Kande Onions, Nellore V. Income Tax Officer, Ward-1, Nellore

ITA 943/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0280 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 25-03-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 11-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KIRAN KATTADR
• Assessee Lawyers: PANDU RANGAIAH
• Keywords: Reasonable cause; Revenue expenditure
• Section: 40A(3)

Judgement Text

ITA NO 943 OF 2018 KANDE ONIONS NELLORE. PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A SMC BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.943/HYD/2018 (ASSESSMENT YEAR: 2014-15) M/S.KANDE ONIONS NELLORE PAN:AAEFK4156B VS INCOME TAX OFFICER WARD-1 NELLORE (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI PANDU RANGAIAH FOR REVENUE : SHRI KIRAN KATTA,DR O R D E R THIS IS ASSESSEES APPEAL FOR THE A.Y 2014-15 AGAIN ST THE ORDER OF THE CIT (A)-TIRUPATHI, DATED 28.2.2018 . INITIALLY IT IS FOUND THAT THERE IS A DELAY OF TWO DAYS IN FILING O F THE APPEAL BEFORE ME AND THE ASSESSEE HAS FILED AN APPLICATION EXPLAINING THE REASONS FOR THE DELAY AS UNDER: THE APPELLANT REMITTED APPEAL FEE OF RS.10,000/- O N 3.5.2018 WHICH IS WELL WITHIN TIME AND THE APPEAL W AS DULY SINGED ON EVEN DATE I.E. ON 3.5.2018 AND THE ADVOCATE AFTER ADDING NECESSARY ORDERS MADE IT TRIP LICATE AND ENTRUSTED TO THE ACCOUNTANT FOR SENDING IT BY S PEED POST ON 7.5.2018. SINCE THE APPEAL WAS ENTRUSTED AF TER CLOSING HOURS OF THE POST OFFICE, THE ACCOUNTANT SE NT THE APPEAL BY SPEED POST ON THE NEXT DAY I.E. 8.5.2018 AND DUE TO POSTAL DELAY THE APPEAL WAS RECEIVED BY THE HON'BLE ITAT ON 11.5.2018. THE DELAY OF 2 DAYS OCCU RRED WHICH IS NEITHER WILLFUL NOR DELIBERATE AND SO HAPP ENED IN THE PECULIAR CIRCUMSTANCES OF THE CASE. THOUGH THE APPELLANT HAS TAKEN DUE CARE AND CAUTION THE DELAY OF 2 DAYS OCCURRED. THE DELAY OF 2 DAYS MAY K INDLY BE CONDONED AND THE APPEAL MAY BE ADMITTED FOR HEARING. DATE OF HEARING : 25.03.2019 DATE OF PRONOUNCEMENT: 29.03.2019 ITA NO 943 OF 2018 KANDE ONIONS NELLORE. PAGE 2 OF 6 2. TAKING THE ABOVE INTO CONSIDERATION, I AM SATIS FIED THAT THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE AND THE DELAY IS NEITHER INTENTIONAL OR WILLFUL. THEREFORE, THE DELAY OF TWO DAYS IN FILING OF THE APPEAL BEFORE THIS TRIBUNAL I S CONDONED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI RM E-FILED ITS RETURN OF INCOME FOR THE A.Y 2014-15 ON 22.9.20 14 ADMITTING A TOTAL INCOME OF RS.3,05,000/-. DURING THE SCRUTINY PROCEEDINGS PURSUANT TO CASS, NOTICES WERE ISSUED FOR ASSESSMEN T U/S 143(3). ON VERIFICATION OF THE INFORMATION FURNISHED BY THE ASSESSEE, THE AO OBSERVED THAT THE ASSESSEE HAS MADE A TOTAL OF C ASH PAYMENT OF RS.8,02,023/- TOWARDS LORRY FREIGHT AND THEREFOR E, THE PROVISIONS OF SECTION 40A(3) OF THE ACT ARE ATTRACT ED. HE, THEREFORE, ASKED THE ASSESSEES EXPLANATION AS TO WHY THE DISA LLOWANCE SHOULD NOT BE MADE. THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS DEALING IN ONIONS WHICH ARE PERISHABLE GOODS AN D HAD TO MAKE THE PAYMENTS TO THE LORRY DRIVERS IN THE EARLY HOURS OF THE DAY WHEN THEY CAME TO DELIVER THE GOODS AND THEREFO RE, THE PROVISIONS OF SECTION 40A(3) CANNOT BE APPLIED. THE AO HOWEVER, DID NOT ACCEPT THE ASSESSEES CONTENTION AND OBSERV ED THAT THE ASSESSEE WAS DEALING WITH ONIONS WHICH DO NOT FAL L UNDER THE CATEGORY OF PERISHABLE GOODS AND ALSO HELD THAT T HE TIME AND CIRCUMSTANCES OF PAYMENT TO THE LORRY DRIVERS DO NO T DEMAND PAYMENT IN CASH SINCE CHEQUE IS TO BE GIVEN IN THE NAME OF THE TRANSPORTER AND NOT TO THE LORRY DRIVER. HE THEREFO RE, HELD THAT THE PROVISIONS OF SECTION 40A(3) ARE APPLICABLE AND ACCORDINGLY DISALLOWED THE SUM OF RS.8,02,023/-. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A), WHO CONFIRM ED THE ORDER OF ITA NO 943 OF 2018 KANDE ONIONS NELLORE. PAGE 3 OF 6 THE AO AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT APPEALS AS WELL AS AO FAILED TO APPRECIATE THE INDISPUTABLE FACT THAT FRESH ONIONS ARE PERISHABLE AGRICULTURES PRODUCTS. THE PROVISIONS AR E NOT APPLICABLE TO AGRICULTURAL PRODUCTS PURCHASE AND TRANSPORTATION. 2. THE PURCHASE AND TRANSPORT ARRANGEMENT WERE MADE BY THE COMMISSION AGENTS STATIONED AT MAHARASHTRA, GUJ ARAT AND MADHYA PRADESH BY PHONE ARRANGEMENT. AS PER THE COMMISSION AGENTS LETTER SINCE BALANCE FREIGHT CHAR GES WERE PAID TO THE LORRY DRIVER IN THE WEE HOURS OF T HE DAY WHILE TAKING DELIVERY OF THE GOODS, CIRCUMSTANCES NECESSITATED CASH PAYMENTS VIDE CIT VS. ASHOKA STEE L INDUSTRIES AND FLOOR MILLS (2007) 293 ITR 192 (P&H) . 3. IN FACT IT IS AN INDIVISIBLE CONTRACT. THE BALAN CE FREIGHT PAID TO THE DRIVER OF THE LORRY AS PER DIRECTIONS O F PURCHASING AGENT. IN FACT THE LORRY DRIVER INSISTED AT WEE HORSE TO AFFECT DELIVERY OF THE GOODS. HENCE THE PA YMENT WAS MADE IN EXCEPTIONAL CIRCUMSTANCES IN CASH TO ME ET CONTINGENT EXPENDITURE. 4. THE REASONS AND THE REASONS URGED IN THE GROUNDS OF APPEAL BEFORE THE CIT APPEALS AND THE WRITTEN SUBMI SSIONS MADE BEFORE THE C1T APPEALS MAY BE READ AS PART AND PARCEL OF THIS APPEAL. 5. THE ASSESSING OFFICER DID NOT POINT OUT ANY SING LE MISTAKES, OMISSIONS OR COMMISSIONS OR ANY ADVERSARI ES AND HAVING BEEN SATISFIED WITH THE BOOK RESULTS HAS ACCEPTED THE SAME. KO ADDITION WAS CONTEMPLATED. 6. EVEN REGARDING FREIGHT CHARGES PAID TO LORRY DRI VER THE AO DID NOT SUSPECT THE BONAFIDE. 7. THE SALES ARE EFFECTED BY THE APPELLANT BY EARLY MORNING AFTER TAKING DELIVERY AS THE APPELLANT HAS NO GODOW N FACILITY FOR STORING AND PROCESSING PERISHABLE ONIONS WILL E MANATE FOUL SPELL FROM THE THIRD DAY ON WARDS AND WILL BE SPOILED. 8. HENCE THE APPELLANT IS IN THE HABIT OF TAKING DE LIVERY AND DISPOSING THE FRESH ONIONS ON THE SAME DAY. THE AO AS WELL AS THE COMMISSIONER OF APPEALS FAILED TO APPRE CIATE THESE INDISPUTABLE FACTS. 9. FOR THESE AND OTHER REASONS AS MAY BE URGED AT T HE TIME OF HEARING OF THE APPEAL THE ADDITION MADE BY THE A O AND UPHOLD BY THE COMMISSIONER OF APPEALS MAY BE QUASHE D. ITA NO 943 OF 2018 KANDE ONIONS NELLORE. PAGE 4 OF 6 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THE TRANSPORT CHARGES ARE TO BE PAID TO THE LO RRY DRIVERS IN THE WEE HOURS OF THE DAY AND SINCE MOST OF THE DRIV ERS ARE FROM MAHARASHTRA, GUJARAT, KARNATAKA,ETC., THEY WOULD NO T ACCEPT THE CHEQUES AND THEREFORE, THE ASSESSEE WAS CONSTRAINED TO MAKE THE PAYMENT IN CASH EXCEEDING RS.35,000/-. 5. THE LEARNED DR, HOWEVER, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, I FIND THAT THOUGH THE ONIONS ARE NOT IN THE SAME QUALITY AS VEGETABLES REFERRED TO BY THE AO, THEY A RE IN FACT PERISHABLE IF THEY ARE NOT PRESERVED IN A PROPER MANNER AND IF THEY ARE KEPT IN THE CLOSED CONTAINERS. THE ASSESSE E HAD TO MAKE PAYMENTS IN CASH EXCEEDING OF RS.35,000/- AS UNDER: S.NO LORRY NO. CASH PAYMENT MADE TO DATE OF PAYMENT AMOUNT (RS.) TOTAL (RS.) 1 MP09HG5756 NANDURA 15.4.2013 54,540 54,540 2 AP02TB0466 NIJAMPUR 16.4.2013 50,400 50,400 3 AP07TU7575 NANDURA 24.4.2013 16,458 61,578 45,120 4 AP02TA0018 NANDURA 9.5.2013 19,900 85,400 65,500 5 KA56/0416 A.NAGAR 22.5.2013 54,000 54,000 6 SP7Y3699 INDORE 30.05.2013 55,275 55,275 7 AP02TA7322 NIJAMPUR 31.5.2013 55,650 55,650 8 MP09HG8890 INDORE 1.6.2013 12,000 74,000 62,000 9 AP02DB2556 NIJAMPUR 1.6.2013 56,680 56,680 10 AP07TB1989 SANGRAMPUR 6.6.2013 51,200 51,200 11 MP09HG6953 INDORE 6.6.2013 70,000 70,000 ITA NO 943 OF 2018 KANDE ONIONS NELLORE. PAGE 5 OF 6 12 AP16T Y6819 NIJAMPUR 7.6.2013 56,700 56,700 13 MP09HG6843 INDORE 8.6.2013 76,600 76,600 TOTAL 8,02,023 7. FURTHER, AS RIGHTLY POINTED OUT BY THE LEARNED C OUNSEL FOR THE ASSESSEE, THE AO DID NOT DOUBT THE GENUINEN ESS OF THE PAYMENTS BUT HAS ONLY MADE THE DISALLOWANCE, BECAUS E THE PAYMENTS WERE MADE IN CASH. THE HON'BLE RAJASTHAN H IGH COURT IN THE CASE OF SMT. HARSHILA CHORDIA VS. ITO (2008) 298 ITR 349 (RAJ.) HAS HELD THAT THE GENUINENESS OF THE TRANSAC TIONS AND IT BEING FREE FROM VICE OF ANY DEVICE OF EVASION OF TA X IS RELEVANT CONSIDERATION AND THAT IT SHOULD BE EXAMINED BEFORE INVOKING THE RIGORS OF SECTION 40A(3) OF THE ACT. SIMILARLY, THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. CHOUDAR Y 7MCO (1996) 217 ITR 431 (ALL.) HAS ALSO HELD THAT THE OB JECT OF SECTION 40A(3) IS THAT NO FICTITIOUS AMOUNT SHOULD BE ALLOW ED AS REVENUE EXPENDITURE AND NOT THAT CASH PAYMENT CAN NEVER BE MADE OR ALLOWED AND WHERE THE TOTALITY OF CIRCUMSTANCES SHO W THAT TRANSACTIONS WERE GENUINE, DISALLOWANCE U/S 40A(3) IS NOT CALLED FOR. RESPECTFULLY FOLLOWING THE SAME, I DEEM IT FIT AND PROPER TO DELETE THE ADDITIONS MADE U/S 40A(3) OF THE ACT. 8. IN THE RESULT, ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH MARCH, 2019. SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 29 TH MARCH, 2019. VINODAN/SPS ITA NO 943 OF 2018 KANDE ONIONS NELLORE. PAGE 6 OF 6 COPY TO: 1 SHRI K. PANDU RANGAIAH, ADVOCATE, 5-1-679 STONEHO USEPET, NELLORE 524002 2 ITO WARD-1 NELLORE 3 CIT (A)-TIRUPATHI 4 PR. CIT - TIRUPATI 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER