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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per:Anikesh Banerjee, JM:
The instant appeal was filed by the assessee against the order of the ld. Commissioner of Income Tax(Appeals)-2,Jalandhar, [in brevity the CIT(A)] bearing appeal No. 2/10660/2017-18/CIT(A)-2/Jal, date of order 21.06.2019, the order passed u/s 250(6) of the Income Tax Act 1961, [in brevity the Act] for A.Y.2015-16. The impugned order was originated from the order of the Income Tax Officer, Ward 3(1), Jalandhar, (in brevity the AO) order passed u/s 143(3)of the Act, date of order 29.12.2017.
The brief fact of the case is that the assessee was running boutique shop and purchase was made from her party M/s Chhabra Suits and Sarees, Delhi. During the assessment year the payment was made Rs.10,49,000/- which was violated section 40A(3) of the Act as per the order of the assessment. The amount was added back for violation of Rule 6DD and amount Rs 10,49,000/- was added back with the total income of the assessee. Aggrieved assessee filed an appeal before the ld. CIT(A). The remand report was called for and assessee explained that the amount was paid to the agent of the party Mr. Desraj Singh, who collected the cash on behalf of the party. The assessee paid the amount to the agent of the party Mr. Desraj Singh as per the provision of section 40A(3) r.w. Rule 6DD of the Income Tax Rule, 1962. The confirmation of the party was annexed. But the revenue without consideration the same, rejected the assessee’s submission. The ld. CIT(A) upheld the order of the AO. Being aggrieved assessee filed an appeal before the ITAT.
The ld. Counsel for the assessee Mr. Sandeep Vijh, CA had filed written submission and synopsis which are kept in record. The ld. Counsel Mr. Vijh vehemently argued and informed that the assessee paid the amount in cash without contravening section 40A(3) to the agent of the party Mr. Des Raj Singh, copy of the ledger of assessee in APB page no. 19 to 20 is annexed. During the appeal proceedings the agent filed an affidavit and accepting that the amount was received from assessee on behalf of the party. After collection from assessee in different dates, accumulated amount was submitted in the bank account of the party. Copy of the affidavit of Mr. Desraj Singh is annexed in APB pages 6 to 7.
3.1 Mr. Vijh, further argued that the verification was made during the remand by the ld. AO. The assessee’s party, M/s Chhabra Suits and Sarees, had confirmed by a letter dated 12.11.2018 that the payment was received from assessee through their agent for the relevant Financial Year. A copy of the confirmation is annexed is page no. 16of APB. In any case, the assessee had not violated the section 40A(3) read with Rule 6DD during the payment to party in the financial Year.
The ld. Sr. DR vehemently argued and relied on the order of the ld. CIT(A) in para 4.7 which is annexed as under: “4.7 I have gone through the material available on record and find that it is a clear cut case of payments being made in cash in contravention to the provisions of section 40A(3) of the IT Act. The entries made in the books of accounts by the appellant in the account of M/s Chhabra Suits & Sarees do reflect the amount of payment and date on which this payment has been made. Similarly, the account of the appellant in the books of M/s Chhabra Suits & Sarees also reflects
the amount received from the appellant on those dates in cash. Therefore, I do not find force in the theory now being propounded in the course of present proceedings that Shri Des Raj used to collect payments in small amount (always being less than Rs. 20,000) from the appellant and then deposit the same later with the party M/s Chhabra Suits & Sarees. The contention is clearly an after-thought as otherwise the appellant would have recorded the amount of cash paid to the agent - Shri Des Raj in her books of accounts on the actual date of payment as is contended in the affidavit filed by him. It is not a case where small payments being less than Rs. 20,000 were found to have been recorded in the books of the appellant and in response to the enquiry made by the AO, it was found that other party has recorded having received these amounts being more than Rs. 20,000 on each occasion. Further, this contention is not acceptable on account of being against the common sense logic as no agent has the authority to keep the money (cash) with him and deposit in the account of his principal at his will.”
We heard the rival submission and considered the documents available in the records. Perusal of the remand report, it revels that the party had not collected the cash payment directly from the assessee and the assessee had not deposited the amount in the bank account of the party. The whole transaction was made through an agent, appointed by the party. The agent collected the cash from the assessee in different dates. The factual interpretation from the documents of the assessee it is observed that the payment to the agent of party was not contravening section 40A(3) of the Act in any case. In the remand report which was enclosed in APB page no. 30 to 32had considered that the certificate issued by the party is genuine.
The affidavit was executed by the agent of the party. The agent was called for by a summon u/s 131. The statement of Sh. Desraj Singh is annexed APB page 33 to 34which was recordedbefore the revenue authority. The agent had accepted the fact and collection of cash from assessee. He also accepted that the assessee paid the amount after his signature on her vouchers. In evidential value, there is no lacuna related to payment to party and the payment has not violated the provision of section 40A(3). The entire addition is rejected. The ld. DR had not found any other contrary fact in relation to submission of the assessee. The addition made by the ld. AO amount of Rs.10,49,000/- is setting aside& liable to be quashed. In the result, the appeal of the assessee in ITA 565/Asr/2019 is allowed. 6.
Order pronounced in the open court on 12.09.2022