M/S. RAMLANI BUILDERS, Ujjain V. THE ITO-2(1), Ujjain

ITA 632/IND/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5759 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 31-08-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESHPANDE
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE (SINGLE MEMBER CASE) BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER I.T.A.NO.632/IND/2015 A.Y. : 2010-11 M/S.RAMLANI BUILDERS, ITO, UJJAIN VS. 2(1), UJJAIN. APPELLANT RESPONDENT PAN NO. AACFR2661L A PPELLANT S BY : SHRI S.S.DESHPANDE, CA RESPONDENT BY : SHRI R. A. VERMA, DR O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A), UJJAIN, DATED 02.06.2015 FOR THE ASSESSM ENT YEAR 2010-11. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL DERIVING INCOME FROM REAL ESTATE BUSINES S. THE DATE OF HEARING : 15 .12.2015 DATE OF PRONOUNCEMENT : 08 . 0 2 .201 6 M/S.RAMLANI BUILDERS, UJJAIN VS. ITO, 2(1), UJJAIN, I.T.A.NO. 632/IND/2015 - A.Y.2010-11 2 2 RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 89,6 90/- HAS BEEN FILED ON 05.10.2010. THE AO MADE THE ADDITION OF RS. 5,88,018/- ON ACCOUNT OF CASH PAYMENT MADE U/S 40A( 3) OF THE INCOME-TAX ACT, 1961. ON VERIFICATION OF PROFIT AND LOSS ACCOUNT, IT WAS FOUND THAT THE ASSESSEE HAS MADE TH E FOLLOWING CASH PURCHASES :- S.NO. NAME OF THE PARTY FROM WHOM PURCHASES MADE DATE AMOUNT ( RS.) 1. SHIVALAY TRADERS, UJJAIN 9/4/2009 16/4/2009 23/4/2009 28/4/2009 1/5/2009 7/5/2009 17/5/2009 29/5/2009 1/06/2009 6/6/2009 15/6/2009 22/6/2009 2/8/2009 18/09/2009 32400/- 36,870/- 21,450/- 24,040/- 23,220/- 31,985/- 24,560/- 27,930/- 25,135/- 21,670/- 21,730/- 31,935/- 25,095/- 29,210/- 3,77,230/- 2. SANJIV TRADERS, UJJAIN 15/04/2009 14/05/2009 16/06/2009 30,050/- 24,190/- 30,610/- 84,850/- 3. DHABADE TRADES, UJJAIN 6/4/2009 3/6/2009 21/6/2009 4/8/2009 24,320/- 27,655/- 27,170/- 22,595/- 22,595/- 101740 4. SANA AIR CONDITIONER, UJJAIN 13/06/2009 24,198/- TOTAL 5,88,018/- M/S.RAMLANI BUILDERS, UJJAIN VS. ITO, 2(1), UJJAIN, I.T.A.NO. 632/IND/2015 - A.Y.2010-11 3 3 3. SINCE THE ASSESSEE FIRM INCURRED EXPENDITURE IN RESPECT OF WHICH PAYMENT MADE TO THE AFORESAID PART IES IN A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR AC COUNT PAYEE BANK DRAFT, EXCEEDED RS. 20,000/-, THE DEDUCT ION SHALL NOT BE ALLOWED AS PER THE PROVISIONS OF SECTION 40A (3) OF THE INCOME-TAX ACT, 1961. ACCORDINGLY, RS. 5,88,018/- I S DISALLOWED OUT OF PURCHASES MADE AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 4. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT(A) HAS CONFIRMED THE ADDITION. 5. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT TH E AO HAS MENTIONED ONLY DATES AND HAS NOT MENTIONED B ILL NUMBERS. THE AO HAS CLEVERLY ESCAPED TO MENTION THA T PAYMENTS ARE FOR DIFFERENT BILLS AND PAYMENTS HAVE BEEN MADE FOR DIFFERENT BILLS AND NO SINGLE BILL EXCEED RS. 2 0,000/-. THE ASSESSEE FIRM HAD TWO SITES DURING THE YEAR ON WHIC H THE CONSTRUCTION WORK WAS GOING ON. ONE SITE IS AT MANG LAM APARTMENT, VEDNAGAR, UJJAIN AND ANOTHER SITE IS AT BHURI KA ADDA, DAULATGANJ, UJJAIN. THE PAYMENTS HAD BEEN MAD E FOR DIFFERENT BILLS AND FOR DIFFERENT SITES. THE AO HAS AGGREGATED M/S.RAMLANI BUILDERS, UJJAIN VS. ITO, 2(1), UJJAIN, I.T.A.NO. 632/IND/2015 - A.Y.2010-11 4 4 TWO DIFFERENT BILLS AND ARRIVED AT ABOVE FIGURE. IN CASH BOOK ALSO BILL NUMBERS ARE CLEARLY MENTIONED AND THE CAS H BOOK WAS VERIFIED . THEREFORE, THE PAYMENT MADE TO ALL T HESE PARTIES ARE NOT EXCEEDING RS. 20,000/-. THEREFORE, ADDITION MAY BE DELETED. THE LD. AUTHORIZED REPRESENTATIVE ALSO SUB MITTED THAT DECISION OF I.T.A.T., COCHIN BENCH IN THE CASE RAJA & CO. VS. DY. CIT, CENTRAL CIRCLE TRICHUR, (2013) 37 TAXMANN. COM 268 (COCHIN-TRIB.). THE LD. AUTHORIZED REPRESENTATIVE S UBMITTED THAT AS PER AMENDMENT IN SECTION 40A(3) BY FINANCE ACT, 2008, W.E.F. 1.4.2009 DOES NOT PERMIT SPLITTING OF PAYMENT AND SINCE THE SAID AMENDMENT IS CLARIFICATORY IN NATURE , IT WILL HAVE RETROSPECTIVE OPERATION. ACCORDINGLY, THE VALU E OF EACH BILL HAS TO BE TAKEN INSTEAD OF AGGREGATE AMOUNT OF PAYMENT MADE TO SINGLE PERSON IN A DAY. THEREFORE, THIS ADD ITION MAY BE DELETED. 6. THE LD. DR RELIED UPON THE ORDER OF AO. 7. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT IN THIS CASE, THE DISALLOWANCE OF EXPENDITURE BEYON D THE SPECIFIED LIMIT BY MEANS OTHER THAN CROSSED CHEQUE OR CROSSED M/S.RAMLANI BUILDERS, UJJAIN VS. ITO, 2(1), UJJAIN, I.T.A.NO. 632/IND/2015 - A.Y.2010-11 5 5 DRAFT HAD UNDERGONE A CHANGE IN THAT IT COULD BE AL LOWED BEFORE 1.4.1996 IF IT WERE GENUINE AND OTHERWISE ES TABLISHED TO HAVE BEEN OCCASIONED FOR THE REASONS ACCEPTABLE TO THE AO UNDER RULE 6DD(J) OF THE INCOME TAX RULES, 1962. TH ERE WAS AMENDMENT IN THE SECTION AND AFTER AMENDMENT IN SEC TION 40A(3) W.E.F. 1.4.2009 THE AMENDMENT U/S 40A(3) SAY S THAT WHERE THE ASSESSEE INCURRED ANY EXPENDITURE IN RESP ECT OF PAYMENT OR AGGREGATE PAYMENT MADE TO A PERSON IN A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT EXCEEDS RS. 20,000/-, N O DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPEN DITURE. I FIND THAT THERE IS AMENDMENT IN SECTION 40A(3) W.E. F. 1.4.2009. THIS ASSESSMENT YEAR IS 2010-11, THEREFOR E, THE AMENDED SECTION IS APPLICABLE IN THE YEAR UNDER CON SIDERATION. IT IS AN INTENTION OF THE LEGISLATOR IS TO STRICT A S FAR AS COMPLIANCE OF PROVISIONS OF SECTION 40A(3) IS CONCE RNED. SECTION 40A(3) REQUIRES DISALLOWANCE OF PAYMENT IN CASH FOR EXPENSES INCLUDING PURCHASES UNLESS PAYMENT IS ACCE PTED UNDER RULE 6DD. SECTION 40A(3) ALLOWS THAT PAYMENT OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE OR ACCOUNT P AYEE M/S.RAMLANI BUILDERS, UJJAIN VS. ITO, 2(1), UJJAIN, I.T.A.NO. 632/IND/2015 - A.Y.2010-11 6 6 BANK DRAFT EXCEEDING RS. 20,000/- IS TO BE DISALLOW ED AS EXPENDITURE. THE ASSESSEES CASE DOES NOT FALL IN A NY OF THE CRITERIA OF THE EXCEPTIONS MADE UNDER RULE 6DD(J). THE ASSESSEES PAYMENT IS GENUINE. AS THE ASSESSEE HAD STATED THAT THESE WERE LESS THAN RS. 20,000/- PERTAINING T O DIFFERENT SITES, THE ASSESSEES ARGUMENT IS NOT ACCEPTABLE, B ECAUSE THE LAW CLEARLY LIMITS THE PAYMENT MADE IN A SINGLE DAY . RULE 6DD UNDER CLAUSE (J) BEFORE 1995 PROVIDED EXCEPTION AND UNAVOIDABLE CIRCUMSTANCES OR IN CASE OF HAVING GENU INE DIFFICULTY TO THE PAYEE. HOWEVER, THIS CLAUSE HAS B EEN REMOVED FROM 1995 AND SUBSEQUENTLY CLAUSE (J) PROVIDES EXCE PTION ONLY WHERE THE PAYMENT IS REQUIRED TO BE MADE ON A DAY, WHICH THE BANKS ARE CLOSED EITHER ON ACCOUNT OF HOLIDAY OR ST RIKE. THE ASSESSEES CASE DOES NOT FALL WITHIN THE AMENDED RU LE 6DD. I FIND THAT THE HON'BLE SUPREME COURT IN THE CASE OF ATTAR SINGHJI GURUMUKH SINGH VS. ITO, (1991) 191 ITR 667 (S.C.) HELD THAT RULE 6DD PROVIDES THAT AN ASSESSEE CAN B E EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSS ED CHEQUE OR CROSSED BANK DRAFT IN THE CIRCUMSTANCES S PECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISION S OF SECTION M/S.RAMLANI BUILDERS, UJJAIN VS. ITO, 2(1), UJJAIN, I.T.A.NO. 632/IND/2015 - A.Y.2010-11 7 7 40A(3) AND RULE 6DD THAT THEY ARE INTENDED TO REGUL ATE THE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNA CCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK-MONEY FOR BUSINESS TRANSACTIONS. ANY RESTRAINT INTENDED TO CURB THE CH ANCES AND OPPORTUNITIES TO USE OR CREATE BLACK MONEY SHOULD N OT BE REGARDED AS CURTAILING THE FREEDOM OF TRADE OR BUSI NESS. THE WORD EXPENDITURE HAS NOT BEEN DEFINED IN THE ACT. AS PER SECTION 40A(3), WHICH REFERS TO THE EXPENDITURE INC URRED BY THE ASSESSEE IN RESPECT OF WHICH PAYMENT IS MADE. T HEREFORE, FORM THIS JUDGMENT, I AM OF THE VIEW THAT SECTION 4 0A(3) IS VERY CLEAR AND THERE IS NO AMBIGUITY IN THE MEANING OF SECTION 40A(3). THE LANGUAGE OF THE LAW IS CLEAR AND NO INT ERPRETATION CAN BE MADE. I FIND THAT THE ASSESSEE RELIED UPON T HE DECISION OF I.T.A.T. IN THE CASE OF RAJA & CO. VS. DY. CIT, 37 TAXMANN.COM 268 (COCHIN TRIB.), BUT IN THAT CASE TH E FACTS ARE DIFFERENT. THEREFORE, THIS WILL NOT BE HELPFUL TO THE ASSESSEE. I FIND THAT IN THE INSTANT CASE, THE ASSESSEE HAS P AID PAYMENT TO ONE PERSON ONLY AND IN SOME CASES TWO BILLS ARE PREPARED AND IF TWO BILLS ARE PREPARED, IT DOES NOT MAKE ANY DIFFERENCE, AS IS THE LANGUAGE, IT IS STATED THAT AGGREGATE OF PAYMENT MADE M/S.RAMLANI BUILDERS, UJJAIN VS. ITO, 2(1), UJJAIN, I.T.A.NO. 632/IND/2015 - A.Y.2010-11 8 8 TO A PERSON IN A DAY. THEREFORE, WHEN THE ASSESSEE FIRM HAS PURCHASED THE MATERIAL WORTH MORE THAN RS. 20,000/- , THE ASSESSEE IS BOUND TO MAKE PAYMENT BY CHEQUE AND IF IT IS NOT PAID BY CHEQUE OR ACCOUNT PAYEE DRAFT, NO DEDUCTION WILL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE AND SINCE TH E FIRM HAS INCURRED THE EXPENDITURE IN RESPECT OF WHICH PAYMEN T MADE TO AFORESAID PARTY IN A DAY OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE OR DRAFT EXCEEDS RS. 20,000/-, THE DEDUCTION U/S 40A(3) WILL NOT BE ALLOWED. HENCE, THE APPEAL OF TH E ASSESSEE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER HAS BEEN PRONOUNCED IN THE OP EN COURT ON 8 TH FEBRUARY, 2016, SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 8 TH FEBRUARY, 2016. CPU*