Techmates Marketing Services , Belgaum V. Commissioner of Income Tax, Belgaum

ITA 83/PAN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79584 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 12-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 22-10-2012
• Court: TRIBUNAL
• Department Lawyers: D BARTHAKUR
• Assessee Lawyers: R V DESHPANDE
• Keywords: Difference of opinion; Change of opinion
• Section: 40A(3); 143(3)

Judgement Text

- 1 - ITA 83/PNJ/2012 TECHMATES MARKETING SERVICES IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 83 /PNJ/20 12 (ASST. YEAR 2008 - 09 ) TECHMATES MARKETING SERVICES, APPELLANT 9, M G BHAVAN, COLLEGE ROAD, BELGAUM 590 002. PAN : AAAFT7509D VS COMMISSIONER OF INCOME TAX, BELGAUM RANGE, BELGAUM RESPONDENT APPELLANT BY : SHRI R. V. DESHPANDE (CA ) RESPONDE NT BY : SHRI D. BARTHAKUR (D R ) DATE OF HEARING: 12/03/2014 DATE OF ORDER : 11/04 /201 4 O R D E R PER D. T. GARASIA JM THIS APPEAL BY THE ASSESSEE AGAINST THE 263 ORDER DT. 11/09/2012 OF CIT, BELGAUM FOR A.Y. 2008 - 09. 2. FOLLOWING GROUNDS WERE RAISED BY THE ASSESSEE WHICH READS AS UNDER: - 1 THE CIT HAS ERRED IN MAKING ADDITIONS OF RS 1,31,682.00. THE CIT HAS INVOKED SEC 40A(3) OF THE INCOME TAX ACT IN REVISIONAL PROCEEDINGS. THE EXPLANATION FOR THE AMOUNT WHICH CIT HAS ADDED WAS ALREADY GIVEN TO A O. HE WAS SATISFIED A ND DID NOT TAX THE SAME. NOW THERE IS A CHANGE OF OPINION BY CIT . 2 THE TRAVELLING EXPENSES IN EXCESS OF RS 20,000/ - ARE DISALLOWED BY CIT U/S 263. THE ASSESSEE IS OF THE OPINION THAT THE TRAVELLING EXPENSES ARE NOT INCURRED ON ANY DAY IN EXCESS OF RS 20,000/ - THE FIELD STAFF AND THE PARTNERS GO TO TOUR FOR BUSINESS ALMOST EVERY DAY. DAILY THEY INCUR EXPENDITURE. BUT ONCE IN A MONTH A REPORT FOR THE ENTIRE MONTH IS - 2 - ITA 83/PNJ/2012 TECHMATES MARKETING SERVICES PREPARED AND SUBMITTED TO ACCOUNTS SECTION FOR PAYMENT. THE ACCOUNTS SECTION AFTER DEDUCT ING THE ADVANCE PAID PAYS THE BALANCE AMOUNT TO THE PAYEE. THE TOTAL EXPENSES FOR THE MONTH, AS PER THE REPORT IS IN EXCESS OF RS 20,000/ - AND AFTER ADJUSTING THE ADVANCE PAID THROUGH THE BANK THE EXPENSE IS BELOW RS 20,000/ - THEREFORE THIS IS NOT A CASE O F DISALLOWANCE ELIGIBLE U/S 40 A (3) OF THE INCOME TAX ACT. 3. FURTHER, THE CIT IS OF THE OPINION THAT WHILE FINALIZING THE TRAVELLING BILL OF THE MONTH, THE ADVANCE GIVEN TO THE EMPLOYEE IS RETURNED IN CASH BY THE EMPLOYEE, WHICH IS A IMAGINARY CONCEPT . A PRACTICAL TOUCH WAS REQUIRED BY THE REVISING AUTHORITY IN THE CASE. NO EMPLOYEE RETURNS THE ADVANCE TAKEN FOR TOUR EXPENSES AT THE TIME OF SUBMITTING THE MONTHLY BILLS. IT IS CUSTOMARY THAT THE ADVANCE IS DEDUCTED FROM THE TOTAL EXPENSES AND THE BALANCE IS PAID. 3. THE SHORT FACTS OF THE CASE ARE AS UNDER: - THE CASE OF ASSESSEE THE AC I T, CIRCLE 2, BELGAUM PASSED THE ORDER U/S 143(3) FOR A.Y 2008 - 09 ON 27/12/2010. ON PERUSAL OF THE LEDGER ACCOUNT OF TRAVELLING EXPENSES FILED BY THE ASSESSEE DURI NG THE COURSE OF ASSESSMENT IT IS NOTICED THAT ASSESSEE HAS PAID CASH IN EXCESS OF RS. 20000/ - ON FOLLOWING DATES: - DATE OF PAYMENT AMOUNT(RS.) 04.06.2007 26,752 05.10.2007 23,489 04.09.2007 35,348 04.06.2008 24,843 04.02.2008 21,250 TOTAL 1,31,682 THESE CASH PAYMENTS ARE IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT. THE ASSESSING OFFICER HAS FAILED TO EXAMINE AND VERIFY THE DISALLOWANCE OF THESE TRANSACTIONS WHICH ARE IN CONTRAVENTION TO THE PROVISIONS OF SECTION 40A(3) AND FAILED TO MAKE ADDITION OF RS.1,31,682/ - U/S 40A(3) OF THE I.T. ACT. THE ASSESSING OFFICER HAS PASSED THE ORDER WITHOUT VERIFICATION IN A PERFUNCTORY MANNER. THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE ON THIS POINT. 4. THE ASSESSEE WAS GIVEN SHOW CAUSE NOTICE AND ASSESSEE HAS REPLIED AS UNDER: - TRAVELLING EXP OVER RS.20,000/ - IN THE FOLLOWING CASES. SIR, IN THE CASE OF TRAVELLING EXPENSES, GENERALLY , WE GIVE ADVANCE FOR TRAVELLING AND WHEN THE FINAL BILL IS MADE, ADVANCE ACCOUNT IS CREDITED AND FULL AMOUNT IS DEBITED TO TRAVELLING EXP A/C. THE EMPLOYEES AND THE PARTNERS CONTINUOUSLY TRAVEL TO VARIOUS PLACES FOR BUSINESS. A TRAVEL BILL IS MADE ONCE IN A MONTH AND THE BILL IS DEBITED AND THE ADVANCE IS CREDITED. - 3 - ITA 83/PNJ/2012 TECHMATES MARKETING SERVICES FURTHER, THE EXPENSES ARE INCURRED THROUGHOUT THE MONTH. NONE OF THE EXPENSES ARE INCURRED ON ANY ONE DAY ABOVE RS.20,000/ - S.NO. DAT OF PAYMEN T AMOUNT EXPLANATION ADVANCE PAID BALANCE PAID 1 4 - 6 - 2007 26752 12924.00 13828.00 2 5 - 10 - 2007 23489 977.00 22512.00 3 4 - 9 - 2007 35348 16108.00 19240.00 4 4 - 1 - 2008 24843 1882.00 22961.00 5 4 - 2 - 2008 21250 1887.75 19362.25 I AM PRODUCING THE TRAVELLING EXPENSES BILLS FOR YOUR PERUSAL. I AM ALSO ENCLOSING THE COPY OF THE LEDGER A/C OF A G HANJI TRAVELLING ADVANCE A/C. EACH TRAVELLING EXPENSES IS BELOW RS.20,000/ - . FOR THE PURPOSE OF CONVENIENCE, THE BILLS ARE MADE ONCE IN A MONTH. HENCE THE ENTRIES DO NOT FALL UNDER THE PER VIEW OF PAYMENTS ABOVE RS.20,000/ - YOU ARE REQUESTED TO DROP THE PROCEEDINGS AND DO THE NEEDFUL.' 5. AFTER CONSIDERING THE REPLY THE COMMISSIONER OF INCOME TAX WAS OF A VIEW THAT THE LEDGER ACCOUNT OF TRAVEL EXPENSES SHOWS CASH PAYMENT ON GIVEN DATES IN EXCESS OF RS. 20,000/ - . THE ENTRIES IN CASH BOOK SHOWS THE CASH PAYMENT OF SAME AMOUNT IN EXCESS OF RS. 20 , 000/ - . THE ENTRY IN CASH BOOK SHOWS ADVANCE GIVEN IS RECEIVED BACK IN CASH BOOK FROM PERSONS IN FULL AMOUNT OF EXPENDITURE IS GIVEN TO EACH PERSON. ULTIMATELY THE CASH PAYMENT TO A PERSONS IN A DAY EXCEEDS RS. 20,000/ - . ON 04/06/2008 THE CASH WAS PAID FOR TRAVELLING EXPENSES FOR MAY 2007 RS. 26752/ - AND TOUR ADVANCE RECEIPT PAID IN CASH RS. 12,924/ - . THIS ENTRIES CLEARLY SHOWS THAT THE A SSESSEE HAS RECEIVED THE ADVANCE GIVEN IN CASH FROM PERSONS AND HAS PAID TO A PERSON THE FULL AMOUNT OF TRAVELLING EXPENDITURE IN EXCESS OF RS. 20,000/ - . THE PAYMENT IS SQUARELY COVERED BY THE PROVISION OF SECTION 40A ( 3) AND IT IS DISALLOWABLE EXPENDITURE . THE COMMISSIONER HAS DISALLOWED A SUM OF RS 1,31,682/ - . 6. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS MANY REPRESENTATIVES. THE ASSESSEE GIVES TRAVELLING ADVANCE TO THIS EMPLOYEE. THE SALES EMPLOYEES PREPARE A TRAVELLING BILL MONTHLY FOR EXPENSES INCURR ED DURING THE MONTH. IN - 4 - ITA 83/PNJ/2012 TECHMATES MARKETING SERVICES THE BILL THE ADVANCE GIVEN IS REDUCED THE BALANCE PAYMENT IS GIVEN TO THEM. THIS EXPENDITURE INCURRED DAILY IN A MONTH. SUCH EXPENSES VOUCHERS ARE TOTALLED AND A REPORT IS PREPARED TO SUBMIT TO ACCOUNTS DEPARTMENT FOR SETTLEMENT. AT NO TIME THE EXPENSES IS INCURRED IN EXCESS OF RS. 20,000/ - THEREFORE SECTION 40A (3) IS NOT APPLICABLE. LD. DR RELIED UPON THE ORDER OF COMMISSIONER OF INCOME TAX. 7. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES LOOKING TO THE FACTS AND CIRCUMST ANCE OF THE CASE WE FIND THAT AS PER SECTION 40A (3) WHERE THE ASSESSEE INCURRED ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENT MADE TO A PERSON IN A DATE OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE DRA FT, EXCEEDS RS. 20,000/ - NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. WE FIND THAT THE ASSESSEE HAS MADE PAYMENT ON VARIOUS DATES WHICH READS AS UNDER: - S. NO. DAT E OF PAYMENT AMOUNT EXPLANATION ADVANCE PAID BALANCE PAID 1 4 - 6 - 2007 26752 12924.00 13828.00 2 5 - 10 - 2007 23489 977.00 22512.00 3 4 - 9 - 2007 35348 16108.00 19240.00 4 4 - 1 - 2008 24843 1882.00 22961.00 5 4 - 2 - 2008 21250 1887.75 19362.25 8. FROM THIS ABOVE TABLE WE FIND THAT ON VARIOUS DATES THE ASSESSEE HAS PAID THE AMOUNT TO VARIOUS PERSONS WHICH IS IN EXCESS OF RS. 20,000/ - . WE FIND THAT ASSESSEE HAS INCURRED THE EXPENDITURE OF RS. 22,512/ - ON 05/10/2007 AND RS. 22,961/ - TOTALLING TO RS. 45,473/ - ARE COVERED FOR DISALLOWANCE U/S 40A (3). WE FIND THAT O N TWO DATES THE PAYMENT EXCEEDS RS. 20,000/ - THEREFORE WE ARE OF THE VIEW THAT THE ASSESSEE HAS CLAIMED THE EXPENDITURE AS DEDUCTION IN CONTRAVENTION OF SECTION 40A (3) OF THE I. T. ACT . IN RESPECT OF TWO OTHER DATES THEREFORE WE ARE OF THE VIEW THAT COMMISSIONER IS JUSTIFIED IN DISALLOWING AMOUNT OF RS. 22,512/ - DT. 05/10/2007 AND RS 22,961/ - DT. 04/01/2008 TOTALLING TO RS. 45,473/ - - 5 - ITA 83/PNJ/2012 TECHMATES MARKETING SERVICES 9. IN RESPECT OF OTHER PAYMENTS WE ARE OF THE VIEW THAT OUT OF TOTAL FIVE PAY MENTS TWO PAYMENTS AS STATED ABOVE IS TO BE DISALLOWED AND REST OF T HE AMOUNT IS BELOW RS. 20,000/ - THEREFORE AS PER SECTION 40A (3) THE ASSESSEE HAS MADE PAYMENT BELOW RS. 20,000/ - . WE FIND THAT ON 04/06/2007 THE TOTAL EXPENDITURE WAS RS. 26,752/ - AND ADV ANCE WAS RS. 12,924/ - THEREFORE REMAINING BALANCE WAS PAID BY CASH BY ASSESSEE AND THE REMAINING AMOUNT IS BELOW RS. 20,000/ - . AND OTHER TWO PAYMENTS ON 04/09/2007 RS. 19,240/ - AND ON 04/02/2008 THE PAYMENT IS 19,362.25/ - ARE BELOW RS. 20,000/ - . WE FIND TH AT ASSESSEE IN HIS ACCOUNTING SYSTEM THE FULL AMOUNT OF EXPENSES IS DEBITED TO TRAVELLING EXPENSES AND TOUR ADVANCE IS CREDITED. EVERY MONTH THE TOUR ADVANCE SHALL GET CLOSED. THE EMPLOYEE OF THE ASSESSEE GOES ON TOUR FOR BUSINESS REGULARLY AND ADVANCES AR E GENERALLY GIVEN TO ALL EMPLOYEES FOR GOING ON TOUR FOR PURPOSE OF BUSINESS. THE EMPLOYEE INCURRED EXPENSES EVERYDAY AND A REPORT IS MADE ONCE IN A MONTH. EACH EXPENSES INCURRED EVERYDAY IS A SMALL AMOUNT BUT WHEN IT TOTALLED FOR A MONTH IT EXCEEDS RS. 20 000/ - . THE EXPENSE IS EVERYDAY THEREFORE WE ARE OF THE VIEW THAT WHILE MAKING THE PAYMENT FOR CONSOLIDATED ENTRY FOR 30 DAYS BUT THE EXPENSES PER DAY WAS RS. 800 TO 1000 INCLUDING LODGING. WE FIND THAT AS PER SECTION 40A(3) THE ASSESSEE IS REQUIRED TO MAKE PAYMENT IN A SINGLE DAY BY CHEQUE OR ACCOUNT PAYEE BANK DRAFT IF THE PAYMENT EXCEEDS RS. 20000/ - . THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS PAID ON 05/10/2007 AND ON 04/01/2008 WHICH EXCEEDS RS. 20000/ - THEREFORE WE ARE OF THE VIEW THAT THIS PAYMENT IS FALL UNDER THE PURVIEW OF SECTION 40A(3) OF THE I.T. ACT THEREFORE WE DISALLOW THE SAME. THE REST OF THE PAYMENT ON SINGLE DAY ON 04/06/2007, 04/09/2007 & 04/02/2008 IS BELOW RS. 20000/ - THEREFORE DISALLOWANCE CANNOT BE MADE U/S 40A(3) OF THE I.T. ACT THEREFORE WE ALLOW THE APPEAL OF THE ASSESSEE. 10 . IN THE RESULT APP EAL OF THE ASSESSEE IS PARTLY ALLOWED . JUDGMENT PRONOUNCED IN OPEN COURT ON 11/ 04 /2014 . SD/ - SD/ - (P. K. BANSAL) (D. T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER - 6 - ITA 83/PNJ/2012 TECHMATES MARKETING SERVICES PANAJI / GOA DATED: - 1 1. 4 .201 4 *NANU* COPY TO : 1 . APPELLANT 2 . RESPONDENT 3 . CIT, BELGAUM 4 . D.R 5 . GUARD FILE BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL , PANAJI