ACIT 22(3), NAVI MUMBAI V. M/s. ZUBAIR H. QURESHI, MUMBAI

ITA 5943/MUM/2005

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2745 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 07-12-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 05-10-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MRS RITIKA GARG
• Section: 40A(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI R.K. GUPTA (JM) AND SHRI RAJENDRA SING H(AM) ITA NO.5943/M/2005 ASSESSMENT YEAR 2002-03 THE ACIT 22(3), 3 RD FLOOR, TOWER NO.6 M/S.ZUBAIR H. QUERESHI VASHI RLY. STATION COMPLEX PROP. SHRI MOHAMMED Z UBAIR H VASHI, NAVI MUMBAI ` QUERESHI, H/623/624 APMC FR UIT MARKET, SEC.19, VASHI, NAVI MUMBAI PAN : AAAPQ7919L APPELLANT RESPONDENT REVENUE BY : MR. MOHD. USMAN ASSESSEE BY : MRS. RITIKA GARG O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25.7.2005 OF CIT(A) FOR THE A.Y.2002-03. IN THIS APPEAL THE R EVENUE HAD DISPUTED THE DECISION OF CIT(A) RELATING TO RELIEF OF RS.3,50,00 0/- IN RELATION TO ADDITION ON ACCOUNT OF CASH CREDIT AND DELETION OF ADDITION OF RS.21,35,621/- MAY BY AO UNDER SECTION 40A(3). THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE HAD BEEN DISPOSED OFF BY THE TRIBUN AL VIDE ORDER DATED 14.5.2008 IN WHICH THE ORDER OF CIT(A) WAS SET ASID E AND BOTH THE ISSUES WERE RESTORED TO THE AO FOR FRESH ADJUDICATION. SUBSEQUE NTLY THE ASSESSEE FILED MISCELLANEOUS APPLICATION REQUESTING FOR RECALL OF THE ORDER RELATING TO THE SETTING ASIDE THE ISSUE OF ADDITION UNDER SECTION 4 0A(3) TO THE FILE OF AO ON THE GROUND THAT THE VARIOUS JUDGMENTS AND FACTUAL DETAI LS RELIED UPON BY THE ASSESSEE HAD NOT CONSIDERED BY THE TRIBUNAL. THE SA ID MISCELLANEOUS 2 APPLICATION WAS CONSIDERED BY THE TRIBUNAL WHO BY O RDER DATED 6.1.2009 RECALLED THE GROUND NO.3 OF THE REVENUE RELATING TO THE ADDITION UNDER SECTION 40A (3) FOR FRESH ADJUDICATION. THE PRESENT PROCEED INGS HAVE THUS ARISEN PURSUANT TO THE ORDER OF RECALL BY THE TRIBUNAL DAT ED 6.1.2009. 2. BRIEFLY STATED THE FACTS OF THE CASE RELATING TO THE GROUND NO.3 OF THE REVENUE ARE THAT THE ASSESSEE WHO WAS ENGAGED IN TH E FRUIT BUSINESS WAS SELLING AGRICULTURAL PRODUCE ON BEHALF OF THE FARME RS THROUGH AGRICULTURAL PRODUCE MARKETING COMMITTEE (APMC) AND WAS OPERATIN G THROUGH MIDDLEMAN. THE AO DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD MADE CASH PAYMENTS TOTALING RS.1,06,78,105/- FOR PURCHAS E OF GOODS. AO THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY 20% OF THE CASH PAYMENTS SHOULD NOT BE DISALLOWED UNDER SECTION 40A(3). THE ASSESSEE OB JECTED TO THE PROPOSED DISALLOWANCE BUT THE AO MADE THE DISALLOWANCE AFTER OBSERVING THAT THE ASSESSEE HAD NOT PRODUCED BOOKS OF ACCOUNT AND THAT IN ONE OF THE CASES PAYMENT HAD ALSO BEEN MADE BY CHEQUE AS WELL AS IN CASH. THE ASSESSEE DISPUTED THE MATTER AND SUBMITTED BEFORE CIT(A) THA T THE ASSESSEE HAD PRODUCED ALL DETAILS INCLUDING BOOKS OF ACCOUNTS WH ICH WAS CLEAR FROM THE LETTER DATED 25.1.2005 AND 29.1.2005 OF THE ASSESSEE ADDRE SSED TO THE AO. IT WAS ALSO POINTED THAT HAD THE ASSESSEE NOT MAINTAINED T HE BOOKS OF ACCOUNT. THE AO COULD NOT HAVE GOT THE FIGURES OF PURCHASE, SALE S AS WELL AS CASH PAYMENTS IF NO BOOKS WERE MAINTAINED. IT WAS ALSO SUBMITTED THAT NO DISALLOWANCE HAD BEEN MADE IN THE PAST THOUGH THE BUSINESS OF THE AS SESSEE REMAINED THE SAME. THE ASSESSEE ALSO EXPLAINED THAT IN VIEW OF T HE AMENDED RULE 6DD(F) W.E.F. 1.4.95 THE FOLLOWING PAYMENTS WERE OUTSIDE T HE PURVIEW OF SECTION 40A(3) : 3 (I) PURCHASE OF AGRICULTURAL OR FOREST PRODUCE (II) PURCHASE OF ANIMAL HUSBANDARY, DAIRY OR POULTRY FAR MING (III) FISH OR FISH PRODUCTS (IV) PRODUCE OF HORTICULTURE OR APICULTURE 2.1 FURTHER CLAUSE (L) OF RULE 6DD ALSO PROVIDED TH AT SECTION 40A(3) WAS NOT APPLICABLE WHEN THE PAYMENT IS MADE BY A PERSON TO AN AGENT WHO IS REQUIRED TO MAKE PAYMENTS FOR GOODS OR SERVICES TO SUPPLIER OF SUCH GOODS AND SERVICES. IT WAS ALSO POINTED OUT THAT THE ASSESSEE HAD MADE CONSOLIDATED PAYMENT TO THE MIDDLEMEN IN RESPECT OF SEVERAL BILLS AND PAYME NT IN EACH CASE WAS LESS THAN RS.20,000/-. THE ASSESSEE ENCLOSED THE NECESSA RY BILLS TO DEMONSTRATE THE POINT. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF TRIBUNAL IN CASE OF SHRI RENUKESHWARI RICE MILLS (93 ITD 263) IN WHI CH THE TRIBUNAL HELD THAT PROVISIONS OF SECTION 40A(3) WERE NOT APPLICABLE TO THOSE TRADERS/ AGENTS WHO EITHER MADE PAYMENTS TO THE CULTIVATOR DIRECTLY OR TO OTHER AGENTS WHO IN TURN MADE PAYMENTS TO THE FARMERS. CIT(A) WAS SATISFIED BY THE EXPLANATION GIVEN. IT WAS OBSERVED BY HIM THAT UNDER RULE 6DD (J) CASH PAYMENTS COULD BE MADE IN EXCEPTIONAL CIRCUMSTANCES. HE ALSO REFERRED TO T HE CBDT CIRCULAR NO.220 DATED 3.6.97 IN WHICH BOARD HAD OUTLINED CERTAIN EX CEPTIONAL CIRCUMSTANCES WHICH INCLUDED THE SITUATION WHERE SELLER ACTING AS COMMISSION AGENT IS REQUIRED TO PAY CASH IN TURN TO PERSONS FROM WHOM H E HAD PURCHASED THE GOODS. THIS HAS NOW BEEN MADE A PART OF THE RULE I TSELF UNDER CLAUSE (L) OF RULE 6DD AS MENTIONED EARLIER. SINCE THE ASSESSEE WAS SE LLING GOODS ON BEHALF OF THE FARMERS AND HAD TO MAKE PAYMENT EITHER TO THE C ULTIVATOR DIRECTLY OR THROUGH THE MIDDLEMEN CASH PAYMENTS WAS EXEMPTED FR OM THE PURVIEW OF SECTION 40A(3). CIT(A) ACCORDINGLY HELD THAT THE PR OVISIONS OF SECTION 40A(3) 4 COULD NOT BE INVOKED ON THE FACTS OF THE CASE AND T HUS DELETED THE ADDITION MADE BY AO AGGRIEVED BY WHICH THE REVENUE FILED THE APPEAL. 3. BEFORE US THE LEARNED AR FOR THE ASSESSEE REITER ATED THE SUBMISSIONS MADE BEFORE CIT(A) AND ARGUED THAT THE CASE OF THE ASSESSEE WAS COVERED BY CLAUSES (F) AND (L) OF RULE 6DD AND THE CASH PAYMEN T WAS EXEMPTED FROM PURVIEW OF SECTION 40A(3). RELIANCE WAS ALSO PLACED ON THE DECISION OF TRIBUNAL IN CASE OF SHRI RENUKESHWARI RICE MILLS (SUPRA) THE LEARNED DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF AO. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. UNDER THE PROVISIONS OF SECTION 40A(3) A NY EXPENDITURE INCURRED IN CASH OF RS.20,000/- AND MORE IS REQUIRED TO BE DISA LLOWED @ 20%. HOWEVER RULE 6DD EXEMPTS CERTAIN CASH PAYMENTS FROM THE PUR VIEW OF SECTION 40A(3) UNDER CERTAIN CIRCUMSTANCES AS MENTIONED IN CLAUSE (F) OF RULE 6DD. THE FOLLOWING PAYMENTS ARE OUTSIDE THE PURVIEW OF SECTI ON 40A(3) AS PER CLAUSE ( F ): (I) PURCHASE OF AGRICULTURAL OR FOREST PRODUCE (II) PURCHASE OF ANIMAL HUSBANDARY, DAIRY OR POULTRY FAR MING (III) FISH OR FISH PRODUCTS (IV) PRODUCE OF HORTICULTURE OR APICULTURE 4.1 FURTHER CLAUSE (L) OF RULE 6DD ALSO PROVIDES T HAT SECTION 40A(3) IS NOT APPLICABLE WHEN THE PAYMENT IS MADE BY A PERSON TO ITS AGENT WHO IS REQUIRED TO MAKE PAYMENTS FOR GOODS OR SERVICES TO THE SUPPL IERS OF SUCH GOODS AND SERVICES WHICH ARE EXEMPT FROM THE PURVIEW OF SECTI ON 40A(3). 5 4.2 THE ASSESSEE IS PURCHASING AGRICULTURAL PRODUCE ON BEHALF OF FARMERS AND IS MAKING PAYMENTS EITHER DIRECTLY OR THOUGH THE MI DDLEMEN. A COMBINED READING OF CLAUSE (F) AND (L) OF RULE 6DD MAKE IT C LEAR THAT CASH PAYMENT IN SUCH SITUATION IS EXEMPTED FROM THE PURVIEW OF SECT ION 40A(3). THE DECISION OF TRIBUNAL IN CASE OF SHRI RENUKESHWARI RICE MILLS (S UPRA) ALSO SUPPORTS THE CASE OF THE ASSESSEE. WE THEREFORE SEE NO INFIRMITY IN T HE ORDER OF CIT(A) DELETING THE ADDITION MADE BY AO UNDER SECTION 40A(3) AND TH E SAME IS THEREFORE UPHELD. 5. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . 6. THE ORDER WAS PRONOUNCED IN OPEN COURT ON 15.12 .2009. SD/- SD/- ( R.K. GUPTA) (RAJEN DRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 15. 12.2009 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 5. THE DR G BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ALK