RAFIQUL HASAN,HOWRAH vs. ITO, WARD-47(2), KOLKATA, KOLKATA

आयकर अपील�य अधीकरण, �यायपीठ – “B” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “B” KOLKATA Before Shri S.S.Godara, Judicial Member and Shri, M. Balaganesh, Accountant Member ITA No.722/Kol/2017 Assessment Year :2010-11 Rafiqul Hasan V/s. Income Tax Officer, Hind Apartment, 2nd Floor, Ward-47(2) 3, Govt. Room No. 207, 545 G.T. Place (West), Road (South) Kolkata-700001 Howrah-711101 [PAN No.AATPH 3151 Q] .. अपीलाथ� /Appellant ��यथ�/Respondent None अपीलाथ� क� ओर से/By Appellant Shri Robin Choudhury, Addl. CIT-DR ��यथ� क� ओर से/By Respondent 27-08-2018 सुनवाई क� तार�ख/Date of Hearing घोषणा क� तार�ख/Date of Pronouncement 19-09-2018 आदेश /O R D E R PER S.S.Godara, Judicial Member:- This assessee’s appeal for assessment year 2010-11 arises against the Commissioner of Income Tax (Appeals)-14, Kolkata’s order dated 30.01.2017, passed in case No.75/CIT(A)-14/Cir-47/2015-16, in proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Case called twice. None appears at assessee’s behest. The registry had already sent an RPAD notice dated 06.07.2018 as well. We therefore proceed ex parte against assessee. 2. Learned Departmental Representative vehemently contends during the course of hearing that both the lower authorities have rightly made the impugned disallowance of ₹38 lac u/s 40A(3) of the Act as the assessee had made cash payments to his wife in violation of prescribed modes as rightly

ITA No.722/Kol/2017 A.Y. 2010-11 Rafiqul Hasan V. ITO Wd-47(2) Kol. Page 2 disallowed in assessee and affirmed in the CIT(A)’s detailed discussion reading as under:- “4. Observation and Decision: The facts of the case re that the case of the appellant was reopened u/s 147 as the AO was in possession of information that the appellant had paid Rs.38 lakh in cash to his wife Tuhinara Begum on different occasions. The recipient was engaged in manufacturing business having similar nature of business as the appellant. The two had business transactions in cash exceeding Rs.20,000/- each time. The appellant was proprietor of the concern Techno Industry. The appellant during assessment proceedings has stated that the said cash was indeed deposited by the appellant from his business sources of manufacturing. He said that the said cash was given for the purchase of a residential flat in the name of his wife Tuhinara Begum. Any form of agreement could not be finalized and the cash received was returned in part and the rest was adjusted against business liabilities. The appellant suggested that the flat w not bought due to some “irregularities and deficiencies” in the documents of thee flat. That some of the total amount of Rs.32 lakh was transferred back to the account of the appellant, while an amount of Rs.18.5 lakh left in the bank account of his wife was adjusted against labour charges of Rs.31,12,916/- receivable by Techno Industry. The AO noted that during the business transactions between the appellant and his wife Tuhinara Begum, the late had provided job work to the appellant during the said year. For this a bill of Rs.29,16,000/- was served upon the appellant. Since the amounts that were due by the appellant were in any case quite large and there was no evidence furnished by the appellant as regards his story of a proposal to purchase a flat the AO considered these payments as being in violation of section 40A(3) of the Act and disallowed the entire sum. During appeal the appellant’s main contention is that since the genuineness of the deposit was not doubted by the AO there was no question of invocation of section 40A(3) of the Act. He has also stated that the said amount of cash has been already been penalized in the hands of the appellant’s wife through imposition of penalty u/s. 271D of the Act by treating the said amount a cash loan. Thus, he argues there can be no question of addition in the hands of the appellant u/s. 40A(3) of the Act. I have examined the entire material on record. At the outset it may be stated that there is not an iota of evidence that the appellant has adduced in support o his story of a proposal for purchase of some flat. The second aspect in this array of facts is that the appellant and his wife were in continuous business dealings with or without this particular transaction. It is also a fact that in the particular period, the appellant had had several job works done through his wife resulting in the raising of a very large bill of over Rs.29 lakhs. If we look at the overall circumstances of the case it is evident that the entire money advanced to his wife, in bits and pieces, is in reality a business transaction. The advancement of such moneys was as under:- Date Deposit in bank (lakhs of Rs.) 30.05.09 10

ITA No.722/Kol/2017 A.Y. 2010-11 Rafiqul Hasan V. ITO Wd-47(2) Kol. Page 3 30.06.09 3 28.07.09 1 21.08.09 4 25.09.09 9 16.12.09 11 We notice the pattern of deposit of the amounts is that the amounts are deposited in intervals that are almost always of about a month. The bills raised by the appellant’s wife are also of a figure that is comparable to the amounts that have been deposited in cash. There did not seem to be any urgency with regard to these deposits since they have been deposited since they have been deposited for the better part of the year. It appears clear that the appellant in the practice of making payments to his wife’s account of amount that are business transactions, sometimes in advance and sometimes otherwise. In most of these cases the moneys have been paid in advance or business loan for the job work to be done by her. These advance are thereafter either returned as and when it suits the convenience of the appellant or are adjusted as business payments. There is nothing that the appellant has pointed on record that would necessitate the payment in cash. The case does not fall under any exceptions whether enumerated or not. As regards the genuineness issue, it may be stated that the genuineness of the deposit has not been doubted by the AO that is a matter of fact. The doubt that is created – and which the section 40A(3) seeks to circumvent – is with respect to the transactions itself. Once a transaction – especially between such close relations as in the instant case is accepted in cash, there is virtually no control over the genuineness or the quantum of such a transaction since it is very easy to manipulate the transit of cash. It is exactly to circumvent such an eventuality that the embargo u/s 40A(3) has been placed on the statute. The fact is that the appellant has nothing on record to suggest that there was any exigency with regard to such payments or that it does indeed fall under any of the exceptions laid out in the rules. In these circumstances I cannot interfere with the order of the AO and the same is confirmed.” 3. We have heard learned Departmental Representative strongly arguing in favour of the impugned disallowance. Case file perused. The question that arises for our apt adjudication is to whether both the lower authorities have rightly disallowed assessee’s cash payments made to his wife or not u/s 40A(3) of the Act. We make it clear that the CIT(A) as well as Assessing Officer are fair enough in not disputing the assessee’s clinching plea that he had made the cash amount in question for purchasing residential flat in the name of his wife Tuhinara Begum. Relevant deal could not see light of the day. This followed the impugned sum’s adjustment as business payments claimed as expenditure. We find no reason to concur to make disallowance in

ITA No.722/Kol/2017 A.Y. 2010-11 Rafiqul Hasan V. ITO Wd-47(2) Kol. Page 4 the above narrated peculiar facts and circumstances. The facts remains assessee had made payment to his wife for purchasing residential property in the beginning. It was later as adjusted as business expenditure for job works. Hon'ble jurisdictional high court’s decision in CIT vs. Crescent Export Syndicate ITA No. 202 of 2008 decided on 30.07.2008 upholds the tribunal’s decision deleting sec. 40A(3) disallowance keeping in mind voluminous genuineness element involved in payments in issue therein. We draw support therefrom to accept assessee’s explanation tendered in support the impugned cash payments therefore. Section 40A(3) of ₹ 38 lac in issue is deleted. 4. This assessee’s appeal is allowed. Order pronounced in the open court 19/09/2018 Sd/- Sd/- (लेखा सद%य) (�या'यक सद%य) (M.Balaganesh) (S.S.Godara) (Accountant Member) (Judicial Member) Kolkata, *Dkp, Sr.P.S (दनांकः- 19/09/2018 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-Rafiqul Hasan Hind Apartment, 2nd Floor, Room No. 207 545 G.T. Road (South) Howrah-711 101 2. ��यथ�/Respondent-ITO, Ward-47(2), 3. Govt. Place (West), Kolkata-001 3. संबं3धत आयकर आयु4त / Concerned CIT Kolkata 4. आयकर आयु4त- अपील / CIT (A) Kolkata 5. 7वभागीय �'त'न3ध, आयकर अपील�य अ3धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड< फाइल / Guard file. By order/आदेश से, /True Copy/ Sr. Private Secretary, Head of Office/DDO आयकर अपील�य अ3धकरण, कोलकाता ।