Ashok Kumar Mittal, Delhi V. ITO, New Delhi

ITA 5610/DEL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1270 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 06-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S VIRK SENIOR
• Assessee Lawyers: PREM LATA BANSAL SENIOR
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) SHRI U.B.S. BEDI, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.5610/DEL./2012 (ASSESSMENT YEAR : 2009-10) SHRI ASHOK KUMAR MITTAL, VS. ITO, WARD 29 (4), PROP. M/S. SHREE BHAGWATI INTERNATIONAL, NEW DELH I. 1342 B, KATRA LEHSWAN, CHANDNI CHOWK, DELHI 110 006. (PAN : AAIPM1868N) (APPELLANT) (RESPONDENT) ASSESSEE BY : SMT. PREM LATA BANSAL, SENIOR ADVOCA TE REVENUE BY : SHRI G.S. VIRK, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF CIT (APPEALS)- XXV, NEW DELHI DATED 06.09.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS AS TRADE R DEALING IN DIFFERENT VARIETIES OF CLOTH. THE ASSESSEE IMPORTS THE GOODS AND SOLD THE SAME. ASSESSMENT WAS MADE U/S 143(3) ON 28.12.2011 AT INCOME OF RS.13,73,760/ - AGAINST RETURNED INCOME OF RS.7,62,022/-. 3. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL :- ITA NO.5610/DEL./2012 2 1. THAT THE LD. CIT (APPEALS) HAS ACTED ILLEGALLY AND ARBITRARILY IN DISMISSING THE APPEAL OF THE ASSESSEE & THEREBY CONFIRMING THE DISALLOWANCE MADE BY THE AO AS UNDER:- (A) RS.588500/- OUT OF FREIGHT IMPORTS (INWARD) INV OKING THE PROVISION OF SEC. 40A (3) OF THE ACT HOLDING TH AT SAME IS NOT COVERED BY THE PROVISO ATTACHED TO SEC.40A(3A) (B) RS.23242/- OUT OF TELEPHONE & INTERNET EXPENSES BY ESTIMATING 1/5TH (20%) TO BE FOR PERSONAL USE OF TH E ASSESSEE IGNORING THE FACT THAT THE TOTAL EXPENSES CLAIMED UNDER THE HEAD INCLUDES INTERNET EXPENSES WHICH IS USED EXCLUSIVELY FOR THE BUSINESS PURPOSES IN PARTICULAR FOR IMPORT QUERIES AND PLACEMENTS OF ORD ERS ETC. 2. THAT THE LD. CIT (APPEALS) HAS CONFIRMED THE DIS ALLOWANCE, MADE BY THE ASSESSING OFFICER INVOKING THE PROVISIO N OF SEC. 40A(3), IGNORING THE FACTS OF THE CASE & WITHOUT APPRECIATI NG & WITHOUT CORRECTLY INTERPRETING THE FIRST PROVISO APPENDED T O SEC.40A(3A). 3. THAT THE AO & THE CIT (APPEALS) HAS FAILED TO AP PRECIATE THAT THE FREIGHT CHARGES WERE PAID IN CASH UNDER THE COM PELLING CIRCUMSTANCES AS AT THE TIME THE PAYMENTS WERE MADE THE BANKS WERE CLOSED. THE AO HIMSELF HAS ADMITTED THAT THE ASSESS EE MADE THE CASH PAYMENTS IN THE GENUINE CIRCUMSTANCES AND HAS ALSO NOT DOUBTED THE GENUINENESS OF THE PAYMENTS MADE AND THE FACT THE P AYMENTS WERE EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS EXPEDIE NCY. 4. THAT THE APPELLATE ORDER AS WELL AS THE ORDER OF ASSESSMENT IS BAD IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF TH E CASE TO THE EXTENT ABOVE 5. THAT THE ASSESSEE CRAVES LEAVE TO AMEND, ALTER, ADD OR DELETE ANY OF THE FORGOING GROUNDS OF APPEAL AT THE TIME O F HEARING OF THE APPEAL 4. AT THE OUTSET OF THE HEARING, THE LD. AR SUBMITT ED THAT SHE IS NOT PRESSING GROUND NO.1(B) WHEREIN 1/5 TH OF THE TELEPHONE AND INTERNET EXPENSES WERE DISALLOWED FOR PERSONAL USE OF THE ASSESSEE. THE S AME IS ACCORDINGLY DISMISSED AS NOT PRESSED. ITA NO.5610/DEL./2012 3 5. THUS, THE ONLY ISSUE IN THESE GROUNDS REMAINS IS ABOUT THE DISALLOWANCE OF RS.5,88,500/- OUT OF THE FREIGHT IMPORTS (INWARD) I NVOKING THE PROVISION OF SECTION 40A(3) OF THE INCOME-TAX ACT, 1961. THE LD. AR SUB MITTED THAT ASSESSEE IMPORTS CLOTHES ON THE PORTS AND THE SAME IS TRANSPORTED BY ROAD BY THE CLEARING AGENT WHO HIRES THE TRUCKS FOR ASSESSEE. THIS AGENT SENDS TH E INSTRUCTIONS THROUGH TRUCK DRIVERS TO MAKE THE PAYMENTS OF FREIGHT CHARGES FIXED TO TH E TRUCK DRIVERS. A COPY OF SUCH INSTRUCTION WAS ALSO FILED BEFORE THE ASSESSING OFF ICER. THE TRUCKS AND LORRIES ARE ALLOWED TO ENTER IN THE CITY OF DELHI ONLY IN NIGHT AS PER THE TRAFFIC RULES. THE PAYMENTS TO THE TRUCK DRIVERS IS TO BE MADE ON THE SPOT IN THE MID OF THE NIGHT. IN SUCH ODD HOURS ONLY THE CASH PAYMENTS ARE ACCEPTED BY THESE TRUCK DRIVERS. DURING THIS TIME, NO BANK IS IN OPERATION. THEREFORE, CAS H PAYMENTS TO THE DRIVERS ARE A NECESSITY FOR THE BUSINESS EXPEDIENCY OF THE ASSESS EE. SUCH PAYMENTS ARE JUSTIFIED UNDER SUCH COMPELLING CIRCUMSTANCES AND ALSO COVER ED BY THE PROVISO TO SECTION 40A(3) AND 40A(3A) OF THE INCOME-TAX ACT, 1961. TH E CIT (A) AS WELL AS THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENESS O F THE PAYMENTS MADE IN CASH. THE CIT (A) SIMPLY CONFIRMED THE ADDITION BY HOLDIN G THAT SECTION 40A(3) IS A STATUTORY PROVISION, HENCE ASSESSING OFFICER IS JUS TIFIED IN DISALLOWING THE SAME. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER AS WELL AS CIT (A) HAS NOT APPRECIATED THE REAL SITUATION AND CIRCUMSTANCES UN DER WHICH THE ASSESSEE HAS TO MAKE THE CASH PAYMENTS TO THE DRIVERS AT THE MID OF THE NIGHT. THESE DRIVERS DO NOT ACCEPT CHEQUES OR DRAFTS. THEY ARE INSTRUCTED ONLY TO RECEIVE THE CASH AND IT IS ALSO NOT POSSIBLE FOR THE ASSESSEE TO ISSUE THE CHEQUES IN THE MID OF THE NIGHT. THEREFORE, ITA NO.5610/DEL./2012 4 THESE PAYMENTS WERE MADE FOR THE BUSINESS EXPEDIENC Y AND COVERED BY THE PROVISO TO SECTION. 6. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE GENUINENESS OF THE CASH PAYMENTS TO THE TRUCK DRIVERS TOWARDS THE FREIGHT C HARGES WAS NOT DOUBTED. IT IS ALSO A FACT THAT THESE TRUCKS ENTER INTO THE CITY AT THE MID OF THE NIGHT. THESE TRUCK DRIVERS ARE INSTRUCTED TO ACCEPT CASH PAYMENTS AT T HESE ODD HOURS. THE ASSESSEE HAD SUBMITTED THE COPY OF SUCH INSTRUCTION BEFORE THE A UTHORITIES BELOW. THE DRIVERS ARE DIRECTED TO RECEIVE THE CASH PAYMENTS ONLY. IN OUR CONSIDERED VIEW, THE ASSESSEE COULD NOT HAVE MADE THE PAYMENTS IN ANY OTHER MANNE R OTHER THAN THE CASH. SUCH PAYMENTS WERE A NECESSITY FOR THE BUSINESS EXPEDIEN CY OF THE ASSESSEE. THEREFORE, WE ALLOW ASSESSEES APPEAL ON THIS GROUND. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 14 TH DAY OF JANUARY, 2013 AFTER THE CONCLUSION OF THE HEARING. SD/- SD/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 16 TH DAY OF JANUARY, 2012 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT