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2016 (12) TMI 1404 - ITAT CHENNAI

2016 (12) TMI 1404 - ITAT CHENNAI - TMI - Addition u/s 40A - Disallowing the payment for purchase of granites - vendors insisted for cash payment - Held that:- We have carefully gone through the provisions of Rule 6DD of the Income-tax Rules, 1962 which categorically says that payment was made by any person to his agent, who is required to make payment in cash for goods or services on behalf of such person, the provisions of Section 40A(3) of the Act is not applicable. In this case, the assessee .....

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ction 40A(3) of the Act. In view of the above discussion, this Tribunal is unable to uphold the orders of the lower authorities, accordingly the same are set aside. The addition made by the Assessing Officer is deleted.- Decided in favour of assessee - Penalty levied under Section 271B - delay in filing audit report - Held that:- The object of filing audit report is only to assist the Assessing Officer to determine the correct taxable income. Since the assessee has filed return of income alo .....

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n favour of assessee - ITA Nos. 1222 & 1223/Mds/2016 - Dated:- 23-11-2016 - Shri N.R.S. Ganesan, Judicial Member And Shri D.S. Sunder Singh, Accountant Member Appellant by : Shri T. Vasudevan, Advocate Respondent by : Shri Supriyo Pal, JCIT ORDER Per N. R. S. Ganesan, Judicial Member Both the appeals of the assessee are directed against the respective orders of the Commissioner of Income Tax (Appeals) -4, Chennai, dated 10.02.2016, for the assessment year 2011-12. While I.T.A. No.1222/Mds/2016 i .....

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ess as a proprietorship concern in the name and style of Sri Meenakshi Granites. During the year under consideration, the assessee claimed before the Assessing Officer that he exported 1996 cu.m. of granite blocks for a total consideration of ₹ 8,56,06,950/-. The assessee further claimed that the cost of the granites exported is ₹ 7,15,63,966/-. The assessee further claimed that the granites were purchased for export from M/s Supreme Granites and Exports, M/s Tirupathi Enterprises, M .....

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hase from M/s Rajham Impex and M/s Shri Bakia Trading Agency on the ground that the credit was outstanding for longer duration. Moreover, the vendor raised a single bill for sale of granites to the assessee. 3. Referring to the assessment order, the Ld.counsel for the assessee further submitted that the Assessing Officer made enquiries through his counterpart at Madurai and Trichy. The Assessing Officer found that M/s Rajham Impex and M/s Shri Bakia Trading Agency are not in existence. According .....

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rial filed by the assessee and simply proceeded to disallow the claim of the assessee on the ground that M/s Rajham Impex and M/s Shri Bakia Trading Agency are not in existence. 4. Referring to the order of the assessment, more particularly para 13, the Ld.counsel submitted that the Assessing Officer accepted that the assessee has exported granites. Unless and until the assessee purchased granites, either from M/s Rajham Impex or M/s Shri Bakia Trading Agency or from somebody else, the assessee .....

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so customary to raise single bill when the assessee purchased large quantity of granites for export. Referring to the paper-book filed by the assessee, the Ld.counsel submitted that this bill discloses the address of M/s Rajham Impex and M/s Shri Bakia Trading Agency with the sales tax registration, etc. The assessee has also filed copies of the shipping bill for export before the Assessing Officer and the copies of the same are available at pages 4 and 5 of the paper-book. M/s Shri Bakia Tradin .....

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of the paper-book, the Ld.counsel submitted that the M/s Rajham Impex has confirmed the outstanding amount as on 31.03.2011. The sales tax registration details of Rajham Impex are available at page 20 of the paper-book. According to the Ld. counsel, these details were filed by the assessee before the income-tax authorities during examination under Section 131 of the Act. The Assessing Officer conveniently omitted this and placed his reliance on the report said to be filed by his counterpart at M .....

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cer himself admits that the transaction was genuine and the assessee has purchased granites from these two entities. Referring to the copies of the statement recorded from assessee under Section 131 of the Act, a copy of this is available at annexure to the assessment order, the Ld.counsel submitted that when the vendors M/s Rajham Impex and M/s Shri Bakia Trading Agency insisted for cash payment, the same was withdrawn from bank and paid to them directly. Referring to Rule 6DD of Income- tax Ru .....

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ced his reliance on the judgment of Gujarat High Court in CIT v. Nangalia Fabrics Pvt. Ltd. 2013 (8) TMI 80, copy of which is filed by the assessee. 7. On the contrary, Shri Supriyo Pal, the Ld. Departmental Representative, submitted that it is not in dispute that the assessee exported 1996 cu.m. of granite blocks. The Assessing Officer, as rightly submitted by the Ld.counsel for the assessee, admitted in the assessment order that the assessee has exported. The dispute is with regard to purchase .....

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, according to the Ld. D.R., the assessee could not have purchased granites from these two business entities. The Assessing Officer has also found that such a huge amount exceeding more than ₹ 1 Crore could not have been outstanding for such a longer time, therefore, the transaction was not genuine. Even though the assessee has filed confirmation letter from respective business entities, the Assessing Officer found that there cannot be any such practice in the business to allow outstanding .....

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laim of the assessee not only doubting the transaction but also under Section 40A(3) of the Act. 8. Referring to the order of the CIT(Appeals), the Ld. Departmental Representative submitted that the dispute was whether the cost of purchase was borne by the assessee or not. The material available on record does not support purchase of granites from M/s Rajham Impex and M/s Shri Bakia Trading Agency. The bills raised by the assessee are bogus. Since the assessee has purchased granites for export t .....

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ites to the extent of 1996 cu.m. is not in dispute. The Assessing Officer is disputing the purchase of granites from two business entities, namely, M/s Rajham Impex and M/s Shri Bakia Trading Agency. On the basis of the enquiries conducted at Madurai and Trichy, the Revenue authorities examined the assessee under Section 131 of the Act. The copies of the statement recorded from the assessee under Section 131 of the Act forms part of assessment order as Annexure-J. In response to question No.14, .....

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aving purchased granite from M/s Rajham Impex and M/s Shri Bakia Trading Agency, as per the result of enquiry undertaken by the Income Tax Investigation units at Thiruchirapalli and Madurai, it appears that the purchases are not genuine. I am now showing you the reports and the evidence based on which this fact was drawn. Further at the first stage you could not produce the Bills or any other proof of transportation. The bills issued by them does not possess any of the qualities that a bill thro .....

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were self drawn by the issuer. To summarise, not a single piece of evidence, nor a single feature in the transaction exhibits truth and supports your claim of genuineness. At least any later day payment should have reached the bank account of these two suppliers of granite. Interestingly all genuine transactions are carried out in a normal manner. Payments to them are systematic, through banking channels, the identities are known or at least clear, abnormal balances are not outstanding to them a .....

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and evidences for non-existence of M/s Rajham Impex in Madurai and M/s Shri Bakia Trading Agency in Thiruchirapalli has been shown to me now. I would like to state that M/s Rajham Impex and M/s Shri Bakia Trading Agency were in existence at the time of our transaction. To prove this I am submitting the sales tax registration papers of the above said two concerns with the same addresses as mentioned in the bills issued by you. With regard to transport bills, my auditor was not aware that we had .....

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M/s Sekhar Transport, Ongole amounting to ₹ 6,45,417/-. Further I am also submitting a bill copy received from M/s Triar Logistics, Bangalore for the shipping charges incurred to the tune of ₹ 8,30,516/- towards uploading the consignment. With regard to the credit facility, it is the common business practice in this trade. Since we buy the old stocks under specific conditions the credit facility is extended. Hence, there is huge outstanding. This was the only purchase made by us on o .....

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is available at page 11 of the paper-book. The TIN number available in the sales tax registration tallies with TIN number referred in the bill issued by the M/s Shri Bakia Trading Agency in favour of the assessee s proprietorship concern. The CST number also tallies with sales tax registration. When these details were filed by the assessee before the income-tax authorities, it is not known why the Assessing Officer has come to a conclusion that Shri Bakia Trading Agency is not existing, only on .....

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rom the assessee s bank account to the bank account of Shri Bakia Trading Agency. Unless Shri Bakia Trading Agency is in existence, such a banking transaction would not have happened. Moreover, the sales tax registration authorities would not have registered such a business entity. Therefore, the report of the counterpart of the Assessing Officer at Trichy on personal inspection has not disclosed the correct fact on the ground level. During the course of inspection by the Inspector, the entity m .....

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g Agency is not in existence merely on the basis of so-called inspection report said to be filed by the Inspector of Income Tax. This Tribunal is of the considered opinion that the material available on record clearly establishes the existence of Shri Bakia Trading Agency and the bills produced by the assessee discloses the TIN number and CST number. It does not lack any details which are required to be disclosed. Therefore, merely because one single bill was raised and the amount was outstandin .....

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rities during examination under Section 131 of the Act. The assessee has filed the copies of the same at page 20 of the paper-book. This contains the TIN number, CST number and permanent address of the proprietor of Rajham Impex. The bill raised by M/s Rajham Impex also tallies with the TIN number CST number given by the sales tax registration Department. In those circumstances, as observed earlier, merely because one single bill was raised and the amount kept outstanding for longer period, it c .....

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usion that M/s Rajham Impex is not in existence. 13. Now coming to the disallowance made by the Assessing Officer under Section 40A(3) of the Act, as rightly submitted by the Ld.counsel for the assessee, the Assessing Officer in fact contradicting himself by making a disallowance under Section 40A(3) of the Act. It is not known, when the Assessing Officer claims that M/s Rajham Impex and M/s Shri Bakia Trading Agency are not in existence, how the assessee could make payment in cash. The very fac .....

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e vendors, which was used in withdrawal of cash. The statement recorded from the assessee, which was reproduced in the earlier part of this order, shows that the vendors insisted for cash payment. 14. We have carefully gone through the provisions of Rule 6DD of the Income-tax Rules, 1962 which categorically says that payment was made by any person to his agent, who is required to make payment in cash for goods or services on behalf of such person, the provisions of Section 40A(3) of the Act is n .....

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there cannot be any disallowance under Section 40A(3) of the Act. In view of the above discussion, this Tribunal is unable to uphold the orders of the lower authorities, accordingly the same are set aside. The addition made by the Assessing Officer is deleted. 15. Now coming to I.T.A. No.1222/Mds/2016, the Assessing Officer levied penalty under Section 271B of the Act. Admittedly, there was a delay in getting the audit report. However, the assessee filed the audit report along with the return of .....

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