O R D E R
PER JOGINDER SINGH, judicial member The Revenue is aggrieved by the impugned order dated 21.2.2013 of the ld. CIT(A)-I, Indore. Both the grounds
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raised pertain to deleting the additions of Rs.1,39,805/- which was made to the income of the assessee on account of unaccounted credits and further disallowing Rs.13,34,498/- u/s 40A(3) on the plea that this amount was made on various occasions in cash.
2. During hearing, we have heard Shri R.A. Verma, ld. SR. DR and Shri H.P. Verma along with Shri Anup Khandelwal, learned Counsel for the assessee. The crux of arguments on behalf of the Revenue is in support to the assessment order whereas the learned Counsel for the assessee defended the impugned order.
2.1 We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee derived income from trading of machinery parts and herbal products, declared income of Rs.3,14,448/- in his return filed on 26.9.2009. During assessment proceedings, the assessee was asked to explain
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regarding genuineness of cash payments made to M/s. Altos Enterprises Ltd., Ludhiana. The Assessing Officer noticed that some of the payments were made on continuous dates. The assessee explained that the payments were made to the party on different dates to the marketing staff of the company, with the consent of the payee company. In response to notice u/s 133(6) of the Act, the payee company submitted the statement of accounts, however, the Assessing Officer made addition of Rs.1,39,805/-. On appeal, the ld. CIT(A) deleted the addition, against which, the Revenue is aggrieved and is in appeal before this Tribunal. Before coming to any conclusion, we are reproducing hereunder the relevant portion from the impugned order:
"4.3 I have considered the Assessing Officer's order as well as the appellant's submission. Having considered both, I find merits in the augments of the appellant. It is evident that the appellant is consignment agent of M/s. Altos Enterprise Ludhiana. Since appellant being
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consignment agent, hence made all purchases on statutory form i.e. Form "F" & Form "49". On perusal of copy of account of both the parties & details mentioned in the statutory forms, I do not find any disagreement with the appellant as regard to quantum of purchases made. On this pretext appellant has also filed copies of statutory forms along with submissions made during appellate proceedings. The facts on record clearly suggest that purchases are genuine and beyond doubt of imagination, as the appellant has made the payment in three different modes i.e.
1. Through account payee cheques
2. Through book adjustment entry by either party
3. Through direct deposit in bank account of supplier.
4.4 Further I also find that all the alleged cash payments are appearing in bank statement of M/s. Altos Enterprises Ltd. and these payments are directly deposit to bank account of supplier and not being cash payments to supplier against purchases. On this pretext, the appellant has also filed copy of bank account of M/s. Altos Enterprise Ltd. and reconciliation of entries by which the A.O. disallowed in the order. The facts on record indicate that payments are made to the bank of supplier and not in cash to the supplier. This clearly establishes that the appellant has used banking channel in making the payment to its supplier i.e. M/s. Altos Enterprises Ltd. directly through depositing cash in their bank account. All such payments are duly reflected in the books of accounts of the appellant as well as in the supplier's account. In addition to this, the A/R of the appellant also relied upon following judicial pronouncements in support of its contention.
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4.5 Even I also find that the difference in the balance of Rs.1,39,805/- is merely due to time gap of entry to Section. Made by the supplier i.e. M/s. Altos Enterprises Ltd. and the appellant. All the opening and closing balance of both parties are matching. The difference is result of merely time gap of entiry in the books of accounts as enumerated by the appellant in its submission in para 11 as extracted above. As the transaction are duly recorded and find place of mention therein, hence the addition so made by A.O. is not justified. Considering the aforesaid facts of the case available on record & the judicial pronouncement cited by the appellant as above specially the decision of jurisdictional M.P. High Court (Indore Bench) in the case of CIT vs. Punjab Boot House Ltd., wherein it has been held that the object behind the provision is that persons are not allowed to show false expenditure for avoiding income-tax and, therefore, once the genuineness of payment and identity of the payee is established fully, the object is achieved and in such a situation, if the payment has been made looking to the necessity of settlement or difficulty of payee, as payee was in need of money after bank hours, the same cannot be said to have been made in violation of the object of the rules. Thus, I consider it proper and appropriate to hold that in the appellant's case, the purchases are genuine and payment are made through banking channel. Hence no disallowance on this account is sustainable as held in the case of Renukaswara Rice Mills vs. ITO reported in 93 TTJ 912 (Bang) extracted as above. Accordingly, the addition so made by the A.O. is deleted. Thus, this ground of appeal is allowed."
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2.2 If the observation made in the assessment order, conclusion drawn in the impugned order, assertion made by the ld. respective counsel and the material available on record are kept in juxtaposition and analysed, we note that while coming to a particular conclusion, the ld. CIT(A) has duly considered the reasons for denial for relief to the assessee along with the detailed submissions of the assessee, which have been reproduced at page 4 onwards of the impugned order. We found that the assessee is a consignment agent of the payee company i.e. M/s. Altos Enterprises Ltd. for the state of Madhya Pradesh since 2006 and all purchases were made on statutory Form "F"
and being interstate purchases, all purchases were made through Form No.49 i.e. transit form. It is not worthy that total purchases were duly reflected in the sales made to the assessee by the payee company. The ld. CIT(A) further found that the books of the assessee were duly tallied with
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the books of the payee company and the payment of purchases were duly settled periodically. On some occasions, the payments were found to be cash into the marketing staff of the company which were duly monitored by the assessee as well as the payee company and such payments were made due to business exigency. The reconciliation statement also reflects such entries and the purchases were found to be genuine. The department has not brought on record any contrary material disproving the claim of the assessee. The ld. CIT(A) has already relied upon certain judicial decisions. The closing and opening balance of the assessee as well as the payee company are matching and the suspicion arose in the mind of the Assessing Officer merely due to time get. The ld. Assessing Officer added a sum of Rs.13,34,498/- to the income of the assessee for violation of the provisions of Section 40A(3) of the Act on the ground that the individual amounts were
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exceeding Rs.20,000/- whereas the assessee made the payments in three different modes like, account payee cheques, book adjustment entry by either party and also through direct deposit in the bank account of supplier. In such a situation, no addition is warranted as has been made by the ld. Assessing Officer. In Shri Renukaswara Rice Mills vs. ITO (2005) 93 TTJ 912 (Ban) where the assessee paid directly to the bank account of the customer by availing banking route, it was held that the payee fulfilled the criteria of ensuing the objects of introduction of Section 40A(3) of the Act as it is a credit in the bank account, thus, there is no violation. In Sharma Associates (55 ITD 177) (Pune ITAT) (TM), it was held that since the genuineness of payment was proved and the accounts were tallying, it is an allowable expenditure. Identical ratio was laid down by Hon'ble Jurisdictional High Court in CIT vs. Punjab Boot House Ltd. (1997) 25 ITC 451 (MP) wherein it
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was held that object behind the provision is that persons are not allowed to show false expenditure to avoid tax, therefore, once the genuineness of payment and identity of payee is established fully, the object achieved. In such a situation, if the payment has been made, looking to necessity of settlement or difficulty of payee as the payee was in needy after bank hours, the same cannot be have to be made in violation of the objects of the rules. The unavoidable circumstances is a relative term and vary from transaction to transaction. In the present appeal also, since the accounts are tallying, genuineness of payment is not in doubt, the amount is actually deposited to the marketing staff of the company from Indore Branch of ICICI bank in core banking account of M/s. Altos Enterprises Ltd. and duly reflected in the statement of payee company, therefore, in view of these uncontroverted facts, we find no
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infirmity in the conclusion drawn by the ld. CIT(A). It is affirmed.
Finally, the appeal of the Revenue is dismissed. This order was pronounced in the presence of ld. representatives of both sides in the open Court at the conclusion of hearing on 16.12.2013.
Sd/- Sd/-
(R.C.SHARMA) (JOGINDER SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 16.12.2013
Copy to: Appellant, Respondent, CIT, CIT(A), DR, Guard File !vyas!