S. 133(6)—Merely for want of Permanent Account Numbers, the AO is not justified in disbelieving the transactions by doubting the creditworthiness of the karigars and disallowing the payments made to karigars who have confirmed the receipt of amounts.

33 2010 TIOL 272 ITAT (Mum.)
ACIT v. Lakhi Games Impex Pvt. Ltd.
A.Y. : 2003-04. Dated : 29-1-2010

The assessee company was engaged in the business of import of
rough diamonds, cutting and polishing and thereafter export of the same. It had
claimed a sum of Rs.22,69,75,283 as labour charges paid to karigars. In the
course of assessment proceedings, particulars of individual recipients of labour
charges were furnished. The Assessing Officer (AO) issued notices u/s.133(6) to
five parties. Notice was served to one party and the other four notices were
returned unserved by the postal authorities. No reply was received from the
party to whom the notice was served. On being confronted, the assessee filed a
confirmation in respect of the said party. The assessee company also filed
confirmations of the other four parties to whom notices were issued but were
returned unserved. Since PAN in respect of all these five parties did not exist
in the confirmations, the AO doubted the creditworthiness of the parties and the
genuineness of the transactions. He disallowed the labour charges in respect of
these five parties.

Aggrieved, the assessee preferred an appeal to the CIT(A) who
observed that this is not a case of cash credit where creditworthiness has to be
examined. He held that non-availability of PAN cannot make a transaction as
non-genuine. He allowed the appeal filed by the assessee.

Aggrieved, the Revenue preferred an appeal to the Tribunal.

The Tribunal agreed with the finding of the CIT(A) that this
is not a case of cash credit and the issue relates to the allowability of
expenditure. Since the parties have confirmed to have received the payments,
merely for want of permanent account numbers the AO was not justified in
disbelieving the transactions by doubting the creditworthiness of the karigars.

The Tribunal upheld the order of the CIT(A) and the ground
raised by the Revenue was dismissed.