Jagdishprasad Chiranjilal Agrawal, Nandurbar V. Income-tax Officer,

ITA 888/PUN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1643 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP R RATHI
• Keywords: Additional evidence
• Section: 44AD; 43B; 40A(3); 143(3); 148

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO S. 887, 888 & 889 /PN/201 6 / ASSESSMENT YEAR S : 20 08 - 09, 2009 - 10 & 2010 - 11 JAGDISHPRASAD CHIRANJILAL AGRAWAL, CA. SANDEEP R. RATHI, C/O. NARENDRA AGRAWAL & ASSOCIATES, LILAVATI KUNJ, SARDAR CHOWK, NAVAPUR, NANDURBAR . / APPELLANT PAN : ADOPA1845N VS. THE INCOME T AX OFFICER, WARD 3 (3), DHULE . / RESPONDENT / APPELLANT BY : S HRI SANDEEP R. RATHI / APPELLANT BY : S HRI SANDEEP R. RATHI / RESPONDENT BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 1 2 . 0 7 .201 6 / DATE OF PRONOUNCEMENT: 15 . 0 7 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS BUNCH OF THREE APPEAL S FILED BY THE ASSESSEE ARE AGAINST CONSOLIDATED ORDER OF CIT (A) - 1 , NASHIK , DATED 0 1 . 02 .20 1 6 RELATING TO ASSESSMENT YEAR S 20 0 8 - 0 9 TO 2010 - 11 AGAINST R ESPECTIVE ORDER S PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THIS BUNCH OF THREE APPEALS RELATING TO THE SAME ASSESSEE ON SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDE R FOR THE SAKE OF CONVENIENCE. ITA NO S. 887, 888 & 889/PN/2016 2 3. THE ISSUE RAISED IN ALL THE APPEALS IS IN RELATION TO THE DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT, WHEREIN THE INCOME OF ASSESSEE WAS COMPUTED UNDER SECTION 44AF OF THE ACT. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS AND ISSUES IN ITA NO.887/PN/2016 TO ADJUDICATE THE ISSUE. 4 . THE ASSESSEE IN ITA NO.887/PN/2016 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE DISALLOWANCES U/S. 40A(3) ARE NOT J USTIFIED WHEN THE ASSESSEE IS SMALL RETAIL TRADER NOT COVERED BY SECTION 44AB OF THE ACT AND HAS FILED RETURN DECLARING INCOME ABOVE LIMITS PRESCRIBED U/S.44AF OF THE ACT. 2. O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE APPELLANT MUS T BE ALLOWED BENEFIT OF SECTION 44AF AS ALL THE CONDITIONS OF APPLICABILITY OF SAID SECTION ARE SATISFIED AND AS THE SAID SECTION IS IMPLIEDLY APPLICABLE WHEN THE APPELLANT IS NOT COVERED BY SECTION 44AB OF THE ACT AND DECLARES INCOME EQUAL TO OR ABOVE LIM IT PRESCRIBED U/S.44AF AS SAID SECTION ALSO PERMITS DECLARATION OF INCOME ABOVE PRESCRIBED LIMITS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSEE MUST BE ALLOWED BENEFIT OF SECTION 44AF AS HON. CIT(APPEALS) - I, NASHIK, IN APPELLATE ORDE R, HAS NOWHERE EXPRESSLY DENIED THE CONTENTION OF THE ASSESSEE THAT ASSESSEE MUST BE CONSIDERED TO BE COVERED U/S.44AF OF ASSESSEE THAT ASSESSEE MUST BE CONSIDERED TO BE COVERED U/S.44AF OF THE ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, APPELLANT REQUESTS TO RE - IOOK INTO ANALYSIS OF SECTION 40A(3) MADE BY HON. CIT(APPEALS) - I, AS THE SAID SECTION IS NOT APPLICABLE TO ASSESSEE COVERED U/S.44AF OF THE ACT. THE DECISION IN BALAJI CONSTRUCTION VS. ACIT, ITAT PUNE BENCH, (2000) 66 TTJ (PUNE) 718: (2000) 72 ITD 559 (PUNE) BE ANALYSED WITH REFERENCE TO THE CASE. 5 . BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS SMALL TIME TRADER OPERATING IN INTERIOR VILLAGE KHANDBARA OF NANDURBAR DISTRICT. THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,05,240/ - . THEREAFTER, REASONS WERE REC ORDED FOR REOPENING THE ASSESSMENT AND NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED, IN RESPONSE TO WHICH , THE ASSESSEE STATED THAT ORIGINAL RETURN OF INCOME FILED MAY BE TREATED AS FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT. THE ASSESSEE WAS ASKED TO PRODUCE THE BOOKS OF ACCOUNT ALONG WITH VOUCHERS. HOWEVER, NO BOOKS OF ACCOUNT WERE PRODUCED EVEN TILL THE PASSING OF THE ASSESSMENT ORDER. THE ASSESSEE CLAIMED ITA NO S. 887, 888 & 889/PN/2016 3 THAT HE WAS A DEALER NOT COVERED UNDER SECTION 44AF OF THE ACT. THE ASSESSING O FFICER NOTED THAT THE ASSESSEE HAD MADE CASH PURCHASES FROM M.B. CHEMICALS AND M.B. SUGAR & PHARMACEUTICALS, MALEGAON. THE DETAILS OF TRANSACTIONS ARE TABULATED AT PAGE 3 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER FROM THE INVESTIGATION CARRIED OUT A GAINST THE SAID TWO PARTIES NOTED THAT THE SELLER PARTIES HAD RECORDED THE RECEIPT OF CASH PAYMENTS FROM THE ASSESSEE IN THEIR CASH BOOKS ON RESPECTIVE DATES. THE ASSESSING OFFICER FURTHER NOTED THAT THE DISCLOSURE OF PROFIT BY THE ASSESSEE WAS MORE THAN PERCENTAGE PROVIDED UNDER SECTION 44AF / 44AD OF THE ACT. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAD NOT CLAIMED IMMUNITY PROVIDED UNDER SECTION 44AF/44AD OF THE ACT. FURTHER, THE ASSESSEE ALSO HAD NOT DENIED THE FACT THAT HE HAD NOT PU RCHASED MATERIAL IN CASH EXCEEDING RS. 20,000/ - FROM THE TWO PARTIES IN THE RESPECTIVE ACCOUNTING PERIODS. THE ASSESSING OFFICER THUS, DISALLOWED CASH PURCHASES EXCEEDING RS.20,000/ - UNDER SECTION 40A(3) OF THE ACT AT RS.4,74,500/ - . ACT AT RS.4,74,500/ - . 6. BEFORE THE CIT(A), THE ASSESSEE FURNISHED AN ADDITIONAL EVIDENCE IN THE FORM OF CONFIRMATION LETTER FROM M.B. CHEMICALS DATED 04.12.2015 FOR CASH PURCHASE FOR FINANCIAL YEAR 2007 - 08 TO 2009 - 10. THE CIT(A) DENIED THE ADMISSION OF THE SAID ADDITIONAL EVIDENCE AS THE ASSESSEE HAD NOT DEMONSTRATED ANY SUFFICIENT CAUSE BY VIRTUE OF WHICH IT WA S PREVENTED FROM FURNISHING THE SAID EVIDENCES FROM THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS. BUT, THEREAFTER, THE ADDITIONAL EVIDENCE WAS SENT TO THE ASSESSING OFFICER F OR VERIFICATION IN THE INTEREST OF JUSTICE. THE ASSESSING OFFICER IN THE REMAND REPORT SUBMITTED THAT THE ASSESSEE WAS A REGULAR PURCHASER OF SUGAR AND CANDY EVEN PRIOR TO 2007 - 08 AND HE WAS NOT A NEW CUSTOMER OF THE SAID PARTY AND THERE WAS NO NEED FOR T HE AFORESAID CASH PAYMENTS. THE ASSESSING OFFICER ALSO POINTED OUT THAT THE ASSESSEE WAS RESIDING AND DOING BUSINESS OF KIRANA AT KHANDBAR TALUKA, NAVAPURA AND BANK ITA NO S. 887, 888 & 889/PN/2016 4 FACILITIES WERE AVAILABLE IN THE SAID AREA. FURTHER, THE ASSESSEE HAD A BANK ACCOUNT IN S TATE BANK OF BIKANER, NAVAPUR BRANCH. IN REJOINDER, THE ASSESSEE POINTED OUT THAT HE WAS 74 YEARS OLD MAN AND WAS NOT CAPABLE OF HANDLING THE BANKING TRANSACTIONS AND HIS ANNUAL TURNOVER WAS ABOUT RS.15 LAKHS AND HE DID NOT ENJOY THE CREDITWORTHINESS. FU RTHER, NAVAPUR WAS 40 KMS. FROM ASSESSEES RESIDENCE AND THE BANK ACCOUNT OF ASSESSEE WAS NON - OPERATIVE FOR THE LAST TEN YEARS. HE FURTHER CLAIMED THAT EVEN IF HE MAINTAINS BOOKS OF ACCOUNT, HE CAN FILE THE RETURN OF INCOME UNDER SECTION 44AF OF THE ACT A ND ONCE, IT IS SO FILED, NO DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT CAN BE MADE. THE CIT(A) WAS OF THE VIEW THAT EVEN IF THE INCOME IS COMPUTED UNDER SECTION 44AF OF THE ACT, THE PROVISIONS OF SECTION 40A(3) OF THE ACT ARE APPLICABLE SINCE THE OPENIN G WORDS OF SECTION ARE THE PROVISIONS OF THIS SECTION SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT. THE CIT(A) THUS, HELD THAT THE DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT IN RESPECT O F CASH PAYMENTS OF MORE THAN RS.20,000/ - WERE IN 40A(3) OF THE ACT IN RESPECT O F CASH PAYMENTS OF MORE THAN RS.20,000/ - WERE IN ORDER EVEN THOUGH THE ASSESSEE HAD OFFERED INCOME WHICH WAS ASSESSED UNDER THE PROVISIONS OF SECTION 44AF OF THE ACT. RELIANCE IN THIS REGARD WAS PLACED ON THE DECISION OF PANAJI BENCH OF TRIBUNAL IN THE CA SE OF GOODLUCK NITETIC IN ITA NO.26/PNJ/2013, WHEREIN IT HAS BEEN HELD THAT DISALLOWANCE UNDER SECTION 43B OF THE ACT IS TO BE MADE EVEN WHEN THE INCOME IS ASSESSED UNDER THE PRESUMPTIVE PROVISION OF SECTION 44AF OF THE ACT. THE OTHER ARGUMENTS OF THE ASS ESSEE THAT THE BANK ACCOUNT WAS NON - OPERATIONAL, WAS NOT ACCEPTED BY THE CIT(A) AND EVEN THE PLEA THAT THE BANK ACCOUNT WAS AT A DISTANCE PLACE ALSO WAS NOT ACCEPTED AND THE ASSESSEE WAS HELD TO HAVE VIOLATED THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND DISALLOWANCE WAS MADE TO THE EXTENT OF RS. 4,74,500/ - , RS.11,47,175/ - AND RS.3,60,000/ - FOR ASSESSMENT YEARS 2008 - 09, 2009 - 10 AND 2010 - 11 RESPECTIVELY. 7. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN THIS REGARD. ITA NO S. 887, 888 & 889/PN/2016 5 8. THE LEARNED AUTHORIZED R EPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE WAS A SMALL TIME RETAIL TRADER HAVING VERY LOW TURNOVER AND HAD OFFERED THE INCOME UNDER SECTION 44AF OF THE ACT. HE FURTHER SUBMITTED THAT ONCE INCOME IS ESTIMATED IN THE HANDS OF ASSESSEE UNDE R SECTION 44AF OF THE ACT, NO DISALLOWANCE IS TO BE MADE UNDER SECTION 40A(3) OF THE ACT IN LINE WITH THE PROPOSITION OF PUNE BENCH OF TRIBUNAL IN BALAJI CONSTRUCTION VS. ACIT (2000) 66 TTJ (PUNE ) 718 AND AHMEDABAD BENCH OF TRIBUNAL IN GOPALSINGH R. RAJPU ROHIT VS. ACIT (2005) 94 TTJ (AHD) 865 . HE ALSO PLAC ED RELIANCE ON THE LATEST DECISION OF MUMBAI BENCH OF TRIBUNAL IN SMT. AVAN GIDWANI VS. ACIT IN ITA NO.5138/MUM/2015, RELATING TO ASSESSMENT YEAR 2007 - 08, ORDER DATED 06.04.2016 AGAINST ADMISSION OF ADDI TIONAL EVIDENCE FILED BY THE ASSESSEE, WHEREIN THE CONFIRMATION LETTER OF SELLER PARTIES, WHO IN TURN, HAD STATED THAT THE SALES WERE MADE TO THE ASSESSEE ON CASH BASIS ONLY AS HE WAS RESIDING IN SMALL VILLAGE WHICH WAS AT A DISTANCE OF 130 KMS. FROM THE B USINESS PLACE OF SMALL VILLAGE WHICH WAS AT A DISTANCE OF 130 KMS. FROM THE B USINESS PLACE OF SELLER. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 10. ON PERUSAL OF RECORD AND AFTER HEARING BOTH THE LEARNED AUTHORIZED REPRESENTATIVES AND WRITTEN SUBMISSIONS FILED BY THE ASSESSEE, THE ISSUE ARISING IN THE PRESENT APPEAL IS WHERE THE INCOME IN THE HANDS OF ASSESSEE HAS BEEN ASSESSED UNDER SECTION 44AF OF THE ACT BEING A RETAILER, CAN ANY DISALLOWANCE BE MADE UNDER SECTION 40A(3) OF THE ACT ON ACCOUNT OF CASH PURCHAS ES. THE ASSESSEE WAS SMALL TIME RETAILER FUNCTIONING IN A REMOTE AREA OF BACKWARD ADIWASI GROUP. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SMALL RETAILER TO FULFILL DAILY NECESSITIES OF HIMSELF AND HIS FAMILY. HE WAS A SENIOR CITIZEN ABOUT 75 YEARS OL D AND HAS BEEN ENGAGED IN KIRANA BUSINESS FOR ITA NO S. 887, 888 & 889/PN/2016 6 THE PAST SEVERAL YEARS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,05,240/ - ON PRESUMPTIVE BASIS UNDER SECTION 44AF OF THE ACT. THE ASSESSEE I N ORDER TO CARRY ON HIS BUSINESS HAD MADE CASH PURCHASES FROM TWO CONCERNS WHICH HAVE DISTANCE AT ABOUT 130 KMS. F ROM THE ASSESSEE. THE SAID CONCERNS HAD REFUSED TO PART WITH THE GOODS WITHOUT RECEIVING CASH PAYMENTS. THE ASSESSEE CLAIMS THAT BECAUSE OF CIRCUMSTANCES, HE WAS COMPELLED TO MAKE CASH PAYMENTS AND ONE BANK ACCOUNT WAS MAINTAINED BY HIM WHICH WAS LOCATED IN DISTRICT AND WAS NOT IN OPERATION FOR ABOUT 10 YEARS. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW O F PECULIARITIES AND CIRCUMSTANCES OF THE ASSESSEE, I FIND MERIT IN THE CLAIM OF ASSESSEE THAT BECAUSE OF LACK OF FACILITIES AND THE DEMAND OF SELLERS, HE WAS COMPELLED TO MAKE THE CASH PAYMENTS FOR THE PURCHASES MADE THROUGH THEM. THE ISSUE WHICH ARISES I S THAT IN SUCH DIRE CIRCUMSTANCES, UNDER WHICH THE ASSESSEE IS OPERATING HIS SMALL RETAIL BUSINESS, WHETHER ANY DISALLOWANCE IS WARRANTED UNDER SECTION 40A(3) OF THE ACT. I FIND WHETHER ANY DISALLOWANCE IS WARRANTED UNDER SECTION 40A(3) OF THE ACT. I FIND NO MERIT IN THE STAND OF AUTHORITIES BELOW IN THIS REGARD . KEEPING IN MIND T HE PECULIAR FACTS OF THE CASE, UNDOUBTEDLY, THERE IS EMBARGO UNDER SECTION 44 AF OF THE ACT IN MAKING CASH PAYMENTS ABOUT RS.20,000/ - , BUT THE SITUATION IN THE PRESENT CASE DEMANDED THE SAID CASH PAYMENTS FOR THE PURPOSE OF BUSINESS AND THE SAME MERITS TO B E ALLOWED , WHERE THE ASSESSEE IS SMALL TIME TRADER . 11. ANOTHER ISSUE IS TO BE KEPT IN MIND IS WHERE THE INCOME IS ASSESSED IN THE HANDS OF ASSESSEE UNDER SECTION 44AF OF THE ACT, THEN NO DISALLOWANCE IS WARRANTED UNDER SECTION 40A(3) OF THE ACT. IN TH IS REGARD, I FIND SUPPORT FROM THE RATIOS LAID DOWN BY PUNE BENCH OF TRIBUNAL IN BALAJI CONSTRUCTION VS. ACIT (SUPRA) AND AHMEDABAD BENCH OF TRIBUNAL IN GOPALSINGH R. RAJPUROHIT VS. ACIT (SUPRA). THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED UNDER SECTION 44AF/44AD OF THE ACT AND THEREAFTER, NO DISALLOWANCE IS TO BE MADE UNDER SECTION 40A(3) OF THE ACT. THE CHANDIGARH BENCH OF TRIBUNAL IN DCIT VS. SHRI ITA NO S. 887, 888 & 889/PN/2016 7 KASHMIR SINGH IN ITA NO.844/CHD/2009, RELATING TO ASSESSMENT YEAR 2006 - 07, VIDE ORDER DATED 02.05.2012 , I N TURN, RELYING ON THE DECISION OF HONBLE HIMACHAL PRA DESH HIGH COURT IN THE CASE OF M/S AMRIT SUGAR COMPANY IN ITA NO. 31 OF 2003 , HAS ALSO LAID DOWN THE SAID PROPOSITION. RELYING ON THE SAME, THE ORDER OF CIT(A) IS REVERSED IN DISALLOWING SUM OF RS. 4,74,500/ - , RS.11,47,175/ - AND RS.3,60,000/ - FOR ASSESSMENT YEARS 2008 - 09, 2009 - 10 AND 2010 - 11 RESPECTIVELY . THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 1 2 . IN THE RESULT, ALL THE APPEAL S OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 15 TH DAY OF JU LY , 201 6 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 15 TH JU LY , 201 6 . RK / GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 1, NASHIK ; 4. / THE PR. CIT - 1 , NASHIK ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , / / TRUE COPY // / PRIVATE SECRETARY , / ITAT, PUNE