M/S KIRTIMAN FOR RURAL DEVELOPMENT AND RESEARCH FOUNDATION, JAIPUR V. INCOME TAX OFFICER, WARD-2-2, JAIPUR

ITA 88/JPR/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7190 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 24-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAN MOHAN GUPTA ACIT
• Keywords: Business expenditure; Maximum Marginal Rate; Set aside
• Section: 6; 40A(3); 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 88/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2015-16 M/S KIRTIMAN FOR RURAL DEVELOPMENT AND RESEARCH FOUNDATION, A-34 KESHAV NAGAR, CIVIL LINES, JAIPUR CUKE VS. ITO WARD 2(2), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAAK8891N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. SHRAWAN KUMAR GUPTA (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SH. MAN MOHAN GUPTA (ACIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 22/10/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 25/10/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-3, JAIPUR DATED 02.01.2019 WHEREIN THE ASSESSEE HAS TA KEN THE FOLLOWING GROUNDS OF APPEAL:- 1. THE IMPUGNED ASSESSMENT ORDER U/S 143(3) DATED 13.12.2017 IS BAD IN LAW AND ON FACTS OF THE CASE, FOR WANT OF JU RISDICTION AND VARIOUS OTHER REASONS AND HENCE THE SAME MAY KINDLY BE QUAS HED. 2. RS. 3,48,150/-: THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE DISALLOW ANCE OF RS. 3,48,150/- U/S 40A(3) ON ACCOUNT OF CASH PAYMENT IN EXCESS OF RS. 20,000/-. HENCE THE ADDITION OR DISALLOWANCE SO MADE BY THE LD. AO AND SUSTAINED BY THE LD. CIT(A) IS BEING TOTALLY CONTRARY TO THE PROVISI ONS OF LAW AND FACTS ON THE RECORD AND HENCE THE PENALTY MAY KINDLY BE DELE TED IN FULL. ITA NO. 88/JP/2019 M/S KIRTIMAN FOR RURAL DEVELOPMENT AND RESEARCH FOUNDATION VS. ITO WARD 2(2), JAIPUR 2 3. THE LD.AO HAS GROSSLY ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CHARGING INTEREST U/S 234 B/C. THE APPELLAN T TOTALLY DENIES IT LIABILITY OF CHARGING OF ANY SUCH INTEREST. THE INT EREST, SO CHARGED, BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS, MAY KI NDLY BE DELETED IN FULL. 2. GROUND NO. 1 IS GENERAL IN NATURE AND IN ANY CAS E, NO SPECIFIC CONTENTIONS HAVE BEEN TAKEN BY THE ASSESSEE, HENCE, THE SAME DOES NOT REQUIRE ANY ADJUDICATION. 3. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF AN AMOUNT OF RS. 3,48,150/- U/S 40A(3) OF THE ACT. 4. IN THIS REGARD, THE LD. AR SUBMITTED THAT THE AS SESSEE IS REGISTERED UNDER THE SOCIETY ACT. 1958 AND IS AN NGO, WHICH RE CEIVED VARIOUS GOVERNMENT GRANT IN AID FROM VARIOUS PANCHAYAT SAMI TIES AND ALSO RECEIVED MEMBERSHIP FEE AND DONATION, FOR WATER SHE D DEVELOPMENT PROJECT, FARMERS MOTIVATIONAL TRAINING PROGRAM, ANI MAL HUSBANDRY DEVELOPMENT AND MANAGEMENT, FOR HORTICULTURE DEVELO PMENT, ORGANIC FARMING DEVELOPMENT, AID FOR SELF HELP GROUP DEVELO PMENT ALONGWITH EDUCATING FARMERS FOR ADOPTING NEW TECHNOLOGY FOR A GRICULTURE. THE INCOME OF THE ASSESSEE IS DECLARED AND ACCEPTED U/S 57 AS INCOME FROM OTHER SOURCES. THE ID. AO HAS NOTED THAT THE ASSESS EE HAS CLAIMED DEDUCTION U/S 57 OF RS.3,48,150/-. THE ID. AO HAS A SKED TO FILE THE DETAILS OF EXPENSES. IN RESPONSE THERETO, THE ASSES SEE HAS FILLED THE SAME OR PRODUCED THE VOUCHER OF EXPENSES. THE ID. AO HAS STATED THAT THE ASSESSEE HAS MADE CERTAIN PAYMENT IN CASH EXCEEDING TO RS.20,000/-VIDE PAGE 2 OF THE ASSESSMENT ORDER. THE ID. AO HAS SHOW -CUASED FOR INVOKING THE PROVISION OF SEC. 40A(3) AND TO MAKE D ISALLOWANCE. HOWEVER THE ID. AO HAS ALLEGED THAT FOR WANT OF JUSTIFICATI ON, THE DISALLOWANCE OF ITA NO. 88/JP/2019 M/S KIRTIMAN FOR RURAL DEVELOPMENT AND RESEARCH FOUNDATION VS. ITO WARD 2(2), JAIPUR 3 RS.3,48,150/- HAS BEEN MADE AND TAXED THE INCOME AT THE MMR MAXIMUM MARGINAL RATE. 4.1 IN FIRST APPEAL, THE ID. CIT(A) HAS CONFIRMED T HE DISALLOWANCE IN SUMMARY MANNER AND ONLY HELD THAT THE APPELLANT MAD E THE INCOME & EXPENDITURE ACCOUNT AND FILED THE AUDIT REPORT AN D MADE RECEIPT AND PAYMENT ACCOUNT AND BALANCE SHEET WHICH ESTABLI SHED THAT IT IS DOING THE BUSINESS OR PROFESSION AND THESE ARE BUSI NESS PAYMENT MADE, HENCE SECTION 40A(3) IS APPLICABLE. THE ID. CIT(A) HAS FURTHER HELD THAT THE ARGUMENT THAT THE PAYMENT MADE ON BEHALF OF GOV T. AGENCY IS ALSO NOT ACCEPTABLE AND THE APPELLANT HAS NOT FILLED ANY EVIDENCE REGARDING THAT THE PAYMENT COVERED WITH RULE 6DD. 4.2 IN THE AFORESAID BACKGROUND, IT WAS SUBMITTED THAT IN THIS CASE PROVISION OF SEC. 40A(3) IS NOT APPLICABLE, BECAUSE THE ASSESSEE IS AN AOP AND DECLARED THE INCOME UNDER THE HEAD OR CHAPTER I NCOME FROM OTHER SOURCE, WHILE THE PROVISION OF SEC. 40A(3) IS APPLI CABLE FORM BUSINESS AND PROFESSION. AND THE ID. AO HIMSELF ASSESSED THE INC OME UNDER THE HEAD INCOME FROM OTHER SOURCES. IN THIS REGARD, REFERENC E IS DRAWN TO SEC. 40 WHICH READS AS UNDER: NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SEC. 3 0 TO 38, THE FOLLOWING AMOUNT SHALL NOT BE DEDUCTED IN COMPUTING THE INCOM E CHARGEABLE UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PROFESSIO N' IT WAS SUBMITTED THAT THE ID. AO HAS NOT ASSESSED T HE INCOME UNDER THE HEAD BUSINESS OR PROFESSION RATHER ASSESSED OR ACCE PTED UNDER THE HEAD INCOME FROM OTHER SOURCES. FURTHER IT IS ALSO IMPOR TANT TO NOTE THAT PROVISION OF SEC. 40A(3) IS APPLICABLE FOR BUSINESS EXPENDITURE AND ADMITTEDLY THESE ARE NOT BUSINESS EXPENDITURE NOR T HE ID. AO IN THE ORDER HELD THAT THESE ARE BUSINESS EXPENDITURE. ITA NO. 88/JP/2019 M/S KIRTIMAN FOR RURAL DEVELOPMENT AND RESEARCH FOUNDATION VS. ITO WARD 2(2), JAIPUR 4 4.3 IT WAS FURTHER SUBMITTED THAT THE ID. AO AND CI T(A) BOTH HAVE IGNORED THAT AS THE ASSESSEE IS AN NGO, WHICH RECEI VED VARIOUS GOVERNMENT GRANT IN AID FROM VARIOUS PANCHYAT SAMIT IES AND ALSO RECEIVED MEMBERSHIP FEES AND DONATION, FOR WATER SH ED DEVELOPMENT PROJECT, FARMERS MOTIVATIONAL TRAINING, PROGRAM, AN IMAL HUSBANDRY DEVELOPMENT AND MANAGEMENT, FOR HORTICULTURE DEVELO PMENT, ORGANIC FARMING DEVELOPMENT, AID FOR SELF HELP GROUP DEVELO PMENT ALONGWITH EDUCATED FARMER FOR ADOPTING NEW TECHNOLOGY FOR AGR ICULTURE. THUS THE ASSESSEE WAS WORKING ON BEHALF OF GOVT. AGENCY OR O THER INSTITUTE AND THE EXPENSES HAS ALSO BEEN INCURRED ON THEIR BEHALF . 4.4 IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS MADE PAYMENTS IN CASH UNDER THE EXCEPTIONAL AND UNAVOIDABLE CIRCUMST ANCES. BECAUSE THE PAYMENT HAS BEEN MADE ON ACCOUNT OF EXPENSES FOR BR EAKFAST, LUNCH DINNER, PAID TO THE VARIOUS RESTAURANT, HALWAI ETC OUT OF STATION FROM THE OFFICE PLACE OF THE ASSESSEE, WHERE THEY PEOPLE NOT ACCEPT THE CHEQUE BEING UNKNOWN TO THE ASSESSEE AND BEING OUT OF STATION. IN THESE TRANSACTION THE PAYMENT CANNOT BE MADE OR NOT POSSIBLE TO PAY BY CHEQUE OR BY DEMAND DRAFT DUE TO THE AMOUNT CANN OT BE ASCERTAINED BEFORE INCURRING EXPENSES. AND THE PAYEE HAS REFUSE D TO ACCEPT THE PAYMENT THROUGH CHEQUE OF NEXT DATE THAT IS WHY THE PAYMENT HAS BEEN MADE IN CASH. THE ASSESSEE HAS TO MAKE PAYMENT IN VARIOUS PLACES OUT OF CITY FROM THE WORKING PALACE OF ASSES SEE WHERE THE ASSESSEE WAS NOT HAVING BANK ACCOUNT AND THE PAYEES INSISTED THE ASSESSEE TO PAY IN CASH ON THE VERY SAME DAY AND IT WAS NOT POSSIBLE FOR THE ASSESSEE. FURTHER IT IS NOT POSSIBLE TO CAR RY CHEQUE BOOK EVERY PLACE AND ASSESSEE NOT KNOW HOW MUCH EXPENSES SHALL BE INCURRED. THE ASSESSEE WAS ALSO IN IMPRESSION THAT PAYMENT ON ACC OUNT OF BREAKFAST, LUNCH DINER AND FOOD AT OUT OF WORKING PLACE MAY BE GIVEN IN CASH. AS ITA NO. 88/JP/2019 M/S KIRTIMAN FOR RURAL DEVELOPMENT AND RESEARCH FOUNDATION VS. ITO WARD 2(2), JAIPUR 5 THE PAYMENT WAS MADE FOR THE PURPOSE OF AIMS AND OB JECT AND ON BEHALF OF THE PERSONS FROM WHOM GRANT HAS BEEN RECE IVED BY THE ASSESSEE AND THE SAME HAS NOT BEEN DISPUTED BY THE LOWER AUTHORITY AS THE ASSESSEE HAS PRODUCED THE COPIES OF THE PRINTED BILLS(PB 3-17) WHERE THE NAME AND ADDRESS ARE MENTIONED. THE IDENT ITY OF THE PAYEE IS CLEARLY KNOWN AND ESTABLISHED SO THE PROVISION O F S. 40A(3) READ WITH RULE 6DD FOR DISALLOWANCE OF EXPENSES ARE NOT APPLI CABLE IN THIS CASE. THE ID. AO AND CIT(A) HAVE NOT APPRECIATED THE PRAC TICAL APPROACH OR DIFFICULTY OF THE PERSONS AND NATURE OF EXPENSES ET C. WE ARE ENCLOSING HEREWITH THE BILLS AND VOUCHERS (PB 3-17). ONE SHOU LD ADOPT A PRACTICAL APPROACH NOT A TECHNICAL APPROACH TO PROBLEMS OF AO P AND STRIKE BETWEEN THE DIRECTION OF LAW AND HARDSHIP TO THE AS SESSEE. FURTHER, RELIANCE WAS PLACED ON THE JAIPUR TRIBUNAL DECISION IN CASE OF M/S A DAGA ROYAL ARTS, JAIPUR V/S ITO WARD 2(2), JAIPUR I N ITA NO. 1065/JP/2016 DT. 15.05.2018. 5. THE LD. DR IS HEARD WHO HAS RELIED ON THE FINDIN GS OF THE LOWER AUTHORITIES AND SUBMITTED THAT EVEN THOUGH INCOME O F THE ASSESSEE HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES, THE PROVISIONS OF SECTION 40A(3) ARE EQUALLY APPLICABLE BY VIRTUE OF SECTION 58 OF THE ACT. HENCE, THE CONTENTION RAISED BY THE LD. AR REGARDING NON- APPL ICABILITY OF SECTION 40A(3) OF THE ACT IS NOT CORRECT. IT WAS SUBMITTED THAT THE A SSESSEE HAS NOT SPECIFIED AS TO HOW THE PAYMENT MADE BY IT IN CASH IS COVERED UN DER ANY OF THE EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES AS SPECIFIED IN RULE 6DD OF THE INCOME TAX RULE. HE ACCORDINGLY SUBMITTED THAT THERE IS NO INF IRMITY IN THE ORDER OF THE LOWER AUTHORITIES AND ACCORDINGLY, THE SAME BE CONF IRMED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LIMITED ISSUE UNDER CONSIDERATION RE LATES TO DISALLOWANCE OF CERTAIN CASH PAYMENT EXCEEDING PRESCRIBED THRESHOLD BY INVOKING THE PROVISIONS ITA NO. 88/JP/2019 M/S KIRTIMAN FOR RURAL DEVELOPMENT AND RESEARCH FOUNDATION VS. ITO WARD 2(2), JAIPUR 6 OF SECTION 40A(3) OF THE ACT. THE INCOME OF THE ASS ESSEE HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND ASSE SSING OFFICER HAS HIMSELF STATED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 57 OF THE ACT AND OUT OF TOTAL EXPENSES, RS. 3,48,150/- HAS BEEN DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. IT IS NO DOUBT TRUE T HAT SECTION 40A(3) OF THE ACT RELATES TO EXPENDITURE UNDER THE HEAD INCOME FROM BUSINESS/PROFESSION. HOWEVER, BY VIRTUE OF SECTION 58 OF THE ACT, THE PR OVISIONS OF SECTION 40A(3) OF THE ACT ARE EQUALLY APPLICABLE WHERE THE INCOME OF THE ASSESSEE IS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. EVEN T HOUGH THE ASSESSING OFFICER HAS NOT SPECIFICALLY STATED SO WHILE INVOKI NG SECTION 40A(3) OF THE ACT, HOWEVER, MERE OMISSION OF REFERENCE TO SECTION 58 O F THE ACT BY THE ASSESSING OFFICER WOULD NOT RENDER THE ADDITION SO MADE BY TH E ASSESSING OFFICER UNTENABLE IN LAW GIVEN THAT THE SUBSTANCE OF THE TR ANSACTIONS RELATES TO CASH PAYMENT EXCEEDING RS. 20,000/- WHICH IS NOT DISPUTE D BY THE ASSESSEE. WE THEREFORE, FIND THAT THERE IS NO INFIRMITY IN THE O RDER OF THE AO AS FAR AS THE INVOKING OF SECTION 40A(3) OF THE ACT WHERE THE SAM E IS READ ALONG WITH SECTION 58 OF THE ACT. FURTHER, THE ASSESSEE HAS CONTENDED THAT IT HAS MADE CASH PAYMENT UNDER EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTA NCES AS THE PAYMENT HAS BEEN MADE ON ACCOUNT OF EXPENSES FOR BREAKFAST, LUN CH DINNER PAID TO THE VARIOUS RESTAURANT, HALWAI ETC. AT PLACES OUTSIDE T HE REGULAR PLACE OF OPERATIONS OF THE ASSESSEE AND AT THESE PLACES, THEY DO NOT AC CEPT THE CHEQUE PAYMENT BEING UNKNOWN TO THE ASSESSEE. FURTHER, THE ASSESSE E HAS RELIED ON THE CO- ORDINATE BENCH DECISION IN CASE OF M/S A DAGA ROYAL ARTS, JAIPUR VS. ITO WARD 2(2), JAIPUR IN ITA NO. 1065/JP/2016 DT. 15.05.2018 . WE FIND THAT THE SAID CONTENTION OF THE ASSESSEE REGARDING EXCEPTIONAL AN D UNAVOIDABLE CIRCUMSTANCES UNDER WHICH IT HAS MADE THE PAYMENTS IN CASH THOUGH RAISED BEFORE THE LOWER AUTHORITIES HAVE NOT BEEN EXAMINED . THEREFORE, IT WOULD BE APPROPRIATE IF THE MATTER IS SET ASIDE TO THE FILE OF THE LD. CIT(A) WHO SHALL CONSIDER THE AFORESAID CONTENTION SO RAISED BY THE ASSESSEE ALONG WITH THE ITA NO. 88/JP/2019 M/S KIRTIMAN FOR RURAL DEVELOPMENT AND RESEARCH FOUNDATION VS. ITO WARD 2(2), JAIPUR 7 DECISION OF THE CO-ORDINATE BENCH REFERRED SUPRA AN D DECIDE THE MATTER AFRESH AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSES SEE. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25/10/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 25/10/2019 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S KIRTIMAN FOR RURAL DE VELOPMENT AND RESEARCH FOUNDATION, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD 2(2), JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 88/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR