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Income Tax Appellate Tribunal, KOLKATA BENCH ‘SMC’, KOLKATA
Before: Shri P. M. Jagtap
ORDER This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income-Tax (Appeals)-XXXVI, Kolkata dated 28.01.2014 for the assessment year 2009-10 and in the solitary ground raised therein, the assessee has challenged the addition of Rs.10,10,000/- made by the AO and confirmed by the ld. CIT(A) by way of disallowance under section 40A(3) on account of purchases made in cash.
The assessee in the present case is an individual, who is engaged in the business of wholesale trading. The return of income for the year under consideration was filed by the assessee on 22.09.2009 declaring the total income of Rs.1,48,980/-. During the course of assessment proceedings, it was noticed by the AO, on verification of the books of accounts of the assessee, that purchases amounting to Rs.10,10,000/- were made by the assessee otherwise than by account payee cheques or bank drafts. He, therefore, required the assessee to explain as to why 2 Manoj Kumar Singha Roy Assessment Year: 2009-10 the said amount should not be disallowed as per the provisions of section 40A(3). Since no explanation was forthcoming from the assessee in this regard, the AO invoked the provisions of section 40A(3) and disallowed the amount of purchases made by the assessee otherwise than account payee cheques or bank drafts.
The disallowance made by the AO under section 40A(3) was challenged by the assessee in the appeal filed before the ld. CIT(A). During the course of appellate proceedings before the ld. CIT(A), the written submissions were filed by the assessee on this issue, which, as summarized by the ld. CIT(A) in his impugned order, are as under: “i) The wheat was purchased from farmers in cash through agents thus not attracting provisions of section 40A(3), due to exception provided in Rule 6DD(K).
ii) Individual payments were below Rs.20,000/- iii) The auditor had certified that the payments were below Rs.20,000/-, thus not attracting provisions of section 40A(3).”
The written submissions filed by the assessee were forwarded by the ld. CIT(A) to the AO for verification and comments. Accordingly, a remand report was submitted by the AO to the ld. CIT(A) offering his comments as under: “i) During the course of assessment proceedings the assessee was given sufficient opportunity to submit the detail statement of purchase including mode of payments of each transaction. But there was no compliance on the part of the assessee. However, letters were issued to all the commission agents as desired by your Honour through speed Post. Except Firu Sk. of Bharatpur, Murshidabad, letters were returned back with postal department remarks in sufficient address. But till date no reply has been received from Firu Sk. As the assessee did not submit any purchase statement during the assessment proceedings and from the balance sheet and P&L accounts available in the record could not 3 Manoj Kumar Singha Roy Assessment Year: 2009-10 ascertained that the purchase was made from commission agents or small traders. ii) Letter was issued to the assessee vide No. ITO/Wd- 4/Msd./Report/2013-14/920 dated 8.10.13 to appear before the undersigned on 21.10.113 along with cash book, purchase ledger and other books of accounts.
In reply AIR of the assessee' vide his letter dated 10.10.13 prayed for adjournment for one month. Accordingly time was given and on 21.11.13 the assessee, Sri Manoj Kumar Singha Roy along with AIR Sri S. Chowdhjury appeared before the undersigned and failed to produced any books of accounts and other related documents for my verification. While enquiry it is stated by the assessee that due to some problem in the accounting software we are unable to produce the books of accounts. Accordingly, it could not be examined whether the purchase were below Rs. 20, 0001- or not. iii) During the course of assessment proceedings the assessee was given every opportunity to submit the details statement of purchase including mode of payments of each transaction. On 4.11.11 the assessee Sri Manoj Kumar Singha Roy appeared and was asked him to submit the details statement of purchase including mode of payments and the case was adjourned to 9.11.11 stating that no further opportunity will not be possible to afford But there was no compliance on the part of the assessee on 9.11.11. On 18.11.11, the assessee appeared again and failed to submit any details of purchases. He was requested to appear before the undersigned on 22.11.11 and to produce the same. But once again there was no compliance on the part of the assessee and the case re-fixed for hearing on 19.12.11. Sri Manoj Kumar Singha Roy, assessee himself appeared on 19.12.11 and failed to produce submit any documents related to purchases. On going through the bank statement(SBI, Aluram, Msd.) that a sum of Rs.1 0.1 0 lakh appeared to be cash transaction. He was asked to explain why a sum of Rs.1 0.1 0 lakhs will not be treated as cash purchase and will not be added to the total income as per provision of section 40A(3) of the IT Act, 1961. He could offer no explanation in this regards and it was also stated by him that no explanation would be given by him by 31.12.11. In the absence of the details documents no further verification was 4 Manoj Kumar Singha Roy Assessment Year: 2009-10 not possible. Accordingly a sum of Rs.1 0.1 0 lakhs was disallowed and a~11d back to the total income of the assessee as per provision of section 40A(3).”
After taking into consideration the submissions made by the assessee, the remand report submitted by the AO, the counter-comments offered by the assessee as well as the other materials available on record, the ld. CIT(A) confirmed the disallowance made by the AO under section 40A(3) for the following reasons given in paragraph no.4.4. “4.4 AppeIlant's submission and the facts available on record are carefully considered. The AO in order to verify if the agricultural produce were purchased from agriculturist through agents, issued notice in the address given by appellant of the alleged agents. All the notices came back unserved except one, who did not comply to the notice. This fact was confronted to the assessee by A.O. Inspite of it, the assessee did not take any steps to submit the correct address or produce the persons for verification of his claim of purchase. As the claim has been made by assessee of purchase from farmers through agents, the onus was entirely on him to produce the necessary verifiable evidence. In the present case the evidence has been found to be false as the letters came back unserved. Further, inspite of further opportunity provided during remand proceeding the books of accounts and other relevant evidence were not produced before the AO, even though the NR and the appellant appeared, under the plea of problem in accounting software. Therefore, it is clear that inspite of adequate opportunity granted, the assessee has not produced any evidence in support of his contention that the purchases were in amount below Rs.20,000/- in cash from farmers.
In the above circumstances, AO was correct in concluding that the withdrawal in bearer cheques represented purchase from individual traders in cash in violation of section 40A(3) of the IT Act. Therefore, the appeal on this ground is rejected.”
5 Manoj Kumar Singha Roy Assessment Year: 2009-10 5. Aggrieved by the order of the ld. CIT(A), the assessee has preferred this appeal before the Tribunal.
I have heard the arguments of both the sides and perused the relevant records. As rightly submitted by the ld. DR, sufficient opportunity was given by the AO earlier during the course of assessment proceedings and later during the course of remand proceedings to support and substantiate his case that the provisions of section 40A(3) are not applicable to the impugned payments made against the purchases, but the assessee failed to do so and this position is clearly evident from the remand report submitted by the AO to the ld. CIT(A). When the same was confronted by me to the ld. Counsel of the assessee at the time of hearing, he has submitted that a CD containing computerized books of accounts of the assessee was produced before the AO during the course of remand proceedings but he failed to take cognizance thereof. It is however observed from the counter-comments filed by the assessee on the remand report of the AO before the ld. CIT(A) in writing that it was admitted by the assessee himself in writing before the ld. CIT(A) that his authorized representative did not show the CD to the AO or got a print out thereof and produced the same before the AO. It is thus clear that there was a failure on the part of the assessee to produce the books of account and/or other relevant documentary evidence before the AO either in the assessment proceedings or even during the course of remand proceedings to establish his case that the provisions of section 40A(3) are not applicable to the impugned payments. When the case was made out by the AO, on verification of the books of accounts of the assessee that the impugned payments made on account of purchases otherwise than by account payee cheques or bank drafts were in contravention of the provisions of section 40A(3), the onus was on the assessee to establish 6 Manoj Kumar Singha Roy Assessment Year: 2009-10 on evidence that the said payments were not hit by the provisions of section 40A(3). In my opinion, the assessee however had failed to discharge the onus in spite of sufficient opportunity already given. This being the position I find no justifiable reason to interfere with the order of the ld. CIT(A) confirming the disallowance made by the AO under section 40A(3) and upholding the same, I dismiss the appeal filed by the assessee.
In the result, the appeal filed by the assessee is dismissed.