M/S MARUTHI TRADERS,CHITRADURGA vs. CIT, DAVANGERE

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. SUNIL KUMAR YADAVA, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER (Assessment Year : 2009-10) M/s. Maruthi Traders, Main Road, Belagur, Hosadurga Taluk, Chitradurga .. Appellant PAN : AAEFM4207H v. Commissioner of Income-tax, Davangere .. Respondent Assessee by : Shri. C. Ramesh, CA Revenue by : Shri. Binod Kumar Singh, CIT-DR-I Heard on : 04.05.2016 Pronounced on : 06.05.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :

Through this appeal, assessee assails an order u/s.263 of the Income- tax Act, 1961 (‘the Act’ in short), passed by Pr. CIT, Davangere, for A. Y. 2009-10. Appeal has been filed with a delay of 77 days. Condonation ITA.1159/Bang/2015 Page - 2 petition has been filed. Reasonable cause shown and hence delay is condoned and appeal admitted.

(i) Stock difference of Rs. 5,39,116/- (ii) Unaccounted debtors Rs.1,45,00,600/- (iii) De-husking charges Rs. 8,10,113/- (iv) Difference in purchase account Rs. 14,22,872/- (v) u/s 40A(3) of the Act Rs.1,37,08,237/- ITA.1159/Bang/2015 Page - 3

6.3. We have carefully considered the rival submissions, perused the relevant case records and also the voluminous paper books furnished by the learned AR during the course of hearing to strengthen his contentions. 6.3.1. For instance, while dealing with the issue of un-accounted debtors, the AO had specifically stated that ‘the assessee firm was avoiding accounting of cash sales as per list prepared by the Survey Team at the time of survey proceedings in the assessee’s business premises and the same is certified by the assessee and the copy of the same is with the assessee…..’ [Refer: Page 5 of the asst. order]. However, when the rival parties were required to furnish a copy of the said list purported to have been prepared by the survey team for the perusal of this Bench, the same has not been produced by either party. Further, the assessee had vouched that it had not been provided with any material evidence as alleged by the AO to the effect that sufficient opportunity was given to clarify or reconcile the said transaction (source: Page 6 of the asst. order) De-husking charges: According to the AO, the assessee vide its letter dated 23.11.2011 has stated that ‘the coconuts were purchased after de-husking at the purchase point and that the husk has not been retained. The purchase and sale of coconut has only been accounted and purchase or sale of husk is not accounted. Therefore, it is to be held that the de-husking charges claimed is not allowable. In this connection, the proposal letters also issued to the assessee to reconcile the same but he was not able to prove, hence the same is added back…’ However, this claim of ITA.1159/Bang/2015 Page - 4 the AO has been contested by the assessee that the entire expenditure is fully vouched and has been audited under section 44AB of the Act. These expenses were part of books maintained in the normal course of its business. These books were also examined during the survey and impounded. The data in the accounts was available even at the time of survey. 6.3.2. We observe that the above assertion of the assessee has not been examined by the AO while deciding the issue Difference in purchase account: It was the stand of the AO that since the assessee was unable to reconcile the same, the addition was resorted to. This fact has been denied by the assessee that the purchases which were declared to the Commercial-tax authorities was the same amount debited to P & L account for which the assessee had produced the audit report under KVAT in Form No.240 before the AO. However, there was no mention in the assessment order as to whether the AO had occasion to peruse the evidence allegedly claimed to have been produced by the assessee. Instead, the AO stated that the addition was made as the assessee had failed to reconcile the same etc., Disallowance u/s 40A(3): On the basis of the enquiries conducted in respect of the names and addresses of the agriculturists with whom the assessee alleged to have purchased coconuts as per the purchase bills raised, the AO found that none of the particulars were available at the addresses mentioned in the said bills. Accordingly, the AO had rejected 357 vouchers on the ground that the payments exceeded Rs.20,000/-. Countering this, it was submitted by the assessee that those 357 bills were each day route-wise bills. Each bill has a trip-sheet containing 3 to 4 transactions. Each of them were less than Rs.20,000/- and, thus, it was argued, the provisions of s. 40A(3) have no role to play. Moreover, it was submitted, all the bills have been impounded and are still lying with the Department. It was, further, submitted that the coconuts ITA.1159/Bang/2015 Page - 5 were purchased from the agriculturists and, thus, the assessee was entitled to claim exemption under rule 6DD of the I.T. Rules. In view of the above, it was pleaded that the assessee’s case falls within the purview of rule 6DD of I.T. Rules. 6.3.3. Taking into account all the facts and circumstances of the issues and also of the fact that the issues have not been dealt with in a proper manner by the authorities below, we are of the considered view that the matter should be restored on the file of the AO with a specific direction to look the issues afresh and to take appropriate action in accordance with the provisions of the Act as well as I.T. Rules, after affording a reasonable opportunity to the assessee of being heard. It is ordered accordingly. AO on 22nd May 2013 passed an order giving effect to the above 04. referred Tribunal order. Pertinent part of the said order read as under :