Sri Kalyanam Ananta Rao, Amadalavalasa v. The Ad CIT, Range-4,, Visakhapatnam

ITA 571/VIZ/2008 | 2005-2006
Pronouncement Date: 10-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 57125314 RSA 2008
Assessee PAN AGTPK6612R
Bench Visakhapatnam
Appeal Number ITA 571/VIZ/2008
Duration Of Justice 2 year(s) 28 day(s)
Appellant Sri Kalyanam Ananta Rao, Amadalavalasa
Respondent The Ad CIT, Range-4,, Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 10-12-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 10-12-2010
Date Of Final Hearing 06-12-2010
Next Hearing Date 06-12-2010
Assessment Year 2005-2006
Appeal Filed On 12-11-2008
Judgment Text
ITA NOS.548&571 OF 2008 K ANANTA RAO AMUDALAVASALA IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO. 548 /VIZAG/ 20 08 ASSESSMENT YEAR : 2005 - 06 AD. CIT RANGE - 4 VI SAKHAPATNAM KALYANAM ANANTA RAO AMUDALAVALASA (APPELLANT) VS. (RESPONDENT) PAN NO.AGTPK 6612R ITA NO.571/VIZAG/2008 ASSESSMENT YEAR : 2005 - 06 KALYANAM ANANTA RAO AMUDALAVALASA AD. CIT RANGE - 4 VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) AP PELLANT BY: SHRI T.L. PETER DR RESPONDENT BY: SHRI G.V.N. HARI CA ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER : - THESE CROSS APPEALS ARE PREFERRED BY THE REVENUE AS WELL AS THE ASSESSEE AGAINST THE ORDER OF THE CIT(A). SINCE THESE APPEALS WERE HEARD TOGETHER THESE ARE BEING DISPOSED OFF THROUGH THIS CONSOLIDATED ORDER. THE CONTROVERSY INVOLVED IN THESE APPEALS IS WITH REGARD TO THE DISALLOWANCE S MADE U/S 40(A)(IA) AND 40A(3) OF THE I.T. ACT. 2. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE IS AN INDIVIDUAL CARRYING ON BUSINESS OF THE EXECUTION OF CIVIL CONTRACT. WHILE COMPLETING THE ASSESSMENT THE ASSESSING OFFICER DISALLOWED RS.3 50 27 780/ - U/S 40(A)(IA) AND RS.1 50 25 500/ - U/S 40A(3) OF THE I.T. ACT. WITH REGARD TO THE DI SALLOWANCE U/S 40(A)(IA) THE A.O. NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAS DEBITED A SUM OF RS.4 37 84 725/ - TOWARDS LABOUR PAYMENTS TO THE PROFIT & LOSS ACCOUNT. ITA NOS.548&571 OF 2008 K ANANTA RAO AMUDALAVASALA 2 ON VERIFICATION IT WAS NOTICED BY THE A.O. THAT VARIOUS LABOUR PAYMENTS EXCEEDING RS.50 000/ - WERE MADE TO MANY PERSONS CONTRARY TO THE STIPULATIONS MADE IN SECTION 194C OF THE ACT WITHOUT DEDUCTING TAX AT SOURCE WHILE MAKING SUCH PAYMENTS. WHEN CONFRONTED THE ASSESSEE SUBMITTED THAT THE LABOUR PAYMEN TS WERE NOT UNDER CONTRACTUAL PAYMENTS AS THE ASSESSEE ENGAGED THE REQUIRED LABOUR DIRECTLY AND FOR THE PURPOSE OF PAYMENT ASSESSEE SELECTED A SENIOR KNOWLEDGEABLE WORKER TO WHOM PAYMENTS WERE RELEASED FOR THE ENTIRE GROUP OF THE LABOURS. THE SAID SELECTE D LABOUR USED TO DISBURSE THE LABOUR PAYMENTS TO THE RESPECTIVE LABOURS AFTER OBTAINING THEIR SIGNATURE ON THE WAGE REGISTER. THEREFORE THE PROVISIONS CONTAINED IN SECTION 194C IS NOT APPLICABLE. THE A.O. DID NOT ACCEPT THE CONTENTION OF THE ASSESSEES A S THE ASSESSEE COULD NOT PRODUCE THE WAGE REGISTER TO PROVE THAT PAYMENTS WERE MADE DIRECTLY TO THE LABOURS. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBMISSION THAT THE ASSESSEE EXECUTES CIVIL WORK AT DIFFERENT WORK SITES I.E. VIS AKHAPATNAM SRIKAKULAM ONGOLE AND HYDERABAD. AT ALL THESE WORK SITES THE ASSESSEE ENGAGED LABOURS DIRECTLY. IN RESPECT OF LABOUR CHARGES THE ASSESSEE MADE PAYMENT TO VARIOUS WORKERS AND OBTAINED SIGNATURES IN THE WAGE REGISTER FROM EACH OF THEM INDIVI DUALLY. THESE PAYMENTS WERE HOWEVER MADE FOR THE SAKE OF CONVENIENCE THROUGH ONE OF THE WORKERS AND LUMPSUM AMOUNT WAS GIVEN TO SAID PERSON WHICH IN TURN WERE DISTRIBUTED BY HIM TO THE INDIVIDUAL WORKERS. THE ASSESSEE DID NOT ENTER INTO ANY CONTRACT EITH ER ORAL OR WRITTEN WITH ANY LABOUR CONTRACTOR AND PAYMENT FOR LABOUR CHARGES WERE MADE TO THE INDIVIDUAL WORKERS THROUGH ONE OF THE WORKERS. DURING THE APPEAL PROCEEDINGS THE ASSESSEE PRODUCED THE WAGE REGISTER IN SUPPORT OF HIS CONTENTION THAT LABOUR PA YMENTS WERE MADE TO THE INDIVIDUALS. THE CIT(A) CALLED A REMAND REPORT ON THE ADDITIONAL EVIDENCE FURNISHED BEFORE HIM. IN THE COURSE OF REMAND PROCEEDINGS THE A.O. EXAMINED THE WAGE REGISTER AND 5 WORKERS UNDER OATH. THE WORKERS FROM WHOM SWORN STATEM ENTS WERE RECORDED AFFIRM ED THAT THEY RECEIVED LUMPSUM PAYMENTS FROM THE ASSESSEE FOR A GROUP OF WORKERS INCLUDING THEMSELVES ON THE WEEKLY BASIS. THEY ALSO AFFIRMED THAT THEY HAD DISTRIBUTED THE LUMPSUM AMOUNT TO ITA NOS.548&571 OF 2008 K ANANTA RAO AMUDALAVASALA 3 THE WORKER AND THE CONCERNED WORKERS AFT ER RECEIVING THE LABOUR CHARGES SIGNED WAGE REGISTER AS A MARK OF RECEIPT OF WAGES. THEY HOWEVER STATED THAT THE ENTIRE LUMPSUM AMOUNT WAS RECEIVED IN CASH AND NOT THROUGH CHEQUE. THE CIT(A) RE - EXAMINED THE ISSUE IN THE LIGHT OF THE REMAND REPORT AND THE EVIDENCE FURNISHED BY THE ASSESSEE AND BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE THE CIT(A) HELD THAT LABOUR PAYMENTS WERE MADE DIRECTLY TO THE LABOURS AND THE SAID PAYMENT WAS NOT CONTRACTUAL . T HEREFORE THE PROVISIONS OF SECTION 194C ARE N OT APPLICABLE TO THE ASSESSEES CASE. HE ACCORDINGLY DELETED THE ADDITIONS MADE BY THE A.O. IN THIS REGARD ON VIOLATION OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE RELEVANT OBSERVATION OF THE CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENC E: I HAVE CAREFULLY EXAMINED THE FACTS OF THE CASE. AT THE TIME OF ASSESSMENT PROCEEDINGS THE APPELLANT COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF HIS CONTENTION THAT LABOUR PAYMENTS WERE MADE DIRECTLY TO THE LABOURERS THROUGH ONE OF THE CO - WORKERS. HOWEVER IN COURSE OF THE APPEAL PROCEEDINGS WAGE REGISTERS WERE FURNISHED WHEREIN PAYMENTS WERE SHOWN TO HAVE BEEN MADE DIRECTLY TO THE LABOURERS AND THE LABOURER HAVING RECEIVED THE PAYMENT HAVE SIGNED THE WAGE REGISTERS. IN COURSE OF THE REMAND PRO CEEDINGS THE ASSESSING OFFICER EXAMINED UNDER OATH FIVE SUCH WORKERS THROUGH WHOM LABOUR PAYMENTS WERE RELEASED TO THE DIFFERENT WORKERS. IN THEIR SWORN STATEMENTS THESE WORKERS CONFIRMED THE FACT THAT THEY RECEIVED THE LUMPSUM PAYMENTS ON BEHALF OF A G ROUP OF WORKERS WHICH IN TURN THEY DISTRIBUTED TO THEM BASED ON THE NUMBER OF DAYS WORKED BY EACH OF THEM. THEY ALSO CONFIRMED THE FACT THAT THE WORKERS SIGNED IN THE WAGE REGISTER ACKNOWLEDGING THE RECEIPT OF THE LABOUR PAYMENTS. IN THIS CONTEXT IT IS NOTED THAT THE WAGE REGISTER MAINTAINED BY THE APPELLANT IS ALSO A PART OF THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT AND ENTRIES IN THE SAID WAGE REGISTER CONSTITUTE PRIMARY EVIDENCE. THE ENTRIES IN THE SAID WAGE REGISTERS CONFIRM THE FACT THAT WA GES WERE PAID TO THE WORKERS ON DAILY WAGES BASIS. IT IS FURTHER NOTED THAT THE ASSESSING OFFICER DID NOT EVER DOUBT THE GENUINENESS OF THE EXPENDITURE INCURRED BY THE APPELLANT. IT WAS ONLY FOR WANT OF PROPER EVIDENCE THE ASSESSING OFFICER DID NOT ACCE PT ORIGINALLY THE CONTENTION OF THE APPELLANT THAT THE WAGES WERE PAID ON DAILY WAGE BASIS AND NOT ON CONTRACTUAL BASIS. THEREFORE ONCE THE APPELLANT PRODUCED THE WAGE REGISTER AND ALSO SOME OF THE PERSONS THROUGH WHOM AMOUNTS WERE DISTRIBUTED TO THE WOR KERS WHO INFACT CONFIRMED THESE FACTS THE ASSESSING OFFICER IS NOT JUSTIFIED IN REJECTING THESE EVIDENCES OUTRIGHT FOR THE SIMPLE REASON THAT THE APPELLANT FAILED TO PRODUCE SOME OF THE WORKERS WHO ACTUALLY ITA NOS.548&571 OF 2008 K ANANTA RAO AMUDALAVASALA 4 RECEIVED WAGES FROM SUCH PERSONS. AN ASSESSEE C ANNOT BE EXPECTED TO DO CERTAIN THINGS WHICH ARE IMPOSSIBLE TO DO. IT IS A FACT THAT THE LABOURERS ARE MIGRATORY IN NATURE AND THEY MIGRATE FROM ONE WORK SITE TO ANOTHER WORK SITE IN SEARCH OF THEIR LIVELIHOOD. THEREFORE IT IS IMPOSSIBLE TO TRACE SUCH W ORKERS AFTER A LAPSE OF TIME. THE APPELLANT CLEARLY EXPLAINED THE REASONS FOR RECORDING CHEQUE PAYMENTS TOWARDS LABOUR CHARGES IN THE BOOKS OF ACCOUNTS. THE SAID EXPLANATION IS ACCEPTABLE ON THE BASIS OF PREPONDERANCE OF PROBABILITIES AS THE APPELLANT US ED TO MOVE FROM ONE WORK SITE TO ANOTHER WORK SITE. WHILE CONSIDERING THE DISALLOWANCE U/S 40A(3) OF THE ACT TOWARDS LABOUR PAYMENTS THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AT PAGES (5) TO (12) HAVE HIMSELF ADMITTED THAT THE IMPUGNED PAYMENTS WE RE MADE THROUGH BEARER CHEQUES. IN THE CASE OF THE BEARER CHEQUES IT IS NOT NECESSARY THAT THE PERSON IN WHOSE NAME CHEQUE IS DRAWN HAS TO ENCASH IT. ANY OTHER PERSON CAN ALSO ENCASH THE CHEQUES. THEREFORE THE FIVE WORKERS WHO ON THEIR SWORN STATEMENT S STATED THAT THEY NEVER RECEIVED CHEQUES BUT CASH CANNOT BE DISBELIEVED. IN VIEW OF THE FACT THE PRIMARY EVIDENCE IN THE FORM OF WAGE REGISTERS WHICH INDICATE PAYMENT OF WAGES DIRECTLY TO THE LABOURERS BY THE APPELLANT AND WHICH IS FURTHER CORROBORATED BY THE SWORN STATEMENTS OF THE FIVE WORKERS I HAVE NO HESITATION IN CONCLUDING THAT THE LABOUR PAYMENTS WERE MADE DIRECTLY TO THE LABOURERS AND THE SAID PAYMENT WAS NOT CONTRACTUAL. THEREFORE THE PROVISIONS OF SEC.194C ARE NOT APPLICABLE TO THE FACTS OF THE APPELLANTS CASE. CONSEQUENTLY THE PROVISIONS OF SEC.40A(IA) ARE NOT APPLICABLE IN THE INSTANT CASE. HENCE THE ADDITION OF RS.3 50 27 780/ - MADE BY THE ASSESSING OFFICER IN THIS REGARD IS HEREBY DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 4. AGGRIEVED THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL BUT DURING THE COURSE OF HEARING THE LD. D.R. COULD NOT POINT OUT THE SPECIFIC DEFECT IN THE ORDER OF THE CIT(A). 5. THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 6. WE HAVE CAREFULLY EXAMINED THE ORDER OF THE CIT(A) AND WE FIND THAT DURING THE APPELLATE PROCEEDINGS BEFORE THE CIT(A) THE ASSESSEE HAS PLACED ALL RELEVANT EVIDENCE IN SUPPORT OF HIS CLAIM THAT THE PAYMENTS WERE MADE DIRECTLY TO THE LABOURS AND FOR CON VENIENCE IT WAS MADE TO THEIR GROUP LEADERS FOR ITS DISBURSEMENT AMONGST THE LABOURS AND AT THE TIME OF DISBURSEMENT TO LABOURS PROPER RECEIPT WAS ALSO OBTAINED. T HE ASSESSEE HAS PLACED THE RELEVANT EVIDENCE BEFORE THE CIT(A) WHO HAS EXAMINED IT MINUTELY BEFORE ITA NOS.548&571 OF 2008 K ANANTA RAO AMUDALAVASALA 5 ACCEPTING THE CLAIM OF THE ASSESSEE . T HEREFORE WE FIND NO INFIRMITY IN HIS ORDER AND WE CONFIRM THE SAME. 7. THE NEXT ISSUE INVOLVED IN THESE APPEALS IS WITH REGARD TO THE DISALLOWANCE OF RS.1 50 25 500/ - MADE BY THE A.O. HAVING INVOKED THE PROV ISIONS OF SECTION 40A(3) OF THE ACT. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE HAS ISSUED 38 CHEQUES FROM THE UNION BANK OF INDIA . O N THE BASIS OF CERTAIN DEFICIENCIES NOTED IN THE SAID CHEQUES T HE A.O. WAS OF TH E VIEW THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 40A(3) IN RESPECT OF ENTIRE LABOUR CHARGES OF RS.4 37 84 72 5 / - . SIMILAR WAS THE POSITION WITH REGARD TO THE PURCHASES AND THE A.O. CONCLUDED THAT OUT OF TOTAL PURCHAS ES OF RS.9 09 46 449/ - AN AMOUNT OF RS.5 96 03 666/ - WAS PAID THROUGH ACCOUNT PAYEE CHEQUES. THEREFORE HE WAS OF THE VIEW THAT DIFFERENTIAL AMOUNT OF RS.3 13 42 784/ - REPRESENTED EITHER PAYMENT BY CASH OR BY CHEQUE OTHERWISE THEN THE ACCOUNT PAYEE CHEQUES. CONSEQUENTLY HE INVO KED THE PROVISIONS OF SECTION 40A(3) OF THE ACT FOR SUCH PURCHASES OF RS.3 13 42 784/ - AND THE LABOUR PAYMENTS OF RS.4 37 84 725/ - TOTALING TO RS.7 51 27 501/ - . HE ACCORDINGLY DISALLOWED 20% OF SUCH EXPENDITURE AMOUNTING TO RS.1 50 25 500/ - . 9 . THE ASSES SEE HAS CHALLENGED THE ADDITION BEFORE THE CIT(A) AND WITH REGARD TO THE DISALLOWANCE OF 20% MADE IN RESPECT OF LABOUR CHARGES OF RS.4 37 84 725/ - I.E. RS.87 56 945/ - IT WAS CONTENDED THAT AT NO STAGE THE A.O. HAS DOUBTED THE GENUINENESS OF AN EXPENDITURE . THE NATURE OF PAYMENTS WERE EXAMINED BY THE A.O. AND THE PAYMENTS WERE MADE TO INDIVIDUAL WORKERS ; A S SUCH PAYMENTS ON ANY SINGLE DAY TO ANY WORKER IS FAR LESS THAN RS.20 000/ - I.E. THE LIMIT SPECIFIED U/S 40A(3) OF THE ACT. 1 0 . THE CIT(A) EXAMINED TH IS CLAIM OF THE ASSESSEES AND BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEES HE CONCLUDED THAT THE ENTIRE AMOUNT CANNOT BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE U/S 40A(3) OF THE ACT ITA NOS.548&571 OF 2008 K ANANTA RAO AMUDALAVASALA 6 AS IT WAS A LABOUR PAYMENT TO VARIOUS LABOURS MADE THROUGH THEIR GROUP LEADERS. FOLLOWING HIS OBSERVATION MADE WHILE DELETING THE DISALLOWANCE MADE U/S 40A(IA) OF THE ACT THE CIT(A) DELETED THE DISALLOWANCE MADE U/S 40A(3) OF THE ACT. 1 1 . NOW THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(A) BUT COULD NOT POINT OUT ANY SPECIFIC DEFECT THEREIN. WE HOWEVER HAVE CAREFULLY EXAMINED THE ORDER OF THE CIT(A) AND FIND NO INFIRMITY THEREIN. THEREFORE WE CONFIRM THE ORDER OF THE CIT(A) O N THIS ISSUE. 1 2 . WITH REGARD TO THE AMOUNT OF RS.3 13 42 784/ - IT WAS CONTENDED T HAT CORRECT AMOUNT SHOULD BE RS.3 28 04 292/ - OF WHICH BREAK UP IS AS UNDER: I. PAYMENTS THROUGH ACCOUNT PAYEE CHEQUES RS.2 13 98 101/ - II. PAYMENTS MADE IN CASH ON HOLIDAYS LIKE SUNDAY RS. 25 000/ - III. PAYMENTS MADE TO COTTAGE INDUSTRY PRODUC TS RS. 29 70 454/ - IV. PAYMENTS MADE THROUGH AGENTS RS. 52 62 108/ - V. PAYMENTS MADE IN CASH BELOW RS.20 000/ - RS. 31 49 128/ - 1 3 . IT WAS CONTENDED THAT WITH REGARD TO THE AMOUNTS PAID BY CROSS CHEQUES THE ASSESSEE OBTAINED CERTIFICATES FROM THE B ANKS IN RESPECT OF SOME PAYMENTS TO SUBSTANTIATE ITS CONTENTIONS AND THEY WERE PRODUCED IN THE APPEAL PROCEEDINGS. WITH REGARD TO THE CASH PAYMENTS MADE ON HOLIDAYS LIKE SUNDAY IT WAS CONTENDED THAT THEY FALL WITHIN THE EXCEPTION PROVIDED IN RULE 6DD(J). WITH REGARD TO THE PAYMENTS MADE TO THE COTTAGE INDUSTRIES IT WAS CONTENDED THAT THESE PAYMENTS WERE MADE TO PURCHASE THE PRODUCTS FROM THE COTTAGE INDUSTRIES AS SUCH IT WOULD NOT FALL WITHIN THE PURVIEW OF SECTION 40A(3) OF THE ACT. WITH REGARD TO T HE PAYMENTS MADE THROUGH AGENTS IT WAS CONTENDED THAT IT ALSO FALLS WITHIN THE EXCEPTION PROVIDED IN RULE 6DD(K) OF THE I.T. RULES. WITH REGARD TO THE CASH BELOW RS.20 000/ - IT WAS FURTHER CONTENDED THAT SINCE EACH OF THE BILL AMOUNT IS LESS THAN STIPUL ATED LIMIT OF RS.20 000/ - NO DISALLOWANCE U/S 40A(3) IS CALLED FOR. ITA NOS.548&571 OF 2008 K ANANTA RAO AMUDALAVASALA 7 1 4 . SINCE ADDITIONAL EVIDENCE WERE FURNISHED BEFORE THE CIT(A) ALONG WITH FRESH ARGUMENTS THE CIT(A) CALLED A REMAND REPORT FROM THE ASSESSING OFFICER ON THE ADDITIONAL EVIDENCE AND N EW ARGUMENT RAISED BEFORE HIM. 1 5 . IN REMAND PROCEEDINGS THE A.O. HAS EXAMINED THE CERTIFICATES OBTAINED BY THE ASSESSEE FROM THE VARIOUS BANKS IN SUPPORT OF HIS CONTENTIONS THAT THE ENTIRE AMOUNT WAS PAID THROUGH CHEQUES AND NOTED THAT THE CERTIFICATES WERE FURNISHED WITH REGARD TO THE PAYMENT OF RS.1 07 45 157/ - . WITH REGARD TO THE BALANCE AMOUNT NO EVIDENCE WAS PRODUCED TO PROVE THAT THE PAYMENTS WERE MADE THROUGH CROSS CHEQUES. THE A.O. ACCORDINGLY SUGGESTED THAT THE BALANCE AMOUNT OF RS.1 06 52 94 4/ - SHOULD BE CONSIDERED FOR DISALLOWANCE U/S 40A(3) OF THE ACT. 1 6 . WITH REGARD TO THE ASSESSEES CLAIM THAT AMOUNT OF RS.31 49 128/ - REPRESENTS PAYMENTS WHICH WERE LESS THAN RS.20 000/ - IN EACH CASE THE A.O. VERIFIED THE DETAILS AND NOTED THAT OUT OF T HE SAME AN AMOUNT OF RS.7 73 545/ - REPRESENTED AMOUNTS WHICH WERE EITHER RS.20 000/ - IN EACH CASE OR WERE NOT FOUND RECORDED IN THE CASH BOOK. THEREFORE HE CONCLUDED THAT ONLY THE DIFFERENTIAL AMOUNT (RS.31 49 128/ - ( - ) RS.7 73 545/ - ) RS.23 75 583/ - SHO ULD ONLY BE CONSIDERED AS PAYMENTS REPRESENTING LESS THAN RS.20 000/ - IN EACH CASE. THE EXPLANATIONS WITH REGARD TO THE PAYMENT TO COTTAGE INDUSTRIES PAYMENT MADE THROUGH AGENTS AND PAYMENT MADE THROUGH CASH O N HOLIDAYS WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND HE SUBMITTED THE REMAND REPORT. REMAND REPORT WAS CONFRONTED TO THE ASSESSEES. 17 . HAVING CONSIDERED THE ASSESSEES CONTENTION IN THE REMAND REPORT THE CIT(A) CONCLUDED THAT THE PAYMENT THROUGH AGENTS AND ALSO TO COTTAGE INDUSTRIES ARE TO B E CONSIDERED FOR DISALLOWANCE U/S 40A(3) OF THE ACT IN AS MUCH AS THE ASSESSEE COULD NOT PLACE THE SATISFACTORY EVIDENCE IN SUPPORT OF HIS CONTENTIONS. WITH REGARD TO THE PAYMENTS MADE IN CASH BELOW RS.20 000/ - THE CIT ACCEPTED THE CONTENTION OF THE ASSE SSEES AND ACCORDINGLY CONCLUDED THAT THE ENTIRE AMOUNT OF RS.39 41 128/ - IS OUTSIDE THE ITA NOS.548&571 OF 2008 K ANANTA RAO AMUDALAVASALA 8 PURVIEW OF SECTION 40A(3) OF THE ACT. WITH REGARD TO THE PAYMENT THROUGH CHEQUES THE CIT HAS RELIED UPON THE REMAND REPORT . B EFORE THE CIT(A) AFTER THE REMAND PROCEE DINGS ASSESSEE FURNISHED ANOTHER CERTIFICATE FROM THE BANK CERTIFYING THAT AMOUNT OF RS.76 40 910/ - WAS ALSO PAID THROUGH CROSS CHEQUES. AFTER GRANTING A CREDIT OF THAT CERTIFICATE FILED BEFORE HIM THE CIT CONCLUDED THAT AN AMOUNT OF RS.30 12 034/ - HAS T O BE CONSIDERED FOR DISALLOWANCE U/S 40A(3) OF THE ACT. THE RELEVANT OBSERVATION OF THE CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: IN SO FAR AS PAYMENTS FOR PURCHASES ARE CONCERNED THE APPELLANT CLAIMED THAT AN AMOUNT OF RS.2 13 98 101/ - WAS PAID THROUGH CROSSED CHEQUES WHICH ARE NOT COVERED BY THE PROVISIONS CONTAINED IN SEC.40A(3) OF THE ACT. THE ASSESSING OFFICER AFTER VERIFYING THE BANK CERTIFICATES FURNISHED BY THE APPELLANT IN SUPPORT OF THE SAID CONTENTION IN COURSE OF THE REMAN D PROCEEDINGS ACCEPTED THAT AS PER EVIDENCES FILED BY THE APPELLANT AN AMOUNT OF RS.1 07 45 157/ - COULD BE CONSIDERED AS PAYMENTS MADE THROUGH CROSSED CHEQUES. SUBSEQUENTLY THE APPELLANT FURNISHED ANOTHER CERTIFICATE FROM THE INDIAN BANK ONGOLE WHO CE RTIFIED THAT AN AMOUNT OF RS.76 40 910/ - WAS PAID THROUGH CROSSED CHEQUES. THUS THE TOTAL AMOUNT WHICH WAS PAID THROUGH CROSSED CHEQUES AS PER THE EVIDENCES FURNISHED BY THE APPELLANT WORKS OUT TO (1 07 45 157 + 76 40 910) RS.1 83 86 067/ - AS AGAINST THE CLAIM OF THE APPELLANT OF RS.2 13 98 101/ - . THUS FOR THE BALANCE AMOUNT (2 13 98 101 - 1 83 86 067) RS.30 12 034/ - THE APPELLANT HAS NOT BEEN ABLE TO FURNISH EVIDENCE SUPPORTING THAT THEY WERE INDEED PAID THROUGH CROSSED CHEQUES. NEEDLESS TO MENTION THE ONUS IS ON THE APPELLANT TO ESTABLISH A FACT WITH SUPPORTING EVIDENCE. THE MERE CONTENTION THAT IT IS DIFFICULT TO COLLECT THE EVIDENCE OR THE SAME IS ON THE BASIS OF BOOKS OF ACCOUNTS CANNOT BE ACCEPTED AS THE ONUS WAS ON THE APPELLANT TO FURNISH SUCH EVIDENCE. THE ENTRIES IN THE BOOKS CANNOT BE TAKEN AS CONCLUSIVE EVIDENCE AS IN THE CASE OF PAYMENTS OTHERWISE THAN CASH ONLY CHEQUE IS MENTIONED AND CHEQUE CAN BE BEARER OR ACCOUNT PAYEE. THEREFORE SUCH ENTRIES IN THE BOOKS NEED CORROBORATIVE EVID ENCE FROM THE BANK WHICH THE APPELLANT HAS FAILED TO FURNISH TO THE EXTENT OF RS.30 12 034/ - . HENCE THE AMOUNT OF RS.30 12 034/ - HAS TO BE CONSIDERED FOR DISALLOWANCE U/S 40A(3) OF THE ACT. WITH REGARDS TO THE APPELLANTS CLAIM THAT AN AMOUNT OF RS.52 62 108/ - WAS PAID TO AGENTS AND THEREFORE THE SAME IS COVERED BY THE EXCEPTION PROVIDED IN RULE - 6DD(K) OF THE INCOME TAX RULES IS NOT ACCEPTED AS NEITHER THE APPELLANT HAS GIVEN THE NAMES AND ADDRESSES OF SUCH AGENTS NOR ANY OF SUCH AGENTS HAVE ITA NOS.548&571 OF 2008 K ANANTA RAO AMUDALAVASALA 9 BEEN PRODU CED FOR CROSS VERIFICATION BEFORE THE ASSESSING OFFICER IN COURSE OF THE REMAND PROCEEDINGS. BECAUSE OF THE APPELLANTS FAILURE TO PRODUCE ANY EVIDENCE IN THIS REGARD THE SAME CLAIM IS NOT ENTERTAINED AND THE PAYMENT OF RS.52 62 108/ - HAS TO BE CONSIDERE D FOR DISALLOWANCE U/S 40A(3) OF THE ACT. WITH REGARDS TO THE CLAIM OF THE APPELLANT COMPANY THAT AN AMOUNT OF RS.29 70 450/ - WAS PAID TOWARDS PROCUREMENT OF BRICKS WHICH WERE MANUFACTURED IN A COTTAGE INDUSTRY AND THE SAID PAYMENT IS COVERED BY THE EXCE PTION PROVIDED IN RULE - 6DD(F) IS ALSO NOT ACCEPTABLE. THE CASE LAW RELIED UPON BY THE APPELLANT COMPANY IN THIS REGARD I.E. 114 ITR 720 (M.P.) LAYS DOWN THE RATIO THAT A SOCIETY ENGAGED IN MANUFACTURING OF ANY ARTICLE WITH THE LABOUR OF ITS MEMBERS WITHOU T ENGAGING OUTSIDE LABOUR IS A COTTAGE INDUSTRY NOTWITHSTANDING THAT IT IS A FACTORY AS DEFINED UNDER THE FACTORIES ACT 1948. IN THE INSTANT CASE THE APPELLANT HAS FAILED TO FURNISH THE UNITS FROM WHICH BRICKS WERE PURCHASED AND WHETHER SUCH BRICKS W ERE MANUFACTURED BY ANY SOCIETY BY ENGAGING LABOUR OF ITS OWN MEMBERS. IN THE ABSENCE OF SUCH VITAL DETAILS IT CANNOT BE CONSTRUED THAT THE BRICKS WERE MANUFACTURED BY COTTAGE INDUSTRIES. HENCE THE AMOUNT OF RS.29 70 450/ - HAS TO BE CONSIDERED FOR DISA LLOWANCE U/S 40A(3) OF THE ACT. IN SO FAR AS PAYMENTS OF LESS THAN RS.20 000/ - IS CONCERNED AS PER THE APPELLANT THE TOTAL OF SUCH PAYMENTS WAS RS.31 49 128/ . HOWEVER ON VERIFICATION OF THE SAME IN COURSE OF THE REMAND PROCEEDINGS THE ASSESSING OFFIC ER WAS OF THE VIEW THAT THE TOTAL PAYMENTS WHICH WERE LESS THAN RS.20 000/ - IN EACH CASH WAS RS.23 75 583/ - ONLY AS PAYMENTS TO THE EXTENT OF RS.7 73 545/ - WAS EITHER NOT RECORDED IN THE CASH BOOK OR THE SAME WAS IN EXCESS OF RS.20 000/ - IN EACH CASE. FRO M THE DETAILS FURNISHED BY THE ASSESSING OFFICER IN THE REMAND REPORT IT IS NOTED THAT IN SO FAR AS THE PAYMENTS IN EXCESS OF RS.20 000/ - WAS CONCERNED THE SAME WAS RS.2 67 600/ - AND THE BALANCE AMOUNT OF RS.5 05 945/ - REPRESENTED PAYMENTS NOT RECORDED IN THE CASH BOOK. HOWEVER IN THE COUNTER SUBMISSION TO THE REMAND REPORT BY THE APPELLANT IT WAS SUBMITTED THAT THE AMOUNT OF RS.5 05 945/ - WAS PAID BY BEARER CHEQUES AND HENCE RECORDED IN THE BANK BOOK AND NOT IN THE CASH BOOK. ON VERIFICATION OF THE BANK BOOK IT IS NOTED THAT SUCH PAYMENTS ARE RECORDED IN THE BANK BOOK AND NONE OF THESE PAYMENTS EXCEED RS.20 000/ - IN EACH CASE. WITH RESPECT TO THE AMOUNTS IN EXCESS OF RS.20 000/ - I.E. IN TOTAL RS.2 67 600/ - IT WAS SUBMITTED THAT SUCH PAYMENTS WER E MADE AT ONGOLE SITE AND AS SUCH THEY HAVE BEEN ROUTED THROUGH THE SAID ACCOUNT. AS PER EXAMPLE ON 4.6.2004 A PAYMENT OF RS.1 01 100/ - HAS BEEN MADE TO ONE G. RASOOL. HE WAS THE SITE INCHARGE OF THE ONGOLE SITE. THE SAID AMOUNT HAVE BEEN DISBURSED B Y HIM EITHER TOWARDS PURCHASE OF MATERIALS OR TOWARDS LABOUR CHARGES AND THE PAYMENT IN EACH CASE WAS LESS THAN RS.20 000/ - . IN VIEW OF THE ABOVE WHICH ARE ITA NOS.548&571 OF 2008 K ANANTA RAO AMUDALAVASALA 10 DULY SUPPORTED BY ENTRIES IN THE BOOKS OF ACCOUNTS IT IS CONCLUDED THAT THE ENTIRE RS.39 41 128/ - IS OUTSIDE THE PURVIEW OF SEC. 40A(3) OF THE ACT. TO SUMMARISE THE ABOVE FINDINGS THE EXPENDITURES WHICH ARE COVERED UNDER SEC. 40A(3) OF THE ACT IS RS.1 12 44 592/ - AS PER THE FINDINGS GIVEN IN (II) (III) & (IV) AS ABOVE AND THEREFORE 20% OF THE SAME RS.22 48 918/ - SHOULD ONLY BE DISALLOWED INSTEAD OF RS.1 50 25 500/ - DISALLOWED BY THE ASSESSING OFFICER. THUS THIS GROUND OF APPEAL IS PARTLY ALLOWED. 1 8 . NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND DURING THE COURSE OF HEARING HE HAS CONFINED HIS ARGUMENT WITH RESPECT TO THE AMOUNT OF RS.30 12 034/ - WHICH WAS CONSIDERED BY THE CIT FOR DISALLOWANCE U/S 40A(3) OF THE ACT. IN THIS REGARD IT WAS CONTENDED THAT THIS AMOUNT WAS ALSO PAID TOWARDS THE PURCHASES THROUGH ACCOUNT PAYEE CHEQUES BUT DURING THE COURSE OF REMAND PROCEEDINGS AND THE APPELLATE PROCEEDINGS THE ASSESSEE COULD NOT OBTAIN THE CERTIFICATES FROM THE BANKERS . I F SOME MORE TIME IS GIVEN H E WOULD EITHER TO PRODUCE THE CERTIFICATE OR TO REQUEST THE DEPARTMENT TO CALL FOR THE RECORD FROM THE BANKERS TO VERIFY THE NATURE OF PAYMENTS. THE LD. D.R. FORMALLY OPPOSED THE REQUEST OF THE ASSESSEES. 19 . HAVING CAREFULLY HEARD THE ASSESSEES CONTENTIONS IN THE LIGHT OF THE ORDER OF THE CIT(A) WE ARE OF THE VIEW THAT BEFORE THE A.O. ASSESSEE COULD NOT PRODUCE THE CERTIFICATE FROM THE BANKERS. BUT WHEN TIME WAS GIVEN TO THE ASSESSEE FOR PRODUCING THE SAME DURING THE REMAND PROCEEDINGS OR THE APPELLANT PROCEEDINGS ASSESSEE PRODUCED THE CERTIFICATES OF BANKERS OF A SUBSTANTI AL AMOUNT. IN THE LIGHT OF THESE FACTS WE ARE OF THE VIEW THAT IF ASSESSEE IS ALLOWED ONE MORE OPPORTUNITY HE MAY PRODUCE SOME MORE EVIDENCE IN SUPPORT OF HIS CLAIM THAT THE ENTIRE PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQUES. WE THEREFORE IN THE IN TEREST OF JUSTICE SET ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE ASSESSEE ONE MORE OPPORTUNITY TO PRODUCE THE BANKER CERTIFICATE IN SUPPORT OF HIS CONTENTION AND IN CASE HE IS NOT ABLE TO DO SO HE CAN MAKE A REQUEST TO THE A.O. TO SUMMON THE RECORD OF TH E BANKER AND IN TURN THE A.O. MAY SUMMON THE RECORD OF THE BANKER TO VERIFY THE CORRECT FACTS. ACCORDINGLY THE ORDER OF THE CIT(A) IN THIS REGARD IS SET ITA NOS.548&571 OF 2008 K ANANTA RAO AMUDALAVASALA 11 ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE A.O. WITH THE DIRECTION TO RE - ADJUDICATE THE ISSU E IN TERMS INDICATED ABOVE. 2 0 . WITH REGARD TO THE OTHER DISALLOWANCES NO SPECIFIC ARGUMENT IS RAISED BEFORE US. WE HOWEVER CAREFULLY EXAMINED THE ORDER OF THE CIT(A) ON REMAINING ISSUES AND WE FIND THAT CIT(A) HAS ADJUDICATED THE ISSUE IN RIGHT PERSPE CTIVE AND SINCE NO INFIRMITY IS FOUND THEREIN WE CONFIRM HIS FINDINGS. ACCORDINGLY THESE APPEALS ARE DISPOSED OFF. 2 1 . IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED AND THAT OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUN CED IN THE OPEN COURT ON 10.12 .20 10 SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 10 TH DECEMBER 2010 COPY TO 1 THE ADDL. CIT RANGE - 4 VISAKHAPATNAM 2 SRI K. ANANTHA RAO 6/3 INDUSTRIAL ESTATE AMUDALAVALASA. 3 THE CI T VISAKHAPATNAM 4 THE CIT (A) - I VISAKHAPATNAM 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECR ETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM