ACIT, CHENNAI v. M/s. Sagar Grandhi Exports Pvt. Ltd., CHENNAI

ITA 1495/CHNY/2009 | 2004-2005
Pronouncement Date: 19-01-2011 | Result: Dismissed

Appeal Details

RSA Number 149521714 RSA 2009
Assessee PAN AADCS4818A
Bench Chennai
Appeal Number ITA 1495/CHNY/2009
Duration Of Justice 1 year(s) 3 month(s) 27 day(s)
Appellant ACIT, CHENNAI
Respondent M/s. Sagar Grandhi Exports Pvt. Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 19-01-2011
Date Of Final Hearing 17-01-2011
Next Hearing Date 17-01-2011
Assessment Year 2004-2005
Appeal Filed On 22-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH A : CHENNAI [BEFORE DR. O.K. NARAYANAN VICE-PRESIDENT AND SHRI HARI OM MARATHA JUDICIAL MEMBER] I.T.A NOS.1494 TO 1496/MDS/2009 ASSESSMENT YEARS : 2003-04 TO 2005-06 THE ACIT COMPANY CIRCLE VI(1) CHENNAI VS M/S SAGAR GRANDHI EXPORTS PVT. LTD NO.53 VENKATESA STREET CHINTADRIPET CHENNAI - 600002 [PAN AADCS4818A] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB RESPONDENT BY : SHRI PHILIP GEORGE O R D E R PER HARI OM MARATHA JUDICIAL MEMBER: THESE FOUR APPEAL FILED BY THE REVENUE FOR AS SESSMENT YEARS 2003-04 TO 2005-06 ARE DIRECTED AGAINST SEPARATE O RDERS OF THE LD. CIT(A)-V CHENNAI DATED 23.09.2008. IN ALL THESE APPEALS IDENTICAL ISSUES ARE INVOLVED THEREFORE FOR THE SAKE OF CON VENIENCE AND BREVITY WE PROCEED TO DECIDE THEM BY A COMMON ORDER. ITA 1494 TP 1496/09 :- 2 -: 2. THE RELEVANT FACTS IN NUTSHELL WHICH ARE COMM ON TO ALL THE YEARS ARE THAT THE ASSESSEE-COMPANY IS ENGAGED IN T HE BUSINESS OF EXPORT OF FISH SHRIMPS AND OTHER MARINE PRODUCTS. THE ASSESSEE- COMPANY PURCHASES THESE PRODUCTS FROM VARIOUS PRAWN FARMERS AND FISHERMEN AND AFTER PROCESSING THE SAME EXPORT THEM . A SURVEY U/S 133A OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFER RED TO AS 'THE ACT' FOR SHORT) WAS CONDUCTED IN THE PREMISES OF THE ASS ESSEE-COMPANY AT NELLORE ON 6.2.2006. AS A RESULT OF SURVEY ASSESS MENTS WERE REOPENED U/S 147 READ WITH SECTION 148 OF THE ACT I N ALL THESE YEARS. IN ALL THESE YEARS ASSESSEE HAD MADE PAYMENTS IN C ASH ABOVE ` 20 000/- CONTRAVENING THE PROVISIONS OF SECTION 40A (3) OF THE ACT. IN DIFFERENT ASSESSMENT YEARS CRORES OF RUPEES HAVE B EEN PAID IN CASH TO THE FISH/PRAWN GROWERS WHICH WAS TREATED BY THE AS SESSING OFFICER TO BE HIT BY THE PROVISIONS OF SECTION 40A(3) OF THE A CT AND THEREFORE HE MADE ADDITION AFTER DISALLOWING 20% OF TOTAL PAYMEN TS MADE OTHERWISE THAN THROUGH CROSSED CHEQUE/DRAFT IN EACH ASSESSMENT YEARS. THE ASSESSEE WENT IN APPEAL IN ALL THESE YE ARS BEFORE THE LD. CIT(A) WHO IN TURN DELETED THOSE ADDITIONS WHICH RELATED TO PAYMENTS IN CASH TO THE CULTIVATORS/GROWERS OR PROD UCERS OF FISH AND FISH PRODUCTS ETC. THE LD. CIT(A) EXAMINED THE ISS UE IN DETAIL AND ALSO ITA 1494 TP 1496/09 :- 3 -: SOUGHT REMAND REPORT FROM THE ASSESSING OFFICER TO THE EXTENT THE PAYMENTS WERE FOUND TO HAVE BEEN MADE TO THE FARMER S/GROWERS OF FISH/FISH PRODUCTS BY TREATING THE PAYMENTS INDIVID UALLY THOUGH PAID THROUGH LEAD FARMERS. THE REVENUE IS AGGRIEVED A GAINST THIS FINDING OF THE LD. CIT(A) AND FILED ALL THESE APPEALS. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MA TERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE REGARDIN G THE FACT THAT THE ASSESSEE HAS PAID IN CASH ABOVE ` 20 000/- IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT IN RESPECT OF PURCHASE OF SEA FOOD. THE ASSESSING OFFICER INITIALLY WANTED THE A SSESSEE TO PRODUCE CERTIFICATES FROM THE VILLAGE REVENUE OFFICER TO TH E EFFECT THAT THE SUPPLIERS WERE FARMERS/FISHERMEN TO PROVE THAT THE PAYMENT WOULD FALL WITHIN THE EXCEPTION PROVIDED IN RULE 6DD OF THE IN COME-TAX RULES. TO A GREATER EXTENT THE ASSESSEE PRODUCED THE REQU ISITE CERTIFICATES BUT THE ASSESSING OFFICER WAS NOT SATISFIED AND HAS HELD THAT THE ASSESSEE CANNOT TAKE SHELTER UNDER RULE 6DD(F) TO C OME OUT OF THE GULLITONES OF SECTION 40A(3) OF THE ACT. IT IS AL SO A FACT THAT TO THE EXTENT WHERE THE TRANSACTIONS ARE FOUND TO BE GENUI NE AND THE IDENTITY OF THE PAYEE IS ESTABLISHED THE LD. CIT(A) HAS ALL OWED RELIEF TO THE ASSESSEE WITH REFERENCE TO RULE 6DD(F) OF THE I.T. RULES AND ITA 1494 TP 1496/09 :- 4 -: REMAINING ADDITION HAS BEEN SUSTAINED IN ALL THESE YEARS. UNDER RULE 6DD(J) WHICH STANDS AMENDED FROM 1.12.1995 NO DIS ALLOWANCE U/S 40A(3) CAN BE MADE WHERE THE PAYMENT IS MADE IN THE CIRCUMSTANCES SPECIFIED THEREIN. CLAUSE (F) OF RULE 6DD PROTECTS CASH PAYMENTS MADE FOR PURCHASES OF FISH PRODUCTS TO THE CULTIVAT ORS GROWERS OR PRODUCERS OF SUCH ARTICLES ETC. ANY SUCH PAYMENT MADE TO ANY MIDDLEMAN HAS TO BE TAXED U/S 40A(3) OF THE ACT. T HE OBJECTION OF REVENUE IS THAT THE PAYMENTS HAVE BEEN MADE TO THE ALLEGED LEAD FARMERS AND THEY CAN AT BEST BE TREATED AS MIDDLEM EN AND AS SUCH PAYMENTS HAVE NOT BEEN DIRECTLY MADE TO THE FARMERS OR FISH GROWERS. TO EXPLAIN THIS THE CASE OF THE ASSESSEE IS THAT T HE PAYMENT WAS NOT MADE TO LEAD FARMERS IN THEIR INDIVIDUAL CAPACITY AS A TRADER BUT IT WAS PAID IN REPRESENTATIVE CAPACITY WHO REPRESENTED TH EIR OTHER CO- FARMERS. IT WAS STATED THAT THERE IS A PRACTICE TH AT CONSOLIDATED PAYMENTS IN CASH ARE MADE TO LEAD FARMERS WHICH I S THEM DISTRIBUTED AMONGST CO-FARMERS IN ACCORDANCE WITH THE ACERAGE ( QUANTITY) OF LAND HELD BY EACH CO-FARMER INDIVIDUALLY. THE LD. CIT(A ) HAS GIVEN A TERMINOLOGY IN THIS REGARD THAT THE PAYMENT WAS MAD E ON THE BASIS OF JOINT VENTURE OF FARMERS AND INSTEAD OF PAYING THEI R SHARES DIRECTLY THE PAYMENT WAS MADE TO THEIR HEAD FARMER ON WHOM ALL THE FARMERS HAD ITA 1494 TP 1496/09 :- 5 -: FAITH AND WHO WOULD DISTRIBUTE THEIR SHARE IN CASH IMMEDIATELY THEREAFTER. IN THAT VIEW OF THE MATTER WE ARE CON VINCED THAT THESE PAYMENTS ARE NOT HIT BY THE PROVISIONS OF SECTION 4 0A(3) OF THE ACT AND ARE SAVED BY RULE 6DD(F) AS IT EXIST TO-DAY AND TH EREFORE WE CONFIRM THE IMPUGNED ORDERS OF THE LD. CIT(A) FOR ALL THESE YEARS. 4. IN THE RESULT ALL THE APPEAL FILED BY THE REV ENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.1.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 19 TH JANUARY 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR