SMT. LAVEENA SHANKAR HOTCHANDANI,INDORE vs. THE ITO 5(1), INDORE

Laveena Shankar Hotchandani ITA No.677/Ind/2016 आयकर अपील�य अ�धकरण, इंदौर �यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER

ITA No.677/Ind/2016 Assessment Year: 2011-12 Smt. Laveena Shankar Income Tax Officer Hotchandani, C/o SV 5(1), Agrawal & Associates, Dadi Indore Dham, 24 Joy Builders Colony, Old Palasia, Indore (Appellant) (Respondent ) PAN No.AAYPH8078D Revenue by Shri P.K. Mitra, Sr.DR Assessee by S/Shri S.N. Agrawal & Pankaj Mogra,CAs Date of Hearing 12.09.2018 Date of Pronouncement .9.2018

O R D E R PER MANISH BORAD, AM.

This appeal filed at the instance of assessee pertaining to A.Y. 2011-12 is directed against the order of Ld. Commissioner of Income Tax(Appeals)-II, Indore, (in short ‘CIT(A)’), vide appeal No. IT-180/14-15/513 order dated 31.03.2016 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(hereinafter called as the ‘Act’) framed on 29.03.2014 by ITO-5(1), Indore.

Laveena Shankar Hotchandani ITA No.677/Ind/2016 2. Briefly stated facts as culled out from the records are that the

assessee is an individual of sole proprietorship concern namely M/s.

Satyam Agencies, Indore. Income of Rs.4,59,640/- disclosed in the

income Tax return filed on 27.09.2012 . Turnover for the year has

been shown at Rs.10.28 crores. Case selected for scrutiny through

Computer Assistance Scrutiny Section (CASS) and notices u/s

143(2) and 142(1) were duly served upon the assessee along with

questionnaire. The Ld. AO while examining the records observed

that the assessee was having regular purchase and sale

transactions from M/s. Sai Impex and during the year cash

payments of Rs.1,00,72,000/- were made. Provisions of Section

40A(3) of the Act were invoked by the Assessing Officer adding the

alleged amount of cash payment to the income of the assessee.

Addition towards low house hold withdrawals Rs.1,50,000/- were

also made and income assessed at Rs.1,06,81,640/-. Accordingly

assessee preferred appeal before Ld.CIT(A) and partly succeeded.

following grounds of appeal;

Laveena Shankar Hotchandani ITA No.677/Ind/2016 “1. That on the facts and in the circumstances of the case the Ld. CIT(A) erred in maintaining disallowance of Rs.1,00,72,000/- by invoking the provision of section 40A(3) of the Act. 1.2. That on the facts and in the circumstances of the case the Ld. CIT(A) erred in maintaining cash payment made in excess of prescribed limit u/s 40A(3) of the even on Sunday and holiday. 1.3 That on the facts and in the circumstances of the case the Ld. CIT(A) erred in not giving any comments on the net profit of the assessee as shown in the case of a whole sale business and after making disallowance u/s 40A(3) of the Act. 2. That on the facts and in the circumstances of the case the Ld. CIT(A) erred in maintaining addition of Rs.1,00,000/- as made on account of low house hold expenses. 3. That on the facts and in the circumstances of the case the amount of interest as charged u/s 234A and 234B of the Act was either wrong or excessive, the same now requires to be deleted in full or reduced substantially”. 4. From perusal of the above grounds, we note that only two issues

needs to be adjudicated (1) Addition of low house hold withdrawals

at Rs.1,00,000/- (2) disallowance u/s 40A(3) of the Act at

Rs.1,00,72,000/-.

heard rival contentions and perused the records placed before us.

In the audited capital account no withdrawals were shown by the

assessee for household expenses and it was claimed that the

household withdrawals of her husband was sufficient. Ld.A.O was

Laveena Shankar Hotchandani ITA No.677/Ind/2016 not satisfied with this statement and estimated the addition of

Rs.1,50,000/- for low household withdrawal which was thereafter

scaled down by Ld.CIT(A) to Rs.1,00,000/- thereby giving relief of

Rs.50,000/- to the assessee.

Rs.4,59,640/- against total turnover of Rs.10.28 crores (approx) and

no cash has been withdrawn by her towards household expenses.

The contention of the Ld. Counsel that assessee’s husband took care

of total household expenditure cannot justify that the assessee was

not required to make any withdrawal for household expenses. In

this give facts we find no inconsistency in the findings of Ld.CIT(A)

confirming the addition of Rs.1,00,000/-. Assessee’s Ground No.2

stands dismissed.

provisions of section 40A(3) of Rs.1,00,72,000/-, at the outset

Ld.Counsel for assessee submitted that the Ld. Assessing Officer

has not examined the details properly. The assessee is having

alleged cash transactions with Ms/ Sai Impex due to huge debt

credit balances and M/s Sai Impex was persisting the assessee to

make payment in cash only. He also contended that each cash 4

Laveena Shankar Hotchandani ITA No.677/Ind/2016 payment is less than Rs.20,000/- , however he accepted that on

various dates total cash payment has exceeded Rs.20,000/-. He

also contended that on various occasions there was bank holiday

but Ld.A.O disallowed the payment u/s 40A(3) of the Act. Ld.

Counsel for the assessee prayed that he may be provided one more

opportunity to go before Ld.A.O to furnish all details so that he

could decide the issue afresh in the light of facts and various

judgments which favours the assessee.

both the lower authorities was fair enough to raise no objection if

this particular issue of disallowance u/s 40A(3) of the Act is set

aside to the file of Ld.AO for re-examination.

before us. This is an undisputed fact that sum of Rs.1,00,72,000/-

has been paid in cash by the assessee to M/s. Sai Impex with

whom the assessee is having regular transaction of purchase and

sale of edible oil. From perusal of the ledger account of Ms/ Sai

Impex from page 28 to 42 of paper book we find that there was an

opening credit balance of Rs.4,80,89,203/-. Regular purchases of

soyabean have been made up till 19.1.2011. There is no transaction 5

Laveena Shankar Hotchandani ITA No.677/Ind/2016 of sale of soyabean up to 19.1.11 thereafter i.e. from 19.1.11

assessee stopped making purchases but only made sale of soyabean

to M/s. Sai Implex. All the payments made during the year are in

cash and each amount is lesss than Rs.20,000/-, however on

various dates the total cash payment has exceeded Rs.20,000/-.

This ledger account of M/s. Sai Impex is not giving a normal picture

of the transactions between the concerns because there is opening

credit balance of Rs.4.81 crores and closing credit balance of

Rs.3.11 crores. Total purchases from M/s. Sai Impex during the

year stood at Rs.5,05,20,558/-. The transactions between the two

concerns are of good magnitude but not a single transaction have

been entered through account payee cheque or bank draft even

when the assessee holds a bank account with Indian Overseas

Bank. Provisions of Section 40A(3) of the Act comes into action if

the payment exceeding Rs.20,000/- in a day is made towards

making any purchase or incurring an expenditure. It seems that

the Ld.A.O has merely added the total cash payment and has made

disallowance u/s 40A(3). Both the parties have agreed for setting

aside this issue to the file of Ld.A.O.

Laveena Shankar Hotchandani ITA No.677/Ind/2016 10. We are of the view that in the given circumstances of the case

the alleged transactions of making cash transactions as well as the

modus operandi of the assessee of entering such transactions of

M/s. Sai Impex of making huge purchase, huge sales and making

the payments only in cash other than the bank holidays needs

extensive verification. Ld.A.O also need to cross verify from Ms/. Sai

Implex as to whether similar transactions of cash have been shown

on the very same date in their books of accounts. We accordingly

set aside this issue of disallowance u/s 40A(3) of the Act to the file

of Ld.AO to make necessary verification along with the application of

the provision of 40A(3) of the Act on all these transactions of cash

payment in the light of various judgments referred and relied by the

Ld. Counsel for the assessee (placed at Page 48 to 89 of the paper

book) during the course of hearing before us. Needless to mention

that proper opportunity of being heard should be provided to the

assessee and also direct the assessee to make due compliances to

the notices of Ld.A.O. Accordingly Ground No.1 relating to

disallowance u/s 40A(3) of the Act raised by the assessee is allowed

for statistical purpose.

Laveena Shankar Hotchandani ITA No.677/Ind/2016 11. In the result the appeal of the assessee is partly

allowed for statistical purposes.

The order pronounced in the open Court on 19.9.2018.

Sd/- Sd/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER �दनांक /Dated : 19th September, 2018 /Dev Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By order Private Secretary/DDO, Indore