Brief of the Case
ITAT Amritsar held In the case of M/s. Pardeep Singh Wazir vs. The DCIT that Circular no. 1/2009, dated 27th March, 2009 issued by CBDT is effective from 01/04/2009 i.e. for the assessment year 2009-10 onwards. As this case belongs to AY 2007-08, this circular is not applicable on current case. It is clear that the assessee was at liberty to pay to a single person any number of times in a day provided that each payments must be below Rs.20,000/-. There is no dispute that payments were found to be recorded in cash book which were less than Rs. 20,000/-. Therefore, from the above, it is apparent that the assessee had not violated the provisions of section 40A (3) as admittedly the payments recorded in the cash book were Rs.20,000/- or below.
Facts of the Case
The Assessing Officer passed an assessment order dated 24.12.2009 for Asst. Year 2007-08. The Commissioner of Income Tax exercised powers under section 263 and passed order under section 263 vide order dated 21.03.2012, which the assessee challenged before the Hon’ble ITAT, Amritsar Bench. The Hon’ble ITAT Amritsar Bench set aside the order of Commissioner of Income Tax vide its order 31.10.2013 with the directions that assessee be provided sufficient opportunity of being heard and therefore, after affording the assessee adequate opportunity, the Commissioner of Income Tax again passed order under section 263 with the same directions which were in original order under section 263 dated 21.03.2012.
Contention of the Assessee
The ld counsel of the assessee submitted that it is an admitted fact by the Commissioner himself that payments were not made in excess of Rs.20,000/- as in the cash book each payment was not exceeding Rs.20,000/- and his allegation is that the entire payments were made in one day in lump sum and was recorded in the cash book by splitting the same in entries of less than Rs.20,000/-. The learned AR submitted that before Asst. Year 2009-10, it was a settled law that each payment was to be considered for the purposes of violation of provisions of section 40A(3) and not the aggregate of payments in a day was to be considered. In this respect, he invited our attention to a Circular No.1/2009 dated 27th March, 2009. The leaner AR submitted that from Asst. Year 2009-10 the aggregate of payments in a single day is to be considered for the purposes of violation of provisions of section 40A(3). The learned AR submitted that circular itself, says that Courts had approved such splitting thereby applying the limit to each transaction. In view of the above, it was submitted that the making of multiple payments in a single day was allowed in the Asst. Year under question.
The learned AR, further submitted that the Assessing Officer had duly carried necessary investigation for verifying violation of section 40A(3) and in this respect he invited our attention to a questioner dated 07.12.2009 placed at paper book page 34 to 36. Our specific attention was invited to question10, wherein, the Assessing Officer had specifically required the assessee to explain the violation of provisions of section 40A(3). The learned AR submitted that the assessee had replied to this objection of Assessing Officer vide letter dated 24.11.2009 placed at paper book 37 to 39. Our specific attention was invited to para 10 & 11 wherein the assessee had explained the alleged violation of provisions of section 40A(3). The learned AR submitted that Assessing Officer again vide letter dated 10.12.2009 raised the same issue vide question No.8 to which the assessee replied vide letter dated 17.12.2009.
In view of the examination of this fact and circumstances by Assessing Officer, the learned AR argued that Assessing Officer had made complete verification and examination and after being satisfied he had accepted that no payments were made in violation of provisions of section 40A(3) and therefore, he had not made any addition. He submitted that omission on the part of Assessing Officer to mention the aspect of verification of a particular transaction in the Assessment order cannot be attributed to Assessee. The earned AR in this respect relied upon the case laws of Hon’ble Delhi Court in the case of CIT vs. Ashish Rajpal 320 ITR 674 (Del) for the proposition that where a query was raised during the course of scrutiny which was satisfactory answered by the assessee but which did not get reflected in the assessment order would not by itself lead to a conclusion that there was no enquiry with respect to transactions carried out by the assessee.
The learned AR submitted that as demonstrated the Assessing Officer had verified this issue on two occasions and on two occasions the assessee had filed replies and Assessing Officer being satisfied did not make any addition, however, he did not record his findings in the Asst. Order for which, there is no fault of assessee as the assessee has no control over Assessing Officer as to how he writes an order. The learned AR further relied upon an order of ITAT, Amritsr Bench in the case of Roshan Lal Vegetable Products (P) Ltd. vs. ITO, 9 ITR 431 in ITA No.06/Asr/2010.
Our attention was further invited to a decision of Hon’ble Bomaby High Court in the case of CIT Vs. Gabrial India Ltd. 204 ITR 208 (Bom), for the same proposition that omission on the part of Assessing Officer to make elaborate discussion in Assessment Order does not make an order erroneous. The learned AR further submitted that audit report issued under section 44AB also did not point out any payment exceeding Rs.20,000/- and the audit report also strengthens the fact that no payment exceeding Rs.20,000/- was made.
On the matter of verification of lorry hiring charges, the ld counsel of the assessee submitted that each year is a different year and principle of res judicata is not applicable to the Income Tax proceedings and differentiation of views of Assessing Officer in two years does not make an assessment order erroneous and prejudicial to the interest of revenue. He further, argued that the Commissioner cannot examine the records of another year to form an opinion in another year.
Contention of the Revenue
The ld counsel of the revenue submitted that assessee had splinted the payments into transactions of less then 20,000/- as in fact he had made payments in lump sum as it is not possible that in a single day the assessee would have made payment to same party 10 times in a day. He argued that human probability does not warrant such type of actions and Assessing Officer had failed to examine this issue as he simply accepted the version of assessee and did not go further to find out as to whether these payments have been made in a manner recorded in the cash book.
The learned DR submitted that the fact of making payments 10 times in a single day to same person warranted further probe. Reliance in this respect was placed on the case law of Channa Bros. vs. CIT decided by Punjab & Haryana High Court and reported at 225 ITR 72, which the Assessing Officer had failed to do and therefore, the order was erroneous and prejudicial to the interest of Revenue. The learned DR submitted that the Hon’ble Supreme Court in the case of Durga Prasad More (1971) 82 ITR 540 has clearly held that while arriving at a conclusion the human probability aspect has to be kept in mind.
As regards second allegation the learned DR submitted that in Asst. year 2008-09, the Assessing Officer had held that some payments were debited under the head hire charges which were found to be bogus which aspect should have been examined by Assessing Officer to arrive at a correct decision in the year under consideration. In view of the above aspects, the learned DR argued that the order of CIT should be upheld.
Held by ITAT
As regards the first objection of Commissioner of Income Tax, we find that the Commissioner himself in his order has stated that though assessee had recorded payments of Rs.20,000/- or less to M/s Shalimar Transporters but in fact the assessee must have paid in lump sum and must have recorded the entries by splitting the same. Consequently he order the AO to make a fresh assessment u/s 263.
The learned CIT did not consider Circular No.1/2009 issued by Central Board of Direct Taxes wherein, the Board amended the provisions of section 40A(3) and vide para 13.3 directed that provisions of section 40A(3) shall also be applicable where the aggregate of payments made to a single party otherwise than by an account payee cheque exceeds Rs.20,000/- in a day. Vide para 13.4, the Circular states that the amendment will be applicable w.e.f. 1st April, 2009, therefore, this amendment will not be applicable for the year under consideration as the assessment year involved in 2007-08. The Circular vide para 13.2 itself states that assessee tend to circumvent the provisions of section 40A(3) by splitting a particular high value payment to one person into several cash payments, each below Rs.20,000/-.
In view of the above circular, it is apparent that the assessee was at liberty to pay to a single person any number times in a day provided that each payments must be below Rs.20,000/-. There is no dispute that payments were found to be recorded in cash book which were less than Rs. 20,000/-. Therefore, from the above, it is apparent that the assessee had not violated the provisions of section 40A (3) as admittedly the payments recorded in the cash book were Rs.20,000/- or below.
Also the Hon’ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. 204 ITR 208 (Bom) has held that where the Assessing Officer had made enquiries in regard to nature of expenditure incurred by assessee and assessee had given detailed explanation in that regard and Assessing Officer had accepted the explanation of the assessee, the decision of Assessing Officer could not be held to be erroneous simply because in his order he did not make an elaborate discussion in this regard. In the present case, the Assessing office raised an enquiry and assessee filed detailed reply and thereafter, Assessing Officer accepted the explanation and did not make any addition on that account. The order of Assessing Officer cannot be said to be erroneous as he has taken a plausible view, keeping in view of the facts and circumstances of the case.
As regards the other issue that Assessing Officer did not examine the amount of lorry charges in a particular manner as he did in the subsequent year, we find that each year is a separate year and principle of res- judicata does not apply to Income Tax proceedings. The view taken by one Assessing Officer in one year, if it differs from the view taken by Assessing Officer in succeeding year on the same issue cannot be said to be erroneous provided the view taken by Assessing Officer is a plausible view.
The Assessing Officer did carry out necessary examination to arrive at the genuineness of payments and assessee also filed confirmations by parties to whom payments were made. The fact that the assessee had filed confirmations of payees becomes apparent from the reply filed by the assessee to CIT against the show cause notice under section 263. There is a difference between lack of enquiry and no enquiry. It is not a case of no enquiry as Assessing Officer did carry out sufficient examination to arrive at the genuineness of transactions and if he did not take one further step to examine the genuineness of transactions which he took in succeeding year, the assessment order passed in earlier year cannot be said to be erroneous only on the basis that in subsequent year, the Assessing Officer found certain bogus entries.
It is also a fact emerging from records that Assessing Officer did examine the payments of lorry charges & obtained confirmation of payees. It is another matter that he did not call for information u/s 133(c) from RTO to further verify the genuineness of payments. Therefore it is a case of inadequate enquiry and not a case of lack of enquiry. The Hon’ble Delhi High Court in the case of CIT vs. Anil Kumar Sharma 335 ITR 83 held that “There is a distinction between “lack of inquiry” and ‘inadequate inquiry” If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Income-tax Act, 1961, merely because he has a different opinion in the matter.”
Accordingly appeal of the assessee allowed.