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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘A’, LUCKNOW
Before: SHRI VIJAY PAL RAO & SHRI RAMIT KOCHAR
PER RAMIT KOCHAR, A.M.
This appeal in I.T.A. No.73/Lkw/2022 for assessment year 2011-12 has arisen from the revisionary order dated 24/03/2021 (DIN & order No. ITBA/Rev/F/REV5/2020-21/1031705283[1]) passed by learned Pr. Commissioner of Income-tax(Hereinafter called “PCIT”) , Bareilly under section 263 of the Income-tax Act, 1961(hereinafter called “the Act”).
The grounds of appeal raised by assessee in memo of appeal filed with Income-Tax Appellate Tribunal, Lucknow (hereinafter called “the tribunal”) reads as under:
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“1. That the Ld. PCIT has erred in law as well as on facts by setting aside the order dated 14/12/2018 passed u/s 143(3)/147 of the I.T. Act.
That the Ld. PCIT has erred in law for issuing notice u/s 263 of the Act for the reason that he has an different opinion to that of the Assessing Officer.
That the Ld. PCIT has erred in law as well as on facts by invoking clause (a) of explanation 2 to section 263 of the Act despite the fact that proper enquiry of the matter has been conducted by Assessing Officer and have been duly stated in the assessment order.
That the Ld. PCIT has erred in law as well as on facts for not accepting the submissions filed by the assessee as well as not following the higher courts orders being taken as reference by the assessee in support of its claim.
That the appellate reserves the right to add , modify, alter, amend or delete any of the ground.”
The brief facts of the case are that the original assessment in this case was completed on 30/03/2014 u/s 143(3) of the 1961 Act , on total income at Rs.5,59,390/-. The assessee is a partnership firm , engaged in manufacturing and trading of Bread and other food items. Thereafter , the case of the assessee was reopened by Revenue by invoking provisions of section 147 of the Act on the ground that the assessee has made aggregate payments in cash to a person in a day, otherwise than by an account payee cheque or account payee draft, exceeding Rs.20,000/- , and such total payments during the year were to the tune of Rs.28,57,810/-, and thus these payments are not allowable as per Section 40A(3). Accordingly, notice u/s 148 , dated 05.02.2018 was issued by Assessing Officer to the assessee, after obtaining approval from ld. Commissioner of Income-tax, Moradabad. The assessee filed return of income in pursuance to notice u/s 148 , on 03.12.2018 declaring income of Rs. 5,59,390/-. The AO issued
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statutory notices u/s 143(2) and 142(1) to the assessee. The assessee appeared before Assessing Officer and submitted its contention wherein assessee contended that assessee is a partnership firm engaged in the business of Manufacturing of bread , food items etc., and there are so many buyers and collections of receipts are in cash . It was submitted that many cash collection agents/salesmen are appointed and every day they are given the collection and payment/use of collected cash and in this processes 4 to 5 salesmen/agents make the payment to same creditor in a day at the different times but no payment has been made in excess of Rs.20,000/- as prescribed u/s 40A(3) of the I.T. Act, 1961. The assessee enclosed copy of payment vouchers and hence prayer were made by the assessee before AO that there was no violation of section 40A(3) of the Act, but the assessee admitted that due to circumstances beyond its control , a supplier may be made payment in aggregate in excess of Rs. 20000 in a day in cash which as per assessee could not be said to be in violation of Section 40A(3). The Assessing Officer, vide order dated 14/12/2018 passed u/s 143(3) read with section 147, accepted the contention of the assessee by holding as under:
“I have carefully considered the submission made by the assessee as discussed above and also gone through the vouchers provided in support of his contention. It has been noticed that the payment has actually been made to the same creditors in a day by the different persons. The name of the person by whom the payment has been made to the creditors, has also been mentioned clearly in the vouchers. Amount paid to the creditors has also been mentioned in the vouchers. The amount so paid does not exceed Rs.20,000/- in any of the vouchers. Considering all these facts, the submission made by the assessee in this regard appears to be convincing and reasonable.”
Thereafter , the learned PCIT invoked revisionary powers u/s 263 of the Act and show cause notice was issued by learned PCIT dated 4th November, 2021 on the ground that the Assessing Officer has not properly examined the issue of the payments exceeding Rs.20,000/- made by the assessee in
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cash in a day to the creditors. The learned PCIT observed that the cash payments exceeding Rs. 20,000/- in a day were made by different salesmen/agents to a particular creditor as claimed by the assessee, but the total payment made to a particular creditor/party by all the salesman on behalf of the assessee has exceeded Rs.20,000/- in a day in cash , and which aggregated to the tune of Rs.28,57,810/- during the impugned assessment year, which is in contravention of Section 40A(3). The assessee submissions before learned PCIT were rejected by ld. PCIT vide revisionary order dated 24.03.2021 passed u/s 263 , by holding as under:
“I have considered the facts of the case. In this case cash payments above Rs.20,000/- is made to different parties in a day. Section 40A(3) is attracted when the aggregate payment above certain limit is paid in a day to a person in cash. It is a undisputed fact in this case that section 40A(3) is attracted as aggregate payment exceeding such limit is paid in a day to a person. The assessee however contends that the payments are made through sales agents. Even if the payments are made by different sales agent but the fact remains that then agent are employees of assessee and acted on his behalf. The ratio descendi of the case laws including Hon'ble Allahabad High Court is therefore not applicable to the facts of the case and there is also no extraordinary situation also which may warrant payment in cash. The AO in his order has not disputed the fact that aggregate payment to a person is more than Rs.20,000/-. The AO has not brought on record any extraordinary circumstances for which such payment to one person in cash with aggregate amount more than Rs.20,000/- is made. Thus looking into the entirety of fact, I am of the opinion that the issue is not properly examined by the AO. The case laws cited are distinguishable on fact and the order passed by the AO is erroneous in so far as prejudicial to the interest of revenue as per explanation 2(a) of section 263 of the Act. Hence, the assessment order passed by the AO is hereby cancelled to make fresh assessment denovo as per law after giving due and reasonable opportunity to the assessee and after investigating complete facts.”
The learned PCIT , thus,cancelled the reassessment order dated 14.12.2018 passed by AO u/s 143(3) read with Section 147 , and issued directions to
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the Assessing Officer to make fresh assessment de novo as per law after giving due and reasonable opportunity to the assessee and after investigating complete facts.
Now , when this appeal was fixed for hearing before the Division Bench on 19th October, 2022, none appeared on behalf of the assessee nor any application for adjournment has been filed on behalf of the assessee. It is observed that on earlier occasion also, when this appeal came up for hearing before Division Bench on 30th August, 2022, again none appeared on behalf of the assessee. We have observed that Registry has issued notices of hearing to the assessee by RPAD, which were duly served to the assessee and none of the notices had been received back from postal authorities. It is clear from records that the assessee is not vigilant in pursuing its appeal filed with tribunal .The DB decided to proceed with adjudication of this appeal on merit based on material on record, after hearing learned CIT-D.R.
Further, it is observed that the Registry has marked that this appeal is filed belatedly by the assessee beyond the time prescribed u/s 253(3) and is time barred by 333 days for which the assessee has filed an application for condonation of delay. We have observed that learned PCIT has passed revisionary order u/s 263 dated 24/03/2021 and this appeal is filed by assessee with tribunal on 21/04/2022. We have observed that due to COVID-19 pandemic, Hon'ble Supreme Court had suspended limitation , for the period from 15/03/2020 until 28/02/2022. The assessee in its application praying for condonation of delay has rightly relied upon directions issued by Hon'ble Supreme Court vide Misc. Application No. 21 of 2022 dated 10/01/2022 in SMW(c)3 of 2020 “Cognizance for Extension of
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Limitation” , the relevant extract of the assessee’s condonation application reproduced as hereunder:
“Taking into consideration & arguments advanced by learned counsel and the impact of the surge of the virus on public health and adversities faced by litigants in the prevailing conditions, we deem it appropriate to dispose of the M.A. No. 21 of 2022 with the following directions."
i. The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi- judicial proceedings.
ii. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022.
iii. In case where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with the effect from 01.03.2022 is greater than 90 days, that longer period shall apply.
iv. It is further clarified that the periods from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under section 23[4] and 29A of the Arbitration and Conciliation Act, 1996 section 12A of the Commercial Courts Act, 2015 and provisos [b] and [c] of section 138 of the Negotiable Instruments Act, 1881 and other laws, which prescribe period[s] of limitation for instituting proceedings, outer limits [within which the court or tribunal can condone] and termination of proceedings.”
Thus , excluding this period wherein limitation was suspended by Hon’ble Supreme Court, there was time available with the assessee to file the appeal within 60 days as provided under section 253(3) of the Act effective from 01.03.2022. The Hon’ble Supreme Court has directed for making available
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period of 90 days effective from 01.03.2022, and the assessee will get extended period of 90 days as directed by Hon’ble Supreme Court effective from 01.03.2022, to file this appeal. Thus, the assessee could have filed this appeal on or before 29/05/2022. The assessee has filed this appeal on 21/04/2022 and hence there is no delay on the part of the assessee in filing this appeal with tribunal ,and we hold that this appeal is filed by assessee within the time prescribed under law, and there is no delay on part of the assessee in filing this appeal with tribunal.
The Learned CIT-D.R. opened arguments before the Bench and submitted that this appeal filed by assessee has arisen from the revisionary order dated 24.03.2021 passed by ld. PCIT u/s 263 of the Act and the issue involved is concerning cash payment exceeding Rs.20,000/- paid by assessee to particular creditor/party in a day, and hence there is infringement of section 40A(3). It was submitted that assessment of the assessee was reopened by Revenue in this case by invoking provisions of Section 147 , on the ground that in original assessment, the Assessing Officer has not looked into cash payments in excess of Rs.20,000/- in a day made by the assessee to the same creditor/party , and all such cash payments exceeding Rs. 20,000/- in a day were to the tune of Rs. Rs.28,57,810/- during the year under consideration . It was submitted that in reassessment proceedings , the Assessing Officer did not looked into this issue in proper perspective and no additions were made , as the AO simply accepted the submissions made by the assessee. The Learned CIT-D.R. drew our attention to para 5 & 6 of the reassessment order passed by the Assessing Officer , and also drew our attention to page 16 of learned PCIT order passed u/s 263. She relied upon the revisionary order passed by learned PCIT.
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We have considered the contentions of learned CIT-D.R. and perused the material on record. We have observed that the assessee’s case was originally assessed u/s 143(3) of the Act. Thereafter by invoking provisions of section 147 of the Act, the case of the assessee was reopened , wherein reasons for reopening was cash payment in excess of Rs.20,000/- in a day made by the assessee to the same party/creditor, allegedly in violation of section 40A(3) of the Act. The aggregate of all such cash payments in a year were to the tune of Rs. Rs.28,57,810/- . The assessee submitted and admitted before Assessing Officer during reassessment proceedings, that the assessee has made payment in cash in excess of Rs.20,000/- in a day to a particular party/creditor . The assessee is engaged in the manufacturing of bread and food items , and it was claimed that several sales persons/agents who made collection from different sources for supply of bread and then made payments in cash in a day to different creditors , and since cash payments were made by different sales persons/agents which in aggregate exceeding Rs.20,000/- in a day to the same party/creditor , but individual cash payment by one sale person/agent to a particular party/creditor in a day is less than Rs. 20000/- , and hence there is no infringement of Section 40A(3). It was claimed by assessee that since cash payment in a day is made by 4-5 different sale person/agent to same party/creditor, the aggregate of cash payment is more than Rs. 20,000/- in a day to one party/creditor , and hence there is no violation of section 40A(3) of the Act. The Assessing Officer simply accepted the contentions of the assessee wherein he observed that section 40A(3) prescribed payment exceeding Rs.20,000/- in a day by account payee cheque or account payee draft , while individual cash payment is below Rs. 20000 in a day per single voucher made to a particular creditor/party. The AO did not appreciated provision of Section 40A(3) in right perspective as the aggregate cash payments in a day exceeded Rs. 20,000/- to a particular party/creditor in
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the instant case albeit the same was claimed by the assessee to have been made by different sale persons/agents. This itself required triggering of deeper probe as to the necessity as well genuinity of making cash payments through 4-5 different salespersons/agents to a particular party/creditor, as claimed by the assessee. All such payments exceeding Rs. 20,000/- in a day by assessee were required to be made by account payee cheque or account payee draft. The exceptions are provided under Rule 6DD of Income-tax Act, 1961. The Assessing Officer did not passed a reasoned and speaking order as to how these cash payments are covered by exceptions as are provided u/r 6DD or also did not looked into the genuinity of the said claim. It is an admitted position that the assessee , may be through its sales persons( who possibly are assessee’s employees) or its agents , has made cash payments exceeding Rs. 20,000/- in a day to same party/creditor.The aggregate of these cash payments were Rs. 28,57,810/-, during the impugned assessment year. The AO did not gave its reasoning before allowing relief to the assessee, and erroneously accepted that since a single voucher cash payment in a day was below Rs. 20000/- and hence Section 40A(3) is not attracted, but failed to appreciate that if all such vouchers reflecting cash payment to a single party/creditor in a day are aggregated , then the total cash payment in a day to a particular party/creditor is exceeding Rs. 20,000/- which clearly is in violation of Section 40A(3) , as whether assessee making payment either through sales persons or agents is the same and the person to whom cash payment exceeding Rs. 20,000/- in a day is made is also one party. In our considered view , the Assessing Officer has not considered the issue in proper perspective and there is no estoppels against law.Thus, clearly the reassessment order passed by AO was erroneous so far as prejudicial to the interest of the Revenue, as to the enquiries and verification as ought to have been made by the AO were not made by AO during reassessment proceedings. The learned PCIT was
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justified in invoking its revisionary powers u/s 263, and the reassessment order dated 14.12.2018 passed by Assessing Officer u/s 147 read with Section 143(3) was rightly cancelled by ld. PCIT by invoking its revisionary powers u/s 263, and directions were rightly issued by ld. PCIT to AO to make fresh assessment denovo after investigating complete facts. We uphold the revisionary order passed by learned PCIT u/s 263 of the 1961 Act. Thus, the assessee fails in this appeal which stand dismissed. We order accordingly.
In the result, the appeal of the assessee in ITA no. 73/Lkw/2022 for assessment year 2011-12 stands dismissed.
(Order pronounced in open court on 21/10/2022 at Lucknow, U.P.)
Sd/. Sd/. (VIJAY PAL RAO) (RAMIT KOCHAR) Judicial Member Accountant Member
Dated:21/10/2022 *Singh
Copy of the order forwarded to :
Appellant: M/s Hare Krishna Food Products, ShahpurTigri, Khushalpur, Moradabad-244001, U.P.. 2. The Respondent-Pr. Commissioner of Income Tax, Central Revenue Building, Kamla Nehru Marg, Civil Lines, Bareilly. 3. Concerned CIT 4. The Guard File Asstt. Registrar 5. The CIT-D.R., I.T.A.T., Lucknow