Bodrul Jamal ( Prop Bodrul Enterprise), Murshidabad V. I.T.O Wd - 1,Murshidabad, Murshidabad

ITA 860/KOL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4944 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 09-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 18-04-2013
• Court: TRIBUNAL
• Department Lawyers: SRIDHAR BHATTACHARYA
• Assessee Lawyers: S K TULSIYAN
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KO LKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M. BALAGANES H, AM] I.T.A NO.860/KOL/2013 ASSESSMENT YEAR: 2007-08 BODRUL JAMAL, PROP. BODRUL ENTERPRISE VS. INCOME- TAX OFFICER, WD-1, MURSHIDABAD (PAN: AECPJ9851Q) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 09.02.2016 DATE OF PRONOUNCEMENT: 02.03.2016 FOR THE APPELLANT: SHRI S. K. TULSIYAN, ADVOCATE FOR THE RESPONDENT: SHRI SRIDHAR BHATTACHARYA, J CIT ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XXXVI, KOLKATA VIDE APPEAL NO. 725/CIT(A)-XXXVI/KOL/ITO,WD-1/MURSHIDABAD/09-10 DAT ED 08.02.2013. ASSESSMENT WAS FRAMED BY ITO, WARD-1, MURSHIDABAD U/S. 143(3) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 2007-08 VIDE HIS ORDER DATED 09 .12.2009. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF AO IN DISALLOWING THE CASH PAYMENT ON EXPENSES U /S. 40A(3) OF THE ACT AMOUNTING TO RS.15,77,501/- AND ALSO ENHANCING BY FURTHER AMOUNT OF RS.5,93,935 /-. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE BEIN G EXPORT OF LAC/SHELLAC. THE ASSESSEE CLAIMED THAT IT IS ENGAGED IN THE BUSINESS OF EXPORT OF LAC WHICH I S AGRICULTURAL PRODUCE. THE AO NOTICED THAT ON ACCOUNT OF PURCHASES CASH PAYMENT IS MADE TO THE EX TENT OF RS.78,87,505/- THEREBY THE AO MADE DISALLOWANCE OF 20% AT RS.15,77,501/-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO CONFIRMED THE ACTION OF AO VIDE PARA 4 OF HIS APPEL LATE ORDER AS UNDER: 4. THE SUBMISSION OF AR, GROUND OF APPEAL AND ASS ESSMENT ORDER WERE DULY CONSIDERED. THOUGH APPELLANT HAS TAKEN FOUR GROUND OF APPEALS BUT ALL REVOLVE REGARDING DISALLOWANCE MADE U/S. 40A(3) TO THE TUNE OF RS.L5,77,501/-. MAJORITY OF PURCHASE S OF LAC FOR WHICH, APPELLANT IS EXPORTER HAVE BEEN SHOWN FROM BISHNU KR. AGARWAL AND NARESH KUMAR BANK A. TO THESE TWO PARTIES NUMEROUS PAYMENTS BOTH IN THE CASH AND CHEQUES HAVE BEEN MADE. WHEN S UPPLIERS WERE ACCEPTING PAYMENTS BY CHEQUES, THERE IS NO POINT IN MAKING HUGE PAYMENTS BY CASH I N EXCESS OF RS.20,000/-. THE PARTIES TO WHOM CASH PAYMENTS HAVE BEEN MADE ARE ONLY TRADERS IN LA C. THEY ARE NOT PRODUCER OF LAC OR AGENT OR MIDDLEMAN. IT IS PURELY A PURCHASE BY APPELLANT ON COMMERCIAL TERMS. HENCE PROVISION OF RULE 6DD(F) AND RULE 6DD(H) ARE, NOT APPLICABLE IN APPEL LANTS CASE. HENCE AO HAS RIGHTLY DISALLOWED A SUM OF RS.15,77,501/- U/S. 40A(3) OF INCOME TAX ACT . APPEAL OF APPELLANT IS DISMISSED. AND FURTHER, HE NOTICED THAT THE ASSESSEE HAS MADE CASH PAYMENT TO THE EXTENT OF RS.29,69,676/- THEREB Y HE ALSO ENHANCED THE DISALLOWANCE BY ISSUING NOTICE U/S. 251 OF THE ACT AT RS.5,93,935/-. THEREBY THE TOTAL DISALLOWANCE INCLUDING ENHANCEMENT BECOMES RS . 21,71,436/-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE TRIBUNAL. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BEFORE US, LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE AR EA OF ASSESSEE IS SO REMOTE THAT THE SAME IS NOT SE RVED BY ANY BANK AND ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF LAC WHICH IS AN AGRICULTURAL PRODUCE. 2 ITA NO.860/KOL/2013 BODRUL JAMAL AY 2007-08 2 LD. COUNSEL FOR THE ASSESSEE PRODUCED BEFORE US THE DEFINITION OF VARIOUS PRODUCES ALSO COVERS LAC. T HE DEFINITION OF VARIOUS PRODUCES AS PROVIDED IN SECTI ON 2(4) OF THE INDIAN FOREST ACT, 1927 STATES VARI OUS PRODUCES INCLUDE TIMBER, CHARCOAL, CAOUTCHOUE, WOOD OIL RESIN, NATURAL VARNISH, BARK, LAC, MYROBALANS, MAHUA FLOWERS. THE ASSESSEE IS EXPORTER OF LAC WH ICH IS PROCURED MAINLY FROM MEDINIPUR AND PURULIA AND MAINLY FROM TWO PARTIES VIZ. NARESH KUMAR BANK AND BISHNU KUMAR AGARWAL. ACCORDING TO ASSESSEE, THE PAYMENT IS FULLY REFLECTED IN THE CAS H BOOK AND ALSO IN THE PARTY LEDGER ACCOUNT. THE ASSESSEE FILED COMPLETE CASH BOOK ALONG WITH ITS PA PER BOOK. THE LD. COUNSEL FOR THE ASSESSEE DREW OU R ATTENTION TO COPIES OF PURCHASE BILLS OF LAC. LD. COUNSEL FOR THE ASSESSEE ALSO PRODUCED THE DEFINITI ON OF SHELLAC AS AGRICULTURE PRODUCE, WHICH READS AS UNDE R: SHELLAC IS SCRAPED FROM THE BARK OF THE TREES WHE RE THE FEMALE LAC BUG, KERRIA LACCA (ORDER HEMIPTERA, FAMILY KERRIIDAE), ALSO KNOWN AS LACCIFE R LACCA, SECRETES IT TO FORM A TUNNEL LIKE TUBE AS IT TRAVERSES THE BRANCHES OF THE TREE. THOUGH THES E TUNNELS ARE SOMETIMES REFERRED TO AS COCOONS, THEY ARE NOT LITERALLY COCOONS IN THE ENTOMOLOGICAL SENSE. THIS INSECT IS IN THE SAME SUPERFAMILY AS THE INSECT FROM WHICH COCHINEAL IS OBTAINED. THE I NSECTS SUCK THE SAP OF THE TREE AND EXCRETE STICKLACALMOST CONSTANTLY. THE LEAST COLOURED SH ELLAC IS PRODUCED WHEN THE INSECTS FEED ON THE KUSUM TREE (SCHLEICHERA). WE FIND THAT THE SHELLAC/LAC IS DEFINED IN SECTION 2(4) OF THE INDIAN FOREST ACT, 1927 AND ACCORDINGLY , THE SAME IS FOREST PRODUCE FALLING UNDER RULE 6DD(E) OF THE RULES AND THE ASSESSEE HAS MADE PAYMENT FOR PURCHASE OF THE SAME FROM ITS CULTIVATOR OR GROWER. ONCE THIS IS FOREST PRODUCE WHICH FALLS UNDER EXCEPTION CATEGORY AS PROVIDED IN RULE 6DD(E) OF TH E RULES AND NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE AC T. ACCORDINGLY, WE DELETE THE DISALLOWANCE AND ALLOW THE APPEAL OF ASSESSEE. 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 02.03.2016. SD/- SD/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 ND MARCH, 2016 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1. APPELLANT BODRUL JAMAL, PROP. BODRUL ENTERPRISES, VILL. ANTARDWIPA, P.O. BHASAI PAIKAR, DIST. MURSHIDABAD-742202. 2. RESPONDENT ITO, WARD-1, MURSHIDABAD. 3. CIT(A), , KOLKATA 4. CIT, , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .