Rafiqul Hasan, Howrah V. ITO, Ward-47(2), Kolkata, Kolkata

ITA 722/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0460 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 12-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Keywords: Business expenditure
• Section: 40A(3); 143(3); 147

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI, M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 722 / KOL / 20 17 ASSESSMENT YEAR :2010-11 RAFIQUL HASAN HIND APARTMENT, 2 ND FLOOR, ROOM NO. 207, 545 G.T. ROAD (SOUTH) HOWRAH-711101 [ PAN NO.AATPH 3151 Q ] V/S . INCOME TAX OFFICER, WARD-47(2) 3, GOVT. PLACE (WEST), KOLKATA-700001 /APPELLANT .. / RESPONDENT /BY APPELLANT NONE /BY RESPONDENT SHRI ROBIN CHOUDHURY, ADDL. CIT-DR /DATE OF HEARING 27-08-2018 /DATE OF PRONOUNCEMENT 19-09-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2010-11 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-14, KOLKATAS ORDER DATED 30.01.2017, PASSED IN CASE NO.75/CIT(A)-14/CIR-47/2015-16, IN P ROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. CASE CALLED TWICE. NONE APPEARS AT ASSESSEES BEHES T. THE REGISTRY HAD ALREADY SENT AN RPAD NOTICE DATED 06.07.2018 AS WELL. WE THEREFORE PROCEED EX PARTE AGAINST ASSESSEE. 2. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY C ONTENDS DURING THE COURSE OF HEARING THAT BOTH THE LOWER AUTHORITIES H AVE RIGHTLY MADE THE IMPUGNED DISALLOWANCE OF 38 LAC U/S 40A(3) OF THE ACT AS THE ASSESSEE HAD MADE CASH PAYMENTS TO HIS WIFE IN VIOLATION OF PRES CRIBED MODES AS RIGHTLY ITA NO.722/KOL/2017 A.Y. 2010- 11 RAFIQUL HASAN V. ITO WD-47(2) KO L. PAGE 2 DISALLOWED IN ASSESSEE AND AFFIRMED IN THE CIT(A)S DETAILED DISCUSSION READING AS UNDER:- 4. OBSERVATION AND DECISION: T HE FACTS OF THE CASE RE THAT THE CASE OF THE APPELL ANT WAS REOPENED U/S 147 AS THE AO WAS IN POSSESSION OF INFORMATION THAT THE APPELLANT HAD PAID RS.38 LAKH IN CASH TO HIS WIFE TUHINARA BEGUM ON DIFFEREN T OCCASIONS. THE RECIPIENT WAS ENGAGED IN MANUFACTURING BUSINESS HAVING SIMILA R NATURE OF BUSINESS AS THE APPELLANT. THE TWO HAD BUSINESS TRANSACTIONS IN CASH EXCEEDING RS.20,000/- EACH TIME. THE APPELLANT WAS PROPRIETOR OF THE CONCERN TECHNO INDUSTRY. THE APPELLANT DURING ASSESSMENT PROCEEDINGS HAS STA TED THAT THE SAID CASH WAS INDEED DEPOSITED BY THE APPELLANT FROM HIS BUSI NESS SOURCES OF MANUFACTURING. HE SAID THAT THE SAID CASH WAS GIVEN FOR THE PURCHASE OF A RESIDENTIAL FLAT IN THE NAME OF HIS WIFE TUHINARA B EGUM. ANY FORM OF AGREEMENT COULD NOT BE FINALIZED AND TH E CASH RECEIVED WAS RETURNED IN PART AND THE REST WAS ADJUSTED AGAINST BUSINESS LIABILITIES. THE APPELLANT SUGGESTED THAT THE FLAT W NOT BOUGHT DUE TO SOME IRREGULARITIES AND DEFICIENCIES IN THE DOCUMENTS OF THEE FLAT. THAT SOME OF THE T OTAL AMOUNT OF RS.32 LAKH WAS TRANSFERRED BACK TO THE AC COUNT OF THE APPELLANT, WHILE AN AMOUNT OF RS.18.5 LAKH LEFT IN THE BANK AC COUNT OF HIS WIFE WAS ADJUSTED AGAINST LABOUR CHARGES OF RS.31,12,916/- R ECEIVABLE BY TECHNO INDUSTRY. THE AO NOTED THAT DURING THE BUSINESS TRANSACTIONS BETWEEN THE APPELLANT AND HIS WIFE TUHINARA BEGUM, THE LATE HAD PROVIDED JOB WORK TO THE APPELLANT DURING THE SAID YEAR. FOR THIS A BILL OF RS.29,16,0 00/- WAS SERVED UPON THE APPELLANT. SINCE THE AMOUNTS THAT WERE DUE BY THE APPELLANT WE RE IN ANY CASE QUITE LARGE AND THERE WAS NO EVIDENCE FURNISHED BY THE AP PELLANT AS REGARDS HIS STORY OF A PROPOSAL TO PURCHASE A FLAT THE AO CONSI DERED THESE PAYMENTS AS BEING IN VIOLATION OF SECTION 40A(3) OF THE ACT AND DISALLOWED THE ENTIRE SUM. DURING APPEAL THE APPELLANTS MAIN CONTENTION IS TH AT SINCE THE GENUINENESS OF THE DEPOSIT WAS NOT DOUBTED BY THE AO THERE WAS NO QUESTION OF INVOCATION OF SECTION 40A(3) OF THE ACT. HE HAS ALSO STATED THAT THE SAID AMOUNT OF CASH HAS BEEN ALREADY BEEN PENALIZED IN THE HANDS OF THE APP ELLANTS WIFE THROUGH IMPOSITION OF PENALTY U/S. 271D OF THE ACT BY TREAT ING THE SAID AMOUNT A CASH LOAN. THUS, HE ARGUES THERE CAN BE NO QUESTION OF A DDITION IN THE HANDS OF THE APPELLANT U/S. 40A(3) OF THE ACT. I HAVE EXAMINED THE ENTIRE MATERIAL ON RECORD. AT T HE OUTSET IT MAY BE STATED THAT THERE IS NOT AN IOTA OF EVIDENCE THAT THE APPE LLANT HAS ADDUCED IN SUPPORT O HIS STORY OF A PROPOSAL FOR PURCHASE OF SOME FLAT . THE SECOND ASPECT IN THIS ARRAY OF FACTS IS THAT THE APPELLANT AND HIS WIFE W ERE IN CONTINUOUS BUSINESS DEALINGS WITH OR WITHOUT THIS PARTICULAR TRANSACTIO N. IT IS ALSO A FACT THAT IN THE PARTICULAR PERIOD, THE APPELLANT HAD HAD SEVERAL JO B WORKS DONE THROUGH HIS WIFE RESULTING IN THE RAISING OF A VERY LARGE BILL OF OVER RS.29 LAKHS. IF WE LOOK AT THE OVERALL CIRCUMSTANCES OF THE CASE IT IS EVID ENT THAT THE ENTIRE MONEY ADVANCED TO HIS WIFE, IN BITS AND PIECES, IS IN REA LITY A BUSINESS TRANSACTION. THE ADVANCEMENT OF SUCH MONEYS WAS AS UNDER:- DATE DEPOSIT IN BANK (LAKHS OF RS.) 30.05.09 10 ITA NO.722/KOL/2017 A.Y. 2010- 11 RAFIQUL HASAN V. ITO WD-47(2) KO L. PAGE 3 30.06.09 3 28.07.09 1 21.08.09 4 25.09.09 9 16.12.09 11 WE NOTICE THE PATTERN OF DEPOSIT OF THE AMOUNTS IS THAT THE AMOUNTS ARE DEPOSITED IN INTERVALS THAT ARE ALMOST ALWAYS OF AB OUT A MONTH. THE BILLS RAISED BY THE APPELLANTS WIFE ARE ALSO OF A FIGURE THAT IS COMPARABLE TO THE AMOUNTS THAT HAVE BEEN DEPOSITED IN CASH. THERE DID NOT SEEM TO BE ANY URGENCY WITH REGARD TO THESE DEPOSITS SINCE THEY HA VE BEEN DEPOSITED SINCE THEY HAVE BEEN DEPOSITED FOR THE BETTER PART OF THE YEAR. IT APPEARS CLEAR THAT THE APPELLANT IN THE PRACTICE OF MAKING PAYMENTS TO HIS WIFES ACCOUNT OF AMOUNT THAT ARE BUSINESS TRANSACTIONS, SOMETIMES IN ADVANCE AND SOMETIMES OTHERWISE. IN MOST OF THESE CASES THE MONEYS HAVE B EEN PAID IN ADVANCE OR BUSINESS LOAN FOR THE JOB WORK TO BE DONE BY HER. T HESE ADVANCE ARE THEREAFTER EITHER RETURNED AS AND WHEN IT SUITS THE CONVENIENCE OF THE APPELLANT OR ARE ADJUSTED AS BUSINESS PAYMENTS. THE RE IS NOTHING THAT THE APPELLANT HAS POINTED ON RECORD THAT WOULD NECESSIT ATE THE PAYMENT IN CASH. THE CASE DOES NOT FALL UNDER ANY EXCEPTIONS WHETHER ENUMERATED OR NOT. AS REGARDS THE GENUINENESS ISSUE, IT MAY BE STATED THA T THE GENUINENESS OF THE DEPOSIT HAS NOT BEEN DOUBTED BY THE AO THAT IS A MA TTER OF FACT. THE DOUBT THAT IS CREATED AND WHICH THE SECTION 40A(3) SEEK S TO CIRCUMVENT IS WITH RESPECT TO THE TRANSACTIONS ITSELF. ONCE A TRANSACT ION ESPECIALLY BETWEEN SUCH CLOSE RELATIONS AS IN THE INSTANT CASE IS ACCE PTED IN CASH, THERE IS VIRTUALLY NO CONTROL OVER THE GENUINENESS OR THE QU ANTUM OF SUCH A TRANSACTION SINCE IT IS VERY EASY TO MANIPULATE THE TRANSIT OF CASH. IT IS EXACTLY TO CIRCUMVENT SUCH AN EVENTUALITY THAT THE EMBARGO U/S 40A(3) HAS BEEN PLACED ON THE STATUTE. THE FACT IS THAT THE APPELLANT HAS NOTHING ON RECORD TO SUGGEST THAT THERE WAS ANY EXIGENCY WITH REGARD TO SUCH PAY MENTS OR THAT IT DOES INDEED FALL UNDER ANY OF THE EXCEPTIONS LAID OUT IN THE RULES. IN THESE CIRCUMSTANCES I CANNOT INTERFERE WITH THE ORDER OF THE AO AND THE SAME IS CONFIRMED. 3. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIV E STRONGLY ARGUING IN FAVOUR OF THE IMPUGNED DISALLOWANCE. CASE FILE P ERUSED. THE QUESTION THAT ARISES FOR OUR APT ADJUDICATION IS TO WHETHER BOTH THE LOWER AUTHORITIES HAVE RIGHTLY DISALLOWED ASSESSEES CASH PAYMENTS MADE TO HIS WIFE OR NOT U/S 40A(3) OF THE ACT. WE MAKE IT CLEAR THAT THE CIT(A) AS WELL AS ASSESSING OFFICER ARE FAIR ENOUGH IN NOT DISPUTING THE ASSESS EES CLINCHING PLEA THAT HE HAD MADE THE CASH AMOUNT IN QUESTION FOR PURCHASING RESIDENTIAL FLAT IN THE NAME OF HIS WIFE TUHINARA BEGUM. RELEVANT DEAL COUL D NOT SEE LIGHT OF THE DAY. THIS FOLLOWED THE IMPUGNED SUMS ADJUSTMENT AS BUSINESS PAYMENTS CLAIMED AS EXPENDITURE. WE FIND NO REASON TO CONCUR TO MAKE DISALLOWANCE IN ITA NO.722/KOL/2017 A.Y. 2010- 11 RAFIQUL HASAN V. ITO WD-47(2) KO L. PAGE 4 THE ABOVE NARRATED PECULIAR FACTS AND CIRCUMSTANCES . THE FACTS REMAINS ASSESSEE HAD MADE PAYMENT TO HIS WIFE FOR PURCHASIN G RESIDENTIAL PROPERTY IN THE BEGINNING. IT WAS LATER AS ADJUSTED AS BUSINESS EXPENDITURE FOR JOB WORKS. HON'BLE JURISDICTIONAL HIGH COURTS DECISION IN CIT VS. CRESCENT EXPORT SYNDICATE ITA NO. 202 OF 2008 DECIDED ON 30.07.2008 UPHOLDS THE TRIBUNALS DECISION DELETING SEC. 40A(3) DISALLOWANCE KEEPING IN MIND VOLUMINOUS GENUINENESS ELEMENT INVOLVED IN PAYMENTS IN ISSUE T HEREIN. WE DRAW SUPPORT THEREFROM TO ACCEPT ASSESSEES EXPLANATION TENDERED IN SUPPORT THE IMPUGNED CASH PAYMENTS THEREFORE. SECTION 40A(3) OF 38 LAC IN ISSUE IS DELETED. 4. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 19 /09/2018 SD/- SD/- ( %) (' %) (M.BALAGANESH) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S (- 19 / 09 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-RAFIQUL HASAN HIND APARTMENT, 2 ND FLOOR, ROOM NO. 207 545 G.T. ROAD (SO UTH) HOWRAH-711 101 2. /RESPONDENT-ITO, WARD-47(2), 3. GOVT. PLACE (WEST), KOLKATA-001 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 3,