Income-tax Officer, V. Shri Vijay Rajkumar Agrawal, Jalgaon

ITA 845/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9335 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 03-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Section: 40A(3); 143(3); 147; 131

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 845/PUN/2015 / ASSESSMENT YEAR : 2010-11 THE INCOME TAX OFFICER, WARD-1(3), C/O. INCOME TAX OFFICE, OLD B.J. MARKET, JALGAON, MAHARASHTRA 425001. . / APPELLANT V/S SHRI VIJAY RAJKUMAR AGRAWAL, PROP. OF KIRTIRAJ FOODS, ADDL. PLOT NO.54, AJANTHA HOUSING, SOCIETY CHOUFULLY, JALGAON. PAN : AJHPA4444L. . / RESPONDENT / APPELLANT BY : SHRI P.S. NAIK / RESPONDENT BY : NONE / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 2, NASHIK DT.24.03 .2015 FOR THE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS THE PROPRIETOR OF KIRTIRAJ FOODS AND ENGA GED IN THE BUSINESS OF TRADING IN FOOD-GRAINS. ASSESSEE FILED HIS R ETURN OF INCOME FOR A.Y. 2010-11 ON 17.09.2010 DECLARING TOTAL INCOME OF / DATE OF HEARING : 19.06.2017 / DATE OF PRONOUNCEMENT: 23.06.2017 2 RS.1,81,317/-. THE CASE WAS SELECTED FOR SCRUTINY AND T HEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.21.06.2013 AND THE TOTAL INCOME WAS DETERMINED AT RS.64,17,260/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.24.03.2015 IN (APPEAL NO.NSK/CIT(A)-2/172/13-14), ALLOWED THE APPEAL OF T HE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS .62,35,944/- ON ACCOUNT OF CASH PAYMENT U/S 40A(3). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT T HAT THE ADDITION WAS MADE ON ACCOUNT OF NON GENUINENESS AND UNPROVED CREDITORS AND NOT ONLY ON ACCOUNT OF CASH PAYMENT U/S 40A(3). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN GRANTING THE BENEFIT OF RUL E 6DD OF THE IT RULES TO THE ASSESSEE WHEREAS THE CREDITORS ARE NOT AGRICULTURIST. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN TREATING THE CREDITORS AS A GENT AND GRANTED THE BENEFIT OF RULE 6DD, THEREBY DELETED THE ADDITI ON OF RS.62,35,944/-. THE APPELLANT PRAYS THAT ALL THE ABOVE ADDITION BEI NG JUST AND FAIR REQUIRES TO BE SUSTAINED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY , DELETE AMEND ANY OF THE GROUNDS, AS PER THE CIRCUMSTANCES OF THE CASE. 6. THE APPELLANT PRAYS LEAVE TO ADDUCE SUCH FURTHER EVIDENCE TO SUBSTANTIATE ITS CASE AS THE OCCASION MAY DEMAND. 3. ON THE DATE OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT APPLICATION WAS FILED. FURTH ER THE CASE FILE REVEALS THAT THE NOTICE FOR HEARING WHICH WAS SEN T TO ASSESSEE THROUGH REGISTERED POST WAS UNDELIVERED. THE ASSESSEE HAS ALSO NOT FILED NEW ADDRESS. WE THEREFORE PROCEED TO DECIDE THE 3 APPEAL EXPARTE-QUA THE ASSESSEE ON THE BASIS OF MATERIA L ON RECORD AND AFTER HEARING THE LD.D.R. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PER USING THE BALANCE-SHEET, AO NOTICED THAT OUT OF LIST OF SUNDRY CREDITORS THE FOLLOWING THREE CREDITORS WERE SHOWN TO HAVE MAJOR OUTSTANDING : 1) SHRI AJAY SHIVAJI PATIL RS.54,34,200/- 2) SHRI SONU TATYA PATIL RS.75,70,900/- 3) SHRI SURESH BHIKULAL PAGADA RS.36,85,500/- IN THIS REGARD, ASSESSEE WAS ASKED TO FILE THE NAME, ADDR ESS, CONFIRMATION AND THE ACCOUNT EXTRACTS AS APPEARING IN HIS BOOK AND THE CREDITORS BOOKS. AO ALSO ISSUED SUMMONS U/S 1 31 OF THE ACT TO THE AFORESAID CREDITORS. AO HAS NOTED THAT THE SUMMONS WERE RETURNED BACK UNDELIVERED BY POSTAL AUTHORITIES. T HE ASSESSEE WAS THEREAFTER ASKED TO SUBSTANTIATE THE CLA IM WHICH ACCORDING TO AO COULD NOT BE SUBSTANTIATED BY THE AS SESSEE. AO ON PERUSING THE BANK STATEMENT NOTICED THAT THE PAYMENTS TO TH ESE CREDITORS WERE MADE THROUGH BEARER CHEQUES AND SOME PAYMENTS IN CASH. HE THEREFORE CONCLUDED THAT THREE CREDITORS W ERE NOT GENUINE AS ASSESSEE NOT PROVED THEIR IDENTITY, GENUINENES S OF TRANSACTION AND THEIR CREDITWORTHINESS. THE PAYMENTS T HAT WERE MADE BY BEARER CHEQUES AND CASH AGGREGATING TO RS.6 2,35,944/- (THE DETAILS OF WHICH ARE LISTED AT PAGE 7 OF THE ASSESSME NT ORDER) WERE DISALLOWED BY THE AO U/S 40A(3) OF THE ACT. AGGRIEVE D BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A ). 4 LD.CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE , REMAND REPORT OF AO AND ASSESSEES REPLY TO REMAND R EPORT DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER : 9. I HA V E CAREFULL Y CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER, THE APPELLANT'S SUBMISSION AND TH E AO'S REMAND REPORT. ON PERUSAL OF THE SAME, IT HAS BEEN NOTICED THAT THE APPELLANT HAD MADE PAYMENT IN RESPECT OF PURCHASE OF GRAINS OTHERWISE THAN BY ACCOUNT PAYEE CHEQUES OR DEMAND DRAFTS. THE APPELLANT HAS CLAIMED THAT HE HAS MADE PA Y MENTS TO FARMERS THROUGH SHRI AJAY SHIVAJI PATIL, SHRI SONU TAT Y A PATIL AND SHRI SURESH BHIKUL A L GUJRATHI AND TH E PAYMENT IS NOT DISALLOWABLE U / S. 40A(3) OF THE ACT IN VIEW OF EXCEPTIONS PROVIDED IN RULE 6DD(E) AND RULE 6DD( K) AND ALSO IN VIEW OF COMPELLING CIRCUMSTANCES IN V IEW OF THE DECISION OF GUJRAT HIGH COURT IN THE CASE OF ANUPAM TELE SER V ICES V S. ITO (GUJ) (2014) 268 CTR 121 ORDER DATED 22 / 1 / 201 4 (AY.2006-07 AND CHENNAI TRIBUNAL IN THE CASE OF ACIT VS. K.M. V IDYASAGAR (2014) 39 CCH 260 (CHEN.TRIB) 9.1 FROM THE ASSESSMENT ORDER, IT HAS BEEN NOTICED THAT THE AO . HAS NOT ACCEPTED THE CONTENTION OF THE APPELLANT TH AT THE ABO V E MENTIONED 3 PERSONS ARE GROUP LEADERS OF THE FARMERS OR AGENT OF THE APPELLANT/FARMERS. THE AO. HAS HELD IN THE CONCLUDING PARA AS UNDER: CONSIDERING THE OVERALL FACT IT IS CLEAR THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE THREE CREDITORS. THE PAY MENT MADE BY ASSESSEE ARE ALSO BY BEARER CHEQUES BY CONTRAVEN TION OF SECTION 40A(3) OF THE I.T.ACT, 1961. THE PAYMENT AS DETAILED ABOVE MADE DURING THE YEAR AMOUNTING TO RS. 62,35,9 44/- ARE DISALLOWED FOR THE ABOVE REASONS AND ADDED TO T HE TOTAL INCOME OF THE ASSESSEE. FOR THE BALANCE OUTSTANDING AS ON 31/3/2010, WHICH IS ALSO MADE IN CASH/BEARER CHEQUE IN THE NEXT FINANCIAL YEAR (A.Y.2011-12), THE NECESSARY AC TION U/S 147 IS BEING TAKEN. THE AMOUNT OF RS.62,35,944/- IS TREATED AS INACCURATE PARTICULAR FURNISHED BY ASSESSEE AND PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T ACT, 1961 INIT IATED SEPARATELY. SUBJECT TO THE ABOVE, TOTAL INCOME OF THE ASSESSEE IS COMPUTED AS UNDER: BUSINESS/PROFESSION INCOME AS RETURNED RS. 1,81, 317/- ADD: ADDITION MADE ON ACCOUNT OF : CASH PAYMENT U/S. 40A(3) AS DISCUSSED ABOVE RS. 62,35,944/- 9.2 FROM THE ABOVE PARA OF THE ASSESSMENT ORDER, I T IS E V IDENT THAT THE A . O. HAS MADE ADDITION U/S 40A(3) OF THE ACT, OBSER V ING THAT THE APPELLANT COULD NOT SUBSTANTIATE THE 3 CREDITORS. THEREFORE, IT IS IMPLIED THAT THE A . O. HAS MADE DISALLOWANCE U . /S.40A(3) BY TREATING THE ABOVE MENTIONED 3 PERSONS AS TRADERS OR HAS TREATED THE SAID 3 PERSON S AS NON 5 GENUINE ENTITIES . 9.3 IF THE 3 PERSONS ARE TREATED AS TRADERS, THEN THEY HAD MADE CA S H PAYMENTS TO FARMERS BY WITHDRAWING THE CASH BY BEARER CHEQUES ISSUED BY THE APPELLANT. IN THIS REG ARD, IT HAS BEEN NOTICED THAT THE FARMERS ARE FROM RURAL AREA A ND MOST OF THEM DID NOT HAVE BANK ACCOUNTS. THEREFORE, THE FAR MERS GENERALLY INSISTED FOR CASH PAYMENT WITHOUT EXCEPTI ON. IN THE ABO V E CIRCUMSTANCES, THE PAYMENT TO THE TRADERS, WHO MA DE PAYMENTS TO FARMERS ARE TO BE CONSIDERED AS GENUINE . FURTHER, IN VIEW OF ABOVE COMPELLING CIRCUMSTANCES, THE APPE LLANT HAS MADE PAYMENTS BY BEARER CHEQUES TO THE ABOVE MENTIO NED 3 PERSONS. THE HON'BLE SUPREME COURT IN THE CASE OF A TTAR SINGH GURUMUKH SINGH VS. ITO 191 ITR 667, HELD THAT PROVISIONS OF SECTION 40A(3) ARE NOT INTENDED TO RE STRICT THE BUSINESS ACTIVITY. THE PROVISIONS OF SECTION 40A(3) AND RULE 6DD ARE INTENDED TO REGULATE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTIONS. IN THE C ASE UNDER APPEAL, NO SUCH CIRCUMSTANCES EXISTED. THOUGH THE A BOVE CIRCUMSTANCES ARE NOT COVERED BY EXCEPTIONS SPECIFICALLY PROVIDED IN RULE 6DD, CONSIDERATIONS OF BUSINESS EXPEDIENCIES, ETC. ARE NOT ELIMINATED AS THE LIST OF EXEMPTIONS M ENTIONED IN RULE 6DD IS NOT EXHAUSTIVE AND THAT RULE MUST BE IN TERPRETED LIBERALLY AS LAID DO W N BY HON'BLE GUJRAT HIGH COURT IN THE CASE OF ANUPAM TELE SERVICES VS. ITO (GUJ) (2014) 268 CT R 121 ORDER DATED 22/1/2014 (A.Y.2006 - 07) AND CHENNAI TRIBUNAL IN THE CASE OF ACIT VS. K . M. VIDYASAGAR (2014) 39 CCH 260 (CHEN.TRIB). THEREFORE, IN VIEW OF THE RATIO LAID D OWN BY ABOVE MENTIONED DECISIONS AND THE FACTS OF THE CASE UNDER APPEAL, THE DISALLOWANCE U/S. 40A(3) IS NOT JUSTIFIED, EVEN IF THE SAID 3 PERSONS MENTIONED ABOVE ARE TREATED AS TRADERS. 9 . 4 IF THE SAID 3 PERSONS MENTIONED ABOVE ARE TREATE D AS NON GENUINE AND NON EXISTING ENTITIES, THEN IN SUCH CAS E IT IS IMPLIED THAT THE PAYMENTS B Y BEARER CHEQUES WERE W ITHDRAWN IN CASH BY THE APPELLANT HIMSELF. IT IS ALSO A FACT THAT TH E APPELLANT HAD SOLD FOOD GRAINS PURCHASED FROM FARMERS AND HENCE H AD MADE PAYMENT TO FARMERS IN CASH. THE SAID PAYMENT IS IN RESPECT OF FOOD GRAINS I . E. AGRICULTURAL PRODUCE PURCHASED FROM FARMERS. THEREFORE, NO SUCH DISALLOWANCE U/S. 40A(3) IN SUCH CASES IS JUSTIFIED, IN VIEW OF E X CEPTION PRO V IDED IN RULE 6DD(E)(I). 9.5 IT HAS ALSO BEEN NOTICED THAT AS MENTIONED IN CONCLUDING PARA OF THE ASSESSMENT ORDER, THE A . O. HAD REOPENED THE ASSESSMENT FOR A . Y.2011 - 12. THE A . O. VIDE ORDER U/S. 143(3) R.W.S. 147 DATED 21/3/2014 HAD ACCEPTED THE CONTENT IONS RAISED BY THE APPELLANT. AS MENTIONED ABOVE, A SUM OF RS.62,35,944/- WAS MADE BY BEARER CHEQUES TO THE AB OVE NAMED 3 PERSONS BY THE APPELLANT DURING THE YEAR UN DER CONSIDERATION , AND SUCH BEARER CHEQUES/CASH PAYMENTS TO THE SAID 3 PERSONS AMOUNTED TO RS.1,66,90,600/- IN THE A . Y.2011- 12. THESE PAYMENTS OF RS.1,66,90,600/- INCLUDED OUT STANDING PAYMENTS OF THE YEAR UNDER CONSIDERATION. IN OTHER WORDS, THE SAME 3 PERSONS ARE INVOLVED HAVING IDENTICAL TRANSA CTIONS FOR BOTH THE YEARS. THE ORDER FOR AYS 2010-11 AND 2011- 12 ARE ALSO PASSED BY THE SAME ASSESSING OFFICER. IN THE A SSESSMENT ORDER FOR A . Y.2011 - 12, THE A . O. HAD ACCEPTED THAT THE 6 TRANSACTIONS AND 3 PARTIES MENTIONED IN EARLIER PAR AGRAPHS ARE GENUINE AND NO DISALLOWANCE CAN BE MADE U/S. 40A(3) IN VIEW OF PROVISIONS RULES 6DD. THE FACTS OF THE CASE UNDE R APPEAL ARE IDENTICAL TO THE FACTS OF THE CASE FOR A . Y.2011 - 12. 9.6 IN VIEW OF THE ABOVE FACTS AND DISCUSSIONS, T HE DISALLOWANCE U/S 40A(3) IS NOT JUSTIFIED. THE ADDI TION OF RS.62,35,944/- IS THEREFORE DELETED. THE AO IS DIR ECTED ACCORDINGLY. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APP EAL BEFORE US. 5. BEFORE US. LD.D.R. SUPPORTED THE ORDER OF AO. 6. WE HEARD THE LD.D.R. AND PERUSED THE MATERIAL ON RECO RD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DISALLOWA NCE OF EXPENSES U/S 40A(3) OF THE ACT. WE FIND THAT LD.CIT(A) AFT ER CONSIDERING SUBMISSIONS OF THE ASSESSEE AND THE REMAND R EPORT HAS GIVEN A FINDING THAT THE PAYMENTS MADE WERE TO FARME RS FROM RURAL AREAS AND MOST OF THEM DID NOT HAVE BANK ACCOUNT AND THE PAYMENT TO THE TRADERS, WHO MADE PAYMENT TO THE FARME RS ARE CONSIDERED TO BE GENUINE. HE FURTHER HELD THAT EVEN IF THE PAYMENT TO THE THREE PERSONS ARE CONSIDERED TO BE TRADERS, T HEN ALSO THE DISALLOWANCE U/S 40A(3) OF THE ACT WAS NOT CALLED FOR AS THE PAYMENT WAS UNDER COMPELLING CIRCUMSTANCES. LD.CIT(A) HAS FURTHER NOTED THAT EVEN IF THE PAYMENT ARE THREE PARTIE S ARE TREATED AS NON-GENUINE AND NON-EXISTING ENTITIES THEN SINCE THE P AYMENT WAS WITH RESPECT TO THE PURCHASE OF FOOD-GRAINS WHICH W ERE PURCHASED FROM FARMERS AND IN SUCH A SITUATION ALSO THE DISALLOWANCE U/S 40A(3) OF THE ACT WAS NOT JUSTIFIED IN VIEW O F EXCEPTIONS PROVIDED UNDER RULE 6DD(E)(I). HE HAS FURTHER N OTED THAT FOR A.YS. 2010-11 AND 2011-12 THE ORDERS WHICH WER E PASSED 7 BY AO U/S 143 R.W.S. 147 OF THE ACT, THE PAYMENTS OF THE TRANSACTIONS WITH THESE THREE PARTIES, WHICH INCLUDED THE OPENING BALANCES WERE HELD TO BE GENUINE AND NO DISALLOWANCE WAS MADE U/S 40A(3) OF THE ACT. HE ACCORDINGLY SET ASIDE THE ADD ITION MADE BY AO. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL O N RECORD TO CONTROVERT THE FINDINGS OF LD.CIT(A). IN VIEW OF THE AFORE SAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.C IT(A) AND THUS THE GROUNDS OF REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED ON 23 RD DAY OF JUNE, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; ! DATED : 23 RD JUNE, 2017. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A)-II, NASHIK. CIT-II, NASHIK. #$% &&'(,* '(, / DR, ITAT, B PUNE; %,-./ GUARD FILE. / BY ORDER, // TRUE COPY // // // / 0123 / ASSISTANT REGISTRAR, * '(, / ITAT, PUNE.