AI Drafter 
TaxTMI 
TaxTMI 
2022 (8) TMI 300
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....are directed against different consolidated orders of the ld. Commissioner of Income Tax (Appeals) 19, Chennai, all dated 29.11.2018 relevant to the assessment years 2012-13 to 2015-16. The assessees have also filed Cross Objections against the order of the ld. CIT(A). Since, the facts are identical and issues are common, for the sake of convenience these appeals as well as Cross Objections were heard together and are being disposed off, by this consolidated order. 2. All the appeals filed by the Revenue are delayed by three/four days in filing the appeal before the Tribunal for which, the Revenue has filed petitions in support of an affidavit for condonation of the delay explaining the cause for the delay in filing the appeals and prayed that the delay may be condoned and admitted the appeals for hearing. Against the submissions made in the affidavit by the Department, the ld. Counsel for the assessee has not raised any serious objection. Consequently, since the Department was prevented by sufficient cause, the delay of three/four days in filing of the appeals stands condoned and admitted the appeals for adjudication. The Revenue has raised the following grounds: 1. Th....
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.... the appeal proceedings, the order of Id. CIT(Appeals) may be set aside and that of the Assessing Officer be restored." 2.1 The assessee has raised following objections in his CO: 1. The Commissioner of Income Tax (Appeals) has gone wrong in dismissing the ground filed by the appellant in respect of time barring of the assessment without considering the facts that the assessment order, demand notice and notice for penalty u/s.271(1)(c) are served on the respondent on 08-01-2018 and hence barred by limitation. 2. The respondent filed application for providing satisfaction u/s.153C of the Act, but the Assessing Officer has not provided the same to the respondent and hence the assessment order is invalid. 3. The respondent is buying copra from agriculturists through agents and the provisions of Section 40A(3) of the Act and rule 6DD(k) are applicable and hence the order of the Commissioner of Income Tax (Appeals) is correct and the contention of the revenue are liable to be dismissed." 3. Facts are, in brief, that the assessee M/s. Achu Traders is a partnership firm run by Shri Shahjahan and Smt. Nihar Bhanu, W/o. Shri Shahjahan. M/s. Appu Traders is e....
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.... During the search conducted on 17.11.2015 in the residential premises of Shri Shahjahan, he has admitted that M/s. VVD & Sons Pvt. Limited has purchased copra from his firm M/s. Achu Traders during the financial year 2011-12 relevant to the assessment year 2012-13. In the sworn statement recorded on 17.11.2015 Shri Shahjahan has stated that he has supplied copras to M/s. VVD & Sons (P) Limited by procuring the copras through the agents (herein called three persons) at Pollachi namely, Shri Senthil, Natarajan and Chinna. Shri Shahjahan has prepared purchase invoices for the copras obtained from the above three persons and then prepared sales invoices in his concerns' names to M/s. M/s. VVD & Sons (P) Limited. The said three persons were identified in the name of his own concerns are Appu Traders - identified in the name of - Shri Chinna, Appu Traders - identified in the name of - Shri Senthil, Alfas Traders & Madeena Traders - identified in the name of - Shri Natajan. In the sworn statement recorded on 23.12.2015 from Shri Shahjahan, while answering to Q. No. 5, he has stated that Shri Natarajan, Senthil and Chinna are the three persons who had procure....
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.... particulars such as in whose favour the cheques are given (payee), date, amount, etc. The bearer/selfcheques are given to the three persons well in advance i.e., before M/s. VVD & Sons makes the payment through RTGS to the said accounts in the name of M/s. Achu Traders. During the search, Shri Shahjahan, while answering to Q.No.7 of the statement recorded he has stated that he is not aware the purchase orders raised by M/s, VVD & Company, details of copra purchased, load and weighment details and the settlement therein. Further in his statement while answering to Q.No. 8, Shri Shahjahan has stated that he has only signed the cheque leaves issued to the three persons and all other particulars are filled by any one of the three persons. According to Shri Shahjahan, the three persons namely Chinna, Senthil and Natarjan are only aware of the full details of copra purchase. During the course of search on 17.11.2015 certain books such as a note book (Kasthuri book) were found seized vide Ann/PC/MS/B&D/S dated 17.11.2015, which contain bank account numbers and cheque book details. However, During the search assessment proceedings it was found on verification of the said....
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....for such withdrawal and the disbursement of the- amount to those persons who Shri Shahjahan or his concerns claim to be supplier. 3.7 The statements of account obtained from M/s. VVD & Sons for the amount transferred to M/s. Achu Traders for the period 1.4.2011 to 31.03.2012 were obtained and found that they were only RTGS payment transferred to M/s. Achu Traders. While the same was verified with respect to the bank account statement of M/s. Achu Traders for the said period it is found that for every of amount of credit from VVD & Sons there is an equal debit entry found on the same day with a narration 'SELF'. It is also seen that the amount withdrawn through such selfcheques are found to be amounts each exceeding rupees twenty thousand, almost all the withdrawal entries ranges to Rs..2,00,000/- to Rs..7,00,000/-. It is evident from the bank statement that in a month the approximate withdrawal found to be Rs.. 20,00,000 for a annual payment of Rs..9,66,67,671/- made by M/s. VVD & Sons. In the case of M/s. Appu Traders, the self-cheques issued by Shri Shahjahan were withdrawn by Shri Chinna at Pollachi, as per sworn statement of Shri Shajahnan and Chinna. A sworn stateme....
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....f Rs..7,30,543/- is treated as bogus purchase made by VVD & Sons and the same is now excluded in the hands M/s. Achu Traders since it represents addition in the hands of M/s. VVD & Sons Pvt. Limited on account bogus purchase for the assessment year 201213. Thus, the Assessing Officer made on account of payment made in violation of section 40A(3) of the Act of Rs.. 9,59,37,128/- and completed the assessment order under section 143(3) r.w.s. 153C of the Act. 4. On appeal, the ld. CIT(A) has deleted the addition made by the Assessing by observing as under: "6. Decision on grounds of appeal: 6.1. The perusal of the written submissions filed during the course of appellate proceedings, it is observed that the first ground of appeal is pertaining to the assertion made by the appellant that the assessment is barred by time limitation and hence it is liable to be cancelled. It is submitted that the demand notices and assessment order along with the notices for initiating for penalty proceedings are dated 8.1.2018, whereas the date of limitation was 31.12.2017 and hence the order is time barred. 6.2. In respect of this contention, the assessee relied upon the de....
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....sing Officer in his order mentions in para 12 and 13 about these seized material and discusses about the examination of these cheque book and other bills during the course of search. Therefore, it is not correct on the part of the appellant to state that the proceedings are not based on any seized material. The AO has examined the material seized and the statements recorded during the search u/s 132 of the I.T Act. Once the AO has relied upon the seized material the sufficiency of the seized material cannot be questioned. Therefore, this ground of the appellant that the issues are not emanating from the material seized during is not correct and hence it is dismissed. 6.4. Secondly, during the course of appellate proceedings, it was also submitted that the assessment u/s. 153C is invalid since the satisfaction as per requirements by section 153C was not made. It is stated further by the appellant that the satisfaction was not made available to the appellant by the Assessing Officer despite request for same therefore presumption is that the said satisfaction was not recorded and hence rendering the assessment void and liable to be quashed. This objection of the appellant was....
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.... form of freight, courier, broker etc" (para-5 of AY. 13-14). It has been observed by the AO that the expenses have been incurred through self-made vouchers and on account of non-maintenance of proper vouchers of payment, the AO has disallowed Rs.12 lakhs in AY. 13-14 (20% of Direct expenses). 2. During the course of search as mentioned in the Assessment order, Para-9, "Shri Shahjahan has stated that he has supplied copras to VVD and Sons P limited by procuring copras through the agents (herein called three persons) at Pollachi namely, ShriSenthil, Natrajan and Chinna". Statement of Shri Senthil, Natarajan and Chinna were recorded during the search. In the statement recorded they have not denied that they are working as agents for commission for Shri Shahjahan. The purchases were infact made for VVD & sons and they received their amount from Shri Shahjahan who gave them signed self-cheques to get them encashed and make further payments to other respective suppliers. It is nowhere the case of the AO that it is a case of bogus purchases or inflation of purchase bills. Nowhere the transactions of the cheque payment received from VVD has been questioned. 3. The turnov....
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.... were completed in all the above cases. In the assessment orders, it is specifically mentioned that purchase of copra by the assessees, which is an agricultural product, through agents from rural areas. No disallowance under the provisions of Section 40A(3) were made in the scrutiny assessments. (2) At the time of assessment u/s.153C, agents have given affidavit stating their function of purchase of copra and the payment of the purchase price through them. No evidence whatsoever is obtained during the assessment u/s.253C of the Act contradicting or opposing the facts of the case as stated above. In the above circumstance, the application of provisions u/s.40A(3) in the assessment U/S.153C are not sustainable. (3) In respect of all the assessments, except in the case of Mr.M.Shahjahan, it is specifically stated in the assessment orders that the assessments are completed on a 'protective basis. I may submit that there should be a substantive assessment under the provisions of section 40A(3) in the case of searched assessee u/s.153A, specifically u/s.40A(3). When such assessment is existing only, there can be a protective assessment in the above cases. A....
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..... On the same day itself after taking my commission I pay the remaining amount to Shahjahan. Q.No.6 You have told that you receive the income of commission from Shahjahan. Explain. Ans. I receive Rs.2/- per bag. I receive Rs.400/-for 200 bags + expense^ 500/-. I receive the commission amount from Shahjahan as self-cheque. I receive the self-cheque for total amount and in that after taking my commission amount the remaining balance will be issued to the farmers from whom I have purchased copra. Approximately I receive Rs. 5000/- per month as commission. D.Godhandapani @ Chinna Q.No.2. Identify yourself: Ans: My name is D.Godhandapani @ Chinna. I am residing at 5/312, Goppanurpudur, Kappalankarai Post, Kindathukadavu Taluk for the past 5 years. Age 36. My wife name is G.Sangeetha, I got one female and male children. My CellNo:9443933561. Q.No.3. Explain in detail regarding your business and income. Ans: I am acting as a commission agent/broker for the past 4 years, in purchasing copra for Shahjahan Traders. I used to purchase copra from various farmers in the area of Anaimalai, Ganapathipalayam, Semampathi, Moongamadai, K....
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....a Bank, Axis Bank and IDBI Bank of Pollachi Branch, for which M. Shahjahan is the owner. Even prior to that I am always had the signed bearer cheques issued Shahjahan, when Ms. WD Company paid the amount in the aforesaid accounts I used to withdraw the amount through the bearer cheques and disburse the amount to the various sellers. Q.No.5. You has told that you have used to purchase copra from various business men. Explain from whom and what quantity you have purchased? Further to whom you have paid the purchase amount? Explain whether you are maintaining the ledgers for particulars/account for the purchase and sale? Ans: I am not having the aforesaid particulars. The sale amount will be transferred by WD & Sons through RTGS to Shahjahan who is having the accounts in the name of Madeena Traders and Alfas Traders. I used to withdraw the amount by using the signed self-cheques of Shahjahan and settle the amount in cash to the local agriculturists from which I have purchased the copra. 6.8. The perusal of the above statements show that the persons are acting on behalf of the appellant i.e. Shri Shahjahan partner in the concern and are earning commission fro....
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....have acted as agents of the assessee, we have no hesitation in holding that the assessee is entitled to protection under rule 6DD(i) of the said Rules as the disputed payments were made only to its agents. Apart from that aspect, by going through the nature of business and transaction between the parties, an element of commercial expediency was also involved in this case, which we can take judicial notice. There are no other materials placed before us by the Revenue to take a different view, moreover when those findings rendered by the first appellate authority as well as the Tribunal is totally a finding of fact, we are not inclined to interfere with the same. Consequently, we find no merits in this appeal and the question of law is answered against the Revenue. Accordingly, the tax case appeal is dismissed." (2013) 37 taxmann.com 422(Madras). [In the above judgement though the rule referred is 6DD(i) which is an inadvertent mistake however the matter pertains to rule 6DD(k) only]." 5. First, we shall take the Cross objections of the assessee for adjudication. By referring to the first ground of cross objection, the ld. Counsel for the assessee has su....
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....e case of State of Andhra Pradesh v. M. Ramakishtaiah and Company (supra) has no application to the facts of the present case. 7.3 In the case of Sanka Agencies v. Commissioner of Commercial axes (2005) 142 STC 496 (AP), the impugned order was passed on 17.05.1996 and received by the assessee on 14.11.1996. Therefore, the Hon'ble High Court came to a conclusion that the order was not made on the date it was purported to have made. The above decision has no application to the facts of the present case. 7.4 In view of the above, we find that there is no delay in passing the assessment order and therefore, the Cross Objection raised by the assessee is dismissed. 7.5 The second cross objection raised by the assessee was not argued before the Tribunal and the same is dismissed. 7.6 The third cross objection raised by the assessee is being dealt by the Tribunal while deciding the merits of the case. 7.7 Since common grounds of cross objection has been raised by all the assessee on an identical facts and circumstances and therefore, all the cross objections filed by the assessee are dismissed. 8. So far as appeals filed by the Department are concerned, against the order ....
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....resented in the Axis bank and withdraw the amount from RTGS. In his sworn statement, while answering to Q.No. 12 Shri Chinna has stated that he is not aware of any details about Shri Shahjahan sending Copras to M/s. VVD & Sons (P) Limited. Shri Chinna in his answer to Q.No.8 in his sworn statement has stated that he is not having any details about the farmers from whom copras were purchased by him. Further, he also stated that he is not maintaining any books of accounts for the purchase of copra made by him. 8.3 When we read carefully the statements given by the assessee as well as his agent, Shri Shahjahan, the assessee is stating that he is not aware of purchase of copra and Chinna is only directly dealing with M/s. VVD & Sons and he is not aware of any quantity details supplied to M/s. VVD & Sons. In the sworn statement, the agent of the assessee Chinna is stating that he is procuring copras on behalf of Shri Shahjahan and same is sending to Shri Shahjahan and after two days he receives bearer cheque and thereafter payments are made. Chinna does not know the details of farmers, such as, the farmers from whom he has purchased, what is the quantity, what are the payments to be ....
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....y clear that the assessee has violated section 40A(3) of the Act. 9. In so far as exception provided to the above section under Rule 6DD(k) of Income Tax Rules, 1962 is concerned, for the sake of convenience, the same is extracted as under: Rule 6DD. 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 person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under rule 6ABBA, exceeds twenty thousand rupees in the cases and circumstances specified hereunder, namely :- (a) to (i) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (k) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person; 9.1 In this case, neither the assessee nor his agent has able to establish that the payments are made to farmers. The Agent of the assessee Shri Chinna says t....
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....s to his agent Shri Chinna and he withdrew the entire amount and his case is that he made the payments to the farmers. However, the details of from whom the copras were purchased, what is the quantity, what is the commission that he has taken, what is the transport charges, etc. are not at all furnished before any authorities. Neither the agent knew the farmers, nor did the assessee know the farmers from whom the copras were purchased and payments were made. Therefore, without examining any materials, the ld. CIT(A) has simply accepted the explanation given by the assessee and wrongly deleted the addition. The order passed by the ld. CIT(A) is without any basis and it requires interference. 9.5 So far as case law relied on by the ld. CIT(A) in the case of Shanmuga Ginning Factory v. CIT (2013) 37 taxmann.com 422 (Madras) is concerned, the ITAT gave a factual finding that the agents are actually participated in the auction process and 1 per cent commission has been charged and therefore, the Tribunal has held that the agents are acted on behalf of the assessee and entitled to protection under Rule 6DD(i) of the Rules. Apart from that, by going through the nature of business and t....
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....er has noted that payments have been made to labours for cleaning of pond, for JCB baffling charges, for purchase of sand, bricks, jally, purchase of salt, etc. and the assessee has not provided any evidences namely, bills and vouchers to prove that said payments had been made to cultivator, grower or producer in order to be excluded under section 40A(3) of the Act by virtue of Rule 6DD(e). It was held that the assessee has not proved that payments had been made to cultivator, grower or producer as per Rule 6DD(e) in order to exclude the said payments from provision of section 40A(3) of the Act, the Tribunal has upheld the order of the Assessing Officer. 9.10 In the case of International Ships Stores Suppliers v JCIT [2016] 75 taxmann.com 130 (Mumbai - Trib.), the assessee was engaged in business of supplier of stores to ocean going ships and made certain payments to suppliers upfront in cash. The Assessing Officer disallowed the said cash payment under section 40A(3), which was upheld by the ld. CIT(A). Before the Tribunal, it was submitted that genuineness and veracity of purchase transactions under consideration were not in doubt, coupled with fact that same were prompted on ....