Ashim Mitra, Nadia vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH: KOLKATA [Before Shri P. K. Bansal, AM & Shri Mahavir Singh, JM]

I.T.A No. 173/Kol/2012 Assessment Year: 2008-09 Shri Ashim Mitra Vs. Income-tax Officer, Wd-4, Nadia. (PAN: AEIPM7954B) (Appellant) (Respondent)

Date of hearing: 19.05.2015 Date of pronouncement: 22.05.2015

For the Appellant: Shri M. K. Datta, FCA For the Respondent: Shri K. L. Kanak, JCIT, Sr. DR

ORDER

Per Shri Mahavir Singh, JM:

This appeal by assessee is arising out of order passed by CIT(A)-XXXVI, Kolkata vide Appeal No. 489/CIT(A)-XXXVI/Kol/Wd-4,Nadia/10-11dated 20.10.2011. Assessment was framed by ITO, Ward-4, Nadia u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2008-09 vide his order dated 24.12.2010.

2. At the outset, it is seen that assessee's appeal is barred by limitation by 38 days and assessee has filed Condonation petition supported by affidavit. It was contended that the assessee was having ill health and due to that he could not file the appeal within the prescribed time limit and there was delay of 38 days. Qua the illness the assessee has filed certificate from Gandhi Memorial Hospital, Kalyani, Nadia dated 04.02.2012. In view of Dr.'s certificate and circumstantial evidence, we condone the delay and admit the appeal.

3. At the outset, Ld. Counsel for the assessee has not objected to the first issue of bogus transaction/inflated account for an addition of Rs.1,63,310/- and disallowance made on account of unexplained investment of Rs.46,027/- and he has 2 ITA No.173/K/2012 Ashim Mitra. AY 2008-09

not pressed these two issues. As these issues were not pressed, the same are dismissed as not pressed.

4. The only issue survives for adjudication is the addition made by AO and confirmed by CIT(A) in respect to cash payments disallowed by invoking the provisions of section 40A(3) of the Act for an amount of Rs.23,69,500/-. For this, assessee has raised following ground no.3:

"3. That the Ld. CIT(A) has erred both in law as well as on the facts and circumstances of the case in adding an amount of Rs.23,69,500/- towards alleged violation of section 40A(3) of the I. T. Act, 1961."

5. Briefly stated facts are that the assessee is a distributor of Reliance Communication Ltd. and Macronet Pvt. Ltd. and selling SIM Cards on commission basis. The total turnover of the assessee in SIM Card business i.e. Cellular Mobile Services is to the extent of Rs.72,71,464/- and cash purchases are to the extent of Rs.23,69,500/- because outstation cheque/DDs were not acceptable to Reliance Communication Ltd. or Macronet Pvt. Ltd. According to assessee, he is running the business of mobile set, cash card (SIM Cards) mainly by cash transactions for the reason that this is carried in the villages. Out of the total purchase of mobile set cash credit cards (E-VCHR) business a sum of Rs.4,88,850/- was made by DD or by cheque but purchases to the tune of Rs.23,69,500/- was made in cash as there is no facility of electronic clearing system or RTGS (Real time Gross Settlement) or NEFT (National Electronic Fund Transfer) in the banks of rural areas during the years under consideration. According to assessee this facility started in the FY 2008-09. As against the disallowance, the CIT(A) also confirmed the action of AO by observing in para 5.2 as under:

"5.2. I have carefully considered the submission of the AR of the appellant and seen the details filed. The AR has not disputed the findings of the AO that the appellant made several cash payments [each exceeding Rs.20,000/-] aggregating to Rs.23,69,500/- to M/s. Macronet Pvt. Ltd. and M/s. Reliance Communications Ltd, though in the ledger of the appellant total of such cash payments was shown at Rs.19,73,419/·. The AR contended that the appellant was forced to made payments by cash as his banker was not having electronic clearing facilities and payment through crossed demand draft was a time consuming affair. However, it is seen from the records that on many occasions the appellant made payments through crossed demand draft. The AR also stated that cash payments were made for immediate receipts of SIM cards etc, from those two companies. But it is seen from the details 3 ITA No.173/K/2012 Ashim Mitra. AY 2008-09

filed by the AR that on many occasions even after cash payments, appellant received goods not immediately but after 2/3 days from the date of cash payments. Thus, the contention of the AR that cash payments made for business exigency has not been borne out of facts of the case. The AR has highly emphasized on the issue of genuineness of the cash payments, which may not be fully applicable in the case of the appellant. It has been discussed earlier in this order that the appellant had not only inflated his purchases to the extent of Rs.1,63,301/- but also not accounted for all cash payments made to M/s. Reliance Communications Ltd and M/s. Macronet Pvt. Ltd in his books. In any case, the AR has not referred any single instance as per which appellant's cash payments should be taken as exempted from disallowances in terms of Rule 6DD of the I.T. Rules, 1962. Under the facts and circumstances, I find that the AO correctly disallowed the cash payments in excess of Rs.20,000/- each, aggregating to Rs.23,69,500/-, for violation of the provisions of section 40A(3) of the Act. The addition of Rs.23,69,500/- is therefore, confirmed."

6. We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee is in the business of Mobile set and SIM cards of Reliance Communications and Macronet Pvt. Ltd. The assessee receives only commission. In view of this fact, we find that the assessee is merely an agent between the distributors and the retailers and take the commission on the sale. No doubt the assessee has accounted for the entire sale but he is working on commission basis. Once the assessee is working on commission basis, the issue stands covered in favour of assessee and against revenue by the decision of Hon'ble jurisdictional High Court in the case of Bharti Cellular Ltd. Vs. ACIT (2013) 354 ITR 507 (Cal), wherein Hon'ble High Court has held that the indirect payment by assessee to the franchisee is commission and commission would attract the provisions of section 194H of the Act. Once the SIM Cards and rechargeable coupons purchased by assessee/franchisee on commission basis no disallowance can be made by invoking the provisions of section 40A(3) of the Act. Accordingly, this issue of assessee's appeal is allowed.

7. In the result, appeal of assessee is partly allowed.

8. Order is pronounced in the open court on 22.05.2015.

Sd/- Sd/- (P. K. Bansal) (Mahavir Singh) Accountant Member Judicial Member Dated : 22nd May, 2015 Jd.(Sr.P.S.) 4 ITA No.173/K/2012 Ashim Mitra. AY 2008-09

Copy of the order forwarded to:

1. APPELLANT - Shri Ashim Mitra, Vill & PO Karimpur, Dist. Nadia, Pin-741152.

2 Respondent - ITO, Ward-4, Nadia.

3. The CIT(A), Kolkata

4. The CIT, Kolkata

5. DR, Kolkata Benches, Kolkata

/True Copy, By order,

Asstt. Registrar.