIONS WERE MADE BY THE ASSESSING OFFICER TOWARDS THE EXPENDITURE SHOWN ON PURCHASE OF OLD BOTTLES TO THE EXTENT OF RS.12,52,19,585/ - . WHEN THE ISSUE WAS CARRIED BEFORE THE LD. CIT(A) HE FOUND THAT THE SAID ASSESSEE HAD BEEN MEETING ITS REQUIREMENT OF OLD BOTTLES BY MAKING PAYMENT IN CASH, HOWEVER, TO CIRCUMVENT THE PROVISIONS OF SEC. 40A(3) OF THE ACT, THE ASSESSEE HAD BEEN RESORTING TO ISSUE OF ACCOUNT PAYEE CHEQUES IN THE NAME OF BOGUS PARTIES, GETTING BACK THE SAM E IN CASH USING THE S AID CASH TO PURCHASE OLD BOTTLES AND THEREFORE, THE PROVISIONS OF SEC. 40A(3) WOULD COME INTO OPERATION. THE COMMISSIONER HELD THAT THE PURCHASES MADE BY THE ASSESSEE SHOULD BE TREATED AS CASH PURCHASES AND AS PROVIDED FOR U/S. 40A(3 ), 20% OF PURCHASES SHOULD BE DISALLOWED IN ADDITION TO THE DISALLOWANCE OF 10% BASED ON THE ORDER OF TRIBUNAL. THE COMMISSIONER SUSTAINED THE DISALLOWANCE AT RS.3,09,58,287/ - AS AGAINST RS.12,52,19,585/ - . THE TRIBUNAL ALSO HELD THAT, IF THE EXPENDITURE WAS GENUINE AND THE SAME HAD BE EN INCURRED IN VIOLATION OF THE PROVISIONS OF THE SAID SECTION, ONLY THEN DISALLOWANCE COULD BE MADE BY APPLYING THE PROVISIONS OF THE SAID SECTION. THE TRIBUNAL FURTHER HELD THAT IF THE COMMISSIONER HAD ACCEPTED THAT TRANSA CTIONS WITH NINE PARTIES WERE NOT GENUINE, OU GH T NOT TO HAVE APPLIED THE PROVISIONS OF SEC. 40A(3) OF THE ACT. THE TRIBUNAL REVERSED THE ORDER OF THE CIT IN RESPECT OF SAID ISSUE AND RESTORED THE 6 ITA NO . 551 /PN/2013, ABHAY CHANDMAL JAIN, NASHIK MATTER WITH CERTAIN DIRECTIONS TO THE ASSESSING OFFICER. T HE FACTS IN THE CASE OF EMPEE DISTILLERIES LIMITED (SUPRA) ARE DISTINGUISHABLE . WE HAVE ALSO CONSIDERED THE OTHER DECISIONS RELIED ON BY THE LD. COUNSEL WHICH ARE ALSO DISTINGUISHABLE ON THE FACTS AND ONE DECISION ALSO RELATE PRIOR TO 1995 WHEN RULE 6DD(J ) HAS UNDERGONE CHANGED. IN OUR OPINION, THE LD. CIT(A) HAS RIGHTLY SUSTAINED THE ADDITION SAVE THE TWO PA YMENTS FOR WHICH WE HAVE ALREADY GIVEN THE RELIEF. 10. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 25 - 08 - 2014 SD/ - SD/ - ( G . S . PAN NU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 25 TH AUGUST, 2014 COPY TO 1 DEPARTMENT 2 ASSESSEE 3 THE CIT(A) - I , NASHIK 4 THE CIT - I , NASHIK 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE