ITA No. 142/Kol/2012 Ashirbad Enterprise., AY 2008-09 IN INCOME TAX APPELLATE TRIBUNAL BENCH: KOLKATA [Before Shri P.M. Jagtap, AM & Shri K. Narasimha Chary, JM] I.T.A No. 142/Kol/2012 Assessment Year: 2008-09 M/s. Ashirbad Enterprise Vs. Income-tax Officer, Wd-49(4), Kolkata (PAN: AAIFA3009R) (Appellant) (Respondent) Date of hearing: 19.09.2016 Date of pronouncement: 28.09.2016 For Appellant: Shri Miraj D. Shah, Advocate For Respondent: Shri Sallong Yaden, Addl. CIT ORDER Per Shri K. Narasimha Chary, JM: This appeal by assessee is arising out of order of CIT(A)-XXXII, Kolkata vide Appeal No. 220/CIT(A)-XXXII/10-11/49(4)/Kol dated 22.09.2011. Assessment was framed by ITO, Ward-49(4), Kolkata u/s. 143(3) of Income Tax Act, 1961 (hereinafter referred to as Act ) for AY 2008-09 vide his order dated 31.12.2010. 2. Brief facts of this case are that assessee is seller of country spirit. During relevant year, assessee made purchases from one M/s. Bhattacharya Bottling Plant Pvt. Ltd. (in short BBPPL). Ld. AO made enquiries u/s. 133(6) of Act from BBPPL and basing on reply received from them found that payment for purchases worth Rs.40,95,282/- was made in cash in excess of Rs. 20,000/- each. AO observed that assessee had offered no explanation at all to show cause notice issued to them disallowed such purchases u/s. 40A(3) of Act and added back to income of assessee. So also basing reply received u/s. 133(6) of Act from M/s. BBPPL AO further observed that in Books of BBPPL sales to assessee were Rs.2,40,99,253/- whereas in assessee s books purchase was entered only to tune of Rs.2,30,40,228/-, leaving difference of Rs.10,59,025/-. AO further observed that assessee had not shown stock of any such goods in his Balance Sheet as such, AO concluded that assessee must have sold these goods out of books of account. On this transaction, AO calculated seed capital at Rs. one lac and gross profit at Rs.6.91% and reached to sum of Rs.73,178/- . He added these two amounts also to income of assessee. 2 ITA No. 142/Kol/2012 Ashirbad Enterprise., AY 2008-09 3. Challenging these findings, assessee carried matter in appeal and Ld. CIT(A) by way of impugned order observed that neither before AO nor before him assessee offered any explanation, details and evidences in respect of their contention on additions except stating that there is business expediency and that amount of purchases made by it from M/s. BBPPL was Rs.2,30,40,228/- only and additions were made on presumption. Observing so, Ld. CIT(A) dismissed appeal on these aspects and confirmed order of AO. 4. Challenging said findings of Ld. CIT(A), AO filed this appeal before Tribunal on following grounds: 1. For that in facts and circumstances of case Ld. CIT (Appeals)-XXXII/Kolkata, erred in law and was not justified in: (a) reducing addition of Rs.40,55,282/- only by Rs.20,000/- and confirming balance amount of Rs. 40,35,282/- which amount has been added unlawfully by Ld. Assessing Officer on account of disallowance u/s 40A(3), without giving due and judicious consideration to facts of case and Proviso to section 40A(3). (b) confirming addition of Rs.73,178/- unlawfully made by Ld. Assessing Officer on account of alleged undisclosed profit; (c) confirming addition of Rs.1,00,000/- unlawfully made by Ld. Assessing Officer on account of seed capital. 2. For that while passing his order ld. C.I.T. (Appeals) did not at all give proper and judicious consideration to Written Submission of appellant filed before him in course of hearing of appeal case and as such there has been mis-carriage of justice. 5. At time of hearing, Ld. AR argued that pursuant to Rules framed by State Government of West Bengal assessee had to pay monies to credit of wholesale licencees who is M/s. BBPPL in this case, as such provisions of section 40A(3) of Act have no application in view of business expediency. It is further contended by him that Rule 6DD(a)(ii) of I. T. Rules, 1962 (hereinafter referred to as Rules ) is applicable. It is submitted that M/s. BBPPL was appointed by State Government by way of Notification for collection of cost price, bottling charges etc. as such, payments made to bank account of such wholesale licencee shall be treated as payment made to Government and consequently disallowance is not sustainable in view of payments under Rule 6DD(b) of Rules which provides for exemption where payment was made to Government. Further contention of Ld. AR is that wholesale licencee appointed by way of notification shall be treated as agent of State 3 ITA No. 142/Kol/2012 Ashirbad Enterprise., AY 2008-09 Government and they answered description of warehouse under Rule 2(vii) of West Bengal Excise Rules, 2005 as such, it has to be deemed as warehouse so established by State Excise Commissioner and State Government establishment, and State Government receives monies from retail vendors only through such wholesale licencee. Hence, assessee falls under exception provided in Rule 6DD(k) of Rules. Basing on these contentions, he prayed before us to delete additions made u/s. 40A(3) of Act. 6. It is further contended by Ld. AR of assessee that three cheques issued to M/s BBPPL were dishonoured and such dishonour was not reflected in books of M/s. BBPPL and subsequently, there was reconciliation of bank statement which is not taken into consideration by authorities below. When this difference of Rs.10,59,025/- was reconciled question of seed capital or G.P. calculation thereon does not arise at all. For these reasons, he prayed to delete addition of Rs.1,73,178/- also. 7. On other hand, Ld. DR submitted that payment in cash is not legal tender and assessee is expected to make payments as per law. Further, there was no proper explanation from assessee to notices issued to them as observed by authorities below as such, authorities are justified in making additions. 8. Now, point that arises for our consideration in this matter is whether authorities below are justified in disallowing purchase expenses u/s. 40A(3) of Act and also adding back Rs.1,73,178/- to income of assessee on ground of purchase out of books? 9. assessee is retail vendor of country liquor which is excisable commodity. sales and purchases are controlled by State Government and earlier retail sellers used to deposit cost price, excise duty, bottling charges etc. in treasury but subsequently Excise Department by way of Notification dated 29.08.2005 changed procedure. As per this procedure vide clause 6(2) no retail vendor of country spirit shall deposit duty directly into local treasury for issue of country spirit to be taken by him from warehouse concerned, but duty, cost price, bottling charge, if there be any, at prescribed rate and other imposition, as may be prescribed by law, shall be paid by retail vendor to credit of wholesale licensee concerned. assessee claims that State Government by way of notification appointed M/s. BBPPL to be wholesale 4 ITA No. 142/Kol/2012 Ashirbad Enterprise., AY 2008-09 licensee for collecting cost price, excise duty, bottling charges etc. However, it is pertinent to note at this juncture but no such notification is produced before us to sustain this statement of assessee that there is any such appointment. 10. Ld. Counsel for assessee drew our attention to Rule 2(vii) of West Bengal Excise Rules, 2005 wherein warehouse was defined and section 22 of West Bengal Excise Act where exclusive privilege of manufacture and sale of country liquor was granted to such bottling plant. He also took us to Rule 6DD(b) of Income Tax rules, wherein it was stated that where payment is made to Government and under rules framed by it such payment is required to be made in legal tender and also to Rule 6DD(k) of Rules which states that where payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person. Ld. AR placed reliance on decision reported in M/s. Amrai Pachai & C.S. Shop, ITA No. 1251/Kol/2011 dated 15.01.2014 wherein coordinate bench of this Tribunal on comprehensive consideration of Rule 6(2) of Rules under notification issued in Calcutta Gazette, Tuesday 20th September, 2005 and 6DD(b) of I. T. Rules held that payments made by assessee to wholesale licensee for purchase of country spirit are protected by exemption in terms of rule 6DD(b) of I. T. Rules. He further placed reliance on decision of Coordinate Bench of this Tribunal in Ramnagar Pachwai & C.S.(S) Shop, in ITA No. 148/Kol/2015 wherein this Tribunal considered similar set of facts with reference to Rule 2(vii) of West Bengal Excise Rules section 22 of West Bengal Excise Act, Rule 6DD(b) and Rule 6DD(k) of I. T. Rules in light of observations of this Tribunal in Amrai Pachai & C.S. Shop, supra and came to conclusion that case of assessee in that case falls under exception provided in Rule 6DD(b) and Rule 6DD(k) of I. T. Rules and disallowance made u/s. 40A(3) of Act was deleted. Ld. AR submits that facts in case on hand are identical to facts of above case. 11. We have carefully perused record and find that no notification in respect of appointment of M/s. BBPPL as wholesale licencee is placed before us to consider status of such entity with reference to different provisions and citations placed before us. It is not possible to reach any conclusion in absence of such evidence. Further, none of contentions raised before us were canvassed before AO and AO had no opportunity of considering them. We, therefore, in these circumstances, feel it just and proper to set 5 ITA No. 142/Kol/2012 Ashirbad Enterprise., AY 2008-09 aside orders of lower authorities and restore matter to file of AO for fresh adjudication after giving reasonable opportunity of being heard to assessee. Therefore, this ground of appeal of assessee is allowed for statistical purposes. 12. Now, coming to ground no. 1(b) and (c), AO recorded in his order that there is no explanation offered by assessee on aspect of purchase out of record in spite of opportunity provided to them as such, he had to proceed in absence of any explanation of assessee to make additions on presumptive basis. So also order of Ld. CIT(A) reads that even before him, assessee had not offered any explanation, details and evidence on this aspect. However, before us, assessee produced by way of paper book vide page no. 87 reconciliation statement of sales figures. Since it was not produced before AO and it requires investigation by following procedure under law, on this aspect, we feel it just and proper to set side orders of lower authorities and restore matter to file of AO for fresh adjudication after giving reasonable opportunity of being heard to assessee. We direct assessee to produce all material before AO and cooperate with him to reach proper and judicious conclusion and to adjudge proper tax liability. Therefore, this ground of appeal of assessee is also allowed for statistical purposes. 13. At time of hearing before us, Ld. AR did not press ground no. 2 and hence, same is dismissed as not pressed. 14. In result, appeal of assessee is allowed for statistical purposes. Order pronounced in open court on 28.09.2016 Sd/- Sd/- (P. M. Jagtap) (K. Narasimha Chary) Accountant Member Judicial Member Dated : 28th September, 2016 Jd.(Sr.P.S.) 6 ITA No. 142/Kol/2012 Ashirbad Enterprise., AY 2008-09 Copy of order forwarded to: 1. APPELLANT M/s. Ashirbad Enterprise, Baguiati C. S. Shop, Baguiati, Kolkata-700 059. 2 Respondent ITO, Ward-49(4), Kolkata. 3. CIT(A), Kolkata 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order, Asstt. Registrar. M/s. Ashirbad Enterprise v. Income-tax Officer, Wd-49(4), Kolkata