Harshdeep Singh Juneja Vs DCIT (ITAT Raipur)
ITAT Raipur held that payment towards purchase of beer from the State Government is an exception to the applicability of section 40A(3). However, brushing aside the said objection/ response filed by the assessee had rendered entire mechanism provided u/s 143(1)(a) as redundant and otiose.
Facts- Income of the assessee was processed by the CPC, Bengaluru u/s.143(1) of the Act dated 26.08.2019, wherein after making a disallowance of Rs.57,62,920/- u/s.40A(3) of the Act its income was determined at Rs.64,85,460/-.
Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
Conclusion- Ostensibly, the assessee in his objection dated 24.01.2019 to the proposed adjustment that was sought to be made by the CPC, Bengaluru u/s.40A(3) of the Act, had clearly stated that the expenditure in question was incurred towards purchase of beer from the State Government which would not accept payment in any mode other than cash. To sum up, the assessee in his reply, had clearly demonstrated before the CPC, Bengaluru that the expenditure in question did fall within the realm of the exception carved out under Rule 6DD(b) of the Income Tax Rules, 1962.
In our considered view, now when the assessee had come forth with a specific objection which did clearly fit within the exception provided under Rule 6DD(b), then, it was obligatory on the CPC, Bengaluru to have either accepted the said explanation ; or in case the same was to be rejected, then provided certain cogent reasons for doing so. In case, the response/objections of the assessee as provided in the “2nd proviso” to Section 143(1)(a) of the Act are taken as an idle formality; or an eye wash, as had been done in the present case before us, then the said mechanism provided for making an adjustment u/s.143(1)(a) of the Act would be rendered as unworkable.
We are unable to persuade ourselves to subscribe to the manner in which the objections/response filed by the assessee to the proposed adjustment had been brushed aside; or in fact dispensed with by the CPC, Bengaluru, which as observed by us hereinabove, had rendered the entire mechanism provided u/s.143(1)(a) of the Act as redundant and otiose.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 05.11.2021, which in turn arises from the intimation issued by the A.O/Centralized Processing Center (CPC) under Sec.143(1) of the Income-tax Act, 1961 (in short ‘the Act’) dated 26.08.2019 for the assessment year 2018-19. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1. That on the facts and in the circumstances of the case and in law, the CIT(A) erred in sustaining disallowances made u/s.40A(3) of the Act of Rs.57,69,920/-.
2. That on the facts and circumstances of the case and in law, the CIT(A) erred in applying the decision of Hon’ble ITAT Panji Bench in the case of Prathamik Krishi Pattinsahkari Bank Ltd vs Income Tax Officer, ward 1(3), Belgaum 55 com 412, even though the facts of the case are distinguishable.
3. That on the facts and circumstances of the case and in law, the CIT(A) erred in not following the decision of Hon’ble Kolkata Tribunal in the case of M/s Bolkunda Packwai & (S) C vs ITO, Ward 1(1), Asansol (ITA No. 462-463/Kol/2016), where the facts of the case are similar to the case of the appellant.
4. The appellant craves to add, alter or delete any of the grounds of appeal during course of appellate proceedings.”
2. Succinctly stated, the assessee is an individual holding FL-2 license on behalf of his partnership firm viz. Juneja Ventures, which is engaged in the business of running a restaurant under the name and style of “Mocha Restaurant” at VIP Road, Raipur. The assessee had filed his return of income for A.Y.2018-19 on 13.10.2018, declaring an income of Rs.7,22,540/-.
3. Income of the assessee was processed by the CPC, Bengaluru u/s.143(1) of the Act dated 26.08.2019, wherein after making a disallowance of Rs.57,62,920/- u/s.40A(3) of the Act its income was determined at Rs.64,85,460/-.
4. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success.
5. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
6. We have heard the Ld. Authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
7. Controversy involved in the present appeal lies in a narrow compass, i.e. sustainability of the disallowance of Rs.56,62,920/- made by the CPC, Bengaluru u/s.40A(3) of the Act. As is discernable from the records, the auditor of the assessee at No.21(d) of his audit report filed in Form 3CD, had reported that the assessee had incurred expenses of Rs.57,62,920/-towards purchases made from the State Government of Chhattisgarh in a manner otherwise than that contemplated u/s.40A(3) of the Act. For the sake of clarity, the qualification by the auditor is being culled out as under:
