I.T.O., Ward-1, Aligarh V. Sh. Ram Prakash Prop., Aligarh

ITA 61/AGR/2013

• Counselvise Citation: 6120314 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 28-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S D SHARMA
• Section: 40A(3); 143(3)

Judgement Text

I.T.A. NO.: 61/AGRA/2013 ASSESSMENT YEAR: 2008-09 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA [CORAM : PRAMOD KUMAR AM AND JOGINDER SINGH JM ] I.T.A. NO.: 61/AGRA/2013 ASSESSMENT YEAR:2008-09 INCOME TAX OFFICER WARD 1, ALIGARH .......APPELLANT VS. RAM PRAKASH .............RESPONDENT PROP RAM PRAKASH ROHINI KUMAR KHAIR, ALIGARH [ PAN: ACWPP9847J] APPEARANCES BY: S D SHARMA, FOR THE APPELLANT DEEPENDRA MOHAN, ALONGWITH PRARTHANA JALAN, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING :JUNE 3, 2014 DATE OF PRONOUNCING THE ORDER :JULY 18 TH , 2014 ORDER PER PRAMOD KUMAR: 1. THIS APPEAL, FILED BY THE ASSESSING OFFICER, IS DIRECTED AGAINST LEARNED CIT(A)S ORDER DATED 6 TH DECEMBER 2012, IN THE MATTER OF ASSESSMENT UNDER S ECTION 143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSME NT YEAR 2008-09 2. IN GROUND NOS. 1, AND 2, WHICH WE WILL TAKE UP T OGETHER, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES: 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS IN LA W AND ON FACTS IN DELETING THE ADDITION OF RS.10,00,000/- SINCE THE A SSESSEE FAILED TO I.T.A. NO.: 61/AGRA/2013 ASSESSMENT YEAR: 2008-09 PAGE 2 OF 7 PRODUCE ALL THE CREDITORS AND THUS VOLUNTARILY SURR ENDERED AN AMOUNT OF RS.10,00,000/- OUT OF THE CREDIT BALANCE OF RS.80,2 7,616/- FOR TAXATION. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT SURRENDER LETTER SUBMITTED BY THE ASSESSEE IS AMBIGUOUS/DEFEC TIVE AND BEING MADE WITHOUT ANY BASIS, WAS ACCEPTED BY THE AO IN P ART, FINDS NO PLACE ON ORDER SHEET AND NOT IN THE HAND WRITING OF THE A SSESSEE. 3. SO FAR AS THESE GRIEVANCES ARE CONCERNED, THE RE LEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FO ODGAINS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS SHOWN UNSECURED CREDITORS AMOUNTING TO RS 80,27,616 BUT, AS CERTAIN PAYMENTS MADE TO THESE PERSONS WERE IN CASH, THE ASSESSEE W AS REQUIRED TO PRODUCE ALL THE 12 CREDITORS FOR VERIFICATION. EVEN THOUGH THE ASS ESSEE PRODUCED ALL THESE PERSONS, AND APPARENTLY THERE WERE NO INFIRMITIES IN THE DOC UMENTS PRODUCED TOO, THE ASSESSING OFFICER MADE AN ADDITION BY OBSERVING AS FOLLOWS: 3.2 ON THE DATE FIXED THAT ASSESSEE FILED A REPLY S TATED THAT .. I AM HERE WITH PRODUCING THE 12 SUNDRY CREDITORS ALONG W ITH PHOTO IDENTITY & KHASRA KHATONI AND FILED ALL THE AFFIDAVITS & KHASRA OF SU NDRY CREDITORS. I AM HERE WITH SURRENDERING RS.10,00,000/- SUBJECT TO NO PENAL ACT ION .. 3.3 I HAVE CONSIDERED THE REPLY OF THE ASSESSEE, IT IS TRUE THAT IN THE TRADE OF ADARTIA MOSTLY PAYMENT HAS BEEN MADE IN CASH. AS A CCOUNT CONFIRMATIONS, NAMES AND ADDRESSES OF THE PARTIES MENTIONED ABOVE HAVE ALREADY BEEN PROVIDED BY THE ASSESSEE, THERE APPEARS A PRIMA FAC IE EVIDENCE TO SHOW THAT THE SAID PARTIES ARE REAL AND HAVING BUSINESS RELAT IONS WITH THE ASSESSEE. MERELY ON THE BASIS OF NOT BEING INCOME TAX ASSESSE E OR IN ABSENCE OF BANKING TRANSACTION, THE IDENTITY OF THE CREDITOR CANNOT BE DOUBTED. IT IS ALSO TRUE THAT THE SMALL TRADERS AND AGRICULTURIST LIVING IN SMALL VILLAGES SCARE TO COME FORWARD BEFORE ANY AUTHORITY AND SCARED TO BE EXAMI NED ON OATH. MOREOVER, BARRING THE CREDITS SURRENDERED BY THE ASSESSEE OF RS.10,00,000/-. IN THESE CIRCUMSTANCES, IT WOULD BE BETTER TO ACCEPT THE SUR RENDER OF THE ASSESSEE AS VOLUNTARY DISCLOSURE. ACCORDINGLY, THE AMOUNT OF R S.10,00,000/- IS ADDED TO THE INCOME OF THE ASSESSEE. . I.T.A. NO.: 61/AGRA/2013 ASSESSMENT YEAR: 2008-09 PAGE 3 OF 7 4. AGGRIEVED BY STAND SO TAKEN BY THE ASSESSING OFF ICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). LEARNED CIT(A) NOTED THAT ALL THE SUNDRY CREDITORS WERE AND ARE VERIFIABLE AND THAT CONSID ERING THE ENTIRE DOCUMENTARY EVIDENCES, I AM OF THE CLEAR VIEW THAT THERE WAS NO REASON WITH THE APPELLANT TO MAKE SUCH A SURRENDER. ACCORDINGLY, HE CONCLUDED T HAT THE SURRENDER IS HELD TO BE UNWARRANTED AND IS BEING CANCELLED AS OBJECTED AND CLAIMED BY THE APPELLANT. THE ADDITION OF RS 10,00,000 WAS, ACCORDINGLY, DELETED. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. WE HAVE NOTED THAT EVEN THOUGH LEARNED CIT(A) HA S GIVEN CATEGORICAL FINDINGS ON MERITS AS ALSO ON THE ADMISSIBILITY OF SURRENDER, THE ASSESSING OFFICER HAS RAISED GRIEVANCE ONLY AGAINST THE LATTER. THE ISSUE RAISED BEFORE US IS THUS INFRUCTUOUS INASMUCH AS EVEN IF THE SURRENDER IS IN ORDER BUT THE ADDITION WAS NOT WARRANTED ON MERITS, IT IS ONLY ELEMENTARY THAT MER ELY BECAUSE THE ASSESSEE HAS, UNDER MISCONCEPTION OF FACTS OR LAW, SURRENDERED AN INCOME, NO ADDITION CAN BE MADE IN RESPECT OF THE SAME. WE HAVE ALSO NOTED THA T AS EVIDENT FROM THE OBSERVATIONS OF EVEN THE ASSESSING OFFICER, THERE WERE NO SPECIFIC REASONS FOR MAKING THE ADDITION OF RS 10,00,000 SAVE AND EXCEPT FOR THE ALLEGED SURRENDER MADE BY THE ASSESSEE. THE ISSUE IN APPEAL IS ALSO COVE RED, IN FAVOUR OF THE ASSESSEE, BY A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS SATYA NARAYAN AGARWAL (91 TTJ 481) WHEREIN IT IS HELD THAT NO ADDITION CA N BE MADE ON THE BASIS OF A SURRENDER SIMPLICTOR EVEN WHEN SURRENDER IS MADE DU RING THE COURSE OF SURVEY PROCEEDINGS UNDER SECTION 133 A. IN VIEW OF THESE D ISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE THE CONCLUSIO NS ARRIVED AT BY THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 7. GROUND NO. 2 AND 3 ARE THUS DISMISSED. 8. IN GROUND NO 3, THE ASSESSING OFFICER HAS RAISED THE FOLLOWING GRIEVANCE: I.T.A. NO.: 61/AGRA/2013 ASSESSMENT YEAR: 2008-09 PAGE 4 OF 7 3. THE LD. CIT(A) IN HIS ORDER DATED 06.12.2012 IN APPEAL NO.761/2010-11/GZB-ALG AND FURTHER APPEAL NUMBER 10 06/2011-12/GZB- ALG HAS ERRED IN LAW AND ON FACTS IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT DISALLOWANCE MADE U/S 40A(3) AT RS.3, 62,202/- (WHICH WAS RECTIFIED U/S 154/143(3) TO RS.18,11,008/-) WAS COV ERED BY CLAUSES (1) OF RULE 6DD AND FIND SUPPORT BY CLAUSE (F) AND (H) OF RULE 6DD. 9. SO FAR AS THIS GRIEVANCE IS CONCERNED, IT IS SUF FICIENT TO TAKE NOTE OF THE FACT THAT WHEN THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE IN RESPECT OF THE CASH PAYMENTS AGGREGATING TO RS 23,47,561, IT WAS POINTE D OUT BY THE ASSESSEE THAT THE ASSESSEE IS AN AARATIA AND PURCHASES THE FOODGRAINS FROM FARMERS OR HIS AGENTS I.E. KACHCHA AARATIAS. IT WAS THUS POINTED OUT THAT THE EXCEPTIONS SET OUT IN RULE 6DD(E) COME INTO PLAY AND, ACCORDINGLY, DISALLOWANCE UNDER SECTION 40A(3), AS PROPOSED BY THE AO, CANNOT BE MADE. WITHOUT ASSIGNING ANY REAS ONS, THE CONTENTIONS OF THE ASSESSEE WERE SIMPLY BRUSHED ASIDE. THE DISALLOWANC E OF RS 3,62,202, BY EXCLUDING PAYMENTS MADE ON WEEKENDS, WAS MADE. AGGRIEVED, ASS ESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). IT WAS NOTED BY THE CIT( A) THAT THE PAYMENTS WERE MADE TO THE FARMERS OR THE KACHA AARATIAS WHO DEFACTO AC T AS AGENTS OF THE FARMERS AND ARE SIMPLY CONDUITS FOR PAYMENTS. UNDER THESE CIRCU MSTANCES, AND TAKING NOTE OF THE JUDICIAL PRECEDENTS HOLDING THAT SECTION 40A(3) DIS ALLOWANCES CANNOT BE INVOKED IN SUCH CASES, LEARNED CIT(A) DELETED THIS DISALLOWANC E AS WELL. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 10. HAVING HEARD THE RIVAL CONTENTIONS, AND HAVING PERUSED THE MATERIAL ON RECORD, WE FIND NO REASONS TO INTERFERE IN THE FIND INGS ON THIS ISSUE EITHER. WE FIND THAT, AS IS THE SETTLED POSITION, EVEN A PAYMENT TO KACHA AARATIA IS TO BE TAKEN AS A PAYMENT TO THE FARMER AS SUCH AARATIA HOLDS AGENCY RELATIONSHIP; HE DOES NOT RECEIVE PAYMENT IN HIS OWN RIGHT. WE HAVE ALSO TAKE N NOTE OF COORDINATE BENCH DECISIONS IN THE CASES OF SHRI RENKUSHWARA RICE MIL LS VS ITO ( 93 TTJ 912) AND DCIT VS HIND INDUSTRIES LTD (26 SOT 196) WHICH SUPP ORT THIS PROPOSITION. ONCE THE PAYMENT IS TREATED AS HAVING BEEN MADE TO THE FARME R, SECTION 40A(3) WILL NOT COME INTO PLAY. IN VIEW OF THESE DISCUSSIONS, AS ALSO BE ARING IN MIND ENTIRETY OF THE CASE, I.T.A. NO.: 61/AGRA/2013 ASSESSMENT YEAR: 2008-09 PAGE 5 OF 7 WE APPROVE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 11. GROUND NO. 3 IS THUS DISMISSED. 12. IN GROUND NOS. 4 AND 5, THE ASSESSING OFFICER H AS RAISED THE FOLLOWING GRIEVANCES: 4. THE LD. CIT(A) HAS ALSO ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION MADE U/S 40(A)(IA) AT RS.5,54,023/- BY ACC EPTING, ON ONE HAND, APPLICABILITY OF SECTION 40(A)(IA) ON THE OTHER HAN D ON THE BASIS OF JUDGMENT DELIVERED BY THE HONBLE ITAT IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT, RANGE-1, VISHAKHAPATNAM (2012)(136ITR 23); AS AN INTERIM SUSPENSION AGAINST THIS JUDGMENT HAS BEEN GRANTED BY THE HONBLE A.P. HIGH COURT ON APPEAL. 5. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGNORING THE JURISDICTIONAL HIGH COURTS DECISION IN THE CASE OF DEYS MEDICAL (U.P.) (P) LIMITED VS. UNION OF INDIA AND OTHERS (316 ITR 445) THAT ONCE A DEDUCTION OF A PARTICULAR AMOUNT IS NOT ALLOWABLE U NDER THE ACT, IT IS LIABLE TO BE TAXED. 13. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. IN T HE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DISALLOWED A SU M OF RS 5,42,023 ON THE GROUND THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE FR OM THESE PAYMENTS MADE TO THE TRANSPORTERS. IN APPEAL, LEARNED CIT(A) DELETED THE DISALLOWANCE ON THE GROUND THAT ENTIRE PAYMENT WAS MADE DURING THE YEAR ITSELF AND NOTHING SURVIVED FOR BEING PAYABLE AT THE YEAR END WHICH COULD JUSTIFY A DIS ALLOWANCE UNDER SECTION 40(A)(IA). IN COMING TO THIS CONCLUSION, LEARNED CIT(A) FOLLOW ED SPECIAL BENCH DECISION BY THIS TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRAVELS VS ACIT ( 136 ITR AT 23). THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEF ORE US. 14. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE A PPLICABLE LEGAL POSITION. I.T.A. NO.: 61/AGRA/2013 ASSESSMENT YEAR: 2008-09 PAGE 6 OF 7 15. WE FIND THAT AS THE ASSESSEE IS IN THE JURISDIC TION OF HONBLE ALLAHABAD HIGH COURT, THIS ISSUE IS TO BE TREATED AS COVERED IN FA VOUR OF THE ASSESSEE BY A DECISION OF AGRA BENCH OF THIS TRIBUNAL, IN THE CASE OF DCIT VS GUPTA OVERSEAS [2014] 42 TAXMANN.COM 42 (AGRA - TRIB.) , WHEREIN THE TRIBUNAL HAS, INTER ALIA , OBSERVED AS FOLLOWS: 38. WE ARE, HOWEVER, SAVED OF TAKING THIS CALL AS, AT THIS STAGE, IT IS USEFUL TO TAKE NOTE OF THE CBDT CIRCULAR 10/DV/2013 [F NO. 27 9/MISC/M 61/2012 SECTION 40 (A)(I) OF THE INCOME TAX ACT, 1961] DATED 16TH D ECEMBER 2013, WHICH, INTER ALIA, OBSERVES AS FOLLOWS: 3.3. THE HONBLE ALLAHABAD HIGH COURT IN CIT VS VEC TOR SHIPPING SERVICES PVT LTD [2013] 38 TAXMANN.COM 77 (ALLAHABA D) HAS AFFIRMED THE DECISION OF THE SPECIAL BENCH IN MERILYN SHIPPING T HAT FOR DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT, THE AMOUNT SHOU LD BE PAYABLE AND NOT WHICH HAS BEEN PAID DURING THE YEAR. 39. THE SAID CIRCULAR THEN EXPRESSED THE DEPARTMENT AL VIEW TO THE EFFECT THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) WILL NOT O NLY INCLUDE THE AMOUNT PAYABLE AT THE YEAR-END BUT ALSO THE AMOUNT PAID DU RING THE YEAR. HAVING SAID SO, THE CIRCULAR ALSO OBSERVED AS FOLLOWS: 5. WHERE ANY HIGH COURT DECIDES AN ISSUE CONTRARY T O THE DEPARTMENTAL VIEW, THE DEPARTMENTAL VIEW THEREON SHALL NOT BE OPERATIVE IN THE AREA FALLING IN THE JURISDICTION OF THE RELEVANT HIGH CO URT. 40. AN ANALYSIS OF THE STAND SO TAKEN BY THE CBDT, WHICH IS BINDING ON ALL THE FIELD OFFICERS UNDER SECTION 119 OF THE ACT, LEADS US TO THE CONCLUSION THAT SO FAR AS ALLAHABAD HIGH COURT DECISION IS CONCERNED, IT IS TO BE TREATED AS APPROVAL OF MERILYN SHIPPING DECISION (SUPRA), AND, ACCORDINGLY, THERE IS NO REQUIREMENT FOR TAX WITHHOLDING WITH RESPECT TO PAY MENTS ACTUALLY MADE TO THE RESIDENTS DURING THE RELEVANT PREVIOUS YEAR ITSELF. NO DOUBT, THIS CIRCULAR DOES NOT BIND THIS TRIBUNAL, BUT, AS IS THE BINDING LEGA L POSITION IN THE LIGHT OF A SERIES OF DECISIONS BY HONBLE SUPREME COURT, SUCH A CIRCULAR, BEING IN THE NATURE OF A BENEVOLENT CIRCULAR, BINDS THE INCOME T AX AUTHORITIES. THIS CIRCULAR IS, THEREFORE, REQUIRED TO BE GIVEN EFFECT BY US, T O THAT EXTENT, AS WELL. ONCE IT IS ACCEPTED, AS HAS BEEN ACCEPTED BY THE CBDT ITSELF, THAT HONBLE ALLAHABAD HIGH COURT HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE, THE RIGOUR OF DISALLOWANCE UNDER SECTION 40(A)(IA) MUST STAND REL AXED IN THE AREA FALLING I.T.A. NO.: 61/AGRA/2013 ASSESSMENT YEAR: 2008-09 PAGE 7 OF 7 WITHIN THE JURISDICTION OF HONBLE ALLAHABAD HIGH C OURT. IT CANNOT, THEREFORE, BE SAID THAT THERE FOR THE PURPOSES OF DISALLOWANCE UN DER SECTION 40(A)(IA), SO FAR AS THE ASSESSEE BEFORE US IS CONCERNED, IT IS NECES SARY THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCES SO FAR AS PAYME NTS MADE DURING THE RELEVANT PREVIOUS YEAR ARE CONCERNED 16. FOLLOWING THE VIEW SO TAKEN BY AGRA BENCH OF TH E TRIBUNAL, WE UPHOLD THE STAND OF THE LEARNED CIT(A) ON THIS ISSUE AS WELL, AND DECLINE TO INTERFERE IN THE MATTER. 17. GROUND NO. 4 AND 5 ARE ALSO DISMISSED. 18. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUN CED IN THE OPEN COURT TODAY ON 18 TH DAY OF JULY, 2014. SD/- SD/- JOGINDER SINGH PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AGRA, THE 18 TH DAY OF JULY, 2014. COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA