Subrata Sarkar, Kolkata V. ITO, Ward 51(3), Kolkata, Kolkata

ITA 693/KOL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6437 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 10-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SALLONG YADEN ADD L
• Assessee Lawyers: D K SAHA
• Keywords: Business expenditure
• Section: 40A(3); 143(3)

Judgement Text

1 ITA NO.693/KOL/2017 SUBRATA SARKAR A.Y.2013-14 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A KOL KATA [BEFORE HONBLE SHRI S.S. GODARA, JM & SHRI M.BAL AGANESH, AM ] ITA NO.693/KOL/2017 ASSESSMENT YEAR : 2013-14 SUBRATA SARKAR -VERSUS- I.T.O.-51(3) KOLKATA KOLKATA (PAN:AYUPS 9203 M) (RESPONDENT) FOR THE APPELLANT: SHRI D.K.SAHA, FCA FOR THE RESPONDENT: SHRI SALLONG YADEN,ADDL. CIT DATE OF HEARING : 26.04.2018. DATE OF PRONOUNCEMENT : 02.05.2018. ORDER PER S.S. GODARA, JM: 1. THIS ASSESSEES APPEAL FOR A.Y.2013-14 EMANATES FROM THE CIT(A)-15, KOLKATAS ORDER DATED 22.02.2017, PASSED IN APPEAL NO. 380/CIT(A)-15/15-16/WD- 51(3)/KOL, IN PROCEEDINGS U/S 143(3) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER THE ACT). 2. LEARNED COUNSEL REPRESENTING ASSESSEE TAKES US TO RELEVANT PLEADINGS IN THE INSTANT APPEAL. HE STATES THAT THE FIRST AND FOREMO ST GRIEVANCE RAISED IN ASSESSEES REVISED GROUNDS IS THAT OF CORRECTNESS OF SECTION 4 0A(3) DISALLOWANCE OF CASH PAYMENT OF BUSINESS EXPENDITURE OF RS.76,74,788/- MADE IN A SSESSMENT AS AFFIRMED IN LOWER APPELLATE PROCEEDINGS FOLLOWED BY ENHANCEMENT IN TH E CIT(A)S ORDER UNDER THE VERY PROVISION AMOUNTING TO RS.23,90,907/-. 3. THIS ASSESSEE /INDIVIDUAL RUNS A PROPRIETARY CO NCERN NAMELY M/S PANHATI FL OFF SHOP ENGAGED IN FOREIGN LIQUOR RETAIL BUSINESS. HE MADE CASH PAYMENTS EXCEEDING RS.20,000/- IN A SINGLE DAY TO M/S. GALAXY TRADERS , M/S CASTLE LIQUOR PVT. LTD., M/S UNITED TRADING COMPANY, SEN LAW & CO, M/S SONA KUTH I AND M/S SHREE RIDDHI SIDDHI OF RS.46,67,384/-, RS.13,07,889/-, RS.6,43, 767/-, RS.9,35,748/-, RS.80,000/- 2 ITA NO.693/KOL/2017 SUBRATA SARKAR A.Y.2013-14 AND RS.40,000/- RESPECTIVELY. THESE CASH PAYMENTS R EPRESENT ITS LIQUOR SUPPLY EXPENDITURE. THE ASSESSING OFFICER ISSUED SECTION 1 33(6) NOTICE(S) TO THE CONCERNED PAYEES. ALL RECIPIENT PARTIES CAME PRESENT WITH THE IR RESPECTIVE LEDGER(S) INDICATING THE ASSESSEE TO HAVE MADE THE IMPUGNED CASH PAYMENTS. T HE ASSESSING OFFICER PROPOSED TO INVOKE THE IMPUGNED STATUTORY DISALLOWANCE PROVI SION U/S 40A(3) OF THE ACT. THE ASSESSEES REPLY CAME ON 11.03.2013 PLEADING THEREI N THAT HIS FOREIGN LIQUOR SALES ARE ADMITTEDLY IN CASH. HE STATED THAT PERIODIC SHORTFA LL OF VARIOUS LIQUOR BRANDS FROM TIME TO TIME LED HIM TO MAKE THE IMPUGNED CASH PURCHASES OF RS.1,35,13,533/- AS AGAINST THE TOTAL PURCHASES OF RS.3,98,06,566/- AND CORRESP ONDING SALES OF RS.4,42,20,422; RESPECTIVELY. ALL THIS EXPLANATION FAILED TO MAKE T HE ASSESSING OFFICER AGREE. HE OBSERVED IN ASSESSMENT ORDER DATED 21.03.2016 THAT THE ASSESSEE HAD ISSUED VARIOUS CHEQUES OVER AND ABOVE HIS SANCTIONED CREDIT LIMIT OF RS.40,00,000/- AND THEREFORE, THE ABOVE FACTS WOULD NOT BE COVERED UNDER THE SPECIFIC CIRCUMSTANCES ALLOWING CASH PAYMENTS UNDER RULER 6DD OF THE INCOME TAX RULES 19 62. THE ASSESSING OFFICER THEREAFTER GRANTED THE ASSESSEE BENEFIT OF SUNDAYS AND CLOSED HOLIDAYS TO ARRIVE AT THE IMPUGNED DISALLOWANCE FIGURE OF RS.76,74,788/- AS A FFIRMED IN LOWER APPELLATE PROCEEDINGS. COUPLED WITH THIS, THE CIT(A) HAS MADE THE CORRESPONDING ENHANCEMENT AS WELL AS IN CASE OF BEARER CHEQUE PAYMENT OF RS.2 3,90,907/- MADE TO M/S GALAXY TRADERS THROUGH ONE SHRI TAPAN CHAKRABORTY ACTING A S ITS SALESMAN. 4. LEARNED COUNSEL FIRST OF ALL SUBMITS THAT THERE IS NO DOUBT ABOUT THE GENUINENESS OF THE ASSESSEES PAYMENTS TO HAVE BEEN MADE TO HIS REGULAR SUPPLIERS. HE REITERATES THE FACTS THAT THE BANK CREDIT LIMIT OF RS.40,00,000/- HAD ALREADY BEEN EXHAUSTED AS PER THE RELEVANT BANK STATEMENT/CASH C REDIT JOURNAL FORMING PART OF CASE RECORDS. LEARNED COUNSEL CITES HONBLE APEX COURT DECISION ATTAR GURMUKH SINGH VS ITO (1991) 191 ITR 667 (SC) HOLDING THAT A TAX PAYE R CAN IDENTIFY ITS CASH RECIPIENTS AND THE IMPUGNED DISALLOWANCE PROVISION IS NOT MADE TO RESTRICT GENUINE BUSINESS ACTIVITIES BUT AIMS TO PREVENT USE OF UNACCOUNTED M ONEY THEREBY REDUCING FLOW OF BLACK MONEY IN BUSINESS TRANSACTIONS. ANOTHER CASE LAW REFERRED IS (2002) 121 TAXMAN.COM 143 (CAL) BAGMARI TEA CO.LTD. VS CIT HO LDING THAT SUCH CASH PAYMENTS 3 ITA NO.693/KOL/2017 SUBRATA SARKAR A.Y.2013-14 OF BUSINESS EXPENDITURE IN ABSENCE OF UNAVOIDABLE CIRCUMSTANCES INVOLVING BUSINESS EXPEDIENCY WOULD INVITE THE IMPUGNED STATUTORY PROV ISIONS APPLICATION. LEARNED COUNSEL FURTHER RELIES ON HONBLE GUJARAT HIGH COUR T JUDGMENT IN [2014] 366 ITR 122 (GUJ) ANUPAM TELE SERVICES VS ITO THAT CASH PAYMENT S OF BUSINESS EXPENDITURE INVOLVING UNAVOIDABLE CIRCUMSTANCES COUPLED WITH GE NUINENESS ELEMENT IS NOT TO BE DISALLOWED U/S 40A(3) OF THE ACT. HE ACCORDINGLY SE EKS TO DELETE THE IMPUGNED DISALLOWANCE AS WELL AS THE ENHANCEMENT (SUPRA) UND ER CHALLENGE. 5. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTS BOTH THE LOWER AUTHORITIES ACTION INVOKING THE DISALLOWANCE ALONG WITH THE ENHANCEMENT IN THE LOWER APPELLATE PROCEEDINGS OF RS.23,90,907/- IN THE CASE OF M/S. GALAXY TRADERS (SUPRA). HE HIGHLIGHTS THE FACT THAT THE ASSESSEE HAD NOT FU LLY EXHAUSTED HIS CREDIT LIMIT SANCTIONED BY THE BANK AUTHORITIES (SUPRA) AS PER T HE RELEVANT RECORDS. HE EMPHASIZES THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) H AVE RIGHTLY DISALLOWED THE IMPUGNED BUSINESS EXPENDITURE IN ABSENCE OF PAYMENT BY WAY OF A SPECIFIED MODE(S). HE FURTHER ASSERTS THAT THE SAME IS NOT LI ABLE TO BE INTERFERED IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE INSTANT APPEAL. 6. WE HAVE HEARD RIVAL SUBMISSIONS. CASE FILE PERUS ED. IT HAS BECOME SUFFICIENTLY CLEAR BY NOW THAT THE ASSESSEE, ENGAGED IN FOREIG N LIQUOR RETAIL BUSINES, HAS MADE THE RELEVANT PAYMENTS TO HIS SUPPLIERS BY BEARER CH EQUE/CASH. HIS PAYEES CONCERNED HAVE ALREADY APPEARED ALONG WITH THEIR RESPECTIVE L EDGERS ACKNOWLEDGING THE VERY PAYMENTS. THERE IS NO ISSUE OF GENUINENESS THEREFOR E. THE SOLE ISSUE BETWEEN THE PARTIES IS QUA MODE OF PAYMENT ONLY. THE REVENUES CASE AS PER BOTH THE LOWER AUTHORITIES RESPECTIVE ORDERS IS THAT THE ASSESSEE S ACTION OF MAKING CASH PAYMENTS OF EXPENDITURE TO HIS SUPPLIERS RATHER THAN THE SPECIF IC MODES U/S 40A(3) OF THE ACT INVITES THE IMPUGNED DISALLOWANCE SINCE NOT COVERED UNDER RULE 6DD OF THE IT RULES. THE RELEVANT BANK STATEMENT/CASH JOURNAL REVEALS TH AT THE ASSESSEE HAD BEEN HAVING SANCTIONED CREDIT LIMIT OF RS.40,00,000 WITH HIS BA NK. THE ASSESSEES CASE BEFORE US IS THAT THE ENTIRE CASH PAYMENTSSOURCE IS HIS CASH SA LES OF FOREIGN LIQUOR. HE EXPLAINS THE SOLE REASON OF MAKING CASH PAYMENTS TO OVERDRAFT IN EXCESS OF THE SANCTIONED CREDIT 4 ITA NO.693/KOL/2017 SUBRATA SARKAR A.Y.2013-14 LIMIT OF RS.40 LAKHS AS INCREASED TO RS.52 LAKHS IN SUCCEEDING ASSESSMENT YEARS. WE NOTICE THAT THERE IS NO MATERIAL IN THE CASE FILE O R IN ASSESSMENT ORDER OR IN LOWER APPELLATE ORDER WHICH COULD INDICATE SUCH AN OVERDR AFT IN THE SAID CREDIT LIMIT ACCOUNT ON THE RESPECTIVE DAYS OF THE IMPUGNED CASH PAYMENT S. WE THUS DEEM IT APPROPRIATE TO REMIT THE INSTANT FORMER COMPONENT OF ORIGINAL DISA LLOWANCE OF RS.76,74,788/- BACK TO THE ASSESSING OFFICER FOR FACTUAL VERIFICATION. IT IS MADE CLEAR THAT THE IMPUGNED DISALLOWANCE WOULD STAND DELETED TO THE EXTENT THE ASSESSEE HAD NEGATIVE BALANCE IN HIS SANCTIONED CREDIT LIMIT 2 DAYS BEFORE OR WITHIN EACH AND EVERY CASH PAYMENT AND NOT OTHERWISE. WE THUS LEAVE THE ISSUE OPEN TO THE ASSESSING OFFICER FOR FURTHER NECESSARY VERIFICATION AS PER LAW. 7. COMING TO ENHANCEMENT COMPONENT OF RS.23,90,907/ - (SUPRA), WE FIND THAT ONE MR. TAPAN CHAKRABORTY ACTING AS PAYEES SALES MAN H AD COLLECTED A BEARER CHEQUE IN ORDER TO WITHDRAW PAYMENT SINCE MANY CHEQUES HAD BO UNCED IN THE PAST. WE ARE OF THE OPINION THAT IN THESE FACTS THAT THE ASSESSEE HAD T O PAY THE SUM IN QUESITON BY WAY OF BEARER CHEQUE IN ORDER TO EXPEDITE PAYMENT TO PAYEE S AUTHORISED AGENT ONLY. THIS ENHANCEMENT COMPONENT OF RS.23,90,907/- IS DELETED THEREFORE. 8. LEARNED COUNSELS NEXT SUBMISSION IS REGARDING ASSESSEES THIRD SUBSTANTIVE GROUND CHALLENGING ESTIMATED PROFIT @ 8.95% COMING TO RS.2,46,642/- ON UNACCOUNTED PURCHASES. BOTH THE LD. REPRESENTATIVES ARE AD IDEM THAT THE ASSESSING OFFICER HAD DISALLOWED/ADDED UNACCOUNTED PURCHASES OF RS.27,55,952/- ALONG WITH CLOSING STOCK OF RS.1,20,201/- AS WELL. THE CIT(A) HAS DELETED THE SAID TWO DISALLOWANCES/ADDITIONS IN HIS LOWER APPELLATE ORDE R. IT THEREFORE APPEARS TO BE A CASE WHEREIN THE IMPUGNED PURCHASE DISALLOWANCE STANDS D ELETED WHEREAS THE RELEVANT PROFIT ESTIMATION ONLY STANDS . WE CONCLUDE IN THE SE FACTS THAT ONCE THE CIT(A) HAS AGREED WITH GENUINENESS THE RELEVANT PURCHASES, THE RE IS NO BASIS LEFT TO CONCUR WITH THE IMPUGNED PROFIT ESTIMATION. THE ADDITION IN QUE STION OF RS.2,46,662/- IS ALSO DELETED. THE INSTANT LATTER SUBSTANTIVE GROUND IS ACCEPTED IN ASSESSEES FAVOUR. 5 ITA NO.693/KOL/2017 SUBRATA SARKAR A.Y.2013-14 8. IN THE RESULT THE APPEAL BY THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON 02.05.2018. SD/- SD/- [M.BALAGANESH] [ S.S. GODARA ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 02.05.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.SHRI SUBRATA SARKAR, PROP: M/S PANIHATI FL OFF SH OP, 19 B.T.ROAD, KOLKATA- 700014. 2. I.T.O. WARD-51(3), KOLKATA. 3. CIT(A)-15, KOLKATA 4. C.I.T.-17, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHES