RINA DAS,KOLKATA vs. I.T.O WD - 1(1) ,MIDNAPORE., MIDNAPORE

This appeal of the assessee arises out of the order of the Learned CITA in Appeal No. 346/CIT(A)-XXXVI/Kol/Wd.-1(1), Mid,/09-10 dated 06/12/2012 passed against the order of assessment framed by the Learned AO u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).

3. The only issue to be decided in this appeal is as to whether the disallowance u/s 40A(3) of the Act in the sum of Rs. 25,45,380/- could be made in the facts and circumstances of the case.

4.1. Not satisfied with the contentions advanced by the assessee, the Learned AO proceeded to make disallowance u/s 40A(3) of the Act to the tune of Rs. 25,45,380/-. Aggrieved, the assessee preferred an appeal before the Learned CITA. During the course of first appellate proceedings, the Learned CITA observed in Para 2 and 3 as under :- Para 2 & 3 of ld.CIT(A)’s order: “2. The appeal was fixed for hearing on 12.4.2012 but no one attended. Again the matter was fixed for hearing on 11.5.2012 but A.R requested for adjournment which was granted for 03.8.2012 on adjourned date i.e 03.8.2012 no one attended. Again the case was posted for hearing for 05.12.2012 and no one attended. One letter was received from appellant on this date seeking adjournment for three months. Keeping in view of non-compliance attitudes of appellant further adjournment was refused.

Officer disallowed a sum of Rs.25,45,380/- on account of cash purchase of gold bars u/s. 40A(3) from M/s. BSK Gem & Jewellery in excess of Rs.20,000/-. As per accounts submitted by the supplier all payments have been made in cash and in excess of Rs.20,000/-. No cross verification and confirmation was submitted by the appellant before the AO that each payment is below Rs.20,000/-. No exceptional circumstances which forced appellant to mare payment in cash and above Rs.20,000/- were claimed before AO. Even in appellate proceeding, appellant did not submit any such details. Hence, AO was right in disallowing cash purchases in excess Rs.20,000/-to the tune of Rs.25,45,380/- u/s. 40A(3) of Income Tax Act”.

Accordingly, the Learned CITA confirmed the order of the Learned AO.

4.2. The assessee challenged the order of the Learned CITA before us. Grounds of appeal:

1. For that in the facts and circumstances of the case the assessment order passed was in violation of principles of natural justice hence is bad in law and be quashed.

2. For that in the facts and circumstances of the case the Learned Commissioner of Income Tax Appeals erred in non granting proper opportunity of hearing to the assessee and thus the order be set aside.

3. For that in the facts and circumstances of the case the Learned Commissioner of Income Tax Appeals erred in confirming the addition of rs.25,45,380/- us 40A(3) of the Income Tax Act 1961. The addition is uncalled for, unjustified and hence the same be deleted.

4. The appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal” .

4.3. During the course of hearing, the Learned AR drew our attention to page 3 of the order of the Learned AO that the assessee filed written submissions on 26.9.2011 along with a break up of payments day by day which proves that no payment exceeded Rs 20,000/- warranting any disallowance u/s 40A(3) of the Act. The Learned AR argued that the Learned AO failed to look into the statement showing the break up of payments made by the assessee to bullion merchant in proper perspective. Further the Learned CITA also failed to consider the adjournment letter submitted by the assessee. Therefore, both the authorities failed to afford proper opportunity to the assessee to prosecute her case. Further the Learned AR submitted a paper book containing the statement of break up of payments and case laws in support of his contentions. The Learned AR further argued that factually the bullion was purchased by the assessee on credit and that the staff of the bullion merchant used to visit the assessee and collect the sale proceeds of the assessee at frequent intervals for onward transmission to the bullion merchant. He further stated that no payments made to the staff of the bullion merchant exceeded Rs. 20,000/- on a single day which is also evident from the paper book filed by him before the lower authorities and before us. He further argued that the assessee is not aware when the concerned collecting staff had handed over the cash collections to the bullion merchant and just because the bullion merchant had recorded the sale receipts in his books on a single day exceeding Rs. 20,000/- , the assesssee cannot be invited with the plenary provisions of section 40A(3) of the Act. In response to this, the Learned DR disputed the submissions of the Learned AR that the staff of bullion merchant collecting payments on daily basis from assessee is far from truth for the reason that the assessee is doing her business in Midnapore and whereas the bullion merchant’s office is situated at Burra Bazaar, Kolkata.

4.4. We have heard the rival submissions and perused the materials available on record. We find that the Learned AO had made this addition on the basis of ledger account obtained by him directly from the bullion merchant u/s 133(6) of the Act which contained cash payments made by assessee in excess of Rs. 20,000/- to the bullion merchant on a single day. The assessee when confronted with the said details, chose not to file any reply before the Learned AO in response to show cause notice dated 21.11.2011. Further the assessee could not plead his case before the Learned CITA as her adjournment request was rejected by the Learned CITA and order passed exparte by the Learned CITA. It is pertinent to note that the genuineness of the payments made by the assessee to the bullion merchant is not in dispute. This is quite evident from the ledger account obtained by the Learned AO from the bullion merchant u/s 133(6) of the Act. From the details filed by the assessee before the lower authorities and before us, it could be seen that no payments were made to bullion merchant exceeding Rs. 20,000/- on a single day. For instance, the Learned AR took us to the page 1 of the paper book in Serial Numbers 1-12 wherein a total sum of Rs. 2,39,289/- was paid on 12 different dates by the assessee which has been recorded on a single date by the bullion merchant on 24.4.2008. We find that this aspect is not verified in detail by the lower authorities. We also find in view of the non-compliance to the show cause notice issued by the Learned AO, the assessee was deprived of the benefit of cross-examination of the bullion merchant and the staff of the bullion merchant for delayed accounting of receipts in their books, which would prove the contentions of the assessee beyond doubt. Hence in these facts and circumstances, we deem it fit and appropriate, in the interest of justice and fair play, to set aside this issue to the file of the Learned AO to decide this afresh by taking into account all the submissions filed by the assessee and if necessary, the assessee be provided an opportunity of cross examination of the bullion merchant and his staff and such other persons for better disposal of this issue. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.

THIS ORDER IS PRONOUNCED IN OPEN COURT ON 30 10/2015