Income Tax Appellate Tribunal - Hyderabad
Smart Mobiles, Hyderabad vs Ncome Tax Officer, Ward-5(3), ... on 7 June, 2021
ITA No 152 of 2018 Smart Mobiles Hyderabad
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ' B ' Bench, Hyderabad
(Through Video Conferencing)
Before Smt. P. Madhavi Devi, Judicial Member
AND
Shri A. Mohan Alankamony, Accountant Member
ITA No.152/Hyd/2018
Assessment Year: 2014-15
Smart Mobiles Vs. Income Tax Officer
Hyderabad Ward 5(3)
PAN:ABUFS7706A Hyderabad
(Appellant) (Respondent)
Assessee by: Sri Nalin Shah
Revenue by: Sri Rohit Mujumdar,DR
Date of hearing: 19/04/2021
Date of pronouncement: 07/06/2021
ORDER
Per Smt. P. Madhavi Devi, J.M.
This is assessee's appeal for the A.Y 2014-15 against the order of the CIT (A)-4, Hyderabad, dated 22.12.2017.
2. Brief facts of the case are that the assessee firm, engaged in the business of wholesale and retail business of mobiles, filed its return of income for the A.Y 2014-15 on 21.11.2014 admitting an income of Rs.1,92,190/-. During the assessment proceedings u/s 143(3) of the Act pursuant to selection of assessee's return of income for scrutiny under CASS, the Assessing Officer called for various details and the assessee filed all the relevant details. From the books of account of the assessee, the Assessing Officer found that the assessee has made certain cash payments towards purchase of goods amounting to Rs.11,78,000/- from Walmart India (P) Ltd. The assessee was Page 1 of 5 ITA No 152 of 2018 Smart Mobiles Hyderabad therefore, asked as to why the said expenditure incurred in cash towards purchase of goods worth Rs.11,78,000/- should not to be disallowed under the provisions of section 40A(3) of the I.T. Act. The assessee submitted its reply on 25.11.2015. However, the submissions of the assessee were not accepted by the Assessing Officer, and the A.O invoked the provisions of section 40A(3) and accordingly disallowed the sum of Rs.11,78,000/- and brought it to tax. Aggrieved, assessee preferred an appeal before the CIT (A) who confirmed the order of the Assessing Officer and the assessee is in second appeal before the Tribunal by raising the following grounds of appeal:
"1. The order of the learned CIT(A) is against the principle of natural justice and bad in law.
2. The learned CIT (A) ought to have allowed the cash payments made towards purchases.
3. The learned Commissioner of Income Tax (Appeals) has erred in sustaining the addition made by the assessing officer u/s 40A(3).
4. The learned CIT (A) ought to have considered the genuineness of transactions between both parties; payer and payee.
5. The learned Commissioner of Income Tax (Appeals) ought to have considered the submissions made by the assessee.
6. Any other ground that may be urged at the time of hearing."
3. The learned Counsel for the assessee, Sri Nalin Shah, submitted that the assessee was a member of Walmart India (P) Ltd, which is a cash and carry wholesale store, and does not sell directly to end users (i.e., business to customers). It is also submitted that Walmart India (P) Ltd delivers the goods only after realization of the cheques or DDs which usually take 3 to 4 working days. Since the mobile market is highly fluctuating and rates alter on daily basis, 3 to 4 days for cheque/DD clearance Page 2 of 5 ITA No 152 of 2018 Smart Mobiles Hyderabad will be too long a period and by then, the business opportunity will be lost. Therefore, the assessee had no option but to buy the goods by making the payments either by credit cards or through cash or net. It was submitted that the assessee has purchased the goods in bulk and made payments partly through credit card of the Partner Sri Kamlesh R Gandhi and the balance payment was made in cash due to compulsion. It was also submitted that the assessee has made total purchases of Rs.24,35,960/- for which the assessee has paid Rs.12,57,160/- by way of a mode other than cash and Rs.11.78 lakhs was paid in cash. It is also submitted that all these cash purchases/payments were made on Saturdays i.e., 15th March, 22nd March and 29th March, 2014, after banking hours. It is also submitted that the main object of section 40A(3) is to regulate the financial transactions and to prevent the use of unaccounted money or reduce the chances of use of black money for business transactions. But in the case of the assessee, the cash payments were made for genuine purchases from the genuine multinational company. He, therefore, prayed that the additions made u/s 40A(3) be deleted. The assessee also placed reliance upon the following decisions in support of his contentions:
i) The Hon'ble Allahabad High Court in the case of CIT vs Chaudhary & Co reported in 129 CTR 010l (1996) (217 ITR 431)(All.).
ii) The Hon'ble Madhya Pradesh High Court (Indore Bench) in the case of CIT vs Satyam Ginning, Pressing & Oil Mills reported in 130 CTR 0580.
iii) The Hon'ble Calcutta High Court in the case of Goenka Agencies vs CIT reported in 184 CTR 0104 (2003) 263 ITR 145 (Cal.).
4. The learned Counsel for the assessee also drew our attention to the ledger a/c of the Walmart India (P) Ltd and the Page 3 of 5 ITA No 152 of 2018 Smart Mobiles Hyderabad invoices of Walmart India to demonstrate that the purchases were made on Saturdays after banking hours.
5. The learned DR, on the other hand, supported the orders of the authorities below and submitted that the disallowance made by the Assessing Officer should be confirmed.
6. Having regard to the rival contentions and the material on record, we find that there is no dispute that the assessee has made certain payments exceeding Rs.20,000/- in cash and therefore, the provisions of section 40(A)(3) would get attracted provided the transaction fall under Rule 6DD of IT Rules. The explanation given by the assessee was that all the purchases were made on Saturdays and that too after banking hours. This contention has not been verified by the Assessing Officer. This contention of the assessee falls under clause (j) of Rule 6DD. Therefore, the Assessing Officer is directed to verify the same denovo. Needless to mention that the assessee should be given a fair opportunity of hearing.
7. In the result, assessee's appeal is treated as allowed for statistical purposes.
Order pronounced in the Open Court on 7th June, 2021.
Sd/- Sd/-
(A. MOHAN ALANKAMONY) (P. MADHAVI DEVI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, dated 7th June, 2021.
Vinodan/sps
Page 4 of 5
ITA No 152 of 2018 Smart Mobiles Hyderabad Copy to:
S.No Addresses 1 Smart Mobiles C/o Gokhale & Co. C.A, 3-6-322, 4th Floor, 403 Mahavir House, Basheerbagh, Hyderabad 500029 2 Income Tax Officer Ward 5(3) Hyderabad 3 CIT (A)-4, Hyderabad 4 Pr. CIT -4, Hyderabad 5 DR, ITAT Hyderabad Benches 6 Guard File By Order Page 5 of 5