Income Tax Appellate Tribunal - Ahmedabad
Royal Construction Co.,, Patan vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL AT
AHMEDABAD
AHMEDABAD "B"BENCH
Before Shri G.D. Agarwal, Hon'ble Vice-President (AZ) and
Shri T.K. Sharma, Hon'ble Judicial Member
ITA No.2372/ Ahd/2009
Assessment Yea r:2006-07
Date of hearing: 21.4.11 Drafted:27.4.11
Royal Construction Co. V/s. Income Tax Officer,
17, Sarvoday Nagar Wrd-1, Patan, A ykar
Society, Opp. R.M.Ptrol Bhavan, Rajmahal Road,
Pump, Deesa High W ay, Patan-384265
Taluka-Ptan - 384265
PAN No. AAHFR8591C
(Appellant) .. (Respondent)
Appellant b y :- Shri Pritesh Shah, AR
Respondent by:- Shri K Madhsudan SR-DR
ORDER
PER T.K. Sharma, Judicial Member:-
This appeal by the assessee is against the order dated15-05-2009 of Commissioner of Income-tax (Appeals) Gandhinagar for the assessment year 2006-07.
2. Various grounds raised by the assessee in this appeal are as under:-
"1. The learned CIT(A)-Gandhinagar erred in confirming addition of Rs.11,300/- in respect of machinery-office expenses.
2. The learned CIT(A)-Gandhinagar erred in confirming addition of Rs.1,41,281/- in closing stock in respect of purchase of cement of Rs.4,575/- & metal/kapchi of Rs.1,36,706/-ITA No.2372/Ahd/2009 A.Y. 2006-07
Royal Constn. Co. v. ITO Wd-1 Patan Page 2
3. The learned CIT(A)-Gandhinagar erred in confirming addition of Rs.65,200/- under section 40A(3) of the Income Tax Act, 1961 in respect of cash payments."
3. Ground No.1 was not pressed at the time of hearing. This ground of appeal accordingly is dismissed being not pressed.
4. The brief facts related to controversy involved in the ground No.2 that in the assessment order Assessing Officer made addition of Rs.1,41,281/- towards closing stock. On appeal in the impugned order Ld. CIT(A) confirmed the same for the detailed given in para-3.3 which reads as under:-
"3.3 The matter has been given due consideration. It is seen that the issue has been discussed by the Assessing Officer in detail and that the out of a total sum of Rs.1,94,981/-, which he started with, gave the allowance of Rs.53,700/-. It appears that he added only the items which have been delivered on 31/03/2006. Out of this amount, the major item is that of metal amounting to Rs.1,36,706/-. If one studies the details given by the Authorized Representative, the closing stock of metal of this amount would be the purchases done from 25/03/2006 only, even if the statement of M/s. Ambica Trades now filed before me is correct. Besides the fact that these are documents claimed to be on the basis of books of accounts and there is no reason why these could not be produced at the time of hearing and therefore producing them now would tantamount to not producing contemporaneous evidence. It is to be normally accepted that so much closing stock of metal would continue in the appellant's hand in a running project. In any construction activity, metal in itself cannot use alone. So if the assessee had bought these large amount, there should have been corresponding cement, sand etc. to carry out the activity, which is not on record. Therefore, overall, I think the Assessing Officer is well justified in making the addition and the same is confirmed."
Aggrieved assessee is in appeal.
5. At the time of hearing, Shri Pritesh Shah appeared on behalf of assessee could not point out in what respect the view taken by Ld. CIT(A) is not acceptable. He merely stated that one more opportunity be given to the assessee to explain its case. Ld. SR-DR strongly objected the same.
ITA No.2372/Ahd/2009 A.Y. 2006-07Royal Constn. Co. v. ITO Wd-1 Patan Page 3
6. We have carefully gone through the order of authority below. It is pertinent to note that Assessing Officer made addition of Rs.1,41,281/- towards closing stock. No useful purpose will be served by giving one more opportunity. Looking to the fact the add of Rs.1,41,281/- in the closing stock is rightly made by Assessing Officer and Ld. CIT(Appeals) is legally and factually correct in confirming the same. The closing stock of this year is opening stock of subsequent assessment year i.e. assessment year 2007-08. We therefore direct the AO to adopt the value of closing stock of this year (including the addition of Rs.1,41,281/-) as opening stock of the assessment year 2007-08. Subject to this direction, the view taken by Ld. CIT(Appeals) is upheld.
7. The facts relating to the controversy involved in ground No.3 are that in the assessment order Assessing Officer made addition u/s 40A(3) of the Act amounting to Rs.66,200/- being 20% of Rs.3.26 lakh. On appeal before Ld. CIT(A) it was contended that the vendor had insisted for full cash payment but upon request by the assessee he became ready to supply the material subject to 60% cash immediately. Consequently, the payment of Rs.3.04 lakh was made in order to carry on the assessee's business. Bill of M/s Manali Enterprises and the letter M/s Manali Enterprise mentioning the fact that they had refused payment through cheque and had insisted on cash payment were filed. It was also stated that this document could not be filed before Assessing Officer because the vendor was not responding to issue such a letter. Hence, it was contended that it be treated an additional evidence to be covered under Rule 46A and Assessing Officer be asked to file remand report.
8. Regarding balance amount of Rs.22,320/- it was contended that these were towards lunch and food expenses of labourers at two sites and amount involved is at Rs.7,900/- and Rs.14,100/-. Since the entries were made on the same day, the amounts got clubbed for the purpose of u/s.40A(3). It was further submitted that vouchers could not be produced before Assessing ITA No.2372/Ahd/2009 A.Y. 2006-07 Royal Constn. Co. v. ITO Wd-1 Patan Page 4 Officer because the vouchers were in the possessions of the labour supervisor.
9. After considering the aforesaid submission, in the impugned order Ld. CIT(A) confirmed the disallowance made by Assessing Officer u/s 40A(3) of the Act for the detailed reason given in para-4.2, which reads as under:-
"4.2 As stated earlier, in my view, the concept of additional evidence on the part of the assessee is not correct. The assessee's books of accounts, the vouchers, the bills, etc. which were in possession of the appellant, were required to be produced before the Assessing Officer. Having not produced before the Assessing Officer the assessee cannot turn back and say at a later stage that this is fresh evidences which he is producing. Hence I do not find any justification in admitting the so called fresh evidences at this staged. The only item which can be called fresh evidence is a letter from M/s. Manali Enterprises. However, as stated earlier, the assessee had ample time to produce all such documents in support of its contention which it wanted. During the course of assessment proceedings, it has not given any such indication of insistence on the part of M/s. Manali Enterprises. Consequently, the same appears to be an after thought only. Similar is my view with respect to the vouchers concerning the site expenses. Hence, in my view, the expenses incurred in cash over Rs.20,000/- do not fall in any of the exceptional clauses listed under the Rules. Therefore, the Assessing Officer's action in disallowing these u/s.40A(3) and consequent addition of 20% appears to be justified. This ground of appeal is also rejected."
Aggrieved assessee is in appeal.
10. At the time of hearing Ld. Counsel for the assessee relying with the various plea before Ld. CIT(A) and contended that disallowance made u/s.40A(3) be deleted. For exceptional and unavoidable circumstances Ld. counsel for assessee relied on the following case laws:-
1. CIT v. Sapna Traders (2007) 165 Taxman 211 (All)
2. ITO v. Som Dutt (2007) 165 Taxman 99 (P & H)
3. CIT v. Narangram Chiranji Lal (1999) 157 CTR 389 (All)
4. CIT v. Ram Agya Shyama Narain (1991) 189 ITR 470 (All) ITA No.2372/Ahd/2009 A.Y. 2006-07 Royal Constn. Co. v. ITO Wd-1 Patan Page 5
11. To query from the Bench that how the aforesaid decision are applicable in the assessment of appeal Ld. Counsel for the assessee fairly admitted that now there is no clause-j in Rule 6DD of I.T. Rules, 1962 which cover exceptionally or unavoidable circumstances before Ld. CIT(A) cited. On the other hand Ld. DR supported the order of Ld. CIT(A).
12. We have carefully gone through the order of authorities below. Rule 6 DD(j) in its original term was removed with effect from 25-07-1995 and has been substituted by new provisions with effect from 01-12-1995. On its substitution, it is no longer possible to accept a transaction in cash merely because it is genuine and payment in cash had been occasional by unavoidable circumstances. It is pertinent to note that decision relied by Ld. Counsel for the assessee pertains to earlier year when Rule 6DD(j) of I.T. Rules, 1962 provides for exceptional and unavoidable circumstances mentioned in those decisions. Admittedly, in the assessment year under appeal there is no clause in Rule 6DD of the I.T. Rules, 1962 which covers the exceptional circumstances pointed out by Ld. Counsel for the assessee. For refusing to admit additional evidence reasoning given by Ld. CIT(A) also needs interference. We therefore decline to interfere. This ground of appeal is rejected.
13. Resultant for the statistical purposes the appeal of the assessee is treated as partly allowed.
Order pronounced on this day of 29th April, 2011
Sd/- Sd/-
(G.D.Agarwal) (T.K. Sharma)
(Vice President) (Judicial Member)
Ahmedabad,
Dated : 29/04/2011
ITA No.2372/Ahd/2009 A.Y. 2006-07
Royal Constn. Co. v. ITO Wd-1 Patan Page 6
*Dkp
Copy of the Order forwarded to:-
1. The Assessee.
2. The Revenue.
3. The CIT(Appeals)-GNG
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
/True copy/
Deputy/Asstt.Registrar
ITAT, Ahmedabad