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Income Tax Appellate Tribunal, BENCH ‘A’ KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Dr.Arjun Lal Saini, AM ]
The captioned appeal filed by the assessee pertaining to A.Y.2011-12, is directed against the order passed by the Commissioner of Income Tax –(A)-Asansol, in Appeal No.30/C.I.T.(A)/Asl/W-3(4)/Purulia/14-15, dated 28.01.2016, which in turn arises out of an order passed by the Ld. Assessing Officer u/s 143(3) of Income Tax Act, 1961 (in short, the Act), dated 07.03.2014.
The facts of the case are as stated in brief. The return of income for A.Y.2011-12 was filed by the assessee, declaring the taxable income of Rs.22,432/-. Later on the case was selected for scrutiny u/s 143(3) of the Act and the AO has completed the assessment by making addition of Rs. 20,68,357/- for violation of the provision of section 40A(3) of the I. T. Act, and other small additions because the assessee did not furnish the documents and evidences.
Aggrieved from the order of the ld. AO, the assessee filed an appeal before the ld. CIT(A), who has also confirmed the action of the AO by observing the followings :- .
2 M/s. URMA C.S.Shop A..Y.2011-12 “12. The Bengal Excise (Supply of Country Spirit on payment of duty) Rules 2005 does not make any express provision mandating the necessity of effecting payment in cash by the vendor in relation to purchases effected either from government or its authorized bottling agents. In view of the above, I uphold the addition of Rs 20,68,357/- made by Assessing Officer. The grounds against additions are dismissed. 13. In the ground of appeal the other disallowance are also agitated. No details as to why the disallowance are objected are available or preferred. Hence I decide the same on basis of contents in assessment order.
14. Upon going through assessment order I find that A.O. has made additions of Rs 7,695/-, Rs 4,26,320/- , Rs 12,228/-, Rs1,000/- , Rs 89,347/- and Rs.9,031/-. He has also recorded reasons. No material to overturn the same is before me. Hence I dismiss the grounds against the additions.
15. The appeal is dismissed. All grounds of appeal stand disposed of accordingly.”
Not being satisfied with the order of the ld. CIT(A), the assessee is in further appeal before us and has taken the following grounds of appeal :- “01. That on the facts and circumstances of the case Id. AO. erred in treating the assessee as retail trader of Country Spirit whereas the appellant is a licensee of Country Spirit under supervision and control of State Excise Authority under Govt. of West Bengal.
02. That on the facts and circumstances of the case Id. A.O. erred in making a disallowance of Rs.20,68,357/- being total purchase of country spirit including excise duty, sales tax, T.D.S. and bottling charges U/S 40A(3) on the ground that purchase amount exceeded the threshold limit of Rs.20,000/- disregarding the fact that entire purchase was made from Government Bond(Warehouse) under control of State Excise Department and such purchase from Government falls within exceptions of Rule 6DD(a).
03. That on the facts and circumstances of the case Id. A.O. erred in disregarding the notification of Govt. of W.B. Excise Department notification No.1208 EX dt. 29/08/2005 that retail vendors will not deposit money for purchase of C.S., Excise Duty and other taxes to the Govt. treasury. They will deposit the cost of C.S., Excise Duty and other impositions by law direct to wholesalers and accordingly the appellant has made the payments to the wholesalers following the directions of the Govt. and such payments as per directions and rule framed therein falls under rule 6DD(a) and rule 6DD(b) and accordingly the appellant is free from any disallowance U/s 40A(3).
04. That on the facts and circumstances of the case Id. A.O. erred in making a disallowance U/s 40A(3) whereas the cost of C.S. Purchase from Govt. Bonds falls within exception provided under rule 6DD(a) and Excise Duty and sales tax falls within exception provided under rule 6DD(b) and accordingly deserves total deletion.
05. That on the facts and circumstances of the case Id. AO. erred in making addition of Rs.4, 26,302/- on account of loss of F.L (foreign liquor) in course of destruction by 3 M/s. URMA C.S.Shop A..Y.2011-12 crowed of local villagers comprising of hundreds of women which came in the print media and also in electronic media and whereas such loss was incurred in course of carrying out the business of the appellant. 06. That on the facts and circumstances of the case Id. A.O. erred in making an addition of Rs. 89,347/- on account of net debit balance computed by the AO in respect of A.N. Enterprise and Kisan F.L Bond.”
5. Ground Nos.1,2,3 and 4 relate to one solitary grievance of the assessee in respect of cash payment made by the assessee in excess of Rs.20,000/- u/s 40A(3) of the Act vide Rule 6DD(a) and 6DD(b) of the IT Rules. Therefore first we are going to deal with the solitary grievance of the assessee which has been reflected by way of multiple grounds raised by the assessee (ground Nos. 1 to 4).
The ld. AR for the assessee has submitted (in respect of ground Nos. 1 to 4) that the Assessee is a retail vendor of country liquor and pochai. The country liquor is an excisable commodity. Its purchase and sale are strictly controlled by the State Government. Previously, the retail dealers like the assessee used to deposit the cost price excise duty, bottling charges etc in the treasury against Form TR-7 in cash for getting supplies from wholesale licensee. Subsequently the Excise Department by a notification dated 29/08/2005 changed the procedure. As per revised procedure prescribed by the Excise department for lifting country spirit the retail vendor like the assessee was required to make the entire payment consisting of cost of the stock in trade , excise duty and bottling charges etc only to the wholesale licensee appointed by the State Government . Following the revised procedure the assessee made the payments by cash deposits in the bank account of the supplier namely M/S IFB AGRO AND INDUSTRIES.LTD, Durgapur in the State Bank Of India at Purulia. While completing the assessment the Assessing officer disallowed a sum of RS.20, 68,357/- U/S 40A (3) on the ground that each payment exceeded a sum of RS.20000/- as the payment was made in cash to the bank account of the seller. He noted his observation on page 5 and 6 of his assessment order and mentioned that the entire payment was made in the bank account of IFB Agro Industries Ltd, in the State Bank of India, Purulia.
4 M/s. URMA C.S.Shop A..Y.2011-12 The assessee filed an appeal against aforesaid disallowance and claimed that the assessee case is covered under Rule-6 DD(b) and Rule 6 DD(k) but the CIT Appeal passed an order without caring the notice of hearing having been served to the appellant on the ground that her predecessor has confirmed the disallowances U/S 40A(3) in respect of earlier assessment years.
The ld AR for the assessee also drew our attention to the very recent consolidated judgment passed by Hon`able Income Tax Appellate Tribunal A-Bench Kolkata in Assessment Year 2007-08, I. T.A. No. 185/Kol/2014 Assessment Year 2008-09 & I.T.A No 1186/Kol/2014 Assessment Year 2010-11 in the case of Ramnagar Pachwai & C.S.(S) shop vs. Income Tax Officer, Ward-2(3), Asansol. It is important to note that in his order dated 05/08/2016 ruled that the case of the appellant falls under the exceptions provided in rule 6DD(b) and Rule 6DD(k) of the IT rules and accordingly allowed the appeal of the assessee. The present appeal of the assessee( of M/s Urma C.S.Shop ), under consideration is squarely covered by the above judgment, as both the assessees M/S Ramnagar Pachwai & C.S.(s) Shop and M/S Urma C.S. Shop are retail vendor of country liquor and pachwai shop and are controlled by the Excise department of the State Government. Both have deposited the cash in the bank account of the seller and lifted the goods from the warehouse under the control the excise department.
On the other hand, the ld. Departmental Representative for the revenue has primarily reiterated the stand taken by the AO which we have already noted in our earlier para, and is not being repeated for the sake of brevity.
Having heard the rival submissions, perused the material available on record, we are of the view that there is merit in the submissions of the assessee, as the propositions canvassed by the ld. AR for the assessee are supported by the judgment of the Hon’ble ITAT, Kolkata ( cited supra) and facts narrated by him. The ld. AR has pointed out that as per the revised procedure prescribed by the Excise department for lifting country spirit the retail vendor like the assessee was required to make the 5 M/s. URMA C.S.Shop A..Y.2011-12 entire payment consisting of cost of the stock in trade, excise duty and bottling charges etc only to wholesale licencee appointed by the State Government. Therefore, following the revised procedure the assessee made the payment by cash deposited in the bank account of the supplier namely M/s. IFB Agro and Industries Ltd., Durgapur in the State Bank of India, Purulia. Therefore, considering the above factual position the addition made by the ld. CIT(A) needs to be deleted. Accordingly, we delete the addition made by the ld. CIT(A).
In the result, the appeal filed by the assessee on this issue is allowed.
Ground No.5 raised by the assessee relates to the addition of Rs.4,26,302/- on account of loss/ destruction by crowd of local villagers. The ld. AO has disallowed Rs.4,26,302/- by observing the followings :-
“3. Further, explanation regarding the loss in transit to the tune of Rs. 2,76,302/ - and debit amount of Rs. 1,50,000/ - under the head 'Drum & Bottles Destroyed in the Trading, P& L account in the year ended on 31/03/2011 was found not satisfactory. Hence, the amount aggregating to the tune of Rs. 4,26,302/- is disallowed and added back to the total income of the assessee as the A/R of the assessee firm had failed to establish the loss in transit to the tune of Rs. 2,76,302/- and 'the destruction of Drums and bottles amounting to Rs. 1,50,000/- by adducing strong and cogent documentary evidence in support of the claim made under above said heads.”
Aggrieved from the addition of the ld. Assessing Officer the assessee filed an appeal before the ld. CIT(A), who has also confirmed the order of Assessing Officer, observing that no material or evidences were filed before him by the assessee.
Not being satisfied with the order of the ld. CIT(A), the assessee is in further appeal before us on this issue and submitted that the AO disallowed a sum of Rs.4,26,302/- on account of loss of F.L. in course of destruction by crowd of local villagers.
On the other hand, the ld. Departmental Representative for the revenue has strongly defended the order made by the ld. AO and the order made by the ld. CIT(A), and explained that no evidence or documents were filed by the assessee either before
Having heard the rival submissions, perused the material available on record, we are of the view that there is merit in the submissions of the ld. DR for the revenue, as the propositions canvassed by the ld. DR for the revenue are supported by the facts narrated by him. He has mentioned that no evidence were submitted by the assessee before the AO. There is no FIR filed by the assessee stating that the bottles were destroyed by the crowd of local villagers. Therefore in view of the above factual position we confirm the order passed by the ld. CIT(A).
In the result, the appeal filed by the assessee on this ground is dismissed.
Ground No.6 raised by the assessee relates to the addition of Rs.89,347/- on account of net debit balance computed by the AO in respect of A.N.Enterprise and Kisan F.L. Bond. The AO has disallowed the said sum observing that the ld. AR for the assessee firm could not produce any documentary evidence regarding the credit balance of Rs.86,917/-, against A.N.Enterprise. The credit balance amounting to Rs.13,735/- against Kishan F.L.Bond is accepted. Thus the net debit balance becomes equal to Rs.1,00,669/- (Rs.86934 + Rs.13735). Hence, the amount of Rs.89,347/- (Rs.1,90,016 minus Rs.1,00,669) is added to the total income of the assessee.
Not being satisfied with the order of the AO the assessee filed an appeal before the ld. CIT(A), who has also confirmed the action of the ld. AO, as the assessee had not furnished any evidence or documentary proof before the ld. CIT(A). Not being satisfied with the order of the ld. CIT(A), the assessee is in further appeal before us on this issue.
The ld. AR for the assessee has submitted that this is an addition made by the ld. AO, u/s 68 of the Act and addition made by him is not valid.
7 M/s. URMA C.S.Shop A..Y.2011-12 19. On the other hand, the ld. Departmental Representative for the revenue has primarily reiterated the stand taken by the ld. AO. He argued that the assessee had neither submitted any documentary evidence before the AO nor before the ld. CIT(A), therefore it is a genuine addition made by AO.
Having heard the rival submissions, perused the material available on record, we are of the view that there is merit in the submissions of the ld. DR for the revenue , as he has rightly pointed out that the assessee has neither submitted any documentary evidence before the ld. AO nor before the ld. CIT(A), to prove the genuineness of the transaction. Therefore the addition made by the ld. AO is valid. Therefore based on the above factual position we confirm the order passed by the ld. CIT(A) on this issue.
In the result, the appeal filed by the assessee on this is dismissed. 22. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the court on 19.10.2016.