Shri R. Jothiram, Pondicherry v. ITO, Pondicherry

ITA 2028/CHNY/2016 | 2009-2010
Pronouncement Date: 30-09-2016

Appeal Details

RSA Number 202821714 RSA 2016
Assessee PAN ACLPJ4930F
Bench Chennai
Appeal Number ITA 2028/CHNY/2016
Duration Of Justice 2 month(s) 26 day(s)
Appellant Shri R. Jothiram, Pondicherry
Respondent ITO, Pondicherry
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Bench Allotted A
Assessment Year 2009-2010
Appeal Filed On 04-07-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . !.. # $% & '( ) [ BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH ACCOUNTANT MEMBER ] ./ I.T.A.NO. 2028/MDS/2016 / ASSESSMENT YEAR : 2009-10 SHRI R. JOTHIRAM 11-A MAIN ROAD VASANTHA NAGAR MUDALIARPET PONDICHERRY 605 004 VS. THE INCOME TAX OFFICER WARD I(1) PONDICHERRY [PAN ACLPJ 4930 F] ( *+ / APPELLANT) ( -*+ /RESPONDENT) / APPELLANT BY : SHRI M. KARUNAKARAN ADVOCATE /RESPONDENT BY : SHRI SHIVA SRINIVAS JCIT / DATE OF HEARING : 21 - 0 9 - 2016 ! / DATE OF PRONOUNCEMENT : 30 - 0 9 - 2016 / O R D E R PER D.S. SUNDER SINGH ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) PUDUCHER RY DATED 6.5.2016 FOR ASSESSMENT YEAR 2009-10. 2. ALL THE GROUNDS OF THE APPEAL ARE RELATED TO THE FO LLOWING ADDITIONS MADE BY THE ASSESSING OFFICER IN THE ASS ESSMENT ORDER PASSED U/S 143(3) DATED 26/12/2011. ITA NO.2028/16 :- 2 -: (I)DISALLOWANCE FOR CASH PURCHASES U/S 40A(3): ` 952744/- (II)CASH CREDIT U/S 68: ` 1039269/- (I)DISALLOWANCE FOR CASH PURCHASES U/S40A(3): ` `` ` 952744/-: DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER FOUND THAT THE ASSESSEE HAS MADE THE PAYMENTS IN CASH FOR PURCHASES AS PER THE DETAILS GIVEN BELOW: NAME OF THE PARTY DATE AMOUNT NARENDRA MARBLES 07/06/20 08 ` 52800/- SRI SRINIVAS TIMBERS 16/09/2 008 ` 177932/- LATHA STEEL SUPPLIERS 14/10/20 08 ` 70036/- LATHA STEEL SUPPLIERS 22/10/20 08 ` 46637/- L KUMARS INTERIORS 27/12/2 008 ` 131325/- DEVAKI TRADERS PUDUCHERY 21/11/2008 ` 113243/- DEVAKI TRADERS PUDUCHERY 02/02/2009 ` 56101/- DEVAKI STEELS PUDUCHERY 02/02/2009 ` 114670/- 190000/- ` `` ` 952744/- THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE U/ S 40A(3) OF INCOME TAX ACT. THE ASSESSEE WENT ON APPEAL AND TH E LD.CIT(A) CONFIRMED THE ADDITION. IN THE ORDER LD CIT(A) OBSE RVED THAT THE ASSESSEES CASE IS NOT COVERED UNDER ANY OF THE EXC EPTIONS UNDER RULE 6DD(J). BEFORE US THE LD. A.R ARGUED THAT THE CASH PAYMENTS WERE MADE ON DEMAND OF THE SUPPLIERS AND HE FURTHER ARGUED THAT IF THE EXPENDITURE IS GENUINE AND THE PAYMENT IS MA DE ON THE DEMAND OF THE SUPPLIERS THE COURTS HAVE HELD THAT THE DISALLOWANCE CANNOT BE MADE UNDER SECTION 40A(3) ME RELY BECAUSE THE PAYMENT IS MADE IN CASH. THE A.R ALSO FURNISHED THE BILLS OF THE SUPPLIERS AND SUBMITTED THAT THE PAYMENT IS GEN UINE. ITA NO.2028/16 :- 3 -: 3. THE LD.DR ON OTHER HAND ARGUED THAT THE DISAL LOWANCE U/S 40A(3) WAS INTRODUCED WITH AN INTENTION TO BRIN G MORE TRANSPARENCY TO PREVENT THE LEAKAGE REVENUE. THOUGH THE SECTION IS INTRODUCED LONG BACK THE PAYERS ARE CLAI MING THE EXPENDITURE BUT THE PAYEE IS NOT ACCOUNTING THE EXP ENDITURE. HE FURTHER ARGUED THAT THE CASH PURCHASES HAVE BECOME THE SOURCE ACCOMMODATION ENTRIES FOR INFLATION OF THE EXPENDIT URE WITHOUT ACCOUNTING THE REPRESENTING INCOME IN THE HANDS OF THE RECIPIENT. INTENTION OF THE LEGISLATURE IN INTRODUC TION OF SECTION 40A(3) IS TO CURB SUCH PRACTICE. THE ASSESSEE HAS NOT PLACED ANY EVIDENCE TO SHOW THAT THE RECIPIENT HAS ACCOUNT ED THE RECEIPT IN HIS HANDS. THEREFORE THE LD.DR ARGUED T HAT THERE IS NO CASE FOR DISTURBING THE ORDER OF THE LD.CIT(A) A ND REQUESTED TO CONFIRM THE ORDER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS A ND PERUSED THE MATERIAL PLACED BEFORE US. ADMITTEDLY THE ASSES SEE HAS MAD CASH PURCHASES TO THE TUNE OF ` 952744/- TO VARIOUS PERSONS WHICH ATTRACT THE PROVISIONS OF SECTION 40A(3) OF I .T.ACT. THOUGH THE A.R HAS STATED THAT THE SUPPLIERS HAVE DEMANDED PAYMENT IN CASH HE HAS NOT PRODUCED ANY EVIDENCE TO SUPPORT HIS STATEMENT. FROM THE DETAILS IT IS SEEN THAT THE ASS ESSEE IS MAKING PAYMENTS REPEATEDLY IN CASH TO SOME PARTIES. THE ASSESSEE HAS SUBMITTED THE DETAILS OF THE SUPPLIERS AND THE ITA NO.2028/16 :- 4 -: INVOICE NUMBER BUT NOT FURNISHED ANY EVIDENCE TO SH OW THAT RECIPIENT HAVE ACCOUNTED THE RECEIPT IN HIS HANDS. HE HAS NOT FURNISHED EVEN PAN NO. OF THE RECIPIENTS. SECTION 4 0A(3) HAS BEEN INTRODUCED TO PLUG THE LEAKAGE REVENUE IN THE HANDS OF THE RECIPIENT OF CASH. IT IS ACCEPTED THAT THE ASSESSEE HAD MADE PAYMENTS IN CASH BUT NOT COVERED BY ANY OF THE EXC EPTIONS IN RULE 6DD(J). THE GENUINENESS OF EXPENDITURE IN THE CASE OF A BUILDER CANNOT BE DECIDED MERELY ON THE BASIS OF TH E BILLS AND THE ASSESSEE HAS TO PROVE THE CASE WITH MATERIAL CO NSUMPTION AND STOCK RECORDS. 5. THE ASSESSEE RELIED ON THE DECISION OF HONBLE ITAT CHENNAI IN ITA NO.376/MDS/2012. IN THIS CASE BOTH THE PAYER AND PAYEE HAVE ACCOUNTED THE RECEIPT AND PAYMENT A ND CONFIRMED WITH THE BOOKS. IN THE CASE OF VASANTHA SUBRAMANIAM HOSPITALS IN ITA NO.2345/MDS/2015 THE ASSESSMENT ORDER WAS VERY CRYPTIC AND THE ADDITION WAS MADE BECAUSE OF NO SATISFACTORY REPLY WAS GIVEN BY THE A SSESSEE AND THE AMOUNT INVOLVED WAS ` 325000/- ON A SINGLE DAY AND THE TURNOVER WAS ` 39.00 CRORES. THE TRIBUNAL HAD NOT GONE INTO THE DETAILS OF THE ACCOUNTING OF INCOME AND EXPENDITURE IN THE HANDS OF PAYEE AND THE PAYER. IN THE ASSESSEES CAS E THE TURNOVER WAS ` 2.67 CRORES AND THE PAYMENTS WERE ` 9.57 LACS. IN THE CASE OF RAJARAJAN & CO THE EXPENDITURE WAS L ORRY ITA NO.2028/16 :- 5 -: PAYMENTS AND THE REVENUE HAS NOT PROVED WITH COGENT MATERIAL THAT THE PAYMENT WAS MADE EXCEEDING ` 20000/- IN A SINGLE DAY. HENCE THE FACTS OF THE ASSESSEES CASE ARE DIF FERENT AND NOT COVERED BY ANY OF THE CASE LAWS RELIED UP ON BY THE ASSESSEE. THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) AND ACCORDINGLY CONFIRM THE CIT(A)S ORDE R. THE ASSESSEES GROUND ON THIS ISSUE IS DISMISSED. 6. THE NEXT ISSUE OF ADDITION AGITATED BY THE ASSE SSEE IS THE ADDITION OF ` 10 39 269/- MADE U/S 68 OF INCOME TAX ACT. DURING THE ASSESSMENT THE AO FOUND THAT THE ASSESSE E HAS SHOWN AN ADVANCE OF ` 1039269/- RECEIVED FROM M/S RAM APARTMENTS. THE ASSESSEE HAS PRODUCED THE BALANCE S HEET OF M/S RAM APARTMENTS AND THE ASSESSING OFFICER FOUND THAT NO ENTRY IN RESPECT OF THE ADVANCES IN THE BALANCE SHE ET OF THE FIRM. THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO SUBSTANTIATE THE CLAIM. THEREFORE THE ASSESSING OFF ICER MADE THE ADDITION OF ` 10 69 269/- TO THE RETURNED INCOME. THE ASSESSEE WENT ON APPEAL BEFORE THE CIT AND THE LD.CIT CONFI RMED THE ORDER OF ASSESSING OFFICER BY OBSERVING THAT THE ASSEESSEE WAS NOT ABLE TO PROVE THAT THE SAID ADVANCE WAS FROM TH E FIRM. THE ASSESSEE DID NOT FURNISH ANY CONFIRMATION ALSO IN S UPPORT OF THE CLAIM BEFORE THE CIT(A). ITA NO.2028/16 :- 6 -: 7. BEFORE US THE LD.A.R ARGUED THAT THE ADVANCE WAS RECEIVED FROM M/S RAMS APARTMENTS AND IN SUPPORT THE A.R HAS FILED THE ACCOUNT COPY OF RAMS APARTMENTS IN TH E APPELLANTS BOOKS BANK STATEMENTEVIDENCING THE RECEIPT AND CON FIRMATION FROM M/S RAMS APARTMENTS. HE ARGUED THAT THE ASSESS EE HAS RECOGNIZED THE INCOME AS PER THE SYSTEM OF ACCOUNTI NG FOLLOWED BY HIM AND THE ASSESSEE CANNOT BE FOUND FAULT IF M /S RAMS APARTMENTS FAIL TO ACCOUNT THE TRANSACTION PROPERLY . ON THE OTHER HAND THE LD D.R ARGUED THAT THE AS PER THE LO WER AUTHORITIES ORDERS THE ASSESSEE HAS NOT FURNISHE D ANY EVIDENCE TO PROVE THAT THE ADVANCE IS GENUINE. HE F URTHER SUBMITTED THAT THE BURDEN IS ON THE ASSESSEE TO PRO VE THE IDENTITY CREDITWORTHINESS AND THE GENUINESS OF THE TRANSACTION. SINCE THE ASSESSEE IN THIS CASE HAS NOT PROVED THE GENUINESS OF THE TRANSACTION THE DR CONTENDED THE ORDER OF THE C IT(A) TO BE CONFIRMED. 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL PLACED BEFORE US. THE A.R SUBMITTED THAT THE ASSESS EE HAS RECEIVED A SUM OF ` 1 03 50 000/- BY CHEQUES AND RENDERED THE SERVICES TO THE EXTENT OF ` 93 10 731/- AND ADMITTED THE INCOME IN HIS BOOKS OF ACCOUNTS. THE REMAINING AMOUNT WAS SHOWN AS OUTSTANDING BALANCE. WHERE AS THE OUTSTANDING AMOU NT WAS ITA NO.2028/16 :- 7 -: NOT REPORTED IN THE BOOKS OF M/S RAMS APARTMENTS. H E ARGUED THAT SIMPLY BECAUSE M/S RAMS APARTMENTS HAS NOT PR OPERLY ACCOUNTED THE TRANSACTION THE SAME CANNOT BE HELD A S INCOME OF THE APPELLANT. WE ARE NOT IN A POSITION TO ACCEPT T HE ARGUMENT OF THE LD.A.R SINCE THE BURDEN HAS CAST UP ON HIM T O PROVE THE TRANSACTION WITH PROPER EVIDENCE. HOWEVER AT THE SA ME TIME WHEN THE ASSESSEE HAS FURNISHED THE DETAILS IT IS A LSO THE DUTY OF THE ASSESSING OFFICER TO MAKE PROPER ENQUIRIES AND COME TO LOGICAL CONCLUSION. IN THIS CASE THE TRANSACTION RE QUIRES FURTHER VERIFICATION AND RECONCILIATION OF THE ACCOUNTS OF THE BOTH THE PARTIES. THEREFORE IN THE INTEREST OF JUSTICE WE D EEM IT FIT TO REMIT THE MATTER BACK TO THE FILE OF ASSESSING OFFI CER WITH A DIRECTION TO MAKE PROPER ENQUIRIES AND RE DO THE AS SESSMENT ON THIS ISSUE. WE ALSO DIRECT THE ASSESSEE TO SUBMIT N ECESSARY DETAILS BEFORE THE ASSESSING OFFICER. THE ASSESSEE S GROUND ON THIS ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.2028/16 :- 8 -: ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2016 AT CHENNAI. SD/ - SD/ - ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . . # $% ) (D.S. SUNDER SINGH) & / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 30 TH SEPTEMBER 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 3. + ' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF