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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO & SHRI D.S. SUNDER SINGH
आदेश /O R D E R Per V.DURGA RAO, Judicial Member:
This appeal is filed by the Revenue and cross objection by the assessee against the order of the Commissioner of Income Tax (Appeals), [CIT(A)]-1, Guntur dated 30.11.2016 for the assessment year 2008-09.
The facts of the case in brief are that the assessee is in the business of wines, trading in aromatic products like lemon grass oil, palm rose oil, davanam oil etc. The assessee has filed return of income by declaring total income of Rs.3,05,110/-. The assessee’s case was selected for scrutiny and the assessment was completed u/s 143(3) of the Act by determining the total income of the assessee at Rs.49,34,346/-. In the original assessment order, the Assessing Officer(AO) has noted that the assessee has paid cash in excess of Rs.20,000/- and he has quantified the amount of Rs.2,10,04,334/-, invoked section 40A(3) and disallowed 20% of the cash purchases amounting to Rs.42,00,867/-. On appeal, the Ld.CIT(A) deleted the addition made by the AO.
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The revenue carried the matter before the Tribunal. The Tribunal in I.T.A No.322/Viz/2011, for the assessment year 2008-09 by order dated 13.12.2013 has observed that the Ld.CIT(A) deleted the addition made by the AO without verifying the details such as banking facilities are available at the places where the payments have been made by the assessee to the farmers and farm men and directed the AO to verify the contention of the assessee and pass assessment order accordingly. The ITAT further noted that the department has raised an issue of 100% disallowance u/s 40A(3) of the Act instead of 20% which has been made by the AO, it cannot be entertained at this stage as it has an effect of enhancing the income assessed by the AO as it is not subject matter of the appeal. The additional ground raised by the department was dismissed. Subsequently in pursuance of the order passed by the ITAT, the AO has issued notice u/s 143(3)/142(1) dated 20.03.2015 and also on 20.03.2015 asking the assessee to furnish the details of villages where the aromatic plats were cropped by the farmers / farm men from whom the assessee made purchases and the evidence for non-availability of banking services and the date of such payments / non-availability of banks in such villages. The Counsel for the assessee appeared on 30.03.2015 and explained the
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circumstances under which the cash payments were made to the farmers. The AO by considering the explanation given by the assessee completed the assessment by noting that AR of the assessee could not furnish evidence for non availability of banks or banking services and of purchases and also the details of other villages or farmers from whom the purchases were made so as to examine the availability of services by any bank in that area, the date on which purchases made in cash other than by account payee cheque / DD as warranted u/s 40A(3) of I.T.Act. Accordingly he has completed the assessment disallowing the entire purchases of Rs.2,10,04,334/- u/s 40A(3) of I.T.Act and the same is added to the total income of the assessee. The Ld.CIT(A) deleted the addition made by the AO by observing that the assessee is dealing with farmers in rural areas and the AO has not doubted the payments and the business expediency suggests that if on the spot payment is made that it paves the way for better business relations advancing the objects of the assessee. And no banking facilities are available at the places where payments have been paid by the assessee to the farmers and farm men and held that section 40A(3) is not applicable.
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On being aggrieved, the revenue carried the matter before the Tribunal. The Ld.DR has pointed out that the Hon’ble ITAT vide order dated 13.12.2013 directed the AO to examine in respect of payments made by the assessee to the farmers and farm men above Rs.20,000/- in those places where banking channels are available or not. In pursuance to the order passed by the ITAT, the AO issued notice calling for the details of the farmers from whom the assessee made purchases, the evidence for non availability of banking services. The assessee did not file the details, therefore, the AO has made the addition u/s 40A(3) which is according to law and submitted that the order passed by the AO may be upheld.
He further submitted that the AO has doubted the entire transaction of payments made to the farmers. The Ld.CIT(A) without considering any evidence has observed that the AO has not doubted the transactions which is not correct, therefore, orders passed by the CIT(A) has to be set aside. On the other hand, the Ld.Counsel for the assessee has submitted that the Hon’ble ITAT by order dated 13.12.2013 directed to verify where banking facilities are available and where assessee made payments to the farmers and farm men and therefore, the AO exceeded his limits by calling the details of the farmers which is not permitted and therefore submitted that
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the Ld.CIT(A) rightly considered the issue and the same may be upheld. The Ld.Counsel for the assessee further submitted that in pursuance of the order passed by the ITAT dated 13.12.2013, notice was issued on 20.03.2015 and 25.03.2015 and asked assessee to file the details within a short span of 10 to 7 days though the order passed by the ITAT in 2013 and submitted that the AO has not given a fair opportunity to comply with the details called by the AO and prayed that order passed by the CIT(A) may be upheld.
We have heard both the sides, perused the records and gone through the orders of the authorities below. The case of the assessee is that the assessee is purchasing lemon grass oil, palm rose oil, dhavanam oil etc from the farmers. He has paid Rs.20000 and above to the tune of Rs.2,10,04,334/-. According to the assessee, cash payment is made to the farmers due to non availability of banking facilities, where the farmers are residing. In the first round of litigation, the AO has not fully agreed with the assessee. He has disallowed 20% of the cash purchases amounting to Rs.42,00,867/- out of Rs.2,10,04,334/- u/s 40A(3) of the Act. Before the Ld.CIT(A), it was submitted by the assessee that the payments were made to the farmers and where the assessee made the purchases, no banking
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facilities were available, therefore, he paid cash. The Ld.CIT(A) without examining any details / evidence deleted the addition made by the AO. On appeal by the department, the ITAT by order dated 13.12.2013 directed the AO to verify whether the banking facilities were available at places where payments were made by the assessee to the farmers and farm men. In pursuance to the order passed by the ITAT, the AO has issued notice u/s 143(2)/142(1) dated 30.03.2015 and 25.03.2015 directing the assessee to furnish the details of the villages where the aromatic plants were cropped by the farmers / farm men from whom the assessee made purchases and the evidence for non availability of banking services and the date of such payments / non availability of banks in such places. The assessee has not filed any details but only explained that under what circumstances, the payments were made to the farmers. In this case, the AO has not accepted the explanation of the assessee that the cash payments were made to the farmers due to non availability of banking facilities, where the farmers reside. On appeal, the CIT(A) without examining the details in respect of whether payments are made to the farmers or not, whether the banking facilities are available or not simply deleted the addition made by the AO. Under those facts and circumstances of the case, the Hon’ble ITAT vide its
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order dated 13.12.2013 directed the AO to verify the details in respect of the payments made by the assessee to the farmers and farm men. Therefore, the AO in pursuance of the order passed by the ITAT directed the AR to file details of the farmers from whom the aromatic oil was purchased and also evidences in respect of non availability of banking services. The assessee has not filed the details. Therefore, under those circumstances, the AO made the addition of entire amount made by the assessee u/s 40A(3) of the Act. We find that when the order passed by the ITAT on 13.12.2013, the AO waited upto 20.03.2015 and thereafter issued a notice. The time given by the AO to the assessee is very short. It may not be possible for the assessee to file all the details as called for by the AO. Therefore, the AO should have given more time to file relevant details to complete the assessment. From the assessee side also, when the order of the ITAT is 13.12.2013, he should be ready with all the details to file before the AO whenever he called. The assessee was also reluctant to file the details before the AO to complete the assessment. Under the above facts and circumstances of the case, we are of the opinion that all the details called by the AO dated 31.03.2015 are very much required. to decide the issue whether section 40A(3) applies to the assessee’s case or not. In view
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of the above, we set aside the order passed by the LdCIT(A) and direct the AO to decide the issue denovo in accordance with law after giving reasonable opportunity to the assessee.
In view of the above, this appeal filed by the revenue is allowed for statistical purpose.
So far as CO No.87/Viz/2017 is concerned, there is a delay of 152 days in filing the cross objection, no condonation is filed, therefore, the CO filed by the assessee is dismissed inlimini.
In the result, the appeal filed by the revenue is allowed for statistical purpose and cross objection filed by the assessee is dismissed.
The above order was pronounced in the open court on 18th July, 2018.
Sd/- Sd/- (धड.एस. सुन्दर ससह) (िी.दुगाा राि) (D.S. SUNDER SINGH) (V. DURGA RAO) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER धिशाखापटणम /Visakhapatnam ददिांक /Dated : 18.07.2018 L.Rama, SPS
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आदेश कीप्रधिधल धपअग्रेधर्ि/Copy of the order forwarded to:- 1. निर्ााररती/ The Assessee- Sri Muvva Nagi Reddy, Prop.Balaji Medicinal and Aromatic Products, Gollamudivari Street, Sattenapalli (PO&Mdl), Guntur Dist. 2. राजस्व/ The Revenue –The I.T.O., Ward-1(3), Guntur 3. The Pr.Commissioner of Income Tax, Guntur 4. The Commissioner of Income Tax (Appeals)-1,Guntur 5. धिभागीयप्रधिधिधि, आयकरअपीलीयअधिकरण, धिशाखापटणम /DR, ITAT, Visakhapatnam 6.गाडाफ़ाईल / Guard file आदेशािुसार / BY ORDER // True Copy //
Sr. Private Secretary ITAT, VISAKHAPATNAM