Globalconnect Travels P.Ltd, New Delhi V. ITO, Ward-10(2), New Delhi

ITA 8153/DEL/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8822 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 24-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NAVEEN SINGH
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER ITA NO.8153/DEL/2018 ASSESSMENT YEAR: 2015-16 GLOBAL CONNECT TRAVELS P. LTD. 403-404, SAGAR TOWER, DISTRICT CENTRE, JANAK PURI, NEW DELHI-110058 PAN NO. AAFCG2562F VS ITO WARD 10 (2) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. NAVEEN SINGH, CA RESPONDENT BY SH. S. L. ANURAGI, SR. DR DATE OF HEARING: 13/08/2019 DATE OF PRONOUNCEMENT: 16/09/2019 ORDER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 09.08.2018 OF THE CIT(A)-4, NEW DELHI RELATIN G TO A.Y.2015-16. 2. THE ASSESSEE IN ITS ONLY EFFECTIVE GROUND OF APP EAL HAS CHALLENGED THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS.13,71.338/- MADE BY THE ASSESSING OFFICER U/S. 40A(3) OF THE IT ACT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSE E IS A COMPANY ENGAGED IN THE BUSINESS OF TOUR AND TRAVELS AND REL ATED ACTIVITIES IN INDIA AND OUT OF INDIA. IT FILED ITS RETURN OF INC OME ON 27.09.2015 PAGE | 2 DECLARING TOTAL INCOME OF RS.8,03,260/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERV ED FROM THE DETAILS FILED BY THE ASSESSEE THAT THE ASSESSEE HAS MADE FOLLOWING CASH PAYMENTS EXCEEDING RS.20,000/- DETAILS OF WHICH ARE AS UNDER :- S. NO. PARTICULARS AMOUNT 1. HOTEL BOOKING OF RS.22,378/- PAID BY SHRI SUDHIR THROUGH CASH ON BEHALF OF ASSESSEE ON 11.09.2014 AND SAME WAS RECEIVED BY HIM FROM THE ASSESSEE (LEDGER A/C OF M/S. KEMPINSKI AMBIENCE HOTEL). 22,338/- 2. GOA MARRIAGE EXPENSES RS.7,58,407/- OUT OF WHICH CASH PAYMENT OF RS.23,000/- MADE ON 01.12.2014. 23,000/- 3. PAYMENT OF RS.76,000/- WAS MADE IN CASH TO BOOK THE PACKAGE HOTEL WITH FOOD. 76,000/- 4. CASH PAYMENT OF RS.50,000/- WAS MADE ON 18.07.2014 AGAINST HOTEL ADVANCE BOOKING (MARQUIS HOTEL LIMITED). 50,000/- 5. THE CASH PAYMENT OF RS.10,00,000/- (RS.5,00,000/- EACH)MADE ON 31.01.2015 TO HOTEL THE LALIT GOLF & SPA RESORTS 10,00,000/- 6. THE CASH PAYMENT OF RS.25,000/- MADE AS STAFF SALARY 10.10.2014 25,00,000/- 7. SALARY PAID TO DIRECTOR IN CASH OR RS.75,000/- O N 05.11.2014. 75,000/- 8. OFFICE EXPENSE OF RS.75,000/- MADE IN CASH ON 12.08.2014 75,000/- PAGE | 3 9. RENT OF RS.25,000/- PAID IN CASH ON 05.11.2014 2 5,000/- TOTAL 13,71,338/- 4. APPLYING PROVISIONS OF SECTION 40A(3) THE ASSESS ING OFFICER MADE ADDITION OF RS.13,71,338/- ON THE GROUND THAT THE A SSESSEE HAS MADE PAYMENTS EXCEEDING TO RS.20,000/- IN CASH. 5. IN APPEAL THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER :- 6.3 I HAVE CONSIDERED THE FINDING OF THE AO, THE SU BMISSION OF THE APPELLANT, THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE POSITION OF LAW. BY WAY OF BACKGROUND, THE APPELLANT COMPANY MADE CERTAIN PAYMENTS IN CASH WHICH ARE IN A TABULAR SHEET ON PA GE 2 OF THE ASSESSMENT ORDER. BEFORE ME THE APPELLANT HAS MADE SUBMISSION THAT THE SAID PAYMENTS HAVE BEEN PAID BECAUSE OF BU SINESS NECESSITY AND ARE COVERED WITHIN THE AMBIT OF SECTI ON40(A)(3) READ WITH RULE 6DD. THE APPELLANT COMPANY WITH RESPECT T O CERTAIN PAYMENTS SUBMITTED THAT THESE WERE MADE TO DIRECTOR S AS REIMBURSEMENT FOR MAKING EXPENSES ON BEHALF OF THE COMPANY. FURTHER WITH RESPECT TO OTHER PAYMENTS, THE APPELLA NT COMPANY SUBMITTED THAT THE SAME WERE MADE AT THE EVENING WH EN THE BANKS WERE CLOSED AND ARE MADE OVER THE WEEKEND WHEN THE BANKS WERE CLOSED AND HENCE ARE COVERED WITHIN THE AMBIT OF RU LE 6DD. 6.4 I HAVE CONSIDERED THE LEDGER ACCOUNTS SUBMITTED BY THE APPELLANT WITH RESPECT TO SUBMISSION OF THE APPELLANT THAT CE RTAIN EXPENSES ARE REIMBURSEMENT MADE TO DIRECTORS AND HENCE ARE COVER ED WITHIN RULE 6DD(K) OF THE RULES. I HAVE CONSIDERED THE LEDGER B UT THE SAME DOES NOT SUGGEST THAT THE CASH WAS PAID TO DIRECTORS FOR REI MBURSEMENT. THERE IS NO ENTRY IN THE LEDGER ACCOUNT WHICH SUGGESTS THAT THE AMOUNT WAS PAID TO DIRECTORS FOR REIMBURSEMENT. INSTEAD LEDGER ACCOUNT SUGGESTS THAT CASH PAGE | 4 WAS DIRECTLY PAID FOR THE EXPENSES. FURTHER, NO CON FIRMATION, AND NO ACCOUNTS OF THE DIRECTOR AND NO CONFIRMATION OF THI RD PARTY WAS PLACED ON RECORD TO JUSTIFY AND DISCHARGE ITS ONUS THAT THE P AYMENT WAS ACTUALLY MADE BY DIRECTOR TO THIRD PARTY AND THEN IT WAS REI MBURSED IN CASH TO THE DIRECTOR. THE SAME IS TRUE FOR OTHER CASH PAYMENTS LIKE SALARY PAYMENTS AND OFFICE EXPENSES. 6.5 FURTHER, WITH RESPECT TO CERTAIN PAYMENTS, THE APPELLANT SUBMITTED THAT THESE ARE COVERED WITHIN THE PROVISI ON OF RULE 6DD(J) AS THESE PAYMENTS WERE MADE IN THE EVENING OR OVER THE WEEKEND WHEN THE BANKS WERE NOT IN OPERATION AND HENCE ARE ALLOWABLE EXPENSES. THE SUBMISSION OF THE APPELLANT IS CONSID ERED BUT NOTHING WAS PLACED ON RECORD BY THE APPELLANT TO JUSTIFY IT S CLAIM. THE APPELLANT SUBMITTED THAT THE BANK WAS CLOSED ON SAT URDAY AND THE HOTEL BOOKING WAS URGENTLY REQUIRED AND HOTEL STAFF REFUSED TO ACCEPT THE CHEQUE. HOWEVER, THE APPELLANT DID NOT SUBMIT A NY DOCUMENTARY EVIDENCE OR CONFIRMATION FROM THE THIRD PARTY ON RE CORD TO JUSTIFY ITS CLAIM AND TO JUSTIFY THAT THE HOTEL REFUSED TO ACCE PT CHEQUE AND INSISTED ON CASH PAYMENT. WHERE ASSESSEE HAD NOT BE EN ABLE TO SHOW THAT THERE WERE SOME EXCEPTIONAL REASONS FOR IT TO MAKE PAYMENT IN CASH WHICH IS ALLOWABLE IN TERMS OF RULE 6DD, THE SAME CANNOT BE ALLOWED IN TERMS OF THE PROVISIONS OF SECTION 40A(3). IN THIS REGARD, RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF JHUNJUN WALA & CO. V. CIT [2008] 167 TAXMAN 58 (DELHI), WHEREIN HON'BLE COURT HELD THAT WHERE ASSESSEE HAD NOT BEEN ABLE TO SHOW THAT THERE WERE SOME EXCEPTIONAL REASONS FOR IT TO MAKE PAYMENT IN CASH, TRIBUNAL WAS JUSTIFIED IN UPHOLDING DISALLOWANCE OF SAID EXPENDI TURE BY INVOKING PROVISIONS OF SECTION 40A(3). THE HON'BLE HIGH COURT HELD AS UNDE R: '..4. A BARE READING OF THE ABOVE PROVISION SHOWS T HAT NOT ONLY IS THE GENUINENESS OF PAYMENT AND THE IDENTITY OF THE PAYE E REQUIRED TO BE PAGE | 5 ESTABLISHED, BUT THE ASSESSEE MUST ALSO SHOW THAT T HE PAYMENT WAS MADE IN CASH DUE TO EXCEPTIONAL OR UNAVOIDABLE CIRC UMSTANCES OR BECAUSE PAYMENT BY WAY OF A CROSSED CHEQUE OR A BAN K DRAFT WAS NOT PRACTICABLE OR WOULD HAVE CAUSED A GENUINE DIFF ICULTY TO THE PAYEE. 5. IN THE REFERENCE BEFORE US, THERE IS A FINDING OF FACT ARRIVED AT BY THE TRIBUNAL TO THE EFFECT THAT THERE WAS NO EXC EPTIONAL OR UNAVOIDABLE CIRCUMSTANCE WHICH REQUIRED THE ASSESSE E TO MAKE THE PAYMENT TO P.C. JAIN IN CASH NOR THAT IT WAS NOT PR ACTICABLE TO MAKE THE PAYMENT IN A MANNER OTHER THAN THROUGH CASH. IN FACT, MR. JAIN STATED BEFORE THE DEPARTMENTAL AUTHORITIES THAT THE RE WAS NO INSISTENCE THAT CASH PAYMENT SHOULD BE MADE. 6. IN VIEW OF THESE FINDINGS OF FACT, IT IS QUITE CLE AR THAT THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT THERE WERE SOME EXCEPTIONAL REASONS FOR THE ASSESSEE TO MAKE THE PA YMENT IN CASH. 7. THE INGREDIENTS OF RULE 6DD OF THE RULES READ WITH SECTION 40A(3) OF THE ACT HAVE NOT BEEN SATISFIED BY THE AS SESSEE...' 6.6 THEREFORE, IN VIEW OF THE FACTS, THE SUBMISSION OF THE APPELLANT WITHOUT ANY COGENT DOCUMENTS ON RECORD TO SUBSTANTIATE THE SAME, THE DISALLOWANCE MADE BY THE AO IS UPHELD. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PAYMENTS WERE MADE TO THE HOTEL AT GOA UNDER EXCEPTIONAL CIR CUMSTANCES. THE LD. COUNSEL FOR THE ASSESSEE FILED THE FOLLOWING DE TAILS REGARDING THE PAYMENTS MADE ON VARIOUS DATES THE DETAILS OF WHICH ARE AS UNDER :- PAGE | 6 THE PAYMENT OF RS. 23,000 WAS MADE BY DIRECTOR SUDHIR KAUL OUT OF HIS OWN POCKET LATER ON HE WAS REIMBURSED THE PAYM ENT. THE SAME INFORMATION WAS GIVEN TO LEARNED ASSESSING OFFICER ON DATED 29.11.2017. THE SAME IS ALLOWED AS PER RULE-6DD(K). THE LEDGER IS ATTACHED ON PAGE NO. 15. - PAYMENT OF RS. 76,000 WAS MADE IN CASH TO BOOK TH E PACKAGE HOTEL WITH FOOD. THESE EXPENSES ARE MADE IN NON-BAN KING HOURS IN THE LATE EVENING. THE LEDGE IS ATTACHED ON PAGE NO. 16. 7. CASH PAYMENT OF RS. 50,000 WAS MADE ON 18.07.2014 AGAINST HOTEL ADVANCE BOOKING (MARQUIS HOTEL LIMITED). THES E EXPENSES ARE MADE IN NON-BANKING HOURS IN THE LATE EVENING. THE LEDGER IS ATTACHED ON PAGE NO. 17. 8. PAYMENT OF RS. 10,00,000 TO HOTEL LALIT GOLD & SPA RESORTS, GOA ON DATED 31.01.2015(SATURDAY). THE CASH PAYMENT OF RS. 10,00,000 WAS MADE TO HOTEL TO BOOK IN ADVANCE FOR 01.02.2015. THE BANK WAS CLOSED ON SATU RDAY AND HOTEL BOOKING WAS URGENTLY REQUESTED. HENCE, IN AN UNAVOIDABLE CIRCUMSTANCES, THE PAYMENT WAS MADE. HOTEL STAFF RE FUSED TO RECEIVE CHEQUE. THE SAME IS ALLOWABLE AS PER RULE-6 DD(K). YOUR HONOR, PLEASE FURTHER NOTE THAT THE PAYMENT WA S MADE IN GOA AND NOT IN DELHI DUE TO URGENT GROUP BOOKING 01.02. 2015. IT WAS REQUIRED TO BE BOOKED AT ANY COST WHICH IS PART OF BUSINESS ENVIRONMENT OF HOTEL INDUSTRY. THE LEDGER IS ATTACHED ON PAGE NO. 18. PAGE | 7 9. STAFF SALARY PAYMENT OF RS.25,000 MADE ON 10.10. 2014:- YOUR HONOR, PLEASE NOTE THE STAFF SALARY PAYMENT OF RS. 25,000 WAS MADE TO MORE THAN 1 EMPLOYEE AND EACH EMPLOYEE WAS PAID BELOW 20,000. THE LEDGER IS ATTACHED ON PAGE NO. 19. 10. THE CASH PAYMENT OF RS. 75,000 ON 05.11.2014 TO SAL ARY PAID TO DIRECTOR : - YOUR HONOR, WE INFORM THAT THE PAYMENT OF RS. 75,00 0 WAS MADE TO DIRECTORS AND NOT ONE DIRECTOR. THERE ARE 4 DIRECTO R IN THE COMPANY AND EQUAL PAYMENT OF RS. 18,750 PER DIRECTOR WAS AW ARDED. THE LEDGER IS ATTACHED ON PAGE NO. 20. 11. OFFICE EXPENSES OF RS. 75,000 MADE IN CASE ON 12.08 .2014:- THE ACCOUNT PAGE IS ATTACHED. THE ACTUAL PAYMENT WA S RS. 50,000 AND NOT RS. 75,000 AND LEARNED ASSESSING OFFICER HA S MADE MISTAKE IN WRITING ASSESSMENT ORDER. HE PREPARED THE ORDER IN HASTY MANNER. YOUR HONOR, THE PAYMENT OF OFFICE EXPENSES WAS MADE ON REIMBURSEMENT OF PETTY CASH BOOK EXPENSES. ACTUALLY , THE ACCOUNTANT IS GIVEN SMALL CASH TO INCUR DAY TO DAY EXPENSES AN D ONCE THE EXPENSES ARE TOTALLY INCURRED, THE PAYMENT IS RECOR DED AT ONE GO TO AVOID VERY SMALL PETTY EXPENSES. HENCE THE PAYMENT IS NOT INCURRED IN A SINGLE DAY IN EXCESS OF RS. 20,000 AND SHOULD NOT BE DISALLOWED. THE LEDGER IS ATTACHED ON PAGE NO. 21. 12. RENT PAYMENT OF RS. 25,000 ON DATED 05.11.2017 :- PAGE | 8 YOUR HONOR, THE PAYMENT OF RENT INCLUDES TOO RENT P AYMENTS OF RS. 15,000 AND RS. 10,000. 8. REFERRING TO THE DECISION OF THE CUTTACK BENCH O F THE TRIBUNAL IN THE CASE OF M/S. LAXMI NARAYAN JEWELLERY VS. ITO VI DE ITA NO.250/CTK/2018 ORDER DATED 13.05.2019, HE SUBMITTE D THAT UNDER IDENTICAL CIRCUMSTANCES THE TRIBUNAL HAS DELETED TH E ADDITION MADE U/S. 40 A(3) OF THE IT ACT. 9. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON T HE ORDER OF THE CIT(A). 10. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. I FIND THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SECTION 40A(3) M ADE ADDITION OF RS.13,71,338/- TO THE TOTAL INCOME OF THE ASSESSEE WHICH HAS BEEN CONFIRMED BY THE CIT(A) AND THE REASONS OF WHICH HA S ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT CERTAIN PAYMENTS WERE MADE IN NON BANKING HOURS IN THE LATE EVENING AND CERTAIN PAYME NTS WERE MADE ON A DATE WHEN BANK WAS CLOSED AND THE HOTEL BOOKING W AS URGENTLY REQUIRED. SIMILARLY IT IS ALSO THE SUBMISSION OF T HE LD. COUNSEL FOR THE ASSESSEE THAT CERTAIN PAYMENTS WERE MADE TO A NUMBE R PERSONS WHERE EACH PAYMENT WAS BELOW RS.20,000/-. IN MY OPINION THE ASSESSING OFFICER HAS NOT PROPERLY CONSIDERED THE FACTUAL ASP ECT AND HAS SUDDENLY JUMPED TO THE CONCLUSION FOR VIOLATION OF SECTION 40 A(3). CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE A ND IN THE INTEREST OF JUSTICE I DEEM IT PROPER TO RESTORE THE ISSUE TO TH E FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GO THROUGH THE ABOVE DE TAILS AND DECIDE THE PAGE | 9 ISSUE AS PER FACT AND LAW AFTER GIVING DUE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. WHILE DOING SO THE ASSESSING OFFICER SHALL ALSO CONSIDER THE PAYMENTS MADE ON A DAY WHEN THE BANK WAS CLOSED OR WHERE THE PAYMENTS HAVE BEEN MADE TO VARIOUS PERSONS WHERE EA CH PAYMENT IS BELOW RS.20,000/-. THE ASSESSING OFFICER SHALL ACC ORDINGLY DECIDE THE ISSUE AS PER FACT AND LAW. I HOLD AND DIRECT ACCORD INGLY. THE GROUNDS RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 16.09.2019. SD/- (R.K PANDA) ACCOUNTANT MEMBER *NEHA* DATE:- 16.09.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 04.09.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 16.09.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER