Bharat Agro Industries Vs ITO (ITAT Raipur)
The first allegation concerns infringement of Section 40A(3) of the Act and consequent applicability of Section 40(a)(ia) of the Act. In this regard, it is the case of the assessee that purchases were made from villagers/Tribals who are procuring the seeds and supplying the same to the assessee. Payments were made to the suppliers only. The Sarpanch of several villages have provided sworn statements to the effect that supplies of seeds were made. The copy of identity proof of Sarpanch, villagers and tribals were also furnished. It is thus contended that the payments made by the assessee are covered by the exceptions provided to Rule 6DD(e). It was pointed out that the village area etc. is naxalite prone resulting in handicap in strict compliance of cheque payment. It is thus the case of the assessee that in such a situation, where the PCIT has not raised any doubt about the genuineness of the expenditure, provisions of Section 40A(3) of the Act is not necessarily attracted in view of the several decisions rendered in this regard.
It is further claimed that the PCIT was himself under some obligations to carry out the minimal enquiry.
In the course of hearing, the learned counsel for the assessee in response to an enquiry from the bench presented cassia tora seeds for which expenses were incurred. The Cassia tora seeds, which is used for the business of the assessee which are procured from villagers and tribals in naxalite area. The case of the assessee is thus quite peculiar. Coupled with this, the purchase of cassia tora seeds is not under any kind of doubt. The view taken by the AO in favour of the assessee appears to be consistent with the long line of judicial precedent and thus plausible. Hence, the view of the AO admitting the bonafide claim towards purchase and other expenses while framing assessment order cannot be attacked as ‘erroneous’ per se. The action of the AO being consistent with the fact situation and judicial view, ought not to have been set aside by the Revisional Commissioner. In this view of the matter, we set aside the action of the PCIT under s.263 of the Act on this score.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The captioned appeal has been filed at the instance of the assessee against the order of the Principal Commissioner of Income Tax-1, Raipur (‘PCIT’ in short), dated 31.03.2017 passed under s.263(1) of the Income Tax Act, 1961 (the Act) whereby the assessment order passed by the Assessing Officer (AO) dated 20.03.2015 under s. 143(3) of the Act concerning AY 2012-13 was sought to be set aside assessment in terms of supervisory directions.
2. As per the grounds of appeal, the assessee has sought to challenge the jurisdiction assumed by the PCIT under s.263 of the Act and as a corollary, sought to impugn the revisional order passed by the PCIT under s.263 of the Act.
3. Briefly stated, the assessee has derived income from manufacturing and trading of Cassia Tora seeds, guwar and tora splits. The assessment order under s.143(3) of the Act for A.Y. 2012-13 was completed by the AO wherein after making some adjustments, the income of the assessee was assessed at Rs.14,61,036/- under s.143(3) of the Act vide order dated 20.03.2015. Thereafter, the PCIT in exercise of its revisionary powers issued show cause notice dated 17.03.2017 under s.263 of the Act requiring the assessee to show cause as to why the assessment so framed under s.143(3) of the Act should not be modified/revised on the ground that such order is erroneous in so far as it is prejudicial to the interest of the Revenue. The show cause notice issued in this regard is extracted herein for ready reference:
“Sub:- Show cause notice for revision u/s 263 of the Act in the case of M/s Bharat Agro Industries, Bhanpuri, Raipur, (C.G.) PAN : PAN: AAHFB8665M for A.Y. 2012-13-regarding
————————-
This is to inform you that the undersigned has examined your assessment records for AY. 2012-13 and from the examination of the assessment order passed in your case u/s 143(3) of the Act dated 20.03.2015, it is seen and observed that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue. In the assessment order the AO has allowed deduction and expenses without making proper verification in regard to the allowability of the same. Thus the assessment order being erroneous in so far as it is prejudicial to the interest of revenue, it is proposed to take revisionary proceedings u/s 263 of the Act in this case.
2. However, in the interest of natural justice and fair play , I am giving you an opportunity of being heard and opportunity to furnish your submission in writing along with documentary evidences if any with regard to following points.
2.1 It is observed that you have paid total amount of Rs.171,22,879/-in cash as shown in the table below for purchase of Cassio Tora Seed, fire wood, rent payment, wage payment exceeding Rs.20,000/- at a time in violation of section 40A(3) of the Act. It is seen that although in the ledger account the same have written as paid through cheque, they have been paid through self cheques. The bifurcation of the sum so paid is as under:
