Sh. Bawa Pasricha, Kullu V. DCIT, Mandi

ITA 714/CHANDI/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0726 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Keywords: Bogus purchase
• Section: 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BEN CH A, CHANDIGARH , . '.., # $, %& BEFORE: SH. SANJAY GARG, JM & DR. B.R.R. KUMAR, AM ./ ITA NO. 714/CHD/2017 / ASSESSMENT YEARS : 2012-13 SHRI. BAWA PASRICHA PROP. SMILE ENTERPRISES AKHARA BAZAR, KULLU THE D CIT CIRCLE, MANDI ./ PAN NO: ABCPP4219P / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : SHRI. GAURAV SHARMA # ! ' / REVENUE BY : SMT. CHANDRAKANTA $ % ! &/ DATE OF HEARING : 04/09/2018 '()* ! &/ DATE OF PRONOUNCEMENT : 29/11/2018 %'/ ORDER PER DR. B.R.R. KUMAR, A.M THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(A) PALAMPUR DT. 31/01/2017. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED FOLLOW ING GROUNDS: 1. THE LD. CIT (APPEALS) FAILED TO APPRECIATE THE F ACT THAT THE ADDITION OF RS.2599935/- BEING AMOUNT PAID TO STONE SUPPLIERS I S UNJUSTIFIED, ILLEGAL AND ARBITRARY. 2. THE LD. CIT (APPEALS) FAILED TO APPRECIATE THE O RIGINAL VOUCHERS AND AFFIDAVITS FROM SUPPLIERS WHICH WERE IGNORED BY THE LD. ASSESS ING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS. 3. THE LD. CIT (APPEALS) FAILED TO APPRECIATE THE F ACT THAT THE CONTRACT WAS EXECUTED TO CONSTRUCT BASE STATIONS OF TRANSMISSION LINE TOWERS. 4. THE LD. CIT (APPEALS) FAILED TO APPRECIATE THE F ACT THAT THE MANUFACTURING OF CUT STONE COMES WITHIN DEFINITION OF COTTAGE INDUSTRY A S SPECIFIED IN CLAUSE (F) OF RULE 6DD OF THE INCOME TAX RULES, 1962. 5. THE LD. CIT (APPEALS) FAILED TO APPRECIATE THE WRIT TEN SUBMISSIONS AND VARIOUS CASE LAWS RELIED UPON. 6. WITHOUT PREJUDICE TO THE ABOVE THE LEARNED LD. CIT( APPEALS) OUGHT TO HAVE CONSIDERED THE FACT THAT THE AMOUNT PAID TO STONE S UPPLIERS COMES WITHIN THE DEFINITION FOREST PRODUCE AS SPECIFIED IN CLAUSE (E ) (I) OF RULE 6DD OF THE INCOME TAX RULES, 1962. 7. WITHOUT PREJUDICE TO THE ABOVE THE LEARNED LD. CIT( APPEALS) OUGHT TO HAVE CONSIDERED-THE FACT THAT THE AMOUNT PAID TO STONE S UPPLIERS THROUGH BEARER CHEQUES BY 'VICKY' ACTING ON BEHALF APPELLANT FALLS UNDER CLAUSE (K) OF RULE 6DD OF THE INCOME TAX RULES, 1962. 8. WITHOUT PREJUDICE TO THE ABOVE THE LEARNED LD. CIT (APPEALS) OUGHT TO HAVE CONSIDERED THE FACT THAT THE AMOUNT PAID TO STONE S UPPLIERS FALLS UNDER CLAUSE (G) OF RULE 6DD OF THE INCOME TAX RULES, 1962. 9. WITHOUT PREJUDICE TO THE ABOVE THE LEARNED LD. CIT (APPEALS) OUGHT TO HAVE CONSIDERED THE FACT THAT ALL OTHER EXPENSES AND PUR CHASE FROM STONE SUPPLIERS THROUGHOUT THE YEAR RELATING TO EXECUTION OF CONTRA CT WERE ALLOWED AND ONLY THE AMOUNT PAID TO THE STONE SUPPLIERS ON 16.03.2012 AN D 17.03.2012 WERE CONSIDERED AS BOGUS . 3. DURING ASSESSMENT PROCEEDINGS, WHILE VERIFYING T HE PURCHASES, IT WAS NOTICED THAT THE ASSESSEE HAD MADE PAYMENTS TO VARI OUS STONE CRUSHERS NAMELY M/S AMIT STONE CRUSHER AND 30 OTHER PERSONS , BUT NO PURCHASE BILLS/VOUCHERS COULD BE PRODUCED IN RESPECT OF THES E PURCHASES. THE PAYMENTS HAD BEEN MADE THROUGH CHEQUES DRAWN ON HIS J&K BANK LTD. KULLU. INFORMATION WAS CALLED BY THE AUTHORITIES FROM THE BANK U/S 133 (6) OF THE ACT AS TO HOW THESE PAYMENTS HAD BEEN MADE. IN COMPLIANCE, THE BANK FU RNISHED INFORMATION VIDE LETTER DATED 29.01.2015 AND CONFIRMED THAT TH ESE PAYMENTS MADE ON 16.03.2012 & 17.03.2012 AMOUNTING TO RS. 13,58,490/ - WERE BY WAY OF BEARER CHEQUES. THE BANK ALSO SUPPLIED COPIES OF BOTH SIDE S OF THE CHEQUES FROM WHICH IT WAS SEEN THAT ALL THE ABOVE PAYMENTS HAVE BEEN W ITHDRAWN BY ONE PERSON NAMELY 'VICKY'. IN VIEW OF THE ABOVE FACTS, THE A.O . HELD THAT THE PURCHASES SHOWN TO HAVE BEEN MADE FROM THE ABOVE 31 PERSONS W ERE BOGUS, THAT IS WHY THE ASSESSEE HAD NOT PRODUCED ANY BILLS/ VOUCHERS I N RESPECT OF THE ABOVE PURCHASES, THE PURCHASES WERE THEREFORE HELD AS UNE XPLAINED. 4. EXTENDING THE SAME CONCLUSION AND REASONING, THE A.O. FURTHER HELD THAT THE AMOUNT SHOWN AS PAYABLE TO THE ABOVE PERSONS IN THE BALANCE SHEET AS SUNDRY CREDITORS WAS ALSO TO BE TREATED AS UNEXPLAI NED AND ON ACCOUNT OF BOGUS PURCHASES. ACCORDINGLY, THE OUTSTANDING CREDI T BALANCES IN THE NAME OF SIX OUT OF THE ABOVE 31 PERSONS AMOUNTING TO RS. 12 ,41,445/- WAS ALSO DISALLOWED. IN TOTAL AN ADDITION OF RS. 25,99,935/- WAS MADE T O THE INCOME OF THE ASSESSEE. 5. DURING APPEAL, THE ASSESSEE FILED WRITTEN SUBMIS SIONS STATING THAT THE PAYMENTS IN QUESTION WERE MADE TO THE CUT-STONES SU PPLIERS. DURING THE YEAR, THE ASSESSEE HAD A CONTRACT WITH M/S A.D. HYDRO, MA NALI, FOR CONSTRUCTION OF BASE STATIONS FOR TRANSMISSION LINE TOWERS. THE WOR K SITES WERE IN EXTREME INTERIOR WITH NO ROAD CONNECTIVITY. IT WAS STATED THAT VICK Y IS AN ACCOUNTANT WORKING WITH THE ASSESSEE. CUT STONE MANUFACTURING, IS A MA NUAL AND LABOUR WORK INVOLVING HAMMERING AND CHISELING. EACH ONE OF THE SUPPLIERS (MATES) DEPLOYED 15-20 LABOURERS (MOSTLY NEPALI AND MIGRANT) TO CUT STONE. IN ORDER TO AVOID UN- NECESSARY LABOUR UNREST, CHEQUES WERE MADE IN THE N AME OF MATE (SUPPLIER) AND ALONG WITH HIM APPELLANT'S ACCOUNTANT (VICKY) W AS SENT TO BANK FOR WITHDRAWAL. AMOUNT WAS WITHDRAWN FROM BANK AND DIST RIBUTED TO THE LABOURERS IN FRONT OF OUR ACCOUNTANT. IN SOME OF THE CASES, T HE ACCOUNTANT SIGNED ON THE BACK OF THE CHEQUES AS BANK REFUSED TO PAY THE MATE S WHO WERE STRANGERS TO IT AND ALSO DID NOT HAVE NECESSARY ID PROOFS. IT WAS A RGUED THAT EVEN IF THE BEARER CHEQUES ARE TREATED AS CASH PAYMENTS, THE PAYMENTS ARE COVERED UNDER RULE 6DD, CLAUSE (F), WHICH PROVIDES THAT NO DISALLOWANC E SHALL BE MADE UNDER SECTION 40A(3) WHERE THE PAYMENT IS MADE FOR THE PU RCHASE OF PRODUCTS MANUFACTURED OR PROCESSED WITHOUT THE AID OF POWER IN A COTTAGE INDUSTRY. 6. THE LD. CIT(A) HELD THAT THE ASSESSEE HAS NOT MA DE THE PAYMENTS IN QUESTION TO A COTTAGE INDUSTRY OR FOR A PRODUCT MAN UFACTURED OR PROCESSED IN A COTTAGE INDUSTRY AND IT IS NOT THE CASE OF THE ASSE SSEE THAT THE PAYMENTS WERE MADE IN CASH AT SITE UNDER A CIRCUMSTANCE FALLING U NDER RULE 6DD. THE ASSESSEE DULY MADE THE PAYMENTS BY CHEQUES DRAWN ON HIS BANK WHICH WERE UPON INVESTIGATION FOUND TO BE BEARER CHEQUES. ALL THE A BOVE AMOUNTS WERE WITHDRAWN BY ONE 'VICKY' ACTING ON BEHALF OF THE AS SESSEE WHOM THE ASSESSEE HAD GIVEN THE BEARER CHEQUES. RULE 6D IT WOULD HAVE COME INTO PLAY IF THE PAYMENTS HAD BEEN MADE IN CASH AT SITES OF WORK, TH ERE IS FURTHER NO EVIDENCE OR MATERIAL ON RECORD THAT THE CASH WITHDRAWN BY 'V ICKY' WAS GIVEN TO ANY OF THE 31 PERSONS IN WHOSE NAMES THE CHEQUES HAD BEEN ISSU ED. THUS THE LD. CIT(A) CONFIRMED THE ADDITION ON BOTH THE GROUNDS OF NOT P ROVING THE PAYMENT AS GENUINE AS WELL AS ON NON APPLICABILITY OF RULE 8DD . 7. BEFORE US, LD. AR ARGUED AND FILED WRITTEN SUBMI SSION IN SUPPORT OF HIS GROUNDS. THE BRIEF SYNOPSIS OF THE ARGUMENTS TAKEN BY THE LD. AR ARE AS UNDER: ASSESSING OFFICER HAS NEVER ASKED TO PRODUCE BOOKS OF ACCOUNT WHERE AS IN THE ASSESSMENT ORDER THE ASSESSING OFFICER WRONGLY MENT IONS THAT BOOKS OF ACCOUNT WERE NOT PRODUCED. 7.1 ALL THE PURCHASE BILLS HAVE BEEN PRODUCED BEFOR E THE ASSESSING OFFICER. 7.2 VICKY THAKUR THE ACCOUNTANT ATTENDED THE PROCEE DINGS BEFORE THE ASSESSING OFFICER ON 07/01/2015 AS PER THE ORDER SH EET NOTING HENCE THE ASSESSING OFFICER IS WELL AWARE OF THE ACCOUNTANT. 7.3 THE BEARER CHEQUES WERE ISSUED FOR CONVENIENCE TO FACILITATE THE PROMPT PAYMENT TO THE LABOURERS. THE ADDITION WAS MADE BAS ED ON THE EVIDENCES COLLECTED FROM THE THIRD PARTY WHICH IS THE J&K BAN K . 7.4 THE AFFIDAVITS OF THE VARIOUS STONE SUPPLIERS W ERE FURNISHED BEFORE THE ASSESSING OFFICER WHOSE GENUINENESS WAS NOT QUESTIO NED BY THE ASSESSING OFFICER DURING THE PROCEEDINGS. 7.5 IT WAS STRONGLY CONTENDED THAT THE PAYMENT MADE ONLY ON 16/03/2012 AND 17/03/2012 WERE DISALLOWED WHEREAS THE PRACTICE OF THE ASSESSEE THROUGHOUT THE YEAR AND IN THE SUBSEQUENT YEAR IS A LSO SAME AND NO REASONS HAS BEEN BROUGHT ON RECORD TO ESTABLISH THAT PAYMENT MA DE ON 16/03/2012 AND 17/03/2012 IS BOGUS KEEPING IN MIND THE FACT THAT T HE OTHER PAYMENTS THROUGHOUT THE YEAR HAS BEEN ACCEPTED AS GENUINE TH OUGH THROUGH BEARER CHEQUES. 8. THE LD. DR ON THE OTHER HAND HAS ARGUED THAT THE GENUINITY OF THE ASSESSMENT PROCEEDINGS CAN BE GAUZED FROM THE ASSES SMENT ORDER THAT NOT ALL THE PAYMENTS MADE BY BEARER CHEQUES HAVE BEEN DISAL LOWED BECAUSE THEY HAVE BEEN FOUND TO BE GENUINE TRANSACTIONS. 9. WE HAVE GONE THROUGH THE FACTS OF THE CASE. THE ASSESSING OFFICER IS DISALLOWED THE AMOUNTS PAID TO THE FOLLOWING SUPPLI ERS. S.NO. NAME OF THE PERSON/ PARTY TO WHOM BEARER CHEQUE ISSUED DATE OF ISSUE TOTAL AMOUNT PARTIES WHOSE AFFIDAVITS FILED BEFORE THE ASSESSING OFFICER 1 AMIT STONE SUPPLIER 16-03-2012 32310/- BHIKAM RAM 2 ASHU STONE SUPPLIER 16-03-2012 49500/- CHAMAN 3 BHAG SINGH STONE SUPPLIER 17-03-2012 48210/- DAWA LAMBA 4 BUNTY STONE SUPPLIER 17-03-2012 48120/- DOLA RAM THAKUR 5 DES RAJ STONE SUPPLIER 16-03-2012 42100/- DOT RAM 6 GUDDU STONE SUPPLIER 16-03-2012 45640/- KARAM CHA ND 7 HARI CHAND STONE SUPPLIER 16-03-2012 49500/- KHEKH RAM 8 HIRA LAI STONE SUPPLIER 16-03-2012 25900/- MANI R AM 9 KAKU STONE SUPPLIER 17-03-2012 43910/- PRAVIN KUM AR 10 KARARN CHAND STONE SUPPLIER 17-03-2012 46220/- PURKH CHAND 11 MANI RAM SIONE SUPPLIER 16-03-2012 49210/- RAMES H KUMAR 12 NOKHU RAM STONE SUPPLIER 16-03-2012 48210/- TOTA RAM 13 OM DUTT STONE SUPPLIER 16-03-2012 47800/- 14 PAWAN STONE SUPPLIER 16-03-2012 48400/- 15 PREETAM STONE SUPPLIER 16-03-2012 47900/- 16 PREM CHAND STONE SUPPLIER 16-03-2012 35600/- 17 RAHUI STONE SUPPLIER 16-03-2012 47210/- 18 RAJ KUMAR 16-03-2012 34000/- 19 RAJESH 16-03-2012 43000/- 20 RAJNESS STONE SUPPLIER 17-03-2012 39110/- 21 RAKU STONE SUPPLIER 16-03-2012 48210/- 22 RAM SINGH STONE SUPPLIER 17-03-2012 38700/- 23 RAM SINGH STONE SUPPLIER 17-03-2012 45410/- 24 RAVINDER KUMAR STONE SUPPLIER 16-03-2012 36400/- 25 SANJAY STONE SUPPLIER 16-03-2012 42520/- 26 SANJAY STONE SUPPLIER 17-03-2012 40800/- 27 SHIV RAM 17-03-2012 40900/- 28 TEK ROM 17 03-2012 47800/- 29 TIKKARN STONE SUPPLIER 17-03-2012 49100/- 30 TULE RAM 16-03-2012 48210/- 31 VIJAY STONE SUPPLIER 16-03-2012 48500/- 1358490/- 10. ON GOING THROUGH THE FACTS OF THE CASE WE ARE U NABLE TO ACCEPT WITH THE ARGUMENTS OF THE LD. AR THAT THE ASSESSING OFFICER HAS NOT ASKED FOR PRODUCTION OF BOOKS OF ACCOUNTS HENCE NOT PRODUCED AND ALSO TH E MAIN ARGUMENT THAT THE AMOUNTS HAVE BEEN PAID BY BEARER CHEQUES SO THA T THE PROMPT WAGES CAN BE PAID TO THE LABOURERS CANNOT BE ACCEPTED AS WE F IND THAT ALL THE PURCHASES WERE LEDGERED IN THE MONTHS OF JANUARY AND FEBRUARY WHERE AS THE PAYMENTS HAVE BEEN MADE ONLY ON 16 TH & 17 TH MARCH 2012. IT IS ALSO CANNOT BE ACCEPTED THAT ALL THE PAYMENTS HAVE BEEN MADE TO SUPPLIERS O NLY ON TWO DAYS WITH WHOM HARDLY ONE OR TWO TRANSACTIONS HAVE BEEN ENTERED. T HE ASSESSING OFFICER WAS WELL JUSTIFIED IN ACCEPTING THE PAYMENTS MADE TO OT HER SUPPLIERS FROM WHOM THE STONE WAS PURCHASED THROUGHOUT THE YEAR ON A REGULA R BASIS. SIMILARLY THE ARGUMENT OF THE LD. AR THAT THE ENQUIRIES CONDUCTED FROM THE BANK AMOUNTS TO THIRD PARTY ENQUIRIES CANNOT BE ACCEPTED AS THE ASS ESSING OFFICER HAS ONLY OBTAINED THE COPIES OF THE CHEQUES ISSUED BY THE AS SESSEE HIMSELF AND DETERMINED THAT THE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE THROUGH A BEARER CHEQUE AND EN CASHED BY HIS ACCOUNTANT NAMEL Y VICKY. HOWEVER, KEEPING IN VIEW THE CIRCUMSTANCES THAT THE ASSESSIN G OFFICER HAS NOT CONCLUSIVELY ENQUIRED INTO THE GENUINITY OF THE TRA NSACTIONS AND THE ASSESSEE HAS ALSO NOT PROVED THE GENUINENESS OF THE PURCHASE AND UTILIZATION OF THE MATERIAL BEFORE THE ASSESSING OFFICER, IN ORDER TO HAVE A FAIR VIEW PERTAINING TO ALLOWABILITY OF THIS EXPENDITURE THE MATTER IS REST ORED BACK TO THE FILE OF ASSESSING OFFICER TO GIVE DUE OPPORTUNITY TO THE ASSESSEE AND DETERMINE THE TAXABILITY AS PER THE PROVISIONS OF THE INCOME TAX ACT,1961. WE H EREBY ALSO HOLD THAT THE RULE 6DD(F), 6DD(G) AND 6DD(K) CANNOT BE APPLIED TO THE PAYMENTS MADE TO STONE SUPPLIERS. HENCE, THE ALTERNATE PLEA TAKEN BY THE A SSESSEE AT GROUND NO. 7 AND 8 ARE TREATED AS DISMISSED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- . '.., # $, (SANJAY GARG ) ( DR. B.R.R. KUMA R, AM) / JUDICIAL MEMBER %& / ACCOUNTANT MEMBER AG DATE: 29/11/2018 (+ ! ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT ,2. / THE RESPONDENT , 3. $ / / CIT, 4. $ / ()/ THE CIT(A), 5. -23 4, & 4, 67839/ DR, ITAT, CHANDIGARH, 6. 38 ;%/ GUARD FILE