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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI A.T.VARKEY, JM &DR. A.L.SAINI, AM
आदेश / O R D E R
Per Dr. A. L. Saini:
The captioned appeal filed by the Assessee, pertaining to assessment year 2012-13, is directed against an order passed by the learned Commissioner of Income Tax (Appeals)-16, Kolkata (in short the ld. ‘CIT(A)’], which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 ( in short the ‘Act’) dated 29.03.2015.
In the present appeal, however the assessee has raised a multiple grounds of appeal but at the time of hearing, the solitary grievance of the assessee has been M/s Chandni Commercials Pvt. Ltd. Assessment Year:2012-13 confined to the addition made by the Assessing Officer to the tune of Rs. 390,19,10,000/- under section 40A (3)/ 40A(3A) of the Act.
3. The brief facts qua the issue are that the assessee is a private limited company and is engaged in trading of electronics goods. The assessee company filed its return of income for assessment year 2012-13 on 30.09.2012, declaring total loss of Rs. 4,92,16,725/-. The assessee’s case was selected for scrutiny u/s 143(3) of the Act on 29.03.2015. During the assessment proceedings, the Assessing Officer noted from the details of purchases made by the assessee from 01.04.2011 to 31.03.2012, that the assessee made payment of Rs.390,19,10,000/- to various parties against the goods purchased by it.That is, the Assessing Officer noted that since the company had purchased goods worth Rs. 390,19,10,000/- for which payments were made in excess of Rs. 20,000/- otherwise then account payee cheque drawn by a bank or account payee bank drafts. Such payment wasnot made by account payee cheque or account payee draft but made through book entry by endorsing through journal, therefore the AO was of the view that assessee company violated the provisions of section 40A(3A) of the Income Tax Act,1961.Therefore, the Assessing Officer asked the assessee to explain that why the amount of Rs.390,l9,10,000/- should not be added to its business income u/s 40A(3A) of the Act. In response, the assessee submitted that no any payment in contravention to provisions of section 40A(3)/40A(3A), has been made to different parties. The payment has been made through journal entry or by banking channels therefore, the provisions of section 40A(3)/40A(3A) does not apply. The assessee further contended that as the transactions were genuine and the identity of the creditors / payee is also not doubted, the mischief of section 40A(3A) is not attracted. The assessee also explained the business expediency for payment otherwise than account payee cheque or account payee draft. However, the AO noted that assessee could not show any business expediency at all. In fact, it did not disclose the reason as to why it had to pass such journal entry amounting to Rs.390,l9,10,000/-. Hence, the Assessing Officer rejected the contention of the assessee and made addition to the tune of Rs. 390,19,10,000/-.
M/s Chandni Commercials Pvt. Ltd. Assessment Year:2012-13
Aggrieved by the stand so taken by the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has confirmed the addition made by the Assessing Officer. Aggrieved, the assessee is in appeal before us.
The ld. Counsel for the assessee submitted before us the ledger account of Visage Equipments Pvt. Ltd., Jessop & Co. Ltd. and Monotome Tyres Ltd. The ld. Counsel stated that in case of Visage Equipment Pvt. Ltd. the payment of purchases of cotton knitted fabric has been made by journal entry therefore, provisions of section 40A(3) does not apply. The counsel stated that there is no cash involved in this transaction. The entry had been passed through journal entry and since there is no cash involvement therefore the provision of section 40A(3) does not apply to the assessee’s case under consideration. In case of other parties, the payment have been made through banking channel therefore, the provisions of section 40A(3) does not apply.
On the other hand, the ld. DR for the Revenue submitted before us that the assessee is engaged in providing accommodation entries and all the payment had been made through general entry which is not acceptable. The ld. DR further pointed out that this is the unaccounted money of the assessee in the system through general entries and by making endorsement of cheques available for other persons. The ld. DR further pointed out that in this transaction the identity of the transaction i.e. who is the beneficiary of this general entry is not known therefore it is a planning of the assessee to avoid the tax hence the provision of section 40A(3) is squarely applicable to the assessee.
7.We have heard both the parties and perused the material available on record. We note that in case of purchases from parties namely, M/s Jessop and Co. Ltd, M/s Monotona Tyres Ltd and M/s Dunlop India Ltd, the assessee company purchased
M/s Chandni Commercials Pvt. Ltd. Assessment Year:2012-13 the goods and made the payment by account payee cheques through banking channel, hence provisions of section 40A(3)/ 40A(3A) does not apply to the assessee company.
However, on examination of ledger account of M/s visage Equipments Pvt Ltd in the books of the assessee for the period 01.04.2011 to 31.03.2012 which relates to assessment year 2012-13, we find that the payment has been made through Journal entry. From the said ledger account, it appears that assessee has paid to M/s Visage Equipments Pvt Ltd, through journal entry on 31.03.2012 at Rs.116,15,50,960/-. The said Journal entry is given below for ready reference:
M/s Visage Equipments Pvt Ltd 116,15,50,960 To Girish Commercial Pvt Ltd 17,15,75,480 To Adhirath Commercials Pvt Ltd 40,00,00,000 To Adhirath Commercials Pvt Ltd 30,00,00,000 To Adhirath Commercials Pvt Ltd 28,99,75,480 We note that the Journal entry mentioned above does not contain any cash element therefore, provisions of section 40A(3)/ 40A(3A) does not apply to the assessee company. However, the ld DR for the Revenue disputed the genuineness of the transaction, therefore, in the interest of justice and fair play we remit this transaction back to the file of the assessing officer for limited purpose, to verify the genuineness of the transaction.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the Court on 29.03.2019