Principal Commissioner Of Income Tax 1 v. Shukla Dairy Pvt. Ltd

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 235 of 2022 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 1 VersusSHUKLA DAIRY PVT. LTD. ========================================================== Appearance: MRS KALPANAK RAVAL(1046) for the Appellant(s) No. 1 for the Opponent(s) No. 1========================================================== CORAM:HONOURABLE MR. JUSTICE A.J.DESAIand HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 13/06/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE A.J.DESAI) 1. Revenue has filed this appeal under section 260Aof the Income Tax Act, 1961 (For short “the Act,1961”) for the assessment year 2013-2014challenging the judgment and order dated23.08.2021 passed by the Income Tax AppellateTribunal, Surat Bench, Surat in I.T.A. No.310/SRT/2018. 2. Following substantial questions of law areproposed by the Revenue : “i)Whether on the facts and in thecircumstances of the case and in law, thelearned Tribunal was justified in quashingthe order passed u/s 263 of the Act eventhough the Assessing Officer had passed theassessment order without making inquiries or C/TAXAP/235/2022 ORDER DATED: 13/06/2022 verification which should have been made toascertain whether the parties to whom cashpayments were made were milk producers andwere covered by circumstances sated inclause(e)(ii) of Rule 6DD of Income TaxRules. (ii) Whether on the facts and in thecircumstances of the case and in law, thelearned Tribunal was justified in quashingthe order passed u/s 263 of the Act eventhough the Assessing Officer had passed theassessment order without making disallowanceu/s 40(a)(ia) on payment made to labourcontractor, Shri Rameshbhai of Rs.13,41,006/- even though no TDS was deductedon the said payment. (iii)Whether on the facts and in thecircumstances of the case and in law, thelearned Tribunal had erred in holding thatthe disallowance u/s 40(a)(ia) was made onthe issue of non-deduction of TDS on paymentmade to Shri Rameshbhai and assesseeaccepted the disallowance even though nosuch disallowance was made in the assessmentorder. (iv) Whether on the facts and in thecircumstances of the case and in law, thelearned Tribunal was justified in quashingthe order passed u/s 263 of the Act withoutgiving a finding on the applicability ofclause (a) of Explanation-2 to sub-section(1) of section 263 of the Act on thebasis of which the revision order u/s 263 ofthe Act was passed by the PrincipalCommissioner of Income-tax.” 3. The respondent-assessee is engaged in thebusiness of manufacturing of dairy products. The assessee filed its return of income for theassessment year 2013-2014 on 30.09.2013declaring total income at Rs.29,09,590/-. The Assessing Officer passed order dated 18.03.2016under section 143(3) of the Act, 1961 assessingtotal income of the assessee at Rs. 33,05,686/-. 4. The Principal Commissioner of Income Tax-2, Surat (For short “PCIT”) on examination of assessment records, noticed from the ledger account of the assessee company with oneRameshbhai that assessee company had paid Rs.13,41,006/- to Rameshbhai in cash in theRameshbhai that assessee company had paid Rs.13,41,006/- to Rameshbhai in cash in the financial year 2012-2013 relevant to assessmentyear 2013-2014. year 2013-2014. 5. The assessee-company in its reply submitted thatRameshbhai is not a contractor but employee ofthe assessee company and money was paid to himRameshbhai is not a contractor but employee ofthe assessee company and money was paid to him for payment to labours. However, during the survey proceedings, the assessee company admitted that Rameshbhai is contractor who provided labours and no TDS was deducted on assessment records, noticed from the ledger account of the assessee company with oneRameshbhai that assessee company had paid Rs.13,41,006/- to Rameshbhai in cash in theRameshbhai that assessee company had paid Rs.13,41,006/- to Rameshbhai in cash in the financial year 2012-2013 relevant to assessmentyear 2013-2014. year 2013-2014. 5. The assessee-company in its reply submitted thatRameshbhai is not a contractor but employee ofthe assessee company and money was paid to himRameshbhai is not a contractor but employee ofthe assessee company and money was paid to him for payment to labours. However, during the survey proceedings, the assessee company admitted that Rameshbhai is contractor who provided labours and no TDS was deducted on payment to Rameshbhai and it was also noticedthat the assessee company has not deductedthat the assessee company has not deducted Provident Fund from payments made to saidRameshbhai, as was evident from the PF statementof assessee company and therefore, the paymentof Rs.13,41,006/- ought to have been disallowedunder section 40(a)(ia) of the Act, 1961. Rameshbhai, as was evident from the PF statementof assessee company and therefore, the paymentof Rs.13,41,006/- ought to have been disallowedunder section 40(a)(ia) of the Act, 1961. 6. PCIT also further noticed that assessee companypaid Rs.20,70,763/- to one Becharbhai Bharwar inthe financial year 2012-2013 and on 15 occasionspaid Rs.20,70,763/- to one Becharbhai Bharwar inthe financial year 2012-2013 and on 15 occasions C/TAXAP/235/2022 ORDER DATED: 13/06/2022 in excess of Rs. 20,000/- and further thatBecharbhai falls under the category of milkproducer and therefore, payment to him in cashin excess of Rs. 20,000/- is permissible underRule 6DD of the Income Tax Rules. PCIT furtherobserved that other sellers of milk to assesseecompany were traders and hence not eligible forbenefit of this Rule. 7. PCIT further observed that during survey in thefinancial year 2012-2013, it was found thatRs.1,82,18,581/- was paid by the assessee incash in excess of Rs. 20,000/- which was neitherdisputed nor the statements retracted and onlyRs.20,70,763/- was allowable expenditure undersection 40A(3) of the Act, 1961 read with Rule6DD of the Income Tax Rules, 1962. It wasfurther observed that declaration of Rs.15,00,000/- paid during the financial year 2012-2013 is regarding irregularities in books ofaccount and hence it has no bearing ondisallowance of cash payment in excess of Rs.20,000/-. PCIT therefore, observed that Rs.1,61,47,818/- (Rs.1,82,18,581 – Rs.20,70,763/-)should be disallowed. 8. PCIT therefore issued show cause notice dated29.1.2018 to explain the above transactions. 9. In response to such notice, assessee contendedinter-alia that assessee-company has madeinter-alia that assessee-company has made C/TAXAP/235/2022 ORDER DATED: 13/06/2022 payment to Rameshbhai-Labour Contractor and suchissue was originally considered in assessmentand accordingly disallowance was made and theassessee accepted such disallowance andtherefore, no fresh disallowance is required to be made. With regard to payment of Rs.1,61,47,818/- made to various persons from1.4.2012 to 22.1.2013, the assessee-companysubmitted that the payments are either coveredby the exceptions provided in Rule 6DD of theIncome Tax Rules or payment of Government stampduties and fees or purchase of agriculture ordairy produce or the payment might not have beendeposited to profit and loss account because thesame may not be revenue expenditure or may beforming part of the disclosure made for the saidperiod. payment to Rameshbhai-Labour Contractor and suchissue was originally considered in assessmentand accordingly disallowance was made and theassessee accepted such disallowance andtherefore, no fresh disallowance is required to be made. With regard to payment of Rs.1,61,47,818/- made to various persons from1.4.2012 to 22.1.2013, the assessee-companysubmitted that the payments are either coveredby the exceptions provided in Rule 6DD of theIncome Tax Rules or payment of Government stampduties and fees or purchase of agriculture ordairy produce or the payment might not have beendeposited to profit and loss account because thesame may not be revenue expenditure or may beforming part of the disclosure made for the saidperiod. 10.PCIT after going through the reply of theassessee held that the Assessing Officer did notmake any disallowance on payment made toRameshbhai of Rs. 13,41,006/- and therefore, theorder passed by the Assessing Officer waswithout proper verification. With regard topayment of Rs. 1,61,47,818/- made to variousperson in cash in excess of Rs. 20,000/-, PCITnoticed from the paper book produced by theassessee that the assessee had made the paymentin cash in excess of Rs.20,000/- in a single daywhich requires detailed verification by theAssessing Officer. Therefore, the PCIT set aside the order passed by the Assessing Officer with adirection to frame a fresh assessment. 11.Being aggrieved by the order passed by thePCIT under section 263 of the Act, 1961, theassessee preferred appeal before the Tribunal.The Tribunal by impugned order allowed theappeal quashing and setting aside the orderpassed by PCIT as under : “In ITA No. 310/SRT/2018 {for assessment year2013-14, ld PCIT has raised the same issue ofpayment in cash in excess of Rs.20,000/-: Inthe matter of payment of Rs. 1,61,47,818/- madeto various persons in cash in excess ofRs.20,000/-, the ld PCIT, noted that in severaltime, the assessee had made the payment in cashin excess of Rs.20,000/- in a single day which,requires detailed verification by the assessingofficer. Therefore, order passed by theAssessing officer for A.Y. 2013-14 undersection 143(3) of the Act, on 22.03.2016 iserroneous and prejudicial to the interest ofthe Revenue. Learned PCIT noticed that other sellers ofassessee company are traders, hence, noteligible for benefit of the Rule 6DD of IncomeTax Rules. In view of this, from the findingsduring survey that in F.Y. 2012-13, Rs.1,82,18,581/- was paid by assessee in cash inexcess of Rs.20,000/-, which was neitherdisputed nor the statements retracted later,and out of the said amount Rs. 1,82,18,581/-,only Rs.20,70,763/- was allowable expenditureunder section 40A(3) of the Act, read with Rule6DD of the Income Tax Rules. Further,declaration of Rs. 15,00,000/- made for F.Y.2012-13, is regarding irregularities in booksof accounts and hence, it has no bearing ondisallowance of cash payment in excess ofRs.20,000/-. Therefore, payment of Rs.1,61,47,818/-(Rs. 1,82,18,581 - Rs.20,70,763/-)should be disallowed by the assessing officer.Since, the assessing officer has not disallowed Rs. 1,61,47,818/- therefore, ld PCIT held thatorder passed by the assessing officer iserroneous and prejudicial to the interest ofrevenue. Rs. 1,61,47,818/- therefore, ld PCIT held thatorder passed by the assessing officer iserroneous and prejudicial to the interest ofrevenue. We note that during the assessment proceedings,assessee had submitted before assessing officer(AO), the cash payment register and explainedeach of the item of proposed addition as pershow cause notice of assessing officer. Thecash payment register, which is placed at paperbook page nos, 22 to 27, wherein payment to thetune of Rs. 1,82,18,581/- has been explained tothe assessing officer. The assessing officer,having gone through the cash payment registerand explanation of each item, did not make theaddition. Therefore, we note that assessingofficer has examined this issue during theassessment stage and has taken a possible viewand therefore, he did not make the addition.Hence, so far this issue is concerned, theorder passed by the assessing officer, isneither erroneous nor prejudicial to theinterest of the Revenue.” 12.In view of above findings of fact arrived atby the Tribunal and in view of settled legalposition with regard to invoking of section 263of the Act, 1961, we are of the opinion thatthere is no infirmity in the impugned orderpassed by the Tribunal so as to give rise to anysubstantial question of law much-less anyquestion of law as proposed or otherwise. 13. Tax Appeal is accordingly dismissed. (A.J.DESAI, J) (BHARGAV D. KARIA, J)