Shri Radhesham Bherulal Bhandari, Satara V. ACIT, Satara Circle, Satara

ITA 954/PUN/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2577 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 15-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTUAMA
• Keywords: Opportunity of being heard; Tangible material; Tax effect
• Section: 143(3); 234B; 201(1); 145

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.954/PN/2011 ASSESSMENT YEAR : 2007-08 SHRI RADHESHAM BHERULAL BHANDARI, MARKET YARD, SATARA. PAN : ABHPB7882R . APPELLANT VS. THE ADDL. COMMISSIONER OF INCOME TAX, SATARA RANGE, SATARA. . RESPONDENT ITA NO.194/PN/2014 ASSESSMENT YEAR : 2008-09 THE ASSTT. COMMISSIONER OF INCOME TAX, SATARA CIRCLE, SATARA. . APPELLANT VS. SHRI RADHESHAM BHERULAL BHANDARI, MARKET YARD, SATARA. PAN : ABHPB7882R . RESPONDENT ITA NO.228/PN/2014 ASSESSMENT YEAR : 2008-09 SHRI RADHESHAM BHERULAL BHANDARI, MARKET YARD, SATARA. PAN : ABHPB7882R . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, SATARA CIRCLE, SATARA. . RESPONDENT ASSESSEE BY : SHRI M. K. KULKARNI DEPARTMENT BY : SMT. ANN KAPTUAMA / DATE OF HEARING : 08.02.2016 / DATE OF PRONOUNCEMENT: 29.02.2016 2 ITA NO.954/PN/2011 ITA NO.194/PN/2014 ITA NO.228/PN/2014 % / ORDER PER PRADIP KUMAR KEDIA, AM : THERE ARE THREE CAPTIONED APPEALS, TWO APPEALS FILE D BY THE ASSESSEE AND ONE CROSS-APPEAL FILED BY THE REVENUE. ITA NO.954/PN/2011 (BY ASSESSEE) : 2. FIRST, WE SHALL TAKE-UP THE APPEAL FILED BY THE ASSESSEE IN ITA NO.954/PN/2011 RELATING TO ASSESSMENT YEAR 2007-08, WHICH IS DIRECTED AGAINST THE ORDER OF CIT(A)-III, PUNE DATED 29.10.2 010 PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT). 3. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL :- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. C.I.T. (A) ERRED IN CONFIRMING THE ACTION OF THE A.O. OF REJEC TION OF THE BOOKS OF ACCOUNTS AND BOOK RESULTS INVOKING PROVISIONS OF SECTION 145 (3) OF THE ACT OBSERVING 'SIMPLY POSSIBILITY OF SUPPRESSION OF SALES AND THERE WAS A MPLE SCOPE IN SUPPRESSION OF SALES TURNOVER.' THE INVOCATION OF S. 145 (3) AND ESTIMAT ION OF GROSS PROFIT PERCENTAGE ON IMAGINARY AND PRESUMPTIVE GROUNDS WAS BAD IN LAW AN D WITHOUT JURISDICTION. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW AND HAVING ACCEPTED THE CONTENTION OF THE ASSESSEE THAT INTER-BRANCH TR ANSFERS FROM PUNE TO DELHI WERE ALREADY LOADED BY AVERAGE GROSS PROFIT OF 5.03 % TH EN LD. C.1.T. (A) OUGHT TO HAVE DELETED THE ENTIRE ADDITION MADE ON ACCOUNT OF ESTI MATION OF G.P. OF RS.20,31,232/- THEREBY SUSTAINING THE ADDITION OF RS.13,70,844/- W HICH AMOUNTS TO TAXATION OF SAME INCOME TWICE. THE ADDITION SUSTAINED OF RS. 13,70,844/- BE QUASHED. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE AUTHORITIES BELOW WERE UNDER BOUNDEN DUTY TO FOLLOW THE RATIO DISIDEN DI OF THE HON'BLE SUPREME COURT JUDGMENT IN CIT VS. WOODWARD GOVERNER INDIA (P.) LT D. (2009) 179 TAXMAN 326 (SC) THAT' IN CASES FALLING UNDER S. 145 (3), THE M ETHOD OF ACCOUNTING UNDERTAKEN BY THE ASSESSEE CONTINUOUSLY IS SUPREME'. DESPITE THIS VERDICT THE INVOCATION OF S. 145 (3) WAS BAD IN LAW AND WITHOUT JURISDICTION. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. C.1.T. (A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.10,28,67 8/- MADE BY A.O. INVOKING S. 40 (A)(I-A) WITHOUT PROPERLY APPRECIATING THE ARGUMENT S OF THE ASSESSEE BASED ON JUDICIAL VERDICTS RELIED UPON. THE DISALLOWANCE BE DELETED. 5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. C.I.T. (A) WAS NOT JUSTIFIED IN CONFIRMING THE AD-HOC DISA LLOWANCE OF RS.79,215/- MADE BY THE A.O. THE SAME BE DELETED. 3 ITA NO.954/PN/2011 ITA NO.194/PN/2014 ITA NO.228/PN/2014 6) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE INTEREST LEVIED U/S.234-B AND 234-C WAS NOT JUSTIFIED AND IT BE DEL ETED. 7) THE APPELLANT CRAVES LEAVE TO ADD/AMEND OR ALTER ANY OF THE ABOVE GROUNDS OF APPEAL. 4. GROUND NOS.1 TO 3 IN ESSENCE PERTAINS TO ADDITIO N ON ACCOUNT OF ESTIMATION OF GROSS PROFIT. THE FACTS CONCERNING T HE ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN WHOLESALE TRADING ACTIVITY, MAINLY IN PULSES, CEREALS AND OTHER FOODGRAINS. THE BUSINESS MAINLY CONSISTS OF PURCHA SING THE PULSES LIKE GHEVDA (RAJMA), SOYABEAN ETC. LOCALLY FROM FARMERS AND PET TY TRADERS AND SELLING TO VARIOUS WHOLESALERS. THE ASSESSEE ALSO OFTEN IMPOR TS PULSES LIKE RAJMA FROM CHINA, PAKISTAN AND BURMA. THE TRADING ACTIVITIES ARE MAINLY CARRIED OUT FROM SATARA THROUGH PROPRIETARY CONCERN, RADHESHAM BHER ULAL BHANDARI AND ALSO FROM DELHI THROUGH ANOTHER PROPRIETARY CONCERN, BH ANDARI AGRI SALES. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER FOUND THAT THE ASSESSEE DERIVED MAJOR TURNOVER FROM TRADING OF GHE VADA/RAJMA. THE TRADING RESULTS IN RESPECT OF TWO ITEMS FROM CENTRES CARRIE D OUT FROM SATARA AND DELHI WERE FOUND TO BE AS UNDER :- TURNOVER GROSS PROFIT GROSS PROFIT % SATARA CENTRE 10.63 CRORES RS.38,98,819/- 3.67% DELHI CENTRE 10.58 CRORES RS.18,51,628/- 1.74% 5. THE ASSESSING OFFICER OBSERVED THAT THERE IS DRA STIC DIFFERENCE IN THE GROSS PROFIT RATIO OF BOTH THE CONCERNS BEING SATAR A CENTRE AND DELHI CENTRE. HE ALSO OBSERVED THAT IN THE IMMEDIATELY PRECEDING YEAR, THE G.P. PERCENTAGE FOR THE DELHI CENTRE WAS 4.02%. IT WAS NEXT OBSERV ED BY THE ASSESSING OFFICER THAT THOUGH THERE IS WIDE VARIATION IN THE SALE PRI CES BETWEEN DIFFERENT TYPES OF GHEVDA/RAJMA, RANGING FROM RS.100/- PER KG. TO RS.6 00/- PER KG., NO SUCH DETAILS HAD BEEN MAINTAINED BY THE ASSESSEE WITH RE FERENCE TO THE SALES EFFECTED BY HIM. THE ASSESSING OFFICER OBSERVED THAT NO QUA LITY/TYPE-WISE DETAILS WERE MAINTAINED BUT ONLY SINGLE TRADING ACCOUNT WAS MAIN TAINED IN THE NAME OF GHEVDA TRADING A/C. IN THIS REGARD, IT WAS THE C ASE OF THE ASSESSEE BEFORE ASSESSING OFFICER THAT QUALITY/TYPE-WISE QUANTITATI VE DETAILS OF THE COMMODITY TRADER IS NOT PRACTICABLE SINCE SUPPLIERS/SELLERS O F THE GHEVADA SIMPLY 4 ITA NO.954/PN/2011 ITA NO.194/PN/2014 ITA NO.228/PN/2014 MENTIONED COMMODITY AS GHEVDA IN THEIR BILLS WITH OUT NARRATING THE QUALITY. THE ASSESSEE FURTHER CONTENTED THAT THIS IS ALSO GE NERAL PRACTICE FOLLOWED BY THE TRADERS IN INDIA. THE ASSESSEE FURTHER MADE OUT A CASE BEFORE THE ASSESSING OFFICER THAT THE G.P. PERCENTAGE ARE AFFECTED BY VA RIOUS FACTORS LIKE MARKET CONDITIONS, RISING TURNOVER, STORAGE PERIOD OF THE GRAINS, ETC. WHICH NEVER REMAINS CONSTANT. THE ASSESSEE SUBMITTED THAT ALL THE SALES EFFECTED THROUGH DELHI CENTRE ARE BY WAY OF CREDIT SALES AND THAT CO MPLETE DETAILS OF OPENING CLOSING STOCK, PURCHASES AND CLOSING STOCK HAD BEEN MAINTAINED. HOWEVER, IN THE ABSENCE OF QUALITATIVE DETAILS MAINTAINED BY TH E ASSESSEE, THE ASSESSING OFFICER WAS OF THE VIEW THAT THERE IS AMPLE SCOPE O F SUPPRESSION OF SALES TURNOVER EVEN WITHOUT COMPROMISING THE QUANTITY OF ITEM TRADED. HE THEREFORE CAME TO THE CONCLUSION THAT BOOK RESULTS DISCLOSED BY THE ASSESSEE COULD NOT BE SAID TO BE TRUE AND CORRECT TO ASCERTAIN TRUE INCOM E. IT WAS ALSO MENTIONED BY THE ASSESSING OFFICER THAT THE SUPPLIERS OF GHEVDA TO BOTH DELHI CENTRES AS WELL AS SATARA CENTRES BEING THE SAME AND THERE EXI STED HARDLY REASON FOR ANY WIDE VARIATIONS IN THE SELLING PRICE AT THE TWO PLA CES AT ANY GIVEN POINT OF TIME. ACCORDINGLY, THE BOOK RESULTS OF THE ASSESSEE FOR T HE DELHI CENTRES WERE REJECTED BY THE ASSESSING OFFICER CITING THE INFIRM ITIES NOTED BY HIM AND THE SAME WAS ADOPTED 3.67% AS DECLARED IN THE CASE OF S ATARA CENTRE BY OBSERVING THAT THE TURNOVER OF BOTH THE CONCERNS WERE ALMOST THE SAME. THIS RESULTED IN AN ADDITION OF RS.20,31,232/- IN THE HANDS OF THE A SSESSEE. 6. THE ASSESSEE CARRIED THE MATTER TO THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE STRONGLY OBJECTED TO THE REJECTION OF BOOK S OF ACCOUNT AND CONSEQUENT ADDITION ON ACCOUNT OF ALLEGED LOWER G.P. RATIO. H E SUBMITTED THAT THE ASSESSING OFFICER DID NOT CONSIDER THE PRACTICAL DI FFICULTIES AND BUSINESS CONSIDERATIONS / EXIGENCIES WHILE MAINTAINING THE B OOKS OF ACCOUNT. IT WAS STATED THAT MAINTAINING VARIETY/QUALITY-WISE STOCK REGISTER WAS NOT POSSIBLE FOR FOLLOWING REASONS :- THE SUPPLIERS SIMPLY MENTION GHEWDA / RAJMA IN THEI R BILLS. VARIETY OF GHEVDA IS NOT AT ALL MENTIONED. 5 ITA NO.954/PN/2011 ITA NO.194/PN/2014 ITA NO.228/PN/2014 SAME IS THE CASE WHILE SELLING GHEWDA. SALES PATTI S ARE PREPARED BY COMMISSION AGENTS OR ADATIYAS AT DELHI MARKET. THEY TOO DO NOT MENTION VARIETY OF GHEWDA TRADED. FARMERS AND LOCAL PETTY SUPPLIERS ALSO DO NOT MENTI ON VARIETY OF GHEWDA SUPPLIED BY THEM WHEN THEY HANDOVER GHEWDA TO LOCAL ADATIYAS AT LOCAL MARKET YARDS IN RESPECTIVE AREAS. NO TRADER IN INDIA KNOWN TO APPELLANT MAINTAINS SEP ARATE VARIETY-WISE TRADING ACCOUNT. THIS IS NORMAL TRADE PRACTICE FOL LOWED OVER THE YEARS BY ALL TRADERS IN INDIA. 7. IT WAS POINTED OUT BY THE ASSESSEE BEFORE THE CI T(A) THAT DURING THE ASSESSMENT PROCEEDINGS THAT THE DETAILS OF QUANTITA TIVE/MONTH-WISE PURCHASES AND SALES AND STOCK AS WELL AS PURCHASES WERE PROVI DED TO THE ASSESSING OFFICER. IT WAS NEXT SUBMITTED THAT THE INFLUENCE OF TEJMANDI FACTORS PREVAILING IN DELHI AND SATARA CENTRES IS REQUIRED TO BE FACTORED. IT WAS FURTHER CONTENDED BY THE ASSESSEE THAT THE DEMAND IN DELHI AND NORTH INDIA IS SUBSTANTIALLY HIGHER AS COMPARED TO PLACE LIKE SATA RA AND THEREFORE MARKET FORCE PREVAILING IN DELHI MARKET ARE CONSIDERABLY D IFFERENCE AS COMPARED TO SATARA MARKET. 8. THE ASSESSEE FURTHER SUBMITTED BEFORE THE CIT(A) THAT ABOUT 1/3 OF THE TOTAL PURCHASES IN DELHI CENTRE IS MADE FROM SATARA CENTRE. THE ASSESSEE TRANSFERS THE PURCHASES FROM SATARA TO DELHI AFTER LOADING THE MARGINS OF GROSS PROFIT UPTO CERTAIN LEVEL AT THE BASIS PURCHASE PRI CE AT SATARA CENTRE. IN THE RESULT, THE G.P. OF SATARA CENTRE GOES UP FOR THE S UPPLY WHEREAS DELHI CENTRE HAS TO BEAR THE LOAD OF G.P. INCLUDED IN THE BASIC PURCHASE PRICE OF SATARA CENTRE. THIS HAS CONTRIBUTED TO SOME MISMATCH IN G .P.. THE DISPATCHES FROM DELHI TO SATARA CENTRE ARE NEARLY 30% OF THE TOTAL TURNOVER WITH SUPPLY QUANTITY OF 7,20,997 KGS. THE CIT(A) HOWEVER WAS NOT FULLY IMPRESSED WITH THE VERSION OF THE ASSESSEE AND CONSIDERED THE REASONS STATED BY THE ASSESSEE TO BE TOO VAGUE TO JUSTIFY THE HUGE VARIATION OF THE G.P. IN THE CASE OF DELHI CENTRE AS COMPARED TO SATARA CENTRE. HOWEVER, HE PROVIDED PA RTIAL RELIEF TO THE ASSESSEE ON ACCOUNT OF G.P. FACTORED IN RESPECT OF SUPPLY OF NEARLY 30% OF THE TURNOVER MADE BY THE SATARA CENTRE TO DELHI CENTRE WHICH WOR KED OUT TO RS.6,60,388/- 6 ITA NO.954/PN/2011 ITA NO.194/PN/2014 ITA NO.228/PN/2014 BY HIM. HOWEVER, HE SUSTAINED THE BALANCE OF RS.13 ,70,844/- ON ACCOUNT OF LOWER G.P. IN RESPECT OF TURNOVER UNRELATED TO SATA RA CENTRE. 9. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN FURTHER APPEAL BEFORE US. 10. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND V EHEMENTLY SUBMITTED THAT THE CIT(A) HAS FAILED TO APPRECIATED THE FACTS IN P ERSPECTIVE. HE SUBMITTED THAT THE CIT(A) OUGHT TO HAVE APPRECIATED THAT QUALITY-W ISE MAINTAINS OF STOCK NEITHER POSSIBLE NOR PRACTICABLE IN VIEW OF THE FAC T THAT THE PURCHASE BILLS AS WELL AS SALES BILLS DO NOT CONTAIN CLEAR PARTICULAR S IN THIS REGARD. COUPLED WITH THIS, THE CIT(A) FAILED TO NOTICE THAT THE ASSESSEE IS MAINTAINING THE SIMILAR RECORDS FOR LAST SEVERAL YEARS IN LINE WITH THE USA GE OF THE TRADE. HE NEXT SUBMITTED THAT THE ASSESSING OFFICER HAS NOT POINTE D OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT DULY AUDITED BY DIFFERENT SET OF CHARTERED ACCOUNTANTS FOR DIFFERENT CENTRES AND HAS SIMPLY RESORTED TO THE PR OVISIONS OF SECTION 145(3) ON THE GROUND THAT THE QUANTITATIVE DETAILS IS NOT AVA ILABLE TO HIS SATISFACTION. 11. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REV ENUE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT(A) AND SUBMI TTED THAT THE RELIEF ENTITLED TO THE ASSESSEE HAS ALREADY BEEN GRANTED IN THIS RE GARD. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, ORDERS OF THE AUTHORITIES BELOW AND MATERIAL PLACED ON RECORD. T HE ISSUE AGITATED BEFORE US IS TO ASCERTAIN WHETHER THE REVENUE WAS JUSTIFIED I N COMPARING THE GROSS PROFIT MARGIN AT DELHI CENTRE VIS--VIS ANOTHER CENTRE LOC ATED AT SATARA (MAHARASHTRA). WE FIND THAT DETAILS OF PURCHASE BILLS, SALE BILLS, QUANTITY-WISE STOCK REGISTER AND OTHER INFORMATION HAVING BEEN PROVIDED IS NOT D ISPUTED. THE PRIMARY GRIEVANCE OF THE REVENUE IS THAT QUALITY-WISE STOCK REGISTER HAS NOT BEEN MAINTAINED WHICH MAY LEAD TO UNDER-VALUATION OF CLO SING STOCK. THE ASSESSING OFFICER ACCORDINGLY REJECTED THE BOOK RESULTS OF TH E ASSESSEE CONCERNING ITS 7 ITA NO.954/PN/2011 ITA NO.194/PN/2014 ITA NO.228/PN/2014 DELHI CENTRE AND SUBSTITUTED THE G.P. BY A G.P. RAT E OF 3.67% AS FOUND TO HAVE BEEN DECLARED FOR ITS SATARA CENTRE. WE NOTICE THA T NO SPECIFIC DEFECT PER SE HAS BEEN POINTED OUT EXCEPT GENERIC OBSERVATION OF ABSE NCE OF VARIETY-WISE QUANTITATIVE TALLY. IN THE ABSENCE OF ANY SPECIFIC DEFECTS IN THE PURCHASE AND CORRESPONDING SALES, WE FAIL TO UNDERSTAND THE RATI ONALE OF THE ACTION OF ASSESSING OFFICER. THE SUPPLIERS OF GHEVDA AT DELH I CENTRE TO THE EXTENT OF 70% ARE VERY DIFFERENT SET OF PARTIES. IT IS COMMO N KNOWLEDGE THAT DEMAND AND CONSUMPTION OF GHEVDA IN NORTHERN REGION INCLUD ING DELHI IS MATERIALLY DIFFERENT FROM THAT OF WESTERN REGION WHERE SATARA CENTRE IS LOCATED. THE GROSS PROFIT OF TWO CENTRES GOVERNED BY DIFFERENT C IRCUMSTANCES CANNOT BE POSSIBLY SIMILAR. THE G.P. AT ONE CENTRE WHICH IS MORE BENEFICIAL BEING ADOPTED FOR ANOTHER CENTRE WITHOUT ANY UNDERLYING M ATERIAL MILITATES AGAINST LOGIC. THE ACTION OF THE ASSESSING OFFICER IS CLASS IC CASE OF REACHING THE CONCLUSION BASED ON ASSUMPTION, PRESUMPTIONS AND CO NJECTURES. THE REVENUE HAS ALSO NOT IMPUGNED THE ASSERTION MADE BY THE ASS ESSEE THAT THE OTHER TRADERS IN INDIA ALSO MAINTAINS QUANTITATIVE RECORDS WITHOU T SEGREGATING THE SAME FOR VARIETY/QUALITY. ALONGSIDE, IT IS ALSO NOT IN DISP UTE THAT THE SUPPLIERS OF GHEVDA TO THE ASSESSEE AS WELL AS THE SELLERS/COMMISSION A GENTS PREPARING THE SALES BILLS DO NOT MENTION ABOUT VARIETY OF GHEVDA. AS A COROLLARY, IT IS NOT PRACTICABLE TO DEDUCE VARIETY/QUALITY-WISE QUANTITA TIVE DETAILS. IN THE CIRCUMSTANCES, WE FAIL TO COMPREHEND THE ACTION OF THE REVENUE IN BENCHMARKING HIGHER G.P. OF ONE CENTRE AND IN CONSE QUENCE EXTRAPOLATE THE SAME TO ANOTHER CENTRE. NO TANGIBLE MATERIAL HAS B EEN BROUGHT ON RECORD BY THE REVENUE TO ENABLE IT TO DISPLACE THE ACTUAL G.P . DECLARED BY THE ASSESSEE. IT IS WELL-SETTLED THAT THE ASSESSEE IS NOT OBLIGED TO MAXIMIZE ITS IT PROFITS. IN THE LIGHT OF THE AFORESAID DISCUSSION, WE FIND CONSIDER ABLE MERIT IN THE PLEA OF THE ASSESSEE THAT SUCH ADDITION BASED ON ASSUMPTIONS AN D PRESUMPTIONS ARE TOTALLY UNCALLED FOR AND DESERVES TO BE DELETED. IN THE RE SULT, THE GROUNDS TAKEN BY THE ASSESSEE CONCERNING THE ABOVE ISSUE ARE ALLOWED AND ADDITIONS SUSTAINED BY THE CIT(A) ON THIS SCORE IS DIRECTED TO BE DELETED. TH US, THE ASSESSEE SUCCEEDS ON THIS ISSUE. 8 ITA NO.954/PN/2011 ITA NO.194/PN/2014 ITA NO.228/PN/2014 13. GROUND NO.4 OF THE APPEAL OF THE ASSESSEE CONCE RNS THE DISALLOWANCE OF RS.10,28,678/- MADE BY THE ASSESSING OFFICER INVOKI NG SECTION 40(A)(IA) OF THE ACT. 13.1 THE RELEVANT FACTS CONCERNING THE ISSUE ARE TH AT THE ASSESSEE MADE CERTAIN INTEREST PAYMENTS TO VARIOUS CO-OPERATIVE C REDIT SOCIETIES ON LOAN TAKEN FROM THEM AS UNDER :- S.NO. NAME OF THE INSTITUTION AMOUNT PAID PAYING U NIT 01. VYAPARI PATSANSTHA 1,92,179 BHANDARI AGRI SALES 02. MAHESH NSPS SANSTHA 4,05,143 BHANDARI AGRI SALE S 03. MAHESH NSPS SANSTHA 1,54,690 B.R. BHANDARI 04. PARSHWANATH NSPS 2,76,666 B.R. BHANDARI 13.2 THE ASSESSING OFFICER DISALLOWED THE SAME INVO KING SECTION 40(A)(IA) OF THE ACT AS THE ASSESSEE HAS FAILED TO DEDUCT DUE TA X AT SOURCE FROM THE SAID PAYMENT. WHILE DOING SO, IT WAS OBSERVED BY THE AS SESSING OFFICER THAT THE CO-OPERATIVE CREDIT SOCIETIES CANNOT BE EQUATED WIT H BANKS AS THEY ARE NOT EMPOWERED TO CARRY OUT BANKING ACTIVITIES UNDER THE BANKING REGULATIONS ACT AND THEREFORE PAYMENT OF INTEREST MADE TO THEM IS N OT COVERED UNDER THE EXCEPTION PROVIDED IN SECTION 194A OF THE ACT. 13.3 IN THE FIRST APPEAL BEFORE THE CIT(A), THE ASS ESSEE INTER-ALIA SUBMITTED THAT PAYMENT OF INTEREST WERE MADE TO NAGRI/ GRAMIN SAHAKARI PATSANSTHAS WHOSE INCOME ARE NOT TAXABLE DUE TO PROVISIONS OF S ECTION 80P OF THE ACT. THE ASSESSEE BONAFIDELY BELIEVED THAT THE INCOME OF NAG RI/ GRAMIN SAHAKARI PATSANSTHAS WAS NOT TAXABLE AND THEREFORE THERE IS NO NEED TO DEDUCT TDS ON INTEREST. THE CIT(A), HOWEVER, REJECTED THE CONTEN TION OF THE ASSESSEE AND HELD THAT THE ASSESSING OFFICER IS JUSTIFIED IN DIS ALLOWING INTEREST EXPENSES IN VIEW OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 13.4 AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL BEFORE US. 9 ITA NO.954/PN/2011 ITA NO.194/PN/2014 ITA NO.228/PN/2014 13.5 THE LIMITED ISSUE THAT ARISES FOR OUR CONSIDER ATION IS WHETHER THE ASSESSING OFFICER IS JUSTIFIED IN RESORTING TO SECT ION 40(A)(IA) OF THE ACT IN RESPECT OF EXPENDITURE TOWARDS INTEREST CHARGES ATT RIBUTABLE TO NAGRI/ GRAMIN SAHAKARI PATSANSTHAS. WE OBSERVE THAT AS PER AMEND MENT MADE BY FINANCE ACT, 2012, W.E.F. 01.04.2013 THE ASSESSEE OUGHT NOT TO BE TREATED AS ASSESSEE IN DEFAULT WHEN THE PAYEE HAS OTHERWISE DISCHARGED ITS OBLIGATION TOWARDS TAX LIABILITY ON ITS CORRESPONDING INCOME AS PER THE PR OVISIONS OF THE ACT. 13.6 WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIB UNAL ON THE IDENTICAL POINT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE IN THE CASE OF M/S S. & S. WIRE PRODUCTS VS. ITO IN ITA NO.779/PN/2015 RELATIN G TO ASSESSMENT YEAR 2010-11, ORDER DATED 15.01.2016. IN THE AFORESAID DECISION, IT HAS BEEN HELD THAT SECOND PROVISO TO SECTION 40(A)(IA) IS CLARIFI CATORY AND THEREFORE RETROSPECTIVE IN OPERATION AND AS A CONSEQUENCE, ON CE THE PAYEE HAS DISCHARGED IN TAX OBLIGATION IN ACCORDANCE WITH LAW, OPERATION OF SECTION 40(A)(IA) STANDS DISPENSED WITH. THE RELEVANT EXTRACT OF THE OPERAT IVE PARA ON THE POINT IS REPRODUCED HEREUNDER :- 9. WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBU NAL ON THE IDENTICAL POINT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF THE BEED DISTRICT CENTRAL CO-OP. BANK LTD. VS. ACIT IN ITA NOS.1108 & 1109/PN /2011, ORDER DATED 31.12.2015. THE RELEVANT EXTRACT OF THE OPERATIVE PARA ON THE POINT IS REPRODUCED HEREUNDER :- 51. NOW, COMING TO THE SECOND ASPECT OF THE ISSUE I.E. NEW LEGAL PLEA RAISED BY THE ASSESSEE IN VIEW OF SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, WHICH WAS INSERTED BY THE FINANCE ACT, 2012. THE TRIBUNAL IN ACIT VS. BHAVOOK CHANDRAPRAKASH TRIPATHI (2015) 43 CCH 292 ( PUNE-TRIB) WHILE ADJUDICATING SIMILAR ISSUE HAD OBSERVED AS UNDER:- 4. FOLLOWING THE AFORESAID PRECEDENT, WE HEREBY RE VERSE THE DECISION OF THE CIT(A). HOWEVER, AT THE TIME OF HEA RING, THE LD. REPRESENTATIVE FOR THE RESPONDENT-ASSESSEE MADE A N EW LEGAL ARGUMENT THAT SECOND PROVISO TO SECTION 40(A)(IA) O F THE ACT WAS INSERTED BY FINANCE ACT, 2012 W.E.F. 01.04.2013, WH EREBY IT IS PROVIDED THAT THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT WOULD NOT BE MADE IF THE ASSESSEE IS NOT DEEMED TO BE AN ASSESSE E IN DEFAULT UNDER THE FIRST PROVISO TO SECTION 201(1) OF THE ACT. THE STAND OF THE ASSESSEE IS THAT THE SAID PROVISO SHOULD BE UNDERSTOOD AS RE TROSPECTIVE IN NATURE AS IT HAS BEEN INTRODUCED TO ELIMINATE UNINT ENDED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIPS TO THE TAX PAYERS. IT WAS POINTED OUT THAT IN SIMILAR CIRCUMSTANCES, THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S GAURIMAL MAHAJA N & SONS VIDE ITA NO.1852/PN/2012 DATED 06.01.2014 FOLLOWING THE DECISION OF THE 10 ITA NO.954/PN/2011 ITA NO.194/PN/2014 ITA NO.228/PN/2014 COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL VS. ACIT VIDE ITA NO.38/COCH/2013 DATED 29.11 .2013 HAS RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. I N THE PRECEDENT DATED 06.01.2014 (SUPRA), THE TRIBUNAL NOTED THAT SUCH A PLEA WAS RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL AND THE CORR ECTNESS OR OTHERWISE OF THE CONTENTIONS RAISED WAS NOT EXAMINED BY THE L OWER AUTHORITIES. THEREFORE, THE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINATION AFRESH, FOLLOWING THE DECISION OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ANT ONY D. MUNDACKAL (SUPRA) IN A SIMILAR CIRCUM STANCE. THE LD. REPRESE NTATIVE SUBMITTED THAT THE MATTER BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER IN THE LIGHT OF THE ORDER OF THE TRIBUNAL DATED 06,01. 2014 (SUPRA). THE AFORESAID PLEA OF THE RESPONDENT-ASSESSEE HAS NOT B EEN SERIOUSLY OPPOSED BY THE LD. DEPARTMENTAL REPRESENTATIVE APPE ARING FOR THE REVENUE. 5. FOLLOWING THE AFORESAID PRECEDENT, WE THEREFORE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF TH E ASSESSING OFFICER WHO SHALL CONSIDER THE PLEA OF THE ASSESSEE BASED O N THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT INSERTED BY THE FINANCE ACT W.E.F. 01.04.2013 IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL CONTAINED IN ITS ORDER DATED 06.01.2014 (SUPRA). N EEDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASON ABLE OPPORTUNITY OF BEING HEARD BEFORE PASSING AN ORDER AFRESH ON TH IS ASPECT AS PER LAW. 14. THIS ISSUE RAISED IN THE PRESENT APPEAL IS SQUA RELY COVERED BY THE ORDER OF TRIBUNAL (SUPRA). FOLLOWING THE PARITY OF REASO NING, WE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF AS SESSING OFFICER, WHO SHALL CONSIDER THE PLEA OF THE ASSESSEE BASED ON THE PROV ISIONS OF THE ACT INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01.04.2013 AND IN LINE WITH EARLIER ORDER OF THE TRIBUNAL DATED 15.01.2016 (SUPRA). THE ASSESSING O FFICER IS DIRECTED TO ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW AFTER A FFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, ON T HIS GROUND ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 15. GROUND NO.5 IS NOT PRESSED AT THE TIME OF HEARI NG AND THE SAME IS BEING DISMISSED AS NOT PRESSED. GROUND NO.6 IS GENERAL I N NATURE AND IS BEING ALSO DISMISSED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.954/PN/2011 RELATING TO ASSESSMENT YEAR 2007-08 IS PARTLY ALLOWED. 11 ITA NO.954/PN/2011 ITA NO.194/PN/2014 ITA NO.228/PN/2014 ITA NO.194/PN/2014 (BY REVENUE) : ITA NO.228/PN/2014 (BY ASSESSEE) : 17. NOW, WE SHALL TAKE-UP THE CROSS APPEALS FILED B Y THE REVENUE AND THE ASSESSEE FOR ASSESSMENT YEAR 2008-09. THE CROSS AP PEALS FILED BY THE REVENUE AND THE ASSESSEE ARE AGAINST THE ORDER OF CIT(A)-II I, PUNE DATED 21.11.2013 RELATING TO ASSESSMENT YEAR 2008-09 PASSED UNDER SE CTION 143(3) ACT. 18. THE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER. 19. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REV ENUE FAIRLY ADMITTED THAT THE APPEAL OF THE REVENUE IN ITA NO.194/PN/201 4 RELATING TO ASSESSMENT YEAR 2008-09 IS COVERED BY RECENT CBDT CIRCULAR NO. 21 OF 2015 DATED 10 TH DECEMBER, 2015. SINCE THE TAX EFFECT IN RESPECT OF DISPUTED ISSUES RAISED BY THE REVENUE IN ITS APPEAL IS LESS THAN THE REVISED MONETARY LIMIT OF RS.10 LAKHS PRESCRIBED BY THE CBDT CIRCULAR, THE AFORESAID APPE AL OF THE REVENUE IN ITA NO.194/PN/2014 IS NOT MAINTAINABLE. 20. IN VIEW OF EXPRESSED CIRCULAR OF THE CBDT (SUPR A), THE APPEAL OF THE REVENUE IN ITA NO.194/PN/2014 STANDS DISMISSED. 21. NOW, WE SHALL TAKE-UP THE APPEAL OF THE ASSESSE E IN ITA NO.228/PN/2014 FOR ADJUDICATION. IN THIS APPEAL, T HE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A)-III, PUNE, WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWA NCE OF RS. 5,37,926/- MADE BY THE A. O. INVOKING THE PROVISIONS OF S. 40(A)(I-A) ON A CCOUNT OF INTEREST PAID TO CO. OP. CREDIT SOCIETIES WHOSE INCOME IS EXEMPT UNDER S. 80 P(2)(A)(I) OF THE ACT. THE PROVISIONS OF S. 40(A)(I-A) ARE NOT APPLICABLE FOR SUCH PAYMENTS OF INTEREST TO THESE SOCIETIES. THE ADDITION CONFIRMED BY LD. CIT(A) BE DELETED. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW AND IN VIEW OF THE FACT THAT THE BOOKS OF ACCOUNT REGULARLY MAINTAINED DULY AUDITED WERE REJECTED U/S 145(3) AND ESTIMATING THE GP% RESULTING INTO ADDITION OF R S. 13,20,097/- THOUGH DELETED BY 12 ITA NO.954/PN/2011 ITA NO.194/PN/2014 ITA NO.228/PN/2014 LD. CIT(A), THE FACT REMAINS THAT THE BOOKS WERE RE JECTED AND THEREFORE, OTHER ADDITION IS NOT PERMISSIBLE. IT BE HELD ACCORDINGLY . 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEVY OF INTEREST U/S 234A, 234B AND 234C IS NOT JUSTIFIED. THE LEVY OF I NTEREST BE QUASHED. 4) THE APPELLANT CRAVES/LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 22. IN THE COURSE OF HEARING BEFORE US, THE LD. AUT HORIZED REPRESENTATIVE FOR THE ASSESSEE EXPRESSED THAT HE IS NOT PRESSING GROU ND NO.2 OF THE ASSESSEES APPEAL. THEREFORE, GROUND NO.2 OF THE ASSESSEES A PPEAL IS TREATED AS DISMISSED. 23. GROUND NOS.3 AND 4 ARE GENERAL IN NATURE AND RE QUIRES ITS NO ADJUDICATION. 24. THIS LEAVES US WITH GROUND NO.1 OF THE APPEAL O F THE ASSESSEE. THE RELEVANT FACTS CONCERNING THE ISSUE ARE THAT THE AS SESSEE MADE CERTAIN INTEREST PAYMENTS TO VARIOUS CO-OPERATIVE SOCIETIES ON LOAN TAKEN FROM THEM AS UNDER :- S.NO. NAME OF THE COOP. CREDIT SOCIETY AMOUNT PAID 01. MAHESH NSPS SANSTHA, SATARA 4,03,397 02. KOREGAON MERCHANT GR. S.P.S.S. 61,825 03. MUNISUWRAL B.S. GR. S.P.S. 72,704 TOTAL 5,37,926/- 25. THE ASSESSING OFFICER DISALLOWED THE SAME INVOK ING SECTION 40(A)(IA) OF THE ACT ON THE SIMILAR GROUND AS IN ASSESSMENT YEAR 2007-08 THAT AS THE ASSESSEE HAS FAILED TO DEDUCT DUE TAX AT SOURCE FRO M THE SAID PAYMENT. 26. THE CIT(A) CONFIRMED THE DISALLOWANCE ON THE RE ASONING SIMILAR TO ASSESSMENT YEAR 2007-08. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 27. THE LIMITED ISSUE THAT ARISES FOR OUR CONSIDERA TION IS WHETHER THE ASSESSING OFFICER IS JUSTIFIED IN RESORTING TO SECT ION 40(A)(IA) OF THE ACT IN RESPECT OF EXPENDITURE TOWARDS INTEREST CHARGES ATT RIBUTABLE TO NAGRI/ GRAMIN 13 ITA NO.954/PN/2011 ITA NO.194/PN/2014 ITA NO.228/PN/2014 SAHAKARI PATSANSTHAS. THE ISSUE INVOLVED BEING IDE NTICAL TO ASSESSMENT YEAR 2007-08 (SUPRA), OUR DECISION IN ASSESSMENT YEAR 20 07-08 SHALL APPLY MUTATIS- MUTANDIS TO THIS ASSESSMENT YEAR I.E. 2008-09 ALSO. ACCORD INGLY, THE ASSESSING OFFICER IS DIRECTED TO ADJUDICATE THE ISSUE IN ACCO RDANCE WITH LAW AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, ON THIS GROUND ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 28. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.228/PN/2014 RELATING TO ASSESSMENT YEAR 2008-09 IS PARTLY ALLOWED. 29. RESULTANTLY, BOTH THE CAPTIONED APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 29 TH DAY OF FEBRUARY, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 29 TH FEBRUARY, 2016. % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %+ / BY ORDER , //TRUE COPY// ! '# / SR. PRIVATE SECRETARY $ %& %'' , / ITAT, PUNE