Vivek Gupta, New Delhi V. ITO, New Delhi

ITA 5727/DEL/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69213 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 07-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 22-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI B.C. MEENA ITA NO. 5727/DEL/2011 ASSTT. YR: 2008-09 VIVEK GUPTA VS. INCOME TAX OFFICER, 7, KALU SARAI, BEGAMPUR. WARD 24(2), NEW DELHI. NEW DELHI-110017. PAN: AFDPG 1036 N ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI R.S. SINGHVI RESPONDENT BY : SHRI SUNIL GAUTAM DR O R D E R PER R.P. TOLANI, J.M : THIS IS ASSESSEES APPEAL AGAINST CIT(A)S ORDER D ATED 11-10- 2011 RELATING TO A.Y. 2008-09. SOLE EFFECTIVE GROU ND RAISED IS AS UNDER: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE C IT(A) WAS NOT JUSTIFIED IN CONFIRMING ADDITION OF RS. 30,63,0 87/- U/S 40A(3) WITHOUT PROPERLY APPRECIATING NATURE OF THE TRANSACTION AND SCOPE AND OBJECT OF SEC. 40A(3) OF THE INCOME T AX ACT, 1961 2. BRIEF FACTS ARE: THE ASSESSEE IS PROPRIETOR OF TWO CONCERNS VIZ. (I) M/S VAAGESH ENTERPRISES (AE IN SHORT) ; AND (II) M/S SHIVA ENTERPRISE (SE IN SHORT). DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER OBSERVED THAT ONE OF THE ASSESSEES PROPRIETARY CON CERN AE HAD MADE PURCHASES FROM ASSESSEES ANOTHER PROPRIETARY CONCE RN SE IN CASH EXCEEDING 2 RS. TWENTY THOUSAND ON VARIOUS OCCASIONS TOTALING TO RS. 30,63,087/-. ASSESSING OFFICER ASKED AS TO WHY THEY SHOULD NOT B E TREATED AS PAYMENT IN VIOLATION OF PROVISIONS OF SEC. 40A(3), ASSESSEE PL EADED THAT THESE CONCERNS MAINTAIN SEPARATE BOOKS OF ACCOUNTS AND THE FACT O F THE MATTER REMAINS THAT THEY COME UNDER THE OWNERSHIP OF ONLY ONE ASSESSEE. THEREFORE, THE INTERSE PAYMENTS BELONG TO ONLY ONE ASSESSEE AND NOT WITH O THER PERSON. PAYMENT FROM ONE CONCERN TO ANOTHER CONCERN OWNED BY ONE AS SESSEE AMOUNTS TO PAYMENT TO SAME PERSON. SECTION 40A(3) IS ATTRACTED WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH A PAYMEN T OR AGGREGATE OF PAYMENTS MADE TO ANOTHER PERSON IN A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE AMOUNTING TO RS. 20,000/- OR MORE. THI S SECTION IS NOT APPLICABLE TO ASSESSEES CASE INASMUCH AS THE ASSES SEE HAS NOT MADE ANY PAYMENT OF EXPENDITURE TO ANOTHER PERSON BUT TO HIS OWN ENTITY. FURTHER, SECTION 40A(3) HAS BEEN INCORPORATED BY THE LEGISLA TURE TO CURB THE TENDENCY OF BLACK MONEY OR UNACCOUNTED MONEY BY WAY OF CASH PAYMENTS, THEREFORE, THE FACT OF THE MATTER IS THAT CASH PAYMENT IS NOT TO ANOTHER PERSON IN THESE FACTS. BESIDES EVERY THING IS RECORDED IN BOOKS WHI CH ARE , AUDITED AND ACCEPTED BY ASSESSING OFFICER AS GENUINE. ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE ASSESSEES VERSION AND MADE THE ABOVE AD DITION. 2.1. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL, WH ERE ASSESSEE REITERATED ITS STAND THAT INVOCATION OF SEC. 40A(3) PRESUPPOSE S EXISTENCE OF TWO DIFFERENT PERSONS TO THE CASH TRANSACTIONS, WHEREAS IN THIS CASE THERE IS NO PRESENCE OF ANOTHER PERSON BUT THE CASH PAYMENT I S TO ASSESSEE ITSELF I.E. ONE ARM OF THE ASSESSEE IS GIVING CASH PAYMENT TO A NOTHER ARM OF THE ASSESSEE. IN THESE FACTS SECTION 40A(3) WOULD NOT BE APPLICABLE. FURTHER RELIANCE WAS PLACED ON FOLLOWING DECISIONS ON MERIT S: (I) HASANAND PINJOMAL VS. CIT 112 ITR 134 (GUJ.); 3 (II) WALFORD TRANSPORT (ESTERN INDIA) VS. CIT 240 ITR 90 2 (GAU.); (III) ATTAR SINGH GURUMUKH VS. ITO 191 ITR 667 (SC); (IV) J.B. BODA & CO. PVT. LTD. VS. CBDT 223 ITR 271 (SC) . 2.2. CIT(A), HOWEVER, CONFIRMED THE ADDITION BY APP LYING HONBLE ANDHRA PRADESH HIGH COURT JUDGMENT IN THE CASE OF S MT. CH. MANGAYAMMA VS. UNION OF INDIA (1999) 239 ITR 687, WHICH HELD T HAT SECTION 40A(3) CANNOT BE CONSIDERED AS CONSTITUTIONALLY INVALID. C IT(A) FURTHER HELD THAT THE ASSESSEE HAS OFFERED NO ARGUMENT THAT CASH PAYM ENTS WERE MADE ON ACCOUNT OF BUSINESS EXPEDIENCY AND EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES. PROVISIONS OF SECTION 40A(3) ARE NOT MERELY A FORMALITY BUT THEY WERE INTRODUCED TO DISCOURAGE PAYMENT NOT THRO UGH BANKING CHANNEL. AGGRIEVED, ASSESSEE IS BEFORE US. 3. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT ASSES SEE IS ENGAGED IN THE BUSINESS OF TRADING IN GODREJ PRODUCTS. FOR THE CON VENIENCE OF CONDUCT BUSINESS AND AS PER THE TERMS AND CONDITIONS OF GOD REJ COMPANY, ASSESSEE FOR ITS BUSINESS MADE TWO INDEPENDENT PROPRIETARY C ONCERNS IN THE ABOVE NAMES. VE IS ENGAGED IN THE MARKETING OF BUSINESS A ND SE IS ENGAGED IN THE PURCHASES OF GOODS. GOODS ARE PURCHASED BY SE AND S OME ARE TRANSFERRED TO VE WHICH IN TURN SELLS TO OUTSIDE PARTIES. VE DEALS ONLY IN GODREJ PRODUCTS IN CONFORMITY OF THE AGREEMENT WITH THE SUPPLIERS I.E. GODREJ, WITHOUT WHICH IT COULD NOT HAVE OBTAINED THE DISTRIBUTORSHIP OF G ODREJ PRODUCTS. THUS, THE BUSINESS EXPEDIENCY IS VERY MUCH THERE AND IN EXIST ENCE FOR CREATION OF TWO PROPRIETORSHIP UNITS AND SUCH CASH TRANSFERS. CIT(A )S FINDING THAT NO BUSINESS EXPEDIENCY HAS BEEN PLEADED IS NOT BORNE O UT FROM THE RECORD. 3.1. ASSESSING OFFICER HAS NEITHER DISPUTED THE GEN UINENESS OF PURCHASES AND TRANSFER OF THE GOODS FROM ONE UNIT TO ANOTHER NOR THE INTERSE TRANSACTIONS HAVE BEEN DOUBTED. SECTION 40A(3) READ S AS UNDER: 4 SEC. 40A(3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEED S TWENTY THOUSAND RUPEES, NO DEDUCTION SHALL BE ALLOWED IN R ESPECT OF SUCH EXPENDITURE . 3.2. A PLAIN READING OF SEC. 40A(3) CONTEMPLATES PR ESENCE OF TWO PARTIES I.E. ASSESSEE AND ANOTHER PERSON. IN THIS CASE IT I S A GLARING FACT THERE IS NO OTHER PERSON AND THESE PAYMENTS ARE INTERSE TRANSA CTIONS OF ONLY ASSESSEE. THERE IS NO OTHER PERSON WITH WHOM CASH TRANSACTION S ARE MADE. THE WORD PERSON ALSO IS DEFINED AS INCLUDING ASSESSEE IN IND IVIDUAL CAPACITY. ASSESSEES RIGHT HAND IS GIVING PAYMENT TO ASSESSEE S LEFT HAND. IN THE ABSENCE OF PRESENCE OF ANOTHER PERSON, SECTION 40A( 3) IS NOT ATTRACTED AT ALL. ON MERITS, RELIANCE IS PLACED ON THE ABOVE JUDGMENT S. 4. LD. DR ON THE OTHER HAND CONTENDS AS UNDER: (I) SECTION 40A(3) WAS NOT CREATED IN ORDER TO ONLY CUR B BLACK MONEY BUT TO ENSURE THAT THE ASSESSEES MAKE THE PAYMENTS BY BANKING CHANNELS. (II) SECTION 40A(3) REFERS TO EXPENDITURE INCURRED BY AS SESSEE. IN THIS CASE BOTH THE PROPRIETORSHIP CONCERNS REPRESENT A D IFFERENT PERSON. THEREFORE, THE SECTION IS ATTRACTED. THE ORDER OF L OWER AUTHORITIES IS RELIED ON. 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. SECTION 40A(3) HAS BEEN REPROD UCED ABOVE, WHICH IN CLEAR TERMS POSTULATES THAT WHERE THE ASSESSEE INCU RS ANY EXPENDITURE BY MAKING CASH PAYMENT TO A PERSON. THIS DEFINITELY PR ESUPPOSE A TRANSACTION WITH ANOTHER PERSON AND NOT THE ASSESSEE HIMSELF. T HUS, FOR INVOKING SECTION 40A(3), THE EXISTENCE OF CASH PAYMENT TO ANOTHER PE RSON (NOT THE ASSESSEE HIMSELF) IS A SINE QUA NON. IN THIS CASE ADMITTEDL Y THE PAYMENT IS BETWEEN 5 THE TWO PROPRIETORSHIP CONCERNS OWNED BY THE SAME A SSESSEE. THUS PAYMENT BY ONE CONCERN TO ANOTHER CONCERN, WHICH ARE BOTH O WNED BY THE SAME ASSESSEE, CANNOT BE TERMED TO BE A PAYMENT TO ANOTH ER PERSON. IN OUR CONSIDERED VIEW SECTION 40A(3) IS NOT ATTRACTED. 5.1. BESIDES, ON MERITS ALSO, HONBLE GUJARAT HIGH COURT IN THE CASE OF HANSANAND PINJOMAL (SUPRA), THE INTENT OBJECT OF TH E INTRODUCTION OF SECTION 40A(3) HAS BEEN HELD TO CHECK THE TAX EVASION AND T O EASILY ASCERTAIN THE TRANSACTION. IT IS NOT A CASE WHERE ANY ADMITTED TA X EVASION HAS BEEN ALLEGED. IN CASE OF WALFORD TRANSPORT, ALSO IT HAS BEEN HELD THAT PURPOSE OF SECTION 40A(3) IS NOT TO PENALIZE THE PARTIES BUT TO PREVEN T AND CHECK TAX EVASION AND FLOW OF UNACCOUNTED MONEY AND TO AVOID FICTITIO US TRANSACTIONS, WHICH IS NOT ALLEGED IN THIS CASE. IN THE CASE OF ATTAR SING H GURUMUKH (SUPRA) THE HONBLE SUPREME COURT HAS HELD THAT SECTION 40A(3) ENABLES THE ASSESSING OFFICER TO ASCERTAIN WHETHER THE PAYMENT IS GENUINE AND NOT FROM UNACCOUNTED MONEY. SIMILARLY, IN CASE OF J.B. BODA & CO. PVT. LTD. (SUPRA), ALSO THE HONBLE SUPREME COURT HAS HELD THAT NATURE AND GENUINENESS OF THE TRANSACTION AND INTENTION OF THE PARTIES IS TO BE C ONSIDERED. 5.2. THE CASE LAW RELIED ON BY THE CIT(A) OF SMT. C H. MANGAYAMMA (SUPRA) IS NOT APPLICABLE AS IT DECIDES THE CONSTIT UTIONAL VALIDITY OF SECTION 40A(3) WHICH IS NOT THE ISSUE BEFORE US. 5.3. IN OUR CONSIDERED VIEW, LOWER AUTHORITIES HAVE NOT ALLEGED ANY TAX EVASION, DEPLOYMENT OF BLACK MONEY AND THE TRANSACT IONS BEING DULY RECORDED BETWEEN THE TWO INDEPENDENT PROPRIETORSHIP CONCERNS OF SAME ASSESSEE AND IN THE ABSENCE OF ANY ALLEGATION TO TH E EFFECT OF TAX EVASION. THE ASSESSEE HAS ALSO DEMONSTRATED EXISTENCE OF BUSINES S EXPEDIENCY AS GODREJ PRODUCTS DISTRIBUTION AGREEMENT NECESSITATED SUCH A RRANGEMENT OF 6 TRANSACTIONS. IN VIEW OF THESE FACTS, CIRCUMSTANCES , SECTION 40A(3) AND CASE LAWS, WE SEE NO JUSTIFICATION FOR THE ADDITION IN Q UESTION, WHICH IS DELETED. 6. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 14-08-2013. SD/- SD/- ( B.C. MEENA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14 TH AUGUST 2013. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR