The ACIT, CICLE -4(1), Indore V. M/s. Narottamdas Enterprises Poddar Plaza, Indore

ITA 843/IND/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5989 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 04-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Keywords: Reopening of assessment; Audit objection; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 40A(3); 143(3); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER ACIT, CIRCLE 4(1), INDORE. .. ./ PAN: AA VS. M/S.NAROTTAMDAS ENTERPRISES, PODDAR PLAZA, MALGODOWN, NEW SIYAGANJ, INDORE. / APPELLANT / RESPONDENT / APPELLANT BY SHRI MOHD.JAVED, SR. DR / RESPONDENT BY SHRI MANISH JAIN, C. A. DATE OF HEARING 21.12.2016 DATE OF PRONOUNCEMENT 10.01.2017 / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-II, INDORE .. . / I.T.A. NO. 843/IND/2016 %' ' / ASSESSMENT YEAR: 2009-10 I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 2 OF 16 [HEREINAFTER REFERRED TO AS THE CIT(A)] DATED 29.04 .2016 AND PERTAINS TO ASSESSMENT YEAR 2009-10 AS AGAINST APPE AL DECIDED IN ASSESSMENT ORDER PASSED U/S 143(3) OF T HE ACT DATED 30.06.2014 OF ACIT, CIRCLE 4, INDORE [HEREINA FTER REFERRED TO AS THE AO]. 2. GROUND NO. 1 RELATES TO QUASHING THE ORDER OF THE A O PASSED U/S 147/143(3) OF THE INCOME-TAX ACT, 1961, WHERE THE AO HAS REOPENED THE CASE AFTER RECORDING OF THE REA SONS. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE RETURN WAS FILED ON 29.03.2009 SHOWING TOTAL INCOME OF RS. 31,32,100/-, WHICH WAS ASSESSED U/S 143(3) AT RS. 3,3 2,100/- ON 19.12.2011. THEREAFTER, THE REVENUE AUDIT TEAM C ARRIED OUT THE AUDIT IN PURSUANCE OF ARTICLE 149 OF CONSTI TUTION OF INDIA AND IN PURSUANCE OF SECTION 16 IN THE COMPTRO LLER AND AUDITOR GENERALS (DUTIES, POWERS AND CONDITIONS OF SERVICE) ACT, 1971 & REGULATIONS/RULES ISSUED THEREUPON BY C AG OF INDIA. THEREFORE, AFTER RECORDING REASONS FOR ISSUE OF NOTICE U/S 148 OF THE ACT WAS ISSUED ON 20.03.2014, WHICH WAS SER VED ON THE ASSESSEE ON 22.03.2014, IN RESPONSE TO WHICH THE ASSESSEE I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 3 OF 16 SUBMITTED THAT THE ORIGINAL RETURN MAY BE TREATED A S RETURN FILED U/S 148. THE AO CONSIDERED THE REOPENING OF A SSESSMENT AND DISCUSSED THE SAME REFERRING TO VARIOUS JUDGMEN TS AND CAME TO CONCLUSION THAT THE NOTICE U/S 148 IS NOT V OID AB INITIO AND IT IS NOT BAD IN LAW ON THE BASIS OF LEGA L POSITION DISCUSSED BY HIM IN THE ASSESSMENT ORDER. THE AO AL SO NOTED THAT THE COPY OF THE REASONS WERE ALSO SUPPLIED TO THE ASSESSEE ON 04.06.2014. 4. AGGRIEVED WITH THIS REOPENING OF ASSESSMENT, THE ASSESSEE CONTESTED THE SAME BEFORE THE LD. CIT(A). THE LD. CIT(A) NOTED THAT THE ASSESSEE HAS CONTESTED THE VA LIDITY OF THE PROCEEDINGS U/S 147 OF THE ACT. AS BROUGHT BY THE A O, THE REVENUE AUDIT TEAM CARRIED OUT AUDIT WHERE THE AUDIT PARTY POINTED OUT THE ASSESSEE OF CLAIM OF DELAYED PAYMEN TS OF ENTRY TAX, THE AO PROCEEDED TO REOPEN THE ASSESSMENT PROC EEDINGS AFTER RECORDING THE REASONS AS REPRODUCED ON PAGE 4 OF THE ASSESSMENT ORDER. IT HAS BEEN OBSERVED FROM THE REP ORT AND THE FACTS NARRATED IN THE ASSESSMENT ORDER ITSELF T HAT BASED ON THE AUDIT OBJECTION, A NOTICE U/S 148 OF THE INCOME -TAX ACT, I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 4 OF 16 1961, WAS ISSUED WITHIN A PERIOD OF 4 YEARS FOR THE A SSESSMENT YEAR 2009-10. THE REASONS RECORDED WERE ALSO COMMUN ICATED TO THE ASSESSEE. THE LD. CIT(A) NOTED THAT IT IS UN DISPUTED FACT THAT WHILE COMPLETING THE ORIGINAL ASSESSMENT, SPECI FIC QUERY WAS RAISED BY THE THEN AO REGARDING AMOUNT DEBITED TO M/S. BHARAT BIDI WORKS LIMITED REGARDING INTEREST ON DEL AYED PAYMENTS OF ENTRY TAX. IT IS ALSO EVIDENT FROM THE PAGE 4 OF THE ASSESSMENT ORDER THAT THE ASSESSEE DURING THE COURS E OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT HAD EX PLAINED THAT IT HAD RECORDED THE SUM OF RS. 12,61,497/- FRO M M/S. BHARAT BIDI WORKS LIMITED TOWARDS INTEREST ON ACCOUN T OF DELAYED PAYMENT FOR ENTRY TAX RELATED TO PREVIOUS F INANCIAL YEAR 2007-08 RELEVANT TO ASSESSMENT YEAR 2008-09. A S SUCH AMOUNT WAS DEBITED ON 26.05.2008 AT THE INSTANCE OF THE SUPPLIER. THE AMOUNT RECOVERED WAS CREDITED TO ENTRY TAX ACCOUNT AND WHILE MAKING, IT WAS DEBITED TO ENTRY TAX ACCOUNT. HOWEVER, IGNORING THE ABOVE EXPLANATION ON RECORD AND DULY CONSIDERED WHILE COMPLETING THE ORIGINAL ASSESSMENT, THE AO PROCEEDED TO RECORD REASONS U/S 147 OF THE ACT. CON SIDERING I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 5 OF 16 THAT THERE WAS FACTUAL ERROR IN ALLOWING DEDUCTION O F RS. 12,61,497/-. IT IS ALSO STATED IN THE ASSESSMENT OR DER BY THE AO THAT SUCH FACTUAL ERROR INFORMATION WAS POINTED O UT BY THE EXTERNAL AGENCIES I.E. AUDIT (CAG). THE REOPENING O F ASSESSMENT WAS JUSTIFIED BY THE AO BY FOLLOWING JUDGE MENT IN THE CASE OF M/S. KALYANJI MAVJI & CO. VS. CIT, DECI DED ON 10.12.1975 IN CIVIL APPEAL NO. 522 OF 1971 AND DELH I HIGH COURT JUDGMENT IN THE CASE OF CIT VS. M/S. USHA INT ERNATIONAL LIMITED, (2012) 25 TAXMANN.COM 200; AND M/S. CADILA HEALTHCARE LIMITED VS. ACIT, (2014, 44 TAXMANN.COM 353 (GUJ). HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LUCAS TVS,(2001) 249 ITR 306 ( S.C.) HELD THAT OPINION OF AUDIT PARTY REGARDING APPLICATION OR INTERPRETATION OF LAW IS N OT INFORMATION WITHIN THE MEANING OF SECTION 147(B) HEN CE REASSESSMENT BASED ON OPINION OF AUDIT PARTY IS INV ALID. THE LD. CIT(A) HELD AS UNDER :- 3.2 IT IS EVIDENT FROM ENTRY TAX ACCOUNT AS APPEARING IN THE BOOKS OF THE APPELLANT AND PROFIT AND LOSS ACCOUNT SUBMITTED THAT THE AMOUNT OF INTEREST PAID ON DELAYED PAYMENT OF ENTRY TAX WAS REIMBURSED BY M/S. BHARAT BIDI WORKS LIMITED WHICH WAS CREDITED TO ENTRY TAX I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 6 OF 16 ACCOUNT AND SAME WAS DEBITED TO ENTRY TAX ACCOUNT. THE SAID EXPLANATION HAS BEEN FOUND GIVEN DURING ORIGINAL ASSESSMENT PROCEEDINGS, HENCE THERE WAS NO FACTUAL ERROR WHICH CAN BE SAID TO HAVE BEEN COMMITTED BY THE THEN ASSESSING OFFICER. IT IS MERELY A CHANGE OF OPINION BASED ON WHICH THE ASSESSMENT HAS BEEN REOPENED U/S 147 OF THE ACT, 1961. THEREFORE, THE REOPENING OF ASSESSMENT ON THIS ISSUE HAS NOT BEEN FOUND PERMISSIBLE WITHIN THE FOUR CORNERS OF LAW AS HELD BY VARIOUS COURTS INCLUDING HON'BLE SUPREME COURT IN THE CASE OF CASE OF CIT VS. KELVINATOR OF INDIA, 320 ITR 561. THE MP HIGH COURT IN THE CASE OF CIT VS. FUJISTU OPTEL LTD, (2013) 359 ITR 67 (MPHC) HAS ALSO HELD THAT ON THE BASIS OF SAME SET OF FACTS, IF THE ASSESSING OFFICER WAS OF THE VIEW THAT IT WAS A CASE OF ESCAPED ASSESSMENT, THEN IT WAS A CASE OF CHANGE OF OPINION AND NOT A CASE OF REASSESSMENT. FURTHER, IT IS APPARENT FROM THE FACTS ON RECORD THAT DURING REASSESSMENT PROCEEDINGS ALSO, VIDE LETTER DATED 10.06.2014 THE ISSUE WAS FURTHER EXPLAINED REGARDING RECOVERY OF AMOUNT FROM M/S. BHARAT BIDI WORKS LIMITED AND IT WAS CATEGORICALLY STATED THAT NO EXPENSE OF INTEREST ON DELAYED PAYMENT OF ENTRY TAX HAS BEEN CLAIMED BY THE APPELLANT UNDER PROFIT AND LOSS ACCOUNT. THERE WAS NO QUESTION OF DISALLOWANCE OF SAID EXPENDITURE. 3.3 IN VIEW OF ABOVE, THE PROCEEDINGS INITIATED U/S 147 OF THE INCOME-TAX ACT, 1961, AND REASSESSMENT COMPLETED THERE UNDER HAVE BEEN FOUND BAD IN LAW AS SUCH THE ORDER SO PASSED DESERVES TO BE QUASHED. THE GROUNDS OF APPEAL ARE ALLOWED. I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 7 OF 16 5. THE LD. SR. DEPARTMENTAL REPRESENTATIVE SUPPORTED T HE ORDER OF THE AO, BUT COULD NOT CONTROVERT THE FACTU AL FINDINGS. 6. ON THE OTHER HAND, THE LD. AUTHORIZED REPRESENTATIV E OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A) A ND SUBMITTED THAT THE ASSESSMENT HAS BEEN REOPENED ON THE BASIS OF AUDIT OBJECTION, WHICH IS NOT PERMISSIBLE I N LAW AS IT IS NOT THE OPINION OF THE AO. FURTHER, THE ISSUE ON WHI CH THE ASSESSMENT HAS BEEN REOPENED REGARDING ENTRY TAX OF RS. 12,61,497/-, THE SAME HAS BEEN ENQUIRED UPON IN THE ORIGINAL ASSESSMENT AND WAS ACCEPTED, THEREFORE, THIS AMOUNTS TO CHANGE OF OPINION ALSO WHICH IS NOT PERMISSIBLE IN L AW. FURTHER, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED THE DEDUCTION ON ACCOUNT O F ENTRY TAX AMOUNTING TO RS. 12,61,497/- IN ITS PROFIT AND LOSS ACCOUNT. THEREFORE, ITEM OF EXPENDITURE CANNOT BE A DDED TO THE ASSESSEES INCOME IF IT WAS NOT CLAIMED AS EXPENDITU RE AT ALL. THEREFORE, THE LD. CIT(A) HAS CORRECTLY QUASHED THE ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT. I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 8 OF 16 7. WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE REOPENING OF THE ASSESSMENT HAS BEEN MADE ON THE BA SIS OF AUDIT OBJECTION RAISED BY CAG(AUDIT). THIS FACT HAS BEEN ELABORATELY DISCUSSED BY THE AO IN THE BODY OF ASSE SSMENT ORDER ITSELF. THEREFORE, IT CANNOT BE SAID THAT THE AO HAS APPLIED HIS MIND WHILE RE-OPENING THE ASSESSMENT AND MERELY BORROWED THE OPINION FROM A.G., AUDIT. WE FURTHER F IND THAT THE REOPENING HAS BEEN MADE ON THE GROUND THAT INTE REST ON ENTRY TAX AMOUNTING TO RS. 12,61,597 IS NOT ALLOWABL E AS DEDUCTION. HOWEVER, WE FIND FROM THE RECORD AND FIN DINGS OF THE CIT(A) THAT THE ASSESSEE HAS NOT CHARGED ANY AM OUNT TO PROFIT AND LOSS ACCOUNT TOWARDS DELAYED PAYMENT OF I NTEREST ON ENTRY TAX. HOWEVER, WE FIND THAT THE ASSESSEE HAS P AID THE ENTRY TAX ON BEHALF OF PRINCIPAL SUPPLIER AND THE S AME WAS SUBSEQUENTLY REIMBURSED TO THE ASSESSEE. THEREFORE, SUCH EXPENDITURE WHICH HAS NOT BEEN CLAIMED AS EXPENDITUR E IN PROFIT AND LOSS ACCOUNT CANNOT BE DISALLOWED AND ON THAT BASIS, THE ASSESSMENT CANNOT BE REOPENED. WE ALSO F IND I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 9 OF 16 SUPPORT FROM THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LUCAS TVS, (2001) 249 ITR 306, WHERE IN IT WAS HELD THAT THE OPINION OF AUDIT PARTY REGARDING APPL ICATION OR INTERPRETATION OF LAW IS NOT INFORMATION WITHIN THE M EANING OF SECTION 147(B) OF THE ACT, HENCE, REASSESSMENT BASE D ON OPINION OF AUDIT PARTY IS INVALID. FURTHER, THE REO PENING OF ASSESSMENT HAS NOT BEEN FOUND PERMISSIBLE WITHIN FO UR CORNERS OF LAW AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA, 320 ITR 561. T HE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. FU JISTU OPTEL LIMITED, (2013) 359 ITR 67 (MP - HC), WHEREIN IT WAS HELD THAT ON THE BASIS OF SAME SET OF FACTS, IF THE AO IS OF THE VIEW THAT IT WAS A CASE OF ESCAPED ASSESSMENT, THEN IT WAS A CASE OF CHANGE OF OPINION AND NOT A CASE OF REASSESSMENT. W E ALSO NOTE THAT ENTRY TAX OF RS. 12,61,497/- WAS PAID ON B EHALF OF M/S. BHARAT BIDI WORKS LIMITED AS EXPLAINED VIDE TH EIR LETTER DATED 10.06.2014 THAT NO EXPENSES OF INTEREST ON DE LAYED PAYMENT OF ENTRY TAX HAS BEEN CLAIMED BY THE ASSESS EE UNDER THE PROFIT AND LOSS ACCOUNT. THEREFORE, THERE WAS NO QUESTION I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 10 OF 16 OF DISALLOWANCE ON SUCH EXPENSES. THEREFORE, IN THE LIGHT OF AFORESAID FACTS, WE FIND THE ACTION OF THE LD. CIT(A ) IN ORDER. ACCORDINGLY, THE SAME IS UPHELD. 8. GROUND NO. 2 RELATES DELETING THE ADDITION OF RS. 12,61,497/- MADE BY THE AO ON ACCOUNT OF DELAY OF P AYMENT OF ENTRY TAX. 9. WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAS NOT CHARGED ANY AMOUNT TO PROFIT AND L OSS ACCOUNT TOWARDS DELAYED PAYMENT OF INTEREST OF ENTRY TAX, THE DETAILS OF WHICH HAVE BEEN DISCUSSED IN GROUND NO.1 ABOVE. THEREFORE, CONSIDERING THE ABOVE FACTS, WE ARE OF TH E OPINION THAT THE DELETION OF ADDITION OF RS. 12,61,497/- IS JUSTIFIED BY THE LD. CIT(A) . ACCORDINGLY, THIS GROUND OF APPEA L IS DISMISSED. 10. GROUND NO. 3 RELATES TO DELETING THE ADDITION OF RS . 1,95,00,000/- MADE BY THE AO ON ACCOUNT OF BOOK ADJUSTMENT/HAWALA ENTRY WITHOUT APPRECIATING THAT TH E ASSESSEE FAILED TO FURNISH EVIDENCE TO SHOW THAT THE SAID EXPENDITURE WAS COVERED WITHIN THE EXCEPTION PROVIDED IN RULE I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 11 OF 16 8DD(F) AS THE ACTUAL PAYMENTS BY BOOK ADJUSTMENT AR E CLEARLY MORE THAN RS. 20,000/- WHICH CLEARLY ATTRACTS THE PR OVISION OF SECTION 40A(3) OF THE INCOME-TAX ACT, 1961. 11. THE LD. CIT(A) HAS DEALT WITH THIS GROUND IN PARA 5, WHICH READS AS UNDER :- 5. THIS GROUND OF APPEAL HAS BEEN RAISED AGAINST ADDITION OF RS. 1.95CRORES BY INVOKING SECTION 40A(3) OF THE INCOME-TAX ACT, 1961, ON THE GROUND THAT THE APPELLANT HAD MADE CERTAIN PAYMENTS REQUIRED TO BE MADE TO M/ S. BHARAT BIDI WORKS, MANGALORE AGAINST PURCHASES EFFECTED BY IT BY BOOK ADJUSTMENTS. THE FACTS OF THE CASE ARE DISCUSSED IN DETAIL BY THE AO IN THE ASSESSMENT ORDER AND ALSO THE WRITTEN SUBMISSION FILED BY THE APPELLANT. THE APPELLANT PURCHASES BIDIS FOR SALE FROM M/ S. BHARAT BIDI WORKS. IT'S ANOTHER SISTER CONCERN IN PETLAD (GUJ) VIZ. M/ S. NAROTTAMDAS JETHABHAI & FAMILY, USED TO SUPPLY RAW MATERIAL I.E. TOBACCO TO M/ S. BHARAT BIDI WORKS, MANGALORE. THE APPELLANT HAS BEEN MAKING VARIOUS PAYMENTS THROUGH BANKING CHANNELS TO M/ S. BHARAT BIDI WORKS AGAINST THE SUPPLIES AS EVIDENT FROM THE COPY OF LEDGER ACCOUNT OF THE SUPPLIER IN THE BOOKS OF THE APPELLANT. DURING THE RELEVANT ASSESSMENT YEAR, IT HAS ALSO MADE PAYMENTS TO THE TUNE OF 1.95 CRORES TO M/S. NAROTTAMDAS JETHABHAI & FAMILY, PETLAD (GUJ), A SISTER CONCERN ON BEHALF OF M/ S. BHARAT BIDI I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 12 OF 16 WORKS, MANGLORE. IN THE LEDGER ACCOUNT, SUCH PAYMENTS HAVE BEEN TERMED AS HAWALA PETLAD. THE AO WITH THESE FACTS IN BACKGROUND PROCEEDED TO CONCLUDE THAT SUCH PAYMENTS OF RS. 1.95 CRORES WERE 'BOOK ADJUSTMENT' AGAINST PURCHASE OF BIDIS FROM M/S. BHARAT BIDI WORKS, HENCE SUCH PAYMENTS WERE HIT BY PROVISIONS OF SECTION 40A(3) OF INCOME TAX ACT,1961 BECAUSE THESE WERE NOT MADE BY A/C PAYEE CHEQUES. ACCORDINGLY, ADDITION OF RS.1.95 CRORES WAS MADE TO THE TOTAL INCOME OF THE APPELLANT DURING THE COURSE OF REASSESSMENT PROCEEDINGS. 5.1 THE SUBMISSIONS MADE BY THE APPELLANT ON VARIOUS DATES HAVE BEEN REPRODUCED ABOVE. I HAVE GONE THROUGH THE WRITTEN SUBMISSIONS AND OBSERVED THAT THE APPELLANT HAS CONTESTED THE ISSUE MAINLY ON TWO ACCOUNTS WHICH ARE AS UNDER: 1. SUCH PAYMENTS ARE COVERED BY EXCEPTION IN CLAUSE (F) OF RULE 6DD OF INCOME TAX RULES ; . 2. SUCH PAYMENTS ARE NOT HIT BY SECTION 40A(3) OF THE ACT BECAUSE THE PAYMENTS WERE MADE THROUGH RTGS ONLY TO M/S. NAROTTAMDAS JETHABHAI & FAMILY FOR AND ON BEHALF OF M/S. BHARAT BIDI WORKS MANGLORE AT I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 13 OF 16 RETURN INSTRUCTIONS FROM THIS PARTY. 5.2 THE CONTENTION OF THE APPELLANT THAT BECAUSE OF EXCEPTION PROVIDED IN CLAUSE(F) OF RULE 6DD OF INCOME TAX RULES, THE PROVISIONS ARE NOT APPLICABLE IN CASE OF BOOK ADJUSTMENT IS DEVOID OF MERITS BECAUSE SUCH EXCEPTION CLAUSE IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IT IS EVIDENT FROM VERIFICATION OF COPIES OF ACCOUNT OF M/ S. NAROTTAMDAS JETHABHAI & FAMILY AND THE BANK STATEMENT OF THE APPELLANT THAT THE REMITTANCES WERE MADE BY THE APPELLANT TO M/S . NAROTTAMDAS JETHABHAI & FAMILY THROUGH BANKING CHANNELS (RTGS) AND SUCH PAYMENTS WERE DEBITED TO THE ACCOUNT OF M/ S. BHARAT BIDI WORKS. THESE PAYMENTS UNDER CONSIDERATION HAVE BEEN FOUND MADE TO M/S NAROTTAMDAS JETHABHAI & FAMILY AS PER WRITTEN INSTRUCTIONS BY M/ S. BHARAT BIDI WORKS, MANGLORE WHICH HAS ALSO BEEN CONFIRMED BY E-MAIL. IN THE LEDGER ACCOUNT, INSTEAD OF WORDS 'RTGS PETLAD' THE WORDS USED WERE 'HAWALA PETLAD'. THEREFORE, SUCH WORDINGS IN THE LEDGER ACCOUNT HAVE BEEN TREATED AS 'BOOK ADJUSTMENT' BY THE AO SO AS TO INVOKE PROVISIONS OF SECTION 40A(3) OF INCOME TAX ACT, 1961. THE ENTRIES IN THE LEDGER ACCOUNT STATED AS 'HAWALA PETLAD' CANNOT BE INTERPRETED AS ADJUSTMENT BECAUSE ALL PAYMENTS WERE MADE THROUGH BANKING CHANNELS ONLY, ALTHOUGH TO A THIRD PARTY. I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 14 OF 16 5.3 IT IS A SETTLED LAW THAT BOOK ENTRIES ARE NOT DECISIVE AS HELD BY SUPREME COURT & OTHER HIGH COURTS IN VARIOUS JUDGMENTS REPORTED IN 82 ITR 363 AT 367 (SC) ; 187 ITR 688 (SC); 188 ITR 402 (SC) ; 200 ITR 588 (SC); 189 ITR 406 (BOM) ; 166 ITR 797 AT P. 802 (CAL); AND 112 ITR 1038 (ALL). THE FACT REMAINS THAT REMITTANCES WERE MADE THROUGH BANKING CHANNELS ONLY I.E. RTGS AND THE AMOUNTS WERE DEBITED TO THE ACCOUNT OF THE SUPPLIER I.E. M/S. BHARAT BIDI WORKS, HENCE DISALLOWANCE U/ S 40A(3) OF INCOME TAX ACT,1961 CANNOT BE MADE. THESE ENTRIES WERE NOT IN THE NATURE OF 'BOOK ADJUSTMENT' AND VARIOUS JUDGMENTS REFERRED TO BY THE AO IN THE ASSESSMENT ORDER VIZ. THE DECISION BY PUNJAB AND HARYANA HIGH COURT IN THE CASE OF KISHAN CHAND MAHESHWARI DAS (121 ITR 232 (P & H), CONFIRMED BY HON'BLE SUPREME COURT AS REPORTED IN 191 ITR 667 (SC) HAVE NOT BEEN FOUND APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. THE COPIES OF THE ACCOUNT OF M/S. . NAROTTAMDAS JETHABHAI & FAMILY AND RELEVANT BANK STATEMENTS REFLECTING SUCH PAYMENTS THROUGH RTGS ARE PLACED ON RECORD WHICH EVIDENTLY PROVE THAT THERE WERE NO 'HAWALA ENTRY' OR 'BOOK ADJUSTMENT' OF ANY NATURE WITH REGARD TO PAYMENTS MADE BY THE APPELLANT TO THE SUPPLIER. THEREFORE, KEEPING IN VIEW ABOVE FACTS IN VIEW, THE AO HAS NOT BEEN FOUND JUSTIFIED IN INVOKING SECTION 40A(3) OF INCOME TAX ACT, 1961 AND MAKING ADDITION OF RS. 1.95 CRORES CONSIDERING THE SAME AS ADJUSTMENT ENTRY. THEREFORE, THE AO IS DIRECTED TO DELETE THE ENTIRE ADDITION. THIS GROUND OF APPEAL IS ALLOWED. I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 15 OF 16 12. THE LD. SR. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE AO. 13. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE FINDING OF THE LD. CIT(A). 14. WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE COPIES OF THE ACCOUNT OF M/S. NAROTTAMDAS JETHABHAI & FAMILY AND RELEVANT BANK STATEMENTS REFLECTING SUCH PAYMENTS THROUGH RTGS ARE PLACED ON RECORD WHICH EVIDENTLY PROVE THAT THERE WERE NO 'HAWALA ENTRY' O R 'BOOK ADJUSTMENT' OF ANY NATURE WITH REGARD TO PAYMENTS MADE BY THE ASSESSEE TO THE SUPPLIER. THEREFORE, KEEPING IN VIEW ABOVE FACTS IN VIEW, THE AO WAS NOT JUSTIFIED IN INVOKING SECTION 40A(3) OF INC OME- TAX ACT, 1961, AND MAKING ADDITION OF RS. 1.95 CROR ES CONSIDERING THE SAME AS ADJUSTMENT ENTRY. WE UPHOLD THE ACTION OF THE LD. CIT(A). GROUND NO. 3 OF THE REVENUES APPEAL IS DISMISSED. I.T.A.NO. 843/IND/2016-A.Y.2009-10 M/S.NARTTAMDAS ENTERPRISES, INDORE PAGE 16 OF 16 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON THE 10 TH JANUARY, 2017. SD/- (..) (D.T.GARASIA) JUDICIAL MEMBER SD/- (..) (O.P.MEENA) ACCOUNTANT MEMBER * / DATED : 10 TH JANUARY, 2017. CPU*