SHABBIR AHMED SHAIKH, MUMBAI V. ITO WD 19(3)(4), MUMBAI

ITA 556/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75652 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 20-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 27-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Keywords: Opportunity of being heard
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.556/M/2012 ( / ASSESSMENT YEAR: 2007 - 2008 ) SHRI SHABBIR AHMED SHAIKH, ROOM NO.38, DAULAT CHEMIST LANE, BEHARAM NAGAR, BANDRA (E), MUMBAI 400 051. / VS. ITO - WARD 19(3)(4), MUMBAI. ./ PAN : AHHPM 0132 F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI RAJENDRA KUMAR JAIN / RESPONDENT BY : SHRI ASHOK SURI, DR / DATE OF HEARING : 20.1.2014 / DATE OF PRONOUNCEMENT : 21 .2.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 27.1.2012 IS AGAINST THE ORDER OF THE CIT (A) - 30, MUMBAI DATED 14.11.2011 FOR THE ASSESSMENT YEAR 2007 - 2008. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE CIT (A) ERRED IN DISALLOWING RS. 11,12,760/ - U/S 40A(3) OF THE IT ACT, 1961 R.W. RULE 6DD OF THE INCOME TAX RULES, 1962. 2. THE CIT (A) HAS NOT CONSIDERED THE NATURE OF ASSESSEES TRADE AND SUBMISSION MADE BY HIM. 3. BRIEFLY STATED RELEVANT FACTS OF TH E CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONDUCTING HAJ TOURS. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 2,15,064/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 13,72,820/ - . DURING THE ASSESSMENT PROCEEDINGS, AO INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT IN RESPECT OF AMOUNTS DEBITED OF RS. 7,30,800/ - AS PURCHASES AND RS. 48.33 LAKHS AC 2 ACCOMMODATION EXPENSES . AO MADE DISALLOWANCE @ 20% OF THE A BOVE SUM I.E., RS. 55,63,800/ - . AO MADE ADDITION OF RS. 11,12,760/ - BEING 20% OF THE SAID EXPENDITURE. BEFORE THE REVENUE AUTHORITIES, IT WAS SUBMITTED THAT THE ASSESSEE COLLECTS LIKELY EXPENDITURE ON ACCOUNT OF TOURS TO HAJ FROM THE CLIENTS AND SPEND S THE SAME ON THEIR BEHALF. WHEN THEY ARE TAKEN ON TOUR TO ABROAD, BUYING AND SELLING OF FOREIGN EXCHANGE IS DONE BY THE ASSESSEE ON BEHALF OF THE CLIENTS IN ACCORDANCE WITH THE RULES OF RBI. THE ASSESSEE HAS DONE THESE THINGS IN THE CAPACITY OF AN AGEN T OR AN AUTHORIZED DEALER AND HE IS NOT COVERED UNDER THE PROVISIONS OF SECTION 6DD(L) WHICH PROVIDES THAT WHERE THE PAYMENT IS MADE BY A AUTHORIZED DEALER OR A MONEY CHANGER AGAINST PURCHASE OF FOREIGN CURRENCY OR TRAVELERS CHEQUES IN THE NORMAL IN TH E NORMAL COURSE OF HIS BUSINESS. THERE IS AN EXPLANATION FOR THE EXPRESSION AUTHORIZED DEALER AND MONEY CHANGER. HE HAS ALSO MENTIONED THAT THE SOUDI ARABIAN HOTELS DO NOT ACCEPT THE PAYMENTS IN CHEQUES. THE ASSESSEE, BEING AN AGENT, HE COLLECTS THE TOUR CHARGES AND CONVERT THEM INTO FOREIGN EXCHANGE TO MEET THE EXPENSES OF THE CLIENTS. THEREFORE, THE SAID CLIENTS OF THE ASSESSEE ARE NOT REQUIRED TO MAKE PAYMENT BY A/C PAYEE CHEQUES OR DRAFT IN VIEW OF RULE 6DD(1) OF THE ACT WHICH PROVIDES THAT WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAY MENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON. IT WAS ALSO CONTENDED BEFORE THE LOWER AUTHORITIES THAT THE PROVISIONS OF SECTION 1 OF THE INCOME TAX ACT, 1961 IS APPLICABLE TO WHOLE OF INDIA AND NOT OUTSIDE INDIA. IT IS THE CLAIM OF THE ASSESSEE THAT SINCE, THE PAYMENTS ARE MADE OUTSIDE INDIA AND SUCH PAYMENTS ARE MADE FOR DAY - TO - DAY FOOD AND MATERIALS, THE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE. NOT SATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE, AO CAME TO THE CONCLUSION THAT THE ASSESSEE COULD NOT SUBSTANTIATE THAT THE CLIENTS WERE INSISTED ON CASH PAYMENTS AND IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE AND RELATABLE BOOKS OF ACCOUNTS TO VERIFY T HE SAME, THE AO INVOKED THE PROVISIONS OF SECTION 40A(3). ACCORDINGLY, AO MADE ADDITION OF RS. 11,12,760/ - BEING 20% OF THE TOTAL CASH EXPENDITURE UNDER THE HEAD ACCOMMODATION AND PURCHASES. RELEVANT DISCUSSION IS GIVEN IN PARA 4 AND ITS SUB - PARAS OF THE ASSESSMENT ORDER. AGGRIEVED WITH THE DECISION OF THE AO, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3 4. DURING PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) DISMISSED THE APPEAL OF THE ASSESSEE AND CONFIRMED THE ADDITION OF RS. 11,12,760/ - MADE BY THE AO BY HOLDING THAT THE AO IS QUITE JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT A ND MAKING AN ADDITION OF RS. 11,12,760/ - BEING 20% OF CASH EXPENSES EXCEEDING RS. 20,000/ - . FURTHER, CIT (A) HAS ALSO CONCLUDED THAT THE ASSESSEES CASE IS NOT COVERED UNDER THE PROVISIONS OF RULE 6DD(1) OF THE INCOME TAX RULE, 1962. AGGRIEVED WITH THE D ECISION OF THE CIT (A), ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, DR. RAJENDRA KUMAR JAIN, LD COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORIT IES. FURTHER, LD COUNSEL SUBMITTED THAT THE ASSESSEE HAS INCURRED THE SAID EXPENSES IN THE CAPACITY OF AN OPERATOR AND THE RECEIPTS CONSIST OF REIMBURSEMENT OF EXPENSES INCURRED BY THE ASSESSEE ON BEHALF OF THE CLIENTS AND THE ASSESSEE COLLECTS FEES FOR THAT PURPOSE. THE HOTELS IN SOUDI COUNTRY DO NOT ACCEPT PAYMENTS IN CHEQUE. AS SUCH, THE ASSESSEE IS NOT HAVING ANY BANKING FACILITY IN THAT COUNTRY NEITHER HE IS REQUIRED TO HAVE SUCH FACILITY. IT IS ALSO SUBMITTED BY THE LD COUNSEL THAT THE ENTIRE P AYMENT OF ACCOMMODATION EXPENSES HAS BEEN MADE IN SAUDI RIYAL AND NOT IN CASH. THEREFORE, ASSESSEE , BEING AN INDIAN CITIZEN, IS LIABLE TO BE COMPLIED WITH ALL THE PROVISIONS OF IT ACT, 1961 WHETHER IN INDIA OR OUTSIDE INDIA ACCORDINGLY, THE PROVISIONS OF RULE 6DD(1) ARE APPLICABLE. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES . FURTHER, LD DR SUBMITTED THAT THE IN ORDER TO FALL WITHIN THE EXCEPTION CLAUSE OF RULE 6DD, THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE SUCH PAYMENT S THROUGH CHEQUES OR DEMAND DRAFTS WERE NOT PRACTICABLE AND WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE HAVING REGARD TO THE NATURE OF TRANSACTION ALONG WITH SUPPORTIVE EVIDENCES. BUT, THE SAME WAS NOT DISCHARGED BY THE ASSESSEE, THEREFORE, THE DECI SION TAKEN BY THE LOWER AUTHORITIES IS PROPER BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 4 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON HEARING BOTH T HE PARTIES AND PERUSING THE FACTS PLACED BEFORE US, IT APPEARS THAT THE ASSESSEE HAS INCURRED THE SAID EXPENDITURE IN THE CAPACITY OF AN OPERATOR AND IN THAT CASE, IT MAY CONSTITUTE A CASE OF REIMBURSEMENT. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT FOR THE PURPOSE OF EXAMINING THE SAME THE MATTER SHOULD BE REMANDED TO THE FILES OF THE AO . ACCORDINGLY, WE REMAND THE ISSUE TO THE FILES OF THE AO AND DIRECTED HIM TO EXAMINE THE SAME AFRESH AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCE D IN THE OPEN COURT ON 21 ST DAY OF FEBRUARY, 2014. SD/ - SD/ - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 21 . 2 .2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI