Sri Siva Sankar Industries, Koraput V. ACIT, Berhampur Circle, Berhampur, Berhampur

ITSSA 21/CTK/2014

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3337 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 27-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUNAL SINGH
• Assessee Lawyers: D K SHETH
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER IT ( SS)A NO.21 /CTK/2014 ASSESSMENT YEAR : 2008 - 09 SRI SHIV SANKAR INDUSTRY , KOSAGUDA, BORIGUMA, DIST: KORAPUT VS. ACIT, BERHAMPUR CIRCLE, AAYAKAR BHAVAN, AMBAPUA, BERHAMPUR PAN/GIR NO. ABDPS 8962 R (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI D.K.SHETH, AR RE VENUE BY : SHRI KUNAL SINGH, CIT DR DATE OF HEARING : 06 /06 / 2017 DATE OF PRONOUNCEMENT : 13 /06 / 2017 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGA INST THE ORDER OF CIT(A) - BERHAMPUR , DATED 14.3.2014 , FOR THE ASSESSMENT YEAR 2008 - 09 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. FOR THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADDITION OF RS.49,79,425/ - AS MADE U/S.40A(3) AND U/S.40A(3A) BY WAY OF ENHANCEMENT BY THE LD CIT IS UNCALLED FOR, ARBITRARY AND WHOLLY UNJUSTIFIED. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CASHEW 2 IT(SS)A NO.21 /CTK/2014 ASSESSMENT YEAR :2008 - 09 PROCESSING. THE ASSESSING OFFICER OBSERVED THAT CERTAIN PAYMENTS WERE MADE TO M/S. GAYAT RI CASHEW INDUSTRY, WHO IS A SISTER CONCERN AND ON WHICH NO INTEREST WAS CHARGED. THE SAID PAYMENTS WERE MADE OUT OF WITHDRAWALS FROM CASH CREDIT ACCOUNT MAINTAINED BY THE ASSESSEE FIRM WITH K.P.G. BANK, SASAHANDI. THE ASSESSING OFFICER, THEREFORE, DISAL LOWED RS.2,15,272/ - OUT OF INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE FIRM. 4. ON APPEAL, THE CIT(A) FINDING THAT THE AFORESAID PAYMENTS WERE FOR BUSINESS CONSIDERATION DELETED THE DISALLOWANCE OF INTEREST EXPENDITURE. NO APPEAL HAS BEEN FILED BY THE DE PARTMENT AGAINST THE ABOVE DELETION OF DISALLOWANCE OF INTEREST BY THE CIT(A). 5. THE CIT (A) OBSERVED THAT THE PAYMENT TO THE SAID M/S. GAYATRI CASHEW INDUSTRY WAS RELATED TO THE LIABILITY OF THE ASSESSEE TO M/S KABA INDUSTRY TOWARDS PURCHASE OF RAW CASH EW NUTS AND AS THE PAYMENTS WERE MADE IN CASH EXCEEDING RS.20,000/ - , HE CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER , AS IN HIS OPINION, PROVISIONS OF S ECTION 40A(3) WERE ATTRACTED IN THIS CASE. THE ASSESSING OFFICER IN HIS REMAND REPORT OPINED THAT PROVISION OF SECTION 40A(3) IS NOT APPLICABLE 6. HOWEVER , THE CIT(A) FINDING THAT RS.49,79,425/ - WAS DEBITED IN THE LEDGER ACCOUNT OF M/S. GAYATRI CASHEW INDUSTRY IN CASH EXCEEDING RS.20,000/ - ON A DAY AND THE SAID PAYMENT WAS RELATED TO PURCHASE S OF CASHEW NUTS FROM M/S. KABA INDUSTRY , HE DISALLOWED RS.49,79,425/ - BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THUS, THE CIT(A) ENHANCED THE ASSESSMENT BY THE SAID AMOUNT. 3 IT(SS)A NO.21 /CTK/2014 ASSESSMENT YEAR :2008 - 09 7. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE AFORESAID ENHANC EMENT MADE BY THE CIT(A) BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 8. LD A.R. OF THE ASSESSEE EXPLAINED THAT SHRI GUDLA VENKATA RAMANA, WHO IS A PARTNER IN THE ASSESSEE FIRM IS ALSO PARTNER IN M/S. GAYATRI CASHEW INDUSTRY. HE CONTENDED THAT THE ENTIRE PAYMENT TO M/S. KABA INDUSTRY AGAINST PURCHASE OF CASHEW NUTS WAS MADE BY ACCOUNT PAYEE CHEQUE. NOT A SINGLE RUPEE WAS PAID IN CASH TO M/S. KABA INDUSTRY AGAINST PURCHASE OF CASHEW NUTS BY THE ASSESSEE. HE EXPLAINED THAT THE LIABILITY OF THE ASSESSEE FIRM TO MAKE PAYMENT TO M/S. KABA INDUSTRY AGAINST PURCHASE OF CASHEW NUTS WAS TAKEN BY SHRI GUDLA VENKATA RAMANA, WHO IS A PARTNER OF THE ASSESSEE FIRM. THE SAID SHRI GUDLA VENKATA RAMANA IS ALSO A PARTNER OF M/S. GAYATRI CASHEW INDUSTRY GOT TH E PAYMENT OF THE AFORESAID LIABILITY OF THE ASSESSEE FIRM TO M/S. KABA INDUSTRY BY CHEQUE THROUGH M/S. GAYATRI CASHEW INDUSTRY. IN SUPPORT OF THE ABOVE CLAIM, HE FILED A COPY OF LEDGER ACCOUNT OF M/S. KABA INDUSTRY IN BOOKS OF M/S. GAYATRI CASHEW INDUSTRY. FROM T HE SAID LEDGER ACCOUNT , IT IS OBSERVED THAT M/S. GAYATRI CASHEW INDUSTRY CREDITED THE ACCOUNT OF M/S. KABA INDUSTRY BY DEBITING THE CAPITAL ACCOUNT OF SHRI GUDLA VENKATA RAMANA AND PAID THE AMOUNT TO M/S. KABA INDUSTRY BY CHEQUES O R DRAFTS ON VARIOUS DATES. THUS, IT IS OBSERVED THAT NO AMOUNT WAS PAID TO SAID M/S. KABA INDUSTRY IN CASH AGAINST PURCHASE S MADE BY THE ASSESSEE FIRM. LD A.R. OF THE ASSESSEE EXPLAINED THAT THE LEDGER ACCOUNT IN THE ASSESSEE BOOK THOUGH IS APPEARING IN THE NAME OF 4 IT(SS)A NO.21 /CTK/2014 ASSESSMENT YEAR :2008 - 09 M/S. GAYATRI CASHEW INDUSTRY BUT THE SAME ACTUALLY IS OF SHRI GUDLA VENKATA RAMANA, PARTNER OF THE ASSESSEE FIRM. AS SHRI G UDLA VENKATA RAMANA GOT THE PAYMENT MADE THROUGH M/S. GAYATRI CASHEW INDUSTRY AND, THEREFORE, THIS WAS NAMED AS M/S. GAY ATRI CASHEW INDUSTRY AS IN FACT THERE WAS NO DIRECT TRANSACTION WITH M/S. GAYATRI CASHEW INDUSTRY. FURTHER, THE CASH WITHDRAWN FROM THE CASH CREDIT ACCOUNT OF THE ASSESSEE FIRM WAS RETAINED BY THE PARTNER SHRI GUDLA VENKATA RAMANA , THE SAME WAS ENTERED I N THIS LEDGER ACCOUNT. 9. WE FIND THAT THE CIT(A) HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT M/S. GAYATRI CASHEW INDUSTRY WAS AN AGENT OF M/S. KABA INDUSTRY . THUS, THE ABOVE PRESUMPTION ON THE PART OF THE CIT( A) IS WITHOUT ANY MATERIAL AND, THEREFORE, CANNOT BE SUSTAINED. THE ENTIRE ADDITION HAS BEEN MADE ON THE ABOVE PREMISE THAT M/S. GAYATRI CASHEW INDUSTRY WAS AN AGENT OF M/S. KABA INDUSTRY AND, THEREFORE, THE ADDITION IS FOUND TO BE MADE ON A WRONG FOOTING . 10. WE FIND THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT ANY AMOUNT WAS PAID IN CASH TO M/S. KABA INDUSTRY IN RESPECT OF PURCHASES OF CASHEW NUTS BY THE ASSESSEE FIRM. IN THE ABOVE CIRCUMSTANCES, THE DISALLOWANCE OF RS.49,79,425/ - MADE BY INVOKING THE PROVISIONS OF SECTION 40A(3) IS NOT SUSTAINABLE. WE, THEREFORE, DELETE THE DISALLOWANCE OF RS.49,79,425/ - MADE BY THE CIT(A) BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 5 IT(SS)A NO.21 /CTK/2014 ASSESSMENT YEAR :2008 - 09 11 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 13 /06 /2017 IN THE PRESENCE OF PARTIES. SD/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 13 /06 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : SRI SHIV SANKAR INDUSTRY , KOSAGUDA, BORIGUMA, DIST: KORAPUT 2. THE RESPONDENT. ACIT, BERHAMPUR CIRCLE, AAYAKAR BHAVAN, AMBAPUA, BERHAMPUR 3. THE CIT(A) BERHAMPUR 4. PR.CIT , BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//