Income-tax Officer-II Bahraich vs. Shri. Sri Bhagwan Mittal Prop. M/s Manoj Traders Wazirbagh, Bahraich
June, 14th 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "A", LUCKNOW
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND
SHRI B. R. JAIN, ACCOUNTANT MEMBER
Income-tax Officer-II v. Shri. Sri Bhagwan Mittal
Bahraich Prop. M/s Manoj Traders
Appellant by: Shri. K. C. Meena, D.R.
Respondent by: None
Date of hearing: 07.06.2012
Date of pronouncement: 12.06.2012
PER B. R JAIN:
This appeal by the Revenue against the order dated 4.7.2011 of
the ld. Commissioner of Income-tax-II, Lucknow raises the following
1. Because the ld. CIT(A)-II, Lucknow has not correctly appreciated
the transaction made over `20,000 in cash.
2. Because ld. CIT(A)-II, Lucknow has wrongly interpreted the fact
of the case.
3. Because section 40A(3) of the Act cannot be said to be iinvalid on
ground that it places the restrictions on right to carry on business
and is arbitrary.
2. Briefly the facts are that the assessee is a Galla Vyapari and has
made purchase of rice from various parties. The assessee has made
payments aggregating to `84 lakhs to five parties namely, M/s Jaiswal
Trading Company, Deoria; M/s Guru Nanak Traders, Bilaspur; M/s Jai
Mahabir Traders, Deoria; M/s Bajrang Chura Udyog, Kushi Nagar and M/s
Jai Bharat Industries, Hardoi. The Assessing Officer required the assessee
to show cause as to why the payments made through bearer cheque should
not be treated as violation of the provisions of section 40A(3) of the Act.
Considering the assessee's reply dated 22.12.2009 and not being satisfied
therewith, he proceeded to disallow 20% of `84 lakhs amounting to
`16,80,000 and added the same to the income of the assessee which stood
assessed at `18,98,630 as against the returned income of `1,68,630.
3. The ld. CIT(A) deleted the disallowance by recording a finding
that the entire business is of agricultural produce i.e. food grains. The
payments have been made to the agent, M/s Rajendra Kumar Pankaj
Kumar, Kanpur by bearer cheque on behalf of the parties which later stood
remitted by the agent to the concerned parties. Thus the appellant made
no payment directly to the aforesaid five suppliers. The ld. CIT(A) further
recorded a finding that none of the aforesaid parties belonged to Bahraich
which is a place of business of the assessee. The parties are identifiable
and purchases being genuine are not disputed. The record reveals that the
payments have become overdue and the likelihood of the parties for saying
the assessee to make payment in cash as claimed by the assessee is not
ruled out. Suspension of trading activities of the assessee on failure to
make payment as desired by the suppliers would have resulted in loss to
the assessee. There was thus business expediency requiring the payment
to be made through bearer cheque otherwise than by crossed account
payee cheque or bank draft. He, therefore, held that there was no
justification in making disallowance of `16.80 lakhs under section 40A(3) of
the Act and accordingly allowed the ground raised in appeal before him.
4. None attends on behalf of the assessee when the case was called
for hearing despite service of notice. It was, therefore, decided to hear the
ld. D.R. ex-parte qua the assessee with reference to the material on record.
Admittedly the appellant made payments by bearer cheques on account of
purchases of rice to the aforesaid five parties with whom it had maintained
a running account. In other words, credit was allowed to the appellant for
all the purchases that he had made from the aforesaid five parties namely,
M/s Jaiswal Trading Company, Deoria; M/s Guru Nanak Traders, Bilaspur;
M/s Jai Mahabir Traders, Deoria; M/s Bajrang Chura Udyog, Kushi Nagar
and M/s Jai Bharat Industries, Hardoi. The Assessing Officer made
disallowance by applying the provisions of section 40A(3) of the Act for the
reason that the appellant had made payments otherwise than by account
payee cheque or bank draft to the supplier of goods to it whereas the ld.
CIT(A) has set out a new case saying that the payments by bearer cheque
have been made to the agent and not to these parties by the appellant. He
himself did not call for the record of the agent nor made any enquiry from
the creditors of the appellant to find out the correctness of the claim as
such of making payment to the agent by the appellant. He also did not
record a definite finding of fact as to how the case of the appellant is
covered by the exceptions contained in section 40A(3) of the Act. No
verification of facts vis--vis the letters or reminder threatening the
appellant to stop supplies of goods by the creditors under the
circumstances requiring clearance of over dues immediately, has been
made by the ld. CIT(A) himself nor got any verification or enquiry done
through the Assessing Officer before recording a finding of payments
having made through bearer cheques under business expediency for which
business has been transacted at the place of suppliers and not at Bahraich,
a place of business of the appellant. There has thus been an inadequate
and halfhearted enquiry on the basis of which the ld. CIT(A) recorded his
findings and proceeded to delete the disallowance. There being procedural
lapse committed by him in this regard, we set aside his order and remit the
matter back to him for recording definite findings of fact with reference to
reliable material and evidence on record and thereafter come to a decision
afresh in accordance with law essentially after providing effective
opportunity of being heard to both the parties.
5. In the result, appeal stands allowed for statistical purposes only.
Order pronounced in the open court on 12.6.2012.
[SUNIL KUMAR YADAV] [B. R. JAIN]
JUDICIAL MEMBER ACCOUNTANT MEMBER
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