TMI Blog2016 (1) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... 6P dated 6.7.1968 reiterates this view that “this provision is designed to counter evasion of a tax through claims for expenditure shown to have been incurred in cash with a view to frustrating proper investigation by the department as to the identity of the payee and reasonableness of the payment.” - Decided in favour of assessee - I.T.A No. 1448/Kol/2011 A.Y 2008-09 - - - Dated:- 18-11-2015 - Shri M. Balaganesh, Accountant Member, and Shri S.S. Viswanethra Ravi, Judicial Member For The Appellant: Shri Siddhartha Pratim Datta, Advocate For The Responden: Md. Ghyas Uddin, JCIT, ld.Sr.DR ORDER SHRI M.BALAGANESH, AM This appeal of the assessee arises out of the order of the Learned CIT(A), XXXVI, Kolkata in Appeal No. 515/CIT(A)-XXVI/Kol/Wd-4, Nadia/10-11/224 dated 12/08/2011 for the Asst Year 2008-09 passed against the order of assessment framed by the Learned AO u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. Shri Siddhartha Pratim Datta, Advocate, learned AR argued on behalf of the assessee and Md.GhyasUddin,JCIT,learnedSr.DR argued on behalf of the revenue. 3. The only issue to be decided in this appeal is as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned AO relying on all these facts sought to disallow a sum of ₹ 60,50,890/- u/s 40A(3) of the Act. 4.1. On first appeal, the Learned CITA upheld the addition of ₹ 60,50,890/- made by the Learned AO and further sought to disallow another sum of ₹ 54,01,473/- towards cash payments made for purchases thereby enhancing the assessment by ₹ 54,01,473/- Aggrieved, the assessee is in appeal before us by raising the several grounds. Though the assessee had raised several grounds in his appeal, the central ground revolves only around disallowance u/s 40A(3) of the Act. Hence all the grounds are taken up together for the purpose of adjudication herein. 4.2. The Learned AR reiterated the facts stated before the lower authorities. He argued that the genuineness of the cash payments made by the assessee is not disputed by the revenue and hence no disallowance u/s 40A(3) of the Act could be made. He argued that the assessee has made payment to his agent Mr.Amit Dutta and hence payments would fall under the exception provided in Rule 6DD(k) of the IT Rules. In response to this, the Learned DR vehemently supported the orders of the lower authorities. 4.3. We have h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or crossed bank draft is insisted upon to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of income from undisclosed sources. The terms of section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing officer the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of section 40A(3) and rule 6DD that they are intended to regulate business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions. CIT vs CPL Tannery reported in (2009) 318 ITR 179 (Cal) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash in their bank account If assessee would not make cash payment and make cheque payments alone, it would have received recharge vouchers delayed by 4/5 days which would severely affect its business operation Assessee, therefore, made cash payment Whether in view of above, no disallowance under section 40A (3) was to be made in respect of payment made to principal - Held, yes [ Paras 21 to 23] [ in favour of the assesse] Sri Laxmi Satyanarayana Oil Mill vs CIT reported in (2014) 49 taxmann.com 363 (Andhrapradesh High Court) Section 40A(3) of the Income-tax Act, 1961, read with Rule 6DD of the Income-tax Rules, 1962 Business disallowance Cash payment exceeding prescribed limit (Rule 6DD) Assessee made certain payment of purchase of ground nut in cash exceeding prescribed limit Assessee submitted that her made payment in cash because seller insisted on that and also gave incentives and discounts Further, seller also issued certificate in support of this Whether since assessee had placed proof of payment of consideration for its transaction to seller, and later admitted payment and there was no doubt about genuineness of payment, no disallowance c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erve such norms in the present case are much higher than which were prescribed under the Madhya Pradesh Sales Tax Act. Apparently, it is a relevant consideration for the assessing authority under the Income Tax Act that before invoking the provisions of section 40A(3) in the light of Rule 6DD as clarified by the Circular of the CBDT that whether the failure on the part of the assessee in adhering to requirement of provisions of section 40A(3) has any such nexus which defeats the object of provision so as to invite such a consequence. We hold that the purpose of section 40A(3) is only preventive and to check evasion of tax and flow of unaccounted money or to check transactions which are not genuine and may be put as camouflage to evade tax by showing fictitious or false transactions. Admittedly, this is not the case in the facts of the assessee herein. The payments made in cash to Shri. Amit Dutta had been duly acknowledged by him in an independent deposition given by him before the Learned AO which was admittedly taken behind the back of the assessee. It is also pertinent to note that the Hon ble Rajasthan High Court in the case of Smt.Harshila Chordia vs ITO reported in (2008) 298 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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