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I.T.O., Ward-33 (2) , Kolkata Versus M/s. Hind Supply Corporation And Vice-Versa

2017 (9) TMI 570 - ITAT KOLKATA

Disallowance u/s.40A(3) - whether the payment was genuine or whether it was out of the income from undisclosed sources - CIT-A allowed claim - violating Rule 46A, as fresh evidence was introduced and no remand report was called for - AO was not afforded an opportunity on the additional evidence filed by the Assessee - Held that:- We are of the view that Sec.250(4) and Rule 46A of the Rules operate on totally different fields. While Sec.250(4) of the Act deals with power of the CIT(A) to make enq .....

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ced by an Assessee before the CIT(A). We are therefore of the view that the issue should be remanded to the CIT(A) for the limited purpose to enable the CIT(A) to afford opportunity to the AO for verifying the veracity of the Certificate filed by the Assessee as additional evidence before the CIT(A). - The question whether the CBDT Circular No.8 of 2006 will apply to the facts of the case should also be left open for comments by the AO in his remand report. The said CBDT Circular talks of p .....

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an opportunity on the additional evidence filed by the Assessee, this aspect also should be left open and cannot be construed as enlarging the scope of the proceedings before CIT(A) than what was contemplated by the Tribunal while remanding the issue vide its order dated 9.3.2011. The CIT(A) after taking into consideration the remand report of the AO and after affording opportunity of being heard to the Assessee is directed to decide the issue in accordance with law. The appeals of the revenue .....

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ss objections against the very same order of the CIT(A). 2. The issue involved in all the appeals by the Revenue and the grounds raised in the cross objections are in relation to disallowance u/s.40A(3) of the Income Tax Act, 1961 (Act). Sec.40A(3) as it existed in AY 2003-04 to 05-06 reads thus: (3) Where the assessee incurs any expenditure in respect of which payment is made, after such date (not being later than the 31st day of March, 1969) as may be specified in this behalf by the Central Go .....

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y previous year the assessee makes any payment in respect thereof in a sum exceeding twenty thousand rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, the allowance originally made shall be deemed to have been wrongly made and the Assessing Officer may recompute the total income of the assessee for the previous year in which such liability was incurred and make the necessary amendment, and the provisions of section 154 shall, so far as may be, apply thereto, t .....

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re and extent of banking facilities available, considerations of business expediency and other relevant factors. 3. The provisions of Sec.40A(3) of the Act has been enacted as one of the measures for countering evasion of tax. It was found from experience, that deductions were being claimed for payment made from unaccounted money in the computation of business or professional income. This provision was enacted to enable the assessing authority to ascertain whether the payment was genuine or whet .....

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gate of payments exceeding twenty thousand rupees may be made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a parson in a day, otherwise than by an account payee cheque drawn on a bank or account pa .....

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eat carcasses to the meat processing factories or to the traders/retail outlets would be considered as producer of livestock and meat. It has also clarified that the benefit of rule 6DD of the Income-tax Rules, 1952 shall be available to any person, by whatever name called, who buys animals from the farmers, slaughters them and then sells the raw meat carcasses to the meat processing factories or to the traders/retail outlets would be considered as producer of livestock and meat subject to furni .....

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business of supplying dressed meat to Defence/Military Authorities in different parts of the country on the strength of Annual Contracts entered into with those authorities. It is not in dispute that meat would be a product of animal husbandry falling within the ambit of Rule 6DD(f)(ii) of the Rules. In the course of assessment proceedings for AY 2003-04 to 2005-06, the AO noticed that the Assessee had made purchases of live goat and chicken from different local farmers and effected supplies to .....

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ssessee in the appeals before CIT(A) was that it was a producer of meat and the persons from whom he effected purchase of livestock insisted on cash payment. The Assessee asked to submit a confirmation from a veterinary doctor certifying that he was a producer of meat and that slaughtering was done under his supervision. A remand report was called for from the AO and the CIT(A) after considering the remand report was of the view that the Assessee did not get certificate of a veterinary doctor ev .....

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r (Military) before the Tribunal. The Tribunal found that this certificate was new evidence and required verification by the CIT(A) and for the said purpose the issue was remanded to the CIT(A). Following were the relevant observations of the ITAT in this regard: 4. At the time of hearing before us, the Id. 'Counsel appearing on behalf of the assessee while referring to page no.166 of the paper book which is the certificate issued by Military Authority regarding supervision of slaughtering o .....

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ed on the orders of the Revenue authorities. 6. After hearing the rival submissions and on careful consideration of the materials available on record, it is observed that the certificate placed at page 116 of paper book on which the ld. AR relied upon, is not available with the ld. CIT(A). It is evident from the date of certificate that is 25th April, 2009 and the fact that the ld. CIT(A) has dismissed the appeal of the assessee by observing that the assessee has failed to furnish certificate be .....

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octor certifying that the Assessee was a producer of meat. The following were the relevant observations of the CIT(A): 5. In compliance to the direction of the Hon'ble ITAT, Kolkata the matter has been re-examined. During the appellate proceedings the case was discussed with the AR of the appellant who has filed written submission along with a paper book. On careful consideration of the remand report of the AO and the submissions filed by the appellant, my findings and decision thereon are a .....

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ed a certificate that the slaughtering is carried on under his supervision in his capacity as Vet Officer. Similar certificates are issued from Veterinary officers from Kolkata, Bangalore, Trimulgherry, etc. Thus the live stock slaughter under the supervision of the Veterinary officer of the Army is established. The appellant has also filed certificates available on pages 26 to 55 of the paper book issued by the suppliers of live stock wherein it is stated by these suppliers that (1) they insist .....

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and meat for the purpose of Rule 6DD of the IT Rules 1962 and therefore the provisions of Section 40A(3) are not attracted when cash payments are made to such persons by the appellant. 5.2. I have considered the submissions, perused the assessment order, ITAT order and the paper book. I find that the appellant made cash payments to persons from whom he purchased meat and supplied the same to the Military. The persons have filed certificates that (1) they insisted for cash payments (2) the slaugh .....

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rtified by the CBDT Circular no.8 of 2006 wherein the board has clarified that person who buys animal from farmers and slaughters them and then sells the raw meat is to be considered as a producer of live stock and meat for the purpose of Rule 6DD of the IT Rules 1962 and therefore the provisions of Section 40A(3) are not attracted when cash payments are made to such persons by the appellant. In view of the above circumstances I hold that the payments made for the purchase of met incurred in cas .....

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ing documents to fulfill the conditions of Rule 6DD were produced at the assessment/first appellate/first remand stage. The documents were produced before the Hon 'ble ITAT & the case was restored back to the CIT(A). The Ld. CIT(A) erred in law in deleting the entire addition on account of violation of provisions of Sec 40A(3) of the I.T.Act, 1961 without calling for remand report from the A.O. 3. The revenue craves leave to add, alter or modify the grounds of appeal. 11. The Grounds rai .....

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Kolkata Bench did not direct the Learned CIT (Appeals), Kolkata to remand the verification procedure or otherwise to the Learned Assessing Officer, Ward -33(2), Kolkata. Therefore, the Learned CIT (Appeals) - XIX did not feel necessary to remand the matters to the Learned Assessing Officer. The Learned CIT (Appeals) - XIX, Kolkata carried out the verification of the said documents that were submitted before the then Learned Members of ITAT and accordingly passed the order under reference. 3. The .....

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not only excided his given power of authority but also misused the same as a measure of his velour and defaulted himself under insubordination clause. 4. For that the Assessing Officer has erred in not giving appeal effect by way of ignoring the First Appellate Order passed by the CIT(Appeals)-XIX, Kolkata. The respondent craves leave to add, alter and/or to modify the Ground or Grounds of Cross Objection either before or at the time of hearing. 12. We have heard the rival submissions. The lear .....

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-r. (1), unless the ITO had been allowed a reasonable opportunity to examine the evidence or to cross-examine the witness whose evidence was taken on record or to produce any evidence in rebuttal of the additional evidence produced by the assessee. Even if no such rule was in existence, ends of justice and fair play demand that when an assessee produces additional evidence in his appeal an opportunity is given to the ITO to test the evidence or to counter the effect of the evidence by producing .....

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decision of the Hon ble Rajasthan high Court in the case of Silver & Art Palace Vs. CIT 206 ITR 501 (Raj) wherein the Hon ble RajasthanHhigh court held while disposing of appeal under s. 251(1)(b), CIT(A) has no power to order further enquiry but while keeping the appeal pending, CIT(A) has power under s. 250(4) to order further enquiry. The Court held that CIT(A)'s order directing the Assessing Officer to summon D and afford an opportunity to petitioner-assessee to cross-examine him, i .....

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he WTO would be entitled to a notice relying on the principle of natural justice, though nothing prevents the WTO from appearing at the hearing or the AAC calling upon him for hearing. Reliance was also placed by him on the decision of Punjab & Haryana High Court in the case of CIT Vs. Kuldip Industrial Corporation 178 ITR 257 (P & H) wherein it was held that the question Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the CIT (A) .....

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u/s.256(2) was directed to be made by the Tribunal to the Hon ble High Court. 14. We have given a careful consideration to the rival submissions and are of the view that there is merit in the appeals of the revenue. Provisions of Rule 46A of the rules reads thus: Production of additional evidence before the Deputy Commissioner (Appeals) and Commissioner (Appeals) ]. 46A. (1) The appellant shall not be entitled to produce before the Deputy Commissioner (Appeals) or, as the case may be, the Commi .....

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ented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal ; or (d) where the Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals)] records in writing the reasons for its admissio .....

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ect the power of the Deputy Commis- sioner (Appeals) or, as the case may be, the Commissioner (Appeals)] to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271. 15. A perusal of R .....

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e CIT(A) and that by itself will not make the evidence in question as one not falling within the ambit of Rule 46A(1) of the rules. As far as the contention of the learned counsel for the Assessee that u/s.250(4) of the Act, the CIT(A) has the power to make enquiries and that in exercise of such powers he has power to admit additional evidence even without confronting the same to the AO, is concerned, We are of the view that Sec.250(4) and Rule 46A of the Rules operate on totally different field .....

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rd opportunity to the AO to have his say on the additional evidence produced by an Assessee before the CIT(A). We are therefore of the view that the issue should be remanded to the CIT(A) for the limited purpose to enable the CIT(A) to afford opportunity to the AO for verifying the veracity of the Certificate filed by the Assessee as additional evidence before the CIT(A). The CIT(A) after such an opportunity and getting a remand report from the AO is directed to decide the validity or otherwise .....

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of meat or livestock for purchase of livestock and chicken is also an issue which needs to be decided. The scope of remand by the Tribunal includes all aspects of the disallowance u/s.40A(3) of the Act and since the AO was not afforded an opportunity on the additional evidence filed by the Assessee, this aspect also should be left open and cannot be construed as enlarging the scope of the proceedings before CIT(A) than what was contemplated by the Tribunal while remanding the issue vide its orde .....

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in the decision of the Hon ble Rajasthan high Court in the case of Silver & Art Palace Vs. CIT 206 ITR 501 (Raj), the Hon ble Rajasthan high court held while disposing of appeal under s. 251(1)(b), CIT(A) has no power to order further enquiry but while keeping the appeal pending, CIT(A) has power under s. 250(4) to order further enquiry. We are of the view that the issue in the present appeal is not with regard to power of CIT(A) to make further enquiry but is confined only to the question .....

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