ACIT, V. Sri. southady Premanath,

ITA 72/BANG/2014

• Counselvise Citation: 7221114 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-02-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 16-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR K SHANKAR PRASAD J
• Assessee Lawyers: R AV EES H A RA O
• Section: 40A(3); 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE , ACCOUNTANT MEMBER ITA NO. 72 /B ANG/2014 (ASSESSMENT YEAR: 20 10 - 11 ) ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), MANGALORE. APPELLANT VS. SHRI SOLTHADY PREMANATH, SHREYAS , BEHIND BC CENTRE, B.C.ROAD, JODUMARGA, BANTWAL - 574219. RESPONDENT PAN: AFTPP 5608 P APPELLANT BY: DR.K.SHANKAR PRASAD, JCIT(DR). RESPONDENT BY: SHRI R AV EES H A RA O, CA. DATE OF HEARING : 09/02/2015 DATE OF PRONOUNCEMENT: 20 /02/2015 O R D E R PER SMT. P.MADHAVI DEVI, JM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), MYSORE , DATED 1 7 / 10 /2013 FOR THE ASSESSMENT YEAR 2010 - 1 1. THE REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.54,81,759/ - MADE BY THE ASSESSING OFFICER (AO) HOLDING THAT THE PAYMENTS ARE MADE IN CASH IN CONTRAVENTION OF THE PROVISIONS OF SEC.40A(3) OF THE SP NO.118 & ITA NO.946/BANG/2013 SMT. SANTOSH DEVI. PAGE 2 OF 7 INCOME - TAX ACT, 1961 [ HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT]. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, WHO IS ENGAGED IN THE BUSINESS OF EXECUTING CIVIL CONSTRUCTION CONTRACT WORK, FILED HIS RETURN OF INCOME ON 12/10/2010 FOR THE ASSESS MENT YEAR 2010 - 11 DECLARING A TOTAL INCOME OF RS.53,62,690/ - . DURING THE ASSESSMENT PROCEEDINGS U/S 143(3), THE AO PERUSED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND NOTICED THAT THE ASSESSEE HAS MADE PURCHASES FROM MANY SUPPLIERS AND THE PAYMENTS WERE IN T HE RANGE OF RS.18,000/ - TO RS.19,000/ - EVERY DAY. THEREFORE, THE AO ISSUED A NOTICE U/S 133(6) OF THE ACT TO VARIOUS SUPPLIERS OF MATERIALS TO VERIFY THE CLAIMS OF THE ASSESSEE. THE SUPPLIERS COMPLIED WITH THE NOTICES AND FURNISHED THE LEDGER EXTRACTS OF THE ASSESSEE IN THEIR BOOKS ON DIFFERENT DATES. ON VERIFICATION OF THE BOOKS OF ACCOUNT OF THE ASSESSEE AS WELL AS OF THE SUPPLIERS, THE AO OBSERVED THAT THE ASSESSEE HAD PAID AMOUNTS OF RS.17,000/ - TO RS.19,500/ - ON ALMOST ALL THE DAYS DURING THE FINANCI AL YEAR 2009 - 10. THEREFORE, HE ISSUED SUMMONS U/S 131 OF THE ACT TO THE PROPRIETOR OF M/S.RACHANA SERVICE CENTRE,[RSC] MELKAR, BANTWAL TQ. THE PROPRIETOR APPEARED AND DURING THE COURSE OF RECORDING OF HER STATEMENT , SHE ALSO FILED A COPY OF THE LEDGER EXT RACT OF THE ASSESSEE AS APPEARING IN HER BOOKS OF ACCOUNT. AS PER THE SAID STATEMENT, IT WAS EXPLAINED THAT THE TRANSACTION S WITH THE ASSESSEE DURING THE FINANCIAL YEAR WERE DONE IN CASH AND ARE SP NO.118 & ITA NO.946/BANG/2013 SMT. SANTOSH DEVI. PAGE 3 OF 7 REFLECTED IN THE LEDGER EXTRACTS AND THE CHEQUE PAYMENTS AND TRANSFER THROUGH NEFT AND RTGS ARE NOT RECORDED IN THE LEDGER. THE AO, THEREFORE, CAME TO THE CONCLUSION THAT ALL THE PAYMENTS MADE BY THE ASSESSEE ARE CASH PAYMENTS. THE ASSESSEE WAS ALSO EXAMINED U/S 131 OF THE ACT AND DURING THE COURSE OF RECORDING O F THE STATEMENT; THE ASSESSEE FILED A COPY OF THE LEDGER EXTRACT OF M/S.RSC AS APPEARING IN HIS BOOKS OF ACCOUNT. IT WAS CONFIRMED THAT ALL THE PAYMENTS MADE WERE INDEED CASH PAYMENTS AND THE AO FOUND THAT THE PAYMENTS WERE IN SPLIT IN BOOKS TO AVOID APPL ICABILITY OF SEC.40A(3) OF THE ACT. HE FURTHER OBSERVED THAT THE PURCHASES ARE ALL DONE BY DIFFERENT TRUCK OR LORRY DRIVER S AND THOUGH CUMULATIVELY THE AMOUNTS PAID TO M/S.RSC EXCEEDED RS.20,000/ - PER DAY , BUT SINCE THE PURCHASES ARE FOR DIFFERENT VEHICLE S BELONGING TO THE ASSESSEE, SPLIT OF BILLS WAS MADE TO SEE THAT NO SINGLE BILL EXCEED ED RS.20,000/ - . ON A QUERY FROM THE AO, THE ASSESSEE STATED THAT HE WAS NOT AWARE OF THE AMENDMENT TO SEC.40A(3) AND HE VOLUNTARILY AGREED FOR DISALLOWANCE DURING THE SC RUTINY PROCEEDINGS. TAKING THE SAME INTO CONSIDERATION, THE AO HAS MADE THE ADDITION U/S 40A(3) OF THE ACT. 3. SUBSEQUENTLY, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) STATING THAT AS PER THE PROVISIONS OF SEC.40A(3), THE PROVISIONS ARE APPLI CABLE TO EACH EXPENDITURE AND SINCE EACH EXPENDITURE DID NOT EXCEED RS.20,000/ - IN THE CASE OF THE ASSESSEE, THE PROVISIONS OF SEC.40A(3) ARE NOT APPLICABLE. HE SP NO.118 & ITA NO.946/BANG/2013 SMT. SANTOSH DEVI. PAGE 4 OF 7 FURTHER STATED THAT THE ASSESSEE S CASE IS COVERED BY THE EXCEPTION PROVIDED IN CLAUSE (K) TO RULE 6DD OF THE IT RULES , A S THE DRIVERS OF THE VEHICLES , BEING AGENTS OF THE ASSESSEE , MA K E PAYMENTS FOR THE FUEL PURCHASE D FOR THE VEHICLES DRIVEN BY THEM AND CANNOT MAKE PAYMENT BY CHEQUE OR DD. BILLS AND VOUCHERS IN RESPECT OF FUEL PURCHASE ARE ALSO P RODUCED FOR VERIFICATION. IT WAS STATED THAT AT THE TIME OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD AGREED FOR ADDITION ON ALLEGED CASH PAYMENTS WITHOUT UNDERSTANDING THE FACTS OF THE CASE AND CORRECT POSITION IN LAW AND THEREFORE PRAYED FOR SETTING ASID E OF SUCH DISALLOWANCE U/S 40A(3). THE CIT(A), AFTER CONSIDERING THE ASSESSEE S SUBMISSIONS, HAD HELD THAT FUEL HAS BEEN SUPPLIED BY M/S.RSC TO DIFFERENT VEHICLES, AS CAN BE SEEN FROM THE VEHICLE NUMBER S AND THE NAME S OF THE DRIVER S NOTED IN THE BILLS . HE OBSERVED THAT THE DRIVERS CANNOT MAKE PAYMENT BY CHEQUE WHILE PURCHASING FUEL , AND SINCE DRIVERS ARE PROVIDED WITH IMPREST CASH , THEY PURCHASE FUEL AS AND WHEN THEY REQUIRE FUEL AND THE SAME IS SUBMITTED TO THE ASSESSEE FOR REIMBURSEMENT , T HIS ACT CO MES WITHIN THE EXCEPTION PROVIDED UNDER CLAUSE (K) OF RULE 6DD OF THE IT RULES. HE, THEREFORE, ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND DELETED THE ADDITION AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 4. THE LEARNED DEPARTMENTAL REPRESENTAT IVE PLACED RELIANCE ON THE ORDER OF THE AO AND STATED THAT THE ASSESSEE HAS SP NO.118 & ITA NO.946/BANG/2013 SMT. SANTOSH DEVI. PAGE 5 OF 7 HIMSELF ADMITTED DURING THE COURSE OF RECORDING OF STATEMENT U/S 131 THAT THE PAYMENTS WERE SPLIT UP TO AVOID THE RIGOR OF THE PROVISIONS OF SEC.40A(3) OF THE ACT. HE FURTHER SUBM ITTED THAT THE CIT(A) HAS GRANTED RELIEF BY HOLDING THAT THE TRANSACTION FALLS WITHIN CLAUSE (K) OF RULE 6DD WHEREAS DRIVERS OF THE ASSESSEE CANNOT BE CALLED AS THE AGENTS OF THE ASSESSEE. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE UPON THE DECISIO N OF THE TRIBUNAL AT PUNE IN THE CASE OF DCIT VS. VIJAYKUMAR RAMESHCHAND & CO. (2007) 108 ITD 626(PUNE) WHEREIN IT WAS HELD THAT DRIVERS ARE NOT THE AGENTS OF THE OWNERS. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CI T(A) AND PLACED RELIANCE UPON THE DECISION OF THE TRIBUNAL AT BANGALORE IN THE CASE OF SHREE MAHAVEER CORPORATION VS. ITO (2002) 258 ITR 0055 WHEREIN IT WAS HELD THAT THE PROVISIONS APPLY TO INDIVIDUAL PAYMENTS AND NOT TO THE TOTAL PAYMENTS A DAY. HE HAS DRAWN OUR ATTENTION TO THE VARIOUS BILLS ENCLOSED AT PAGES 5 TO 88 OF THE PAPER BOOK TO DEMONSTRATE THAT NONE OF THE PAYMENTS TO RSC OR ANY OTHER CENTRE EXCEEDED RS.20,000/ - AT A TIME. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE PROVISIONS OF SEC.40A(3) ARE ATTRACTED WHERE AN ASSESSEE INCURS EXPENDITURE IN RESPECT 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 RS.20,000/ - SUCH A CLAIM IS SP NO.118 & ITA NO.946/BANG/2013 SMT. SANTOSH DEVI. PAGE 6 OF 7 NOT ALLOWABLE I.E. I N SUCH CIRCUMSTANCES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. RULE 6DD OF THE IT RULES PRESCRIBES THE CASES AND CIRCUMSTANCES IN WHICH A PAYMENT OR AGGREGATE OF PAY MENTS EXCEEDING RS.20,000/ - MAY BE MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT. THUS RULE 6DD APPLIES ONLY TO PAYMENT OR AGGREGATE OF PAYMENT MADE TO ANY PERSON ON A SINGLE DAY BY THE AS SESSEE. IT IS NOT IN DISPUTE THAT THE AGGREGATE OF PAYMENTS MADE TO RSC BY THE ASSESSEE ON A SINGLE DAY HAS EXCEEDED RS.20,000/ - . BUT IT IS TO BE KEPT IN MIND THAT EACH OF THE PAYMENTS TO RSC OR OTHER SERVICE CENTRE IS ON ACCOUNT OF A DIFFERENT TRUCK AND A DRIVER. IT IS ALSO TO BE NOTED THAT THE GENERAL PRACTICE IN THE PETROL PUMP IS TO SUPPLY FUEL ONLY FOR CASH PAYMENTS AND AS A GENERAL PRACTICE THE SERVICE CENTRE WOULD NOT ACCEPT CHEQUE OR WOULD NOT MAKE CREDIT SALES OF FUEL. IN SUCH CIRCUMSTANCES, TH E ASSESSEE WOULD HAVE TO MAKE PAYMENT BY CASH ONLY. FURTHER, AS HELD BY THE ITAT AT BANGALORE IN THE CASE OF SHREE MAHAVEER CORPORATION (CITED SUPRA), WHEN EACH OF THE PAYMENTS DID NOT EXCEED RS.10,000/ - [AS PER THE PRESCRIBED LIMIT FOR THE ASSESSMENT YEA R 1993 - 94] THE PROVISIONS OF SEC.40A(3) WERE NOT APPLICABLE. AS REGAR DS THE DECISION OF THE TRIBUNAL AT PUNE IN THE CASE OF VIJAYKUMAR RAMESHCHAND & CO. (CITED SUPRA), A DRIVER IS DIFFERENT FROM THE AGENT AND CANNOT BE HELD AS AN AGENT OF THE ASSESSEE. THEREFORE, APPLYING THIS PRINCIPLE, WE HOLD THAT THE FINDING OF THE CIT(A) ON THIS ISSUE IS SP NO.118 & ITA NO.946/BANG/2013 SMT. SANTOSH DEVI. PAGE 7 OF 7 NOT CORRECT. HOWEVER, AS SEEN FROM THE EVIDENCE PLACED BEFORE US, THOUGH THE RECIPIENT OF THE PAYMENT IS ONE AND THE SAME, EACH OF THE PAYMENTS, IS ON A DIFFERENT TRUCK AND DRIVER AND THEREFORE EACH PAYMENT HAS TO BE CONSIDERED SEPARATELY AND CANNOT BE AGGREGATED TO APPLY THE PROVISIONS OF SEC.40A(3). IN VIEW OF THE SAME, WE ARE OF THE OPINION THAT THE PROVISIONS OF SEC.40A(3) ARE NOT APPLICABLE AND WE UPHOLD THE F INDING OF THE CIT(A) THOUGH ON A DIFFERENT REASONING. IN THE RESULT, THE REVENUE S APPEAL IS DISMISSED. PRON OUNCED IN THE OPEN COURT ON 20 TH OF FEBRUARY , 201 5 . S D/ - S D/ - ( ABRAHAM P GEORGE ) ( SMT. P.MADHAVI DEVI) ACCOUNTANT MEMBER JU DICIAL MEMBER EKSRINIVASULU COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE T RIBUNAL BANGALORE