BHAWARLAL SAREMAL JAIN HUF, MUMBAI V. INCOME TAX OFFICER 14(2)(4), MUMBAI

ITA 6155/MUM/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48937 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-05-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 13-10-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Assessee Lawyers: D B SANGHVI
• Keywords: Additional evidence
• Section: 40A(3); 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI R.S.SYAL (AM) AND SMT. ASHA VIJAYARAGH AVAN (JM) ITA NO. 6155/MUM/2008 ASSESSMENT YEAR- 2003-04 BHAWARLAL SAREMAL JAIN HUF, 5,1 ST OLD HANUMAN CROSS LANE, NEAR 64C, DHAN BHAWAN, MUMBAI-400 002 PAN-AACHB 8802K VS. THE ITO 14(2)(4), 303, 3 RD FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI-400 021 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI D.B. SANGHVI RESPONDENT BY: SHRI G.P. TRIVEDI O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 8.8.2008 PASSED BY THE LD. CIT(A)-XIV FOR THE ASSESSMENT YEAR 2003-04. 2. THE RETURN OF INCOME WAS FILED ON 1.12.2003 DECL ARING A TOTAL INCOME OF RS. 1,52,080/-. THE RETURN WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE I.T. AC T. 3. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS MADE CASH PAYMENTS ON HEADS LIKE BEAM CHARGES OF RS. 1,95,40 8/-, LABOUR CHARGES PAID TO LABOURERS OF RS. 32,23,597/- AND WARPING CH ARGES PAID OF RS. 1,95,408/-. THE ASSESSEE WAS GIVEN SHOWCAUSE NOTIC E VIDE LETTER DT. 23.12.2005 AS TO WHY ADDITIONS UNDER THE PROVISIONS OF SEC. 40A(3) OF THE I.T. ACT SHOULD NOT BE MADE ON ACCOUNT OF EXPENDITU RE INCURRED IN CASH. ITA NO. 6155/M/08 2 THE ASSESSEE HAS GIVEN DETAILED EXPLANATION VIDE LE TTER DT. 21.12.2005 ABOUT THE ABOVE THREE EXPENSES MADE IN CASH. THE E XPLANATION FILED VIDE LETTER DT. 20.12.2005 DENIES THAT THE PAYMENT IS MA DE IN CASH. THE A.O. HELD THAT THE ASSESSEES STATEMENT IS SELF CONTRADI CTORY AND ON SCRUTINY OF THE STATEMENTS GIVEN BY THE ASSESSEE FOR THE ABOVE THREE PAYMENTS, IT IS SEEN THAT CERTAIN PAYMENTS ARE MADE MORE THAN 30,00 0/- IN CASH TO VARIOUS PARTIES. UNDER THE HEAD WEAVING CHARGES P AID, THE ASSESSEE HAD MADE CASH PAYMENTS OF RS. 32,23,597/-. OUT OF THIS THE PAYMENT OF RS. 16,29,329/- IS MADE TO 51 PARTIES WHICH IS MORE THAN RS. 20,000/-. THEREFORE AN ADDITION TO THE EXTENT OF 20% OF THE A MOUNT PAID IN CASH ABOVE 20,000/- AMOUNTING TO RS. 3,25,865/- WAS DISA LLOWED BY THE AO U/S. 40A(3) AND ADDED BACK TO THE TOTAL INCOME OF T HE ASSESSEE. 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A). BEFORE THE LD. CIT(A), THE AR OF THE ASSESSEE SUBMI TTED AS FOLLOWS: THE AO CALLED FOR DETAILS OF PAYMENTS MADE TO WEAV ERS ALONGWITH THEIR ADDRESS WHICH WERE FURNISHED BY THE APPELLANT. THE APPELLANT ALSO SUBMITTED VIDE LETTE R DT. 21.12.2005 AS UNDER: WEAVING CHARGES: WE HAD PAID LABOUR CHARGES FOR WAVING OF CLOTH FROM YARN. THE CLOTH IS WEAVED ON LOOMS AT BHIVANDI. THESE WEAVERS ARE SMALL TIME WORKERS WHO GENERALLY DO NOT HAVE MAINTAIN BANK ACCOUNT. AT TIMES, WE HAVE TO MAKE PAYMENTS IN CAS H. ALL THE PAYMENTS ARE SUPPORTED BY DULY STAMPED VOUCHERS/RECEIPTS AND ARE REFLECTED IN MY BOOKS OF ACCOUNT. THEREAFTER, IN RESPONSE TO SHOW CAUSE NOT ICE ISSUED BY THE AO, THE APPELLANT VIDE LETTER DT. 28.12.2005 MAKE THE FOLLOWING EXPLANATION AT THE OUTSET I DENY TO HAVE COMMITTED DEFAULT U/ S. 40A(3) OF THE I.T. ACT, 1961 BECAUSE I HAVE NOT MAD E ANY PAYMENT EXCEEDING A SUM OF RS. 20,000/- OTHERWISE BY CROSSED CHEQUES DRAWN ON BANK OR BY A CROSSED BANK DRAFT FOR BEAM CHARGES, LABOUR CHARGES AND WARPING CHARGES AS STATED IN YOUR LETTER. IT M EANS ITA NO. 6155/M/08 3 I HAVE NOT PAID FOR THE SAID EXPENSES ANY AMOUNT EXCEEDING RS. 20,000/- IN CASH AT A TIME. THUS, I HEREBY SUBMIT THAT NO DISALLOWANCE U/S. 40A(3) OF T HE I.T. ACT 1961 IS CALLED FOR, FOR THE PAYMENT MADE I N CASH FOR BEAM CHARGES, LABOUR CHARGES AND WARPING CHARGES. THE LD. AO FROM THE DETAILS OF WEAVING CHARGES SORT ED OUT PAYMENTS MADE TO EACH WEAVER DURING THE YEAR WHEREV ER TOTAL PAYMENT TO A WAIVER EXCEEDED RS. 20,000/- FOR THE Y EAR AND CONCLUDED THAT THE PAYMENTS MADE TO THESE WEAVERS W ERE IN EXCESS OF RS. 20,000/- IGNORING THE FACT THAT EACH PAYMENT WAS NOT IN EXCESS OF RS. 20,000/- AS CONTEMPLATED IN SECTION 4 0A(3) OF THE ACT, MORE SO WHEN CERTAIN PAYMENTS WERE MADE BY CHEQUES ALSO. SECTION 40A(3) PROVIDES THAT EACH PAYMENT MADE IN E XCESS OF RS. 20,000/- EXCEPT BY WAY OF CROSS CHEQUE DRAWN ON A B ANK OR BY CROSS BANK DRAFT WOULD BE INADMISSIBLE FOR DEDUCTIO N. IT DOES NOT SAY THAT THE AGGREGATE OF AMOUNT SHOULD NOT EXCEED RS. 20,000/-. THE WORDS USED ARE IN A SUM I.E. SINGLE SUM HAS B EEN USED. THEREFORE, IRRESPECTIVE OF ANY NUMBER OF TRANSACTIO NS, WHERE THE AMOUNT DOES NOT EXCEED RS. 20,000/- THE RIGOURS OF SEC. 40A(3) WILL NOT APPLY. RELIANCE IS PLACED ON CIT VS TRIVENI PR ASAD PANNALAL, 228 ITR 680 (MP) AND CIT VS KOTHARI SANITATION AND TILES PVT. LTD. 282 ITR 117(MAD). THE VOUCHERS FOR THE ABOVE PAYMENTS MADE WERE PRODU CED BEFORE THE LD. AO. THE LEDGER ACCOUNT OF WEAVING C HARGES PAID FOR THE PREVIOUS YEAR ENDED 31.3.2003 IS ENCLOSED HEREW ITH IN PAPER BOOK, WHEREIN EACH PAYMENT MADE ALONGWITH THE DETAI LS IS DULY REFLECTED. IT WOULD BE APPRECIATED THAT THE PAYMEN T IN EXCESS OF RS. 20,000/- WAS MADE BY CHEQUES ONLY. THUS, THE DISAL LOWANCE U/S. 40A(3) IS UNJUSTIFIED AND UNCALLED FOR WHICH DESERV ES TO BE DELETED. 5. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIONS AND FACTS AND ALSO PERUSED THE ORDER OF THE AO. I FIND THAT THIS ISSUE IS DISCUSSED BY THE AO IN PARA 3 OF HIS ORDER. THE DE TAILS OF WEAVING CHARGES PAID DURING THE YEAR AS FURNISHED B Y THE APPELLANT WAS FOR THE AMOUNT OF RS. 32,33,597/-. I N THE DETAILS, THE NAMES OF WEAVERS INDIVIDUALLY ARE GIVE N. THERE IS THUS NO DISPUTE TO THIS EXTENT OF THE FACT. IT IS ALSO AN ADMITTED FACT THAT THE APPELLANT VIDE LETTER DT. 21 .12.2005 HAS STATED THAT WEAVERS ARE SMALL TIME WORKERS WHO GEN ERALLY DO NOT MAINTAIN BANK ACCOUNTS. AT TIMES, WE HAVE TO M AKE ITA NO. 6155/M/08 4 PAYMENT IN CASH. IN VIEW OF THIS EXPLANATION OF TH E APPELLANT, THE AO GAVE A SHOW CAUSE NOTICE REQUIRING THE APPEL LANT TO EXPLAIN AS TO WHY DISALLOWANCE UNDER THE PROVISIONS OF SEC. 40A(3) OF THE I.T. ACT SHOULD NOT BE MADE. THE APP ELLANT VIDE LETTER DT. 28.12.2005 ERRONEOUSLY WRITTEN AS 20.12. 2005 IN THE ASSESSMENT ORDER, HAS MERELY DENIED TO HAVE COMMITT ED DEFAULT U/S. 40A(3) OF THE ACT AND HAVING MADE ANY PAYMENT EXCEEDING A SUM OF RS. 20,000/- OTHERWISE BY A CROS S CHEQUE DRAWN ON BANK OR BY A CROSSED BANK DRAFT. EXCEPT T HIS DENIAL, THE APPELLANT HAS NOT FURNISHED ANY EVIDENC ES OF HAVING NOT MADE PAYMENTS IN CASH IN CONTRAVENTION T O SEC. 40A(3) OF THE I.T. ACT BEFORE THE AO. THE AO IN TH E ABSENCE OF SUCH EVIDENCES AND IN VIEW OF THE APPELLANTS ADMIS SION OF HAVING MADE PAYMENT IN CASH TO THE WEAVERS WHO WERE NOT MAINTAINING ANY BANK ACCOUNTS, ON NOTICING FROM THE DETAILS THAT THE PAYMENTS ABOVE RS. 20,000/- WERE REFLECTED IN THE CASE OF 51 PARTIES WHICH AMOUNTED TO RS. 16,29,329 /-, INVOKED THE PROVISIONS OF SEC. 40A(3) AND DISALLOWE D 20% OF THIS AMOUNT. IN THE ABOVE SUBMISSIONS, THE APPELLANT HAS CLAIME D THAT IT HAD NOT MADE ANY PAYMENT IN CASH TO THE WEA VERS EXCEEDING RS. 20,000/- AT A TIME. IN SUPPORT A COP Y OF THE LEDGER ACCOUNT OF WEAVING CHARGES IS ENCLOSED IN TH E PAPER BOOK. ON A QUERY RAISED DURING THE APPELLATE PROC EEDINGS AS TO WHETHER THE LEDGER ACCOUNT OF THE WEAVING CHARGE S AS FURNISHED NOW WERE ALSO FURNISHED BEFORE THE AO. I T WAS STATED THAT THE SAME WERE ALSO FURNISHED. TO VERIF Y THE CORRECTNESS OF THE CLAIM OF THE APPELLANT THE ASSES SMENT RECORD WAS CALLED FOR FROM THE AO. ON VERIFICATION, I DO NOT FIND ANY SUCH LEDGER ACCOUNT OF THE WEAVING CHARGES CLAI MED HAVING FILED BY THE APPELLANT IS ON THE RECORD. TH EREFORE, THE CLAIM OF THE APPELLANT IS FACTUALLY INCORRECT. THE FURNISHING OF LEDGER ACCOUNT OF THE WEAVING CHARGES CLAIMING A DA TEWISE PAYMENT TO VARIOUS INDIVIDUALS HAS NO RELEVANCE AT THIS STAGE, SINCE THE SAME WAS NOT PLACED BEFORE THE AO FOR HIS VERIFICATION AND SATISFACTION. THE AUTHENTICITY OF THE LEDGER ACCOUNT FURNISHED DURING THE APPELLATE PROCEEDINGS CAN ALSO NOT BE ACCEPTED AS THE SAME IS FURNISHED AFTER A LO NG GAP I.E. DATE OF ORDER IS 30.12.2005, WHEREAS THE LEDGER ACC OUNT IS BEING FURNISHED ON 4.8.2008. MOREOVER, THE SAME CA N ALSO NOT BE ADMITTED AS AN ADDITIONAL EVIDENCE SINCE THE APP ELLANT HAS NOT MADE ANY PETITION U/R 46A OF I.T. RULES. UNDER SUCH CIRCUMSTANCES, ON THE GIVEN FACTS AT THE TIME OF AS SESSMENT PROCEEDINGS, BASED ON THE DETAILS AND THE EXPLANATI ON OF THE APPELLANT, THE ACTION OF THE AO IN INVOKING THE PRO VISIONS OF ITA NO. 6155/M/08 5 SEC. 40A(3) OF THE I.T. ACT IS JUSTIFIED. THE RELI ANCE PLACED BY THE APPELLANT ON THE TWO DECISIONS OF THE HONBLE H IGH COURT ARE UNDER THESE CIRCUMSTANCES ALSO NOT APPLICABLE. THIS GROUND, THEREFORE, DECIDED AGAINST THE APPELLANT. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE U S AND RAISED THE FOLLOWING GROUNDS: 1.1. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALL OWANCE OF RS. 3,25,865/- U/S. 40(A)(3) OF THE I.T. ACT, 1961. 1.2. FAILED TO CONSIDER THE FACT THAT NONE OF PAYM ENT IN CASH WERE IN EXCESS OF RS. 20,000/- AT A TIME. 6.1 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BE FORE US THAT THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE AO AND ON LY THE LEDGER ACCOUNT WAS NOT FURNISHED DURING THE ASSESSMENT PRO CEEDINGS. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORDS. THE LD. CIT(A) HAS MERELY REJECTED THE PRODUCTION OF THE LEDGER ACCOUNT BEFORE HIM. HE CO ULD HAVE CALLED FOR THE REMAND REPORT FROM THE AO AFTER MAKING THE LEDGER A CCOUNT AVAILABLE TO THE AO INSTEAD OF DISMISSING THE APPEAL ON THE GROU ND THAT THE ACCOUNT HAS BEEN FURNISHED AFTER LONG GAP AND HOLDING THAT THE EVIDENCE IS INADMISSIBLE. 8. THE LD. COUNSEL FOR THE ASSESSEE SHRI D.B. SANGH VI TOOK US THROUGH PAGE 19 TO 22 OF THE PAPER BOOK WHICH CONTA INS DETAILS OF WEAVING CHARGES PAID. HE ALSO PRODUCED THE LEDGER ACCOUNT FROM PAGES 9 TO 18 FROM WHERE EACH PAYMENT MADE ALONG WITH THE D ETAILS IS DULY REFLECTED. WE FIND THAT ALL THE PAYMENTS IN EXCESS OF RS. 20,000/- WAS MADE BY CHEQUE ONLY. THE ASSESSEE HAS MADE PAYMENT S OF LESS THAN RS. ITA NO. 6155/M/08 6 20,000/- IN CASH TOWARDS WEAVING CHARGES. SECTION. 40A(3) READS AS FOLLOWS: WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESP ECT 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, EXCEEDS TWEN TY THOUSAND RUPEES, NO DEDUCTION SHALL BE ALLOWED IN R ESPECT OF SUCH EXPENDITURE. 9. WE FIND THAT EACH PAYMENT MADE IS LESS THAN RS. 20,000/- IN CASH AND IT WOULD NOT BE CORRECT TO ADD UP ALL THE PAYME NTS MADE AT DIFFERENT INSTANCES TO THE SAME PERSON. THE AO HAS IN THIS M ANNER BROUGHT THE AMOUNT IN EXCESS OF RS. 20,000/- U/S. 40A(3) AND T HE LD. CIT(A) HAS CONFIRMED THE SAME. REGARDING THE LEDGER ACCOUNT, WE FIND THAT IN AN INDIVIDUAL TRANSACTION, THE AMOUNT WHICH HAS BEEN P AID BY CASH DOES NOT EXCEED RS. 20,000/- AND WHEREVER THE AMOUNT EXC EEDS RS. 20,000/-, THE ASSESSEE HAS TAKEN CARE TO PAY THE SAME BY CHEQ UE. THEREFORE, THE PROVISIONS OF SEC. 40A(3) ARE NOT APPLICABLE AND TH E ASSESSEES APPEAL IS ALLOWED ON THIS GROUND. 10. THE SECOND GROUND RAISED BY THE ASSESSEE READS AS FOLLOWS: LD. CIT(A) ERRED IN NOT DISPOSING OFF THE GROUND N O. 3 OF LEVYING EXCESSIVE INTEREST 234B OF THE I.T. ACT, 19 61 STATING THAT THE SAME IS CONSEQUENTIAL IN NATURE AND WOULD BE TAKEN CARE OF AT THE TIME OF GIVING EFFECT TO THE APPEAL ORDER. 11. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF TH E LD. CIT(A) IN STATING THAT THE INTEREST U/S. 234B IS MANDATORY AND ALSO C ONSEQUENTIAL IN NATURE, THE SAME WOULD BE TAKEN CARE AT THE TIME OF GIVING EFFECT TO THE APPEAL ORDER. THEREFORE, WE CONFIRM THE ORDER OF T HE LD. CIT(A) ON THIS ISSUE. ITA NO. 6155/M/08 7 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MAY, 2011 SD/- SD/- (R.S. SYAL ) (AS HA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEM BER MUMBAI, DATED 31 ST MAY , 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 6155/M/08 8 DATE INITIALS 1 DRAFT DICTATED ON: 26 . 0 5 . 201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 26 .05 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______