Sri Gautam Dutta, Kolkata V. ITO, Wd-34(4), kolkata, Kolkata

ITA 853/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9506 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 05-05-2014
• Court: TRIBUNAL
• Department Lawyers: PRABAL C HOUDHURY
• Assessee Lawyers: RAJEN DHAR LD
• Section: 40A(3); 142(1); 133(6)

Judgement Text

ITA NO. 853/KOL/14 SRI GAUTAM DUTTA 1 IN THE INCOME TAX APPELLATE TRIBUNAL,DBENCH, KOLKATA BEFORE: SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 853/KOL/2014 A.Y: 2007-08 SRI GAUTAM DUTTA VS. INCOME TAX OFFICER PAN: ACQPD 1755M WARD 34 (4), KOLKATA (APPELLANT) (RESPONDENT) APPEARANCES BY : SHRI RAJEN DHAR, ADVOCATE, LD.AR FOR THE ASSESS EE SHRI PRABAL CHOUDHURY, JCIT, SR. D.R FOR THE RE VENUE DATE OF HEARING : 18-01-2017 DATE OF PRONOUNCEMENT : 10-02-2017 O R D E R SHRI S.S. VISWANETHRA RAVI, JM :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS),XX, KOL KATA DATED 06-03-2014 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ONLY EFFECTIVE ISSUE IS TO BE DECIDED IN THI S APPEAL AS TO WHETHER THE CIT-A JUSTIFIED IN CONFIRMING THE DI SALLOWANCE MADE @ 20% OF CASH PURCHASES IN THE FACTS AND CIRCU MSTANCES OF THE CASE. ITA NO. 853/KOL/14 SRI GAUTAM DUTTA 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL DEALING IN THE BUSINESS OF BICYCLE SPARE PARTS UNDER THE NAME AND STYLE OF M/S. CALCUTTA CYCLE CO. THE A SSESSEE FILED HIS RETURN OF INCOME FOR THE A.Y UNDER CONSID ERATION ON 02- 11-2007 FOR A TOTAL INCOME OF RS.1,52,500/-. UNDER SCRUTINY NOTICES U/S. 143(2) & 142(1) OF THE ACT WERE ISSUED , AGAINST WHICH THE ASSESSEE FILED DETAILS AS PER REQUISITION S OF THE AO. THE NOTICES U/S. 133(6) OF THE ACT WERE ISSUED TO D IFFERENT PARTIES. ON SUCH COMPLIANCES AND INFORMATION SO REC EIVED, THE AO FOUND THAT THE ASSESSEE HAS PAID THE PAYMENTS OF RS.8,50,788/- TO PARTIES EXCEEDING RS.20,000/- IN C ASH ON DIFFERENT DATES. ACCORDINGLY, THE AO DISALLOWED RS. 1,70,158/- @ 20% OF THE AMOUNTS OF RS.8,50,788/- PAID TO M/S. M.K CYCLE (P) LTD AND M/S. CALCUTTA TRADERS AND M/S. BALAJI E NTERPRISES FOR SUCH CASH PAYMENTS AND ADDED THE SAME TO THE TO TAL INCOME OF THE ASSESSEE. 4. IN CHALLENGE, BEFORE THE CIT-A THE ASSESSEE CONT ENDED THAT SAID PURCHASES WERE MADE IN EARLIER AND SUBSEQ UENT YEARS IN ORDER TO GET AT CHEAPER RATE THAN THE CREDIT PUR CHASE OF SAME GOODS AND DEMONSTRATED THE METHOD OF CHEAPER RATES THAT PRICE OF THE CYCLE GEAR WOULD BE RS.91/- IF PAID IN CASH AND DIFFERS BETWEEN RS.104/- TO RS.106/- IF PAID IN CHEQUE. LIK EWISE, HE SUBMITTED THE FOLLOWING DETAILS/CHART AS FILED BEFO RE THE CIT-A IN SUPPORT OF ASSESSEES CONTENTION:- 5.1 NO. NAME AMOUNT (RS.) PAN 1 M.K CUCLE (P) LTD 9/12, LAL BAZAR STREET, KOL-1 4,90,721/- AADCM6953C 2 CALCUTTA TRADERS 4, BENTICK STREET, KOL-1 2,56,464/- AACFC1126H 3 BALAJI ENTERPRISES 6B, BENTICK STREET, KOL-1 1,03,603/- AAZPJ6923A 8,60,788/- ITA NO. 853/KOL/14 SRI GAUTAM DUTTA 3 THUS BY CASH PURCHASED HE SERVED A LOT RESULTING HI GHER PROFIT ON WHICH HE PAID HIGHER TAX. WITH A CAPITAL OF RS.76,280/- HE H AS EARNED NET PROFIT OF RS.2,48,948/-. A) HE PURCHASED BI-CYCLE GEAR FOR CASH @ RS.91/- PE R SET WHEREAS HE HAD TO PAY RS.104/- TO RS.106/- PER SET WHEN HE PAI D BY CHEQUE. B) HE PURCHASED BI-CYCLE FRAME FOR CASH @ RS.355/- PER PIECE WHEREAS HE HAD TO PAY RS.390/- TO RS.455/- PER PIECE WHEN H E HAD PAID BY CHEQUE. C) HE PURCHASED RICKSHAW FRAME FOR CASH @ RS.405/- PER PIECE WHEREAS HE HAD TO PAY RS.422/- TO RS.437/- PER PIECE WHEN H E PAID BY CHEQUE. D) HE PURCHASED BI-CYCLE HANDLE FOR CASH @ RS.110/- TO RS.115/- PER PIECE WHEREAS HE HAD TO PAY RS.132.50 TO RS.135/- P ER PIECE WHEN HE HAD PAID BY CHEQUE. E) HE PURCHASED BI-CYCLE FORK FOR CASH @ RS.100/- TO RS.104/- PER PIECE WHEREAS HE HAD TO PAY RS.114/- TO RS.116/- PER PIEC E WHEN HE HAD PAID BY CHEQUE. F) HE PURCHASED BI-CYCLE FIM FOR CASH @ RS.104/- TO RS.124/- PER PIECE WHEREAS HE HAD TO PAY RS.114 TO 158/- PER PIECE WHE N HE HAD PAID BY CHEQUE. 5. THEREBY THE ASSESSEE CONTENDED THAT THE CONSIDE RATION OF SUCH ITEMS WERE PAID IN CASH IN ORDER TO GET THE IT EMS AT CHEAPER PRICE AND EARNED HIGHER PROFIT. THE CIT-A F OUND THAT THE CONTENTION OF ASSESSEE WAS NOT ACCEPTABLE. THUS , HE CONFIRMED THE ADDITION AS MADE BY THE AO BY OBSERVI NG THAT THE SAID PAYMENTS WERE NOT COVERED BY ANY OF THE EXCEPT ION AS GIVEN UNDER RULE 6DD OF THE IT RULES. 6. BEFORE US THE LD.AR SUBMITS THAT THE ASSESSEE CO NDUCTED HIS BUSINESS TRANSACTION IN CASH IN EARLIER YEARS A ND ALSO IN SUBSEQUENT YEARS IN ORDER TO GET CHEAPER RATES OF I TEMS FOR EARNING HIGHER PROFIT. THE LD. AR ALSO ARGUED WHEN THE ACT OF PAYING CONSIDERATION IN CASH ITSELF THERE BEING BUS INESS EXPEDIENCY AND NO NEED TO BE COVERED BY THE EXCEPTI ON AS PROVIDED IN RULE 6DD OF THE IT RULES. HE ALSO ARGUE D WHEN THE ITA NO. 853/KOL/14 SRI GAUTAM DUTTA 4 PROVISION OF SECTION 40A(3) IS VERY CLEAR THAN RESO RTING TO RULES IS NOT NECESSARY, THEREBY EXCEPTION IN RULE 6DD IS NOT REQUIRED TO BE APPLICABLE. 7. THE LD.DR ARGUED THAT THE ASSESSEE DID NOT GIVE VALID EXPLANATION IN THE SUPPORT OF HIS CONTENTION OF PAY MENTS WERE MADE IN CASH FOR THE PURPOSE OF BUSINESS EXPEDIENCY AND SUCH PAYMENTS WERE NOT COVERED BY THE EXCEPTIONS AS PROV IDED UNDER RULE 6DD. RULE 6DD IS SACROSANCT AND VIOLATIO N OF SECTION 40A(3) OF THE ACT AND FAILURE TO WHICH UNDER EXCEPT ION THE DISALLOWANCE MADE ON THIS COUNT IS JUSTIFIED. HE RE LIED ON THE ORDERS OF THE AO AND THE CIT-A. 8 HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE AO SOUGHT EXP LANATION FROM ASSESSEE REGARDING THE PAYMENTS EXCEEDING RS.2 0,000/- AND ACCORDING TO AO THAT THE ASSESSEE OFFERED NO EX PLANATION AND ADMITTED THE VIOLATION OF THE PROVISION CONTEMP LATED U/SEC. 40A(3) OF THE ACT, WHEREAS BEFORE THE CIT-A, WE FIN D THAT THE ASSESSEE TOOK A PLEA THAT IT WOULD EARN HIGHER PROF ITS IF THE PAYMENTS WERE MADE IN CASH THAN THE PAYMENTS OTHERW ISE MADE IN CHEQUE AND TO SUPPORT ITS CONTENTION FORMUL ATED AN EXAMPLE I.E. THAT IT REQUIRES TO PAY RS. 71/- IN CA SH FOR BICYCLE GEAR, WHEREAS, CONSIDERATION DIFFERS BETWEEN RS.104 /- & RS. 106/-, IF PAID IN CHEQUE. THE LD.AR SUBMITS BEFORE US, THE SAME PRACTICE HAS BEEN FOLLOWED IN EARLIER YEARS AND SUB SEQUENT YEARS AND ARGUED THAT THE PAYMENT IN CASH IS A COMM ERCIAL EXPEDIENCY. IN THIS REGARD, WE MAY REFER TO THE PRO VISION ITA NO. 853/KOL/14 SRI GAUTAM DUTTA 5 CONTEMPLATED U/S. 40A(3) OF THE ACT RELEVANT TO THE YEAR UNDER CONSIDERATION. SECTION - 40A, INCOME-TAX ACT, 1961-2007 EXPENSES OR PAYMENTS NOT DEDUCTIBLE IN CERTAIN CIRC UMSTANCES. 40A. (1) THE PROVISIONS OF THIS SECTION SHALL HAVE EFFE CT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PROVISION OF THIS A CT RELATING TO THE COMPUTATION OF INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION'. (3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN R ESPECT OF WHICH PAYMENT IS MADE, AFTER SUCH DATE (NOT BEING LATER THAN THE 31ST DAY OF MAR CH, 1969) AS MAY BE SPECIFIED IN THIS BEHALF BY THE CENTRAL GOVERNMENT BY NOTIFICATION IN THE OFFICIAL GAZETTE , IN A SUM EXCEEDING [TWENTY] THOUSAND] RUPEES OTHERWISE THAN BY [ AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT ] , [TWENTY PER CENT OF SUCH EXPENDITURE SHALL NOT BE ALLOWED AS A DEDUCTION] 9. A BARE READING OF THE ABOVE PROVISION SUGGESTS T HAT THERE SHALL BE DISALLOWANCE OF 20% IN RESPECT OF ANY EXPE NDITURE WHERE PAYMENT IS MADE EXCEEDING RS.20,000/- OTHERWI SE THAN BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT . IN THE PRESENT CASE, THE AO FOUND THAT ALL THE PAYMENTS AM OUNTING TO RS.8,50,788/- WERE PAID IN CASH EXCEEDING RS.20,000 /-. THE ASSESSEE DID NOT PRODUCE ANYTHING IN EVIDENCE BEFOR E THE AO IN SUPPORTING OF ITS CLAIM THAT THE IMPUGNED AMOUNT WE RE PAID THROUGH ACCOUNT PAYEE CHEQUES OR ACCOUNT PAYEE BANK DRAFT NOR OFFERED ANY EXPLANATION. BEFORE THE CIT-A CONTENDED THE SAID PAYMENTS WERE MADE IN CASH IN ORDER TO GET HIGHER P ROFITS AND VEHEMENTLY SUPPORTED HIS CONTENTION THAT IT IS A CO MMERCIAL EXPEDIENCY TO PURCHASE GOODS AT CHEAPER PRICE AND I N OUR OPINION IT IS NOT TENABLE. IN VIEW OF THE SAME, WE REJECT THE ARGUMENTS ADVANCED BY THE LD.AR AND DO NOT FIND ANY MERIT IN THE APPEAL AND THE ORDER OF THE AO IN DISALLOWING A N AMOUNT OF ITA NO. 853/KOL/14 SRI GAUTAM DUTTA 6 RS.1,70,158/- AND CONFIRMED BY CIT(A) ON THIS ISSUE IS JUSTIFIED. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS D ISMISSED. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMI SSED. ORDER PRONOUNCED IN OPEN COURT ON 10-02-2 017 WASEEM AHMED S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 10-02 -2017 SD/- SD/- *PP/SPS: COPY OF THE ORDER FORWARDED TO: 1 . THE APPELLANT/ASSESSEE : SHRI GAUTAM DUTTA 2G BENT INCK STREET, KOLKATA-700 001. 2 THE RESPONDENT/DEPARTMENT- THE INCOME TAX OFFICER WARD 34(4), PODDAR COURT, KOLKATA-700 068. 3 4. THE CIT(A) THE CIT 5 . DR, KOLKATA BENCH 6 . GUARD FILE . BY ORDER, ASSTT. REGISTRAR