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Income Tax Appellate Tribunal, “D” BENCH: KOLKATA
Before: Shri P.M. Jagtap & Shri A. T. Varkey, JM]
ORDER Per Shri A.T.Varkey, JM This is an appeal preferred by the assessee against the order of Ld. CIT(A)-6, Kolkata dated 14.11.2017 for AY 2013-14.
Ground no. 1 is against the action of Ld. CIT(A) in confirming the action of AO in disallowing Rs.2,92,887/- on account of alleged contravention of sec. 40A(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).
Brief facts of the case are that the AO noted that while perusing the purchase ledger it appeared to him that the assessee paid in cash more than Rs.20,000/- in a day against bills which were in violation of sec. 40A(3) of the Act so he reproduced in a chart at page 2 of his order the violation he noticed and then he asked for explanation from the assessee. According to assessee, the purchases made from the parties were not done in a single day, so these transactions when considered on a daily basis fall below Rs.20,000/-, but the salesmen had actually collected the cash from the assessee on a daily basis and thereafter, posted the same with the respective companies on a single day the entire collection of money for several days and it was argued that since the genuineness is not in doubt disallowance of expenditure invoking sec. 40A(3) of the Act should not be made. However,
M/s. H. L. Mondal, AY- 2013-14 the AO did not agree with the contention of the assessee and disallowed an amount of Rs.2,92,887/-. Aggrieved, assessee preferred an appeal before the Ld. CIT(A), who was pleased to dismiss the same.
We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee is a partnership firm engaged in the retail trading business of liquor of wines and spirit. The AO during the assessment proceedings after perusal of the purchase ledger found that to certain parties the assessee has made payments in cash in excess of Rs.20,000/- a day. The assessee’s stand is that the purchases made from the four companies in a day never exceeded Rs.20,000/-. According to the assessee, the assessee used to book the expenditure of the respective parties on a daily basis which never exceeded Rs.20,000/- and the amounts were kept ready to be collected by the respective company’s salesmen every day. Though the salesmen used to collect the amount which did not exceed Rs.20,000/- a day, these salesmen used to remit the consolidated amount in a week or fifteen days to the respective companies which, according to Ld. AR, might have created the confusion and the consolidated figure might have been reflected by the respective companies in their purchase registers. Therefore, according to Ld. AR, if an opportunity is provided, the assessee would be able to demonstrate before the AO the veracity of the aforesaid claim and explain the modus operandi adopted by the assessee to disburse the payments to the companies which fall below Rs.20,000/- a day and so it does not attract disallowance invoking sec. 40A(3) of the Act. Therefore, he pleaded that the matter may be remanded back to the file of the AO to verify the veracity of the aforesaid claim of the assessee. The Ld. DR vehemently opposes such an action, which according to Ld. DR is an afterthought and if the assessee had such a defence, he should have brought it to the notice of the AO at the first instance itself rather than elaborating all these things at the second appellate stage.
We note that the assessee firm is engaged in retail liquor business. During the assessment proceedings, the AO noted from a perusal of the purchase ledger that assessee has purchased goods from four companies in cash which is in violation of provision of Sec. 40A(3) of the Act since payment exceeded Rs.20,000/- a day so he disallowed the said sum
M/s. H. L. Mondal, AY- 2013-14 of monies. We note that before the AO itself, the assessee has contended that though the assessee had purchased goods from the four companies in cash, it has never exceeded Rs.20.000/- a day. This defence of the assessee has already been recorded by the AO in his assessment order. However, without asking for the proof of it, the AO had made the disallowance brushing aside the defence raised by the assessee. And the same defence the assessee raised before the Ld. CIT(A) also, so it cannot be termed as an afterthought as contended by Ld. DR. In such a scenario, we set aside the order of the Ld. CIT(A) and remand the matter back to the file of the AO to verify as to whether the assessee’s claim that in a day cash expenditure of not more than Rs.20,000/- has been expended to the four companies. It has to be verified by the AO that the assessee had only made payment of less than Rs.20,000/- on a daily basis to these four companies, and the salesmen of the respective companies after having collected the same on daily basis, however, have remitted it in a consolidated manner after a week or fifteen days and reflected the consolidated sums which might have breached Rs.20,000/-. According to assessee, since assessee has only made payment of less than Rs.20,000/- a day and for no fault of assessee, if the salesmen of the companies have deposited after a week the daily collection that does not mean that assessee has contravened the ceiling limit of Rs.20,000/- prescribed by the statute. Therefore, in order to verify the veracity of the aforesaid claim of the assessee, we set aside the order of Ld. CIT(A) and remand the matter back to the file of the AO to verify as to whether the assessee’s claim is correct or not, if it is found correct then no disallowance is warranted and if not, action in accordance to law to be taken.
Ground nos. 1 and 3 are general in nature so, no adjudication is required. Hence the same are dismissed.
In the result, appeal of assessee is partly allowed.