FIROZ AHMEDALLY LOKHANDWALA, MUMBAI V. ACIT 15(3), MUMBAI

ITA 8524/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9175 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 16-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KUNAL D PARIKH
• Section: 40A(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . . !'#$ , % &' BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./I.T.A. NO.8524/MUM/2011 ( ( ( ( ( / ASSESSMENT YEAR : 2007-08 SHRI FIROZ AHMEDALLY LOKHANDWALA PROP. M/S. SWAN LEATHER EXPORTS, 19, C.P. TANK ROAD, RUKAIYA MANZIL, MUMBAI-400 004 / VS. THE ACIT-15(3), MATRU MANDIR, OPP. BHATIA HOSPITAL, TARDEO, MUMBAI ') % ./ *+ ./PAN/GIR NO. : AAEPL 6951D ( ), /APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY: SHRI KUNAL D. PARIKH -.), 0 / / RESPONDENT BY : SHRI MANOJ KUMAR 0 12% / DATE OF HEARING : 5.12.2012 34( 0 12% / DATE OF PRONOUNCEMENT : 07.12.2012 &5 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-26, MUMBAI DT.24.12.2009 PERTAINING TO A.Y. 2007-08. 2. THE ASSESSEE HAS RAISED 3 GROUNDS OF APPEAL. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE IS NOT PRESSING GROUND NO. 2 & 3. ACCORDINGLY GROUND NO. 2 & 3 ARE DISMIS SED AS NOT PRESSED. ITA NO. 8524/M/2011 2 3. GROUND NO. 1 RELATES TO THE DISALLOWANCE OF RS. 2,31,223 U/S. 40A(3) OF THE ACT. 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, ON PERUSAL OF THE LEDGER ACCOUNT OF PURCHASE REGISTER OF THE ASSESSEE , THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD INDULGED IN CASH PUR CHASES TO THE TUNE OF RS. 11,73,816/-. THE DETAILS OF CASH PAID FOR PURC HASES ARE EXHIBITED FROM PAGE-2 TO 4 OF THE ASSESSMENT ORDER. ON A CAR EFUL STUDY OF THE PARTIES FROM WHOM THE PURCHASES WERE MADE, THE AO O BSERVED THAT THE AMOUNTS PURPORTEDLY PAID ARE BELOW THE THRESHOLD LE VEL BEYOND WHICH THE MISCHIEF OF PROVISIONS OF SEC. 40A(3) WOULD COME IN TO PLAY WARRANTING DISALLOWANCE OF 20% OF SUCH EXPENDITURE. 4.1. DURING THE COURSE OF THE ASSESSMENT PROCEEDING S, THE ASSESSEE WAS QUESTIONED ON THE MODALITIES OF THESE PAYMENTS VIS- -VIS THE IMPLICATIONS OF PROVISIONS OF SEC. 40A(3) OF THE I.T. ACT . THE ASSESSEE THOUGH CONCEDED THAT THERE WERE CASH PAYMENTS IN ORDER TO MEET EXIGENCIES OF BUSINESS YET AT THE SAME TIME NOT A SINGLE PAYMENT WAS MADE IN CASH IN EXCESS OF RS. 20,000/-. AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE AND THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO FINALLY DISALLOWED 20% OF SUCH CASH PURCHASES AMOUNTING TO RS. 2,34,76 3/-. 5. THE ASSESSEE AGITATED THE MATTER BEFORE THE LD. CIT(A). IT WAS THE CONTENTION OF THE ASSESSEE THAT THOUGH THE PURCHASE S WERE MADE IN CASH BUT THE AMOUNTS PAID IN EACH OCCASIONS WAS LESS THA N RS. 20,000/-. THE LD. CIT(A) AFTER CONSIDERING THE MODE OF PAYMENT AN D THE MANNER IN WHICH THE PAYMENTS HAVE BEEN MADE AS DISCUSSED BY H IM AT PAGE-3, PARA- 3 OF HIS ORDER HELD THAT THE ASSESSEE HAS MADE BULK PURCHASES AT ONE GO BUT WHILE MAKING PAYMENT, IT HAS DELIBERATELY SHOWN THE PAYMENT FOR ITA NO. 8524/M/2011 3 CONSECUTIVE DAYS KEEPING THE AMOUNT SLIGHTLY LESS T HAN RS. 20,000/-. THE LD. CIT(A) CONCLUDED THAT THE ASSESSEE HAS DELIBERA TELY VIOLATED THE PROVISIONS OF SEC. 40A(3). ACCORDINGLY, CONFIRMED THE DISALLOWANCES MADE BY THE AO. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED A PAPER BOOK GIVING DETAILS OF CASH PAYMENT MADE TO VARIOUS PART IES IN RELATION TO PURCHASES AND REITERATED THAT NOT A SINGLE PAYMENT HAS BEEN MADE IN EXCESS OF RS. 20,000/-. PER CONTRA, THE LD. DEPART MENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDING OF THE LOWER AUTHORI TIES. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE PAPER B OOK SUBMITTED BY THE ASSESSEE. WE FIND THAT THE DETAILS OF CASH PAYMENT S ARE EXHIBITED AT PAGE 24 TO 28 OF THE PAPER BOOK. A CAREFUL PERUSAL OF T HESE DETAILS SHOWS THAT THE ASSESSEE HAS NOT MADE PAYMENT IN EXCESS OF RS. 20,000/- ON A SINGLE DAY THOUGH ON DIFFERENT DATES THE PAYMENTS HAVE BEE N MADE IN CASH. A PERUSAL OF SECTION 40A(3)(A) AS IT STOOD AT THAT P OINT IN TIME READS AS UNDER: WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPE CT OF WHICH A PAYMENT IS MADE IN A SUM EXCEEDING RS. 20,000/- OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. THE LANGUAGE OF THE SECTION IS ABSOLUTELY CLEAR TH AT THE EXPENDITURE CAN BE DISALLOWED ONLY WHEN THE PAYMENT IS MADE IN CASH FOR A SUM EXCEEDING RS. 20,000/-. AS THE ASSESSEE HAS NOT MA DE THE PAYMENT EXCEEDING SUM OF RS. 20,000/-, PROVISIONS OF SEC. 4 0A(3) ARE CLEARLY NOT ITA NO. 8524/M/2011 4 APPLICABLE ON THE FACTS OF THE CASE. FINDINGS OF T HE LD. CIT(A) ARE THEREFORE REVERSED. THE AO IS DIRECTED TO DELETE T HE ADDITION OF RS. 2,31,223/-. GROUND NO. 1 IS ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 6 17 61 0 8 5 '91 0 *1 :# . ORDER PRONOUNCED IN THE OPEN COURT ON 7.12.2012 . &5 0 4( % 8 ;&7 7.12.2012 4 0 < SD/- SD/- (H.L. KARWA) (N.K. BILLAIYA) /PRESIDENT % &' / ACCOUNTANT MEMBER MUMBAI; ;& DATED 7.12.2012 . . ./ RJ , SR. PS &5 &5 &5 &5 0 00 0 -1! -1! -1! -1! =!(1 =!(1 =!(1 =!(1 / COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. > ( ) / THE CIT(A)- 4. > / CIT 5. !?< -1 , , / DR, ITAT, MUMBAI 6. <@ / GUARD FILE. &5 &5 &5 &5 / BY ORDER, .!1 -1 //TRUE COPY// A AA A / : : : : * * * * (DY./ASSTT. REGISTRAR)