TMI Blog2016 (6) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... that the payments were genuine and the parties were identifiable. He was of the view that the assessee is further required to prove that due to exceptional and unavoidable circumstances as provided under the Rules, the payments were made in cash. Therefore, it is not a case of the Department that the payments so made in cash were not genuine. The reasons given by the assessee at every stage have not been disbelieved. Since these reasons are correct, they really make out a case of business expediency. In this view, respectfully following the judgment of the hon'ble Punjab and Haryana High Court in the case of Gurdas Garg (2015 (8) TMI 569 - PUNJAB & HARYANA HIGH COURT ), we hold that the payments cannot be disallowed under section 40A(3) of the Act. - Decided in favour of assessee Addition with regard to ahata income - Held that:- No infirmity in the order of the learned Commissioner of Income-tax (Appeals) as regards ahata income. The Assessing Officer nowhere in his assessment order, nor in the remand report controverted the fact that for running ahata one has to take licence from the excise authority. Neither the Assessing Officer has placed on record any material to show tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en maintained vend-wise since the payments to various parties were also made vend-wise. The Assessing Officer found that the total payment made to each party on a single day was invariably more than ₹ 20,000, which was in excess of the limit prescribed under section 40A(3) of the Act. When questioned on this, the reply of the assessee was that since there were 12 partners in the assessee-firm, the assessee could not open the bank account and, therefore, all payments had to be made in cash. The Assessing Officer rejected this explanation of the assessee and observed that though the purchases made have been made separately through different vends but these were admittedly made on behalf of the assessee-firm. Once a firm is constituted, the concept of separate group of vends ceased to exist. Accordingly, the payment in respect of various groups of vends separately had no meaning. These were payments made by or on behalf of the firm. The Assessing Officer was of the view that to be eligible for deduction as expenditure, the requisite conditions of the provisions of the Act are to be fulfilled. As all these payments were in excess of limit prescribed under section 40A(3) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been held to be not genuine, the same cannot be disallowed under section 40A(3) of the Act. The judgment of hon'ble jurisdictional Punjab and Haryana High Court in the case of Attar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667 (SC) was relied upon. The learned Commissioner of Income-tax (Appeals) forwarded the submissions of the assessee to the Assessing Officer and a remand report was called for. The Assessing Officer in his remand report dated September 17, 2013, reiterated the stand taken by him in the assessment order and further stated that the provisions of rule 6DD clauses (b) and (g) the Income-tax Rules as submitted by the assessee are not applicable in the given case. Copy of the remand report was provided to the assessee, who filed rejoinder to the said report as on October 15, 2013, where again the detailed submissions in this regard were made and it was also submitted that since TCS as required under section 206C of the Act of each vend separately under the permanent account number of each partner, the payment made by cash cannot be clubbed together. The submissions earlier made before the Assessing Officer and the learned Commissioner of Income-tax (Appeals) were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book filed by it. The submissions were made to emphasise the fact that all the transactions of cash payments were made independent of each other by different persons being partners at different places. Though the assessee is a registered firm, the records are being maintained by each partner separately. Even the stock register of each and every vend on day-to-day basis is also maintained separately for different vends. A few samples of the stock records were also shown to us. In the nutshell, it was argued that each and every item of purchase, sale, licence fee, capital investment, stock registers were being recorded independently and each one of the individual persons were carrying on the business independently and only for the limited purpose of avoiding the competition, they formed a partnership firm. The payment of more than ₹ 20,000 on a single day happened only if the cash payment made by different individual vends actually are clubbed together, whereas the case of the assessee is that if the payment is taken of each separate vend independently since the purchases and sales are made independently by all different parties, then no payment in excess of ₹ 20,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure : Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3) and this sub-section where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors : 10. Since heavy reliance was placed on a latest judgment of the hon'ble jurisdictional Punjab and Haryana High Court in the case of Gurdas Garg (supra), after perusing the said judgment we find that a very apt guidance is provided by the hon'ble High Court in deciding the issue in question. Therefore, at the very first instance, we would analyse the said judgment of the hon'ble jurisdictional High Court. In this case, the assessee was engaged in the business of trading in properties. Admittedly, certain payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business transactions. After analysing all these, the hon'ble High Court held that the Tribunal has not disbelieved the transactions or the genuineness thereof, nor has it disbelieved the fact of payments having been made, more importantly, the reasons furnished by the assessee for making the cash payments have not been disbelieved. This clearly makes out a case of business expediency. In this view, the hon'ble High Court held the payments to be outside the purview of section 40A(3) of the Act. 11. Taking the guidance from the abovesaid judgment of the hon'ble jurisdictional High Court, which is also a very recent judgment of the hon'ble High Court we now advert to analyse the case of the present assessee. The proposition laid down by the hon'ble High Court is quite unambiguous to the effect that even if the case of the assessee does not fall in any of the clauses of rule 6DD of the Income-tax Rules, invoking the provisions of section 40A(3) of the Act can be dispensed with if the assessee is able to prove the business expediency because of which it have to make the cash payments, the genuineness of the transactions have also to be verified. In the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the learned Commissioner of Income-tax (Appeals). 14. Since this ground only supports the order of the learned Commissioner of Income-tax (Appeals) and the finding in this regard has already been given in ITA No. 1155/Chd/2013, we do not find any need to adjudicate the same. 15. Ground No. 2 is with regard to ahata income of ₹ 6,40,000. 16. The brief facts of the case are that during the course of assessment proceedings, the Assessing Officer noted that the assessee has not shown any ahata income. The reply of the assessee was that it has not deposited any ahata fee and since there was no ahata income, it was not shown in the profit and loss account. The Assessing Officer was not satisfied with the reply of the assessee. He referred to the case of the sister concern of the assessee, M/s. Mehta and Co., which has shown income of ₹ 84,000 from ahata. He pointed out that M/s. Mehta and Co. was operating four liquor vends and had a turnover of ₹ 437.49 lakhs, while the assessee was operating 42 vends with a turnover of ₹ 2153.63 lakhs. Applying the ratio of turnover, the Assessing Officer estimated an amount of ₹ 6,40,000 as ahata income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned Commissioner of Income-tax (Appeals) as regards ahata income. The Assessing Officer nowhere in his assessment order, nor in the remand report controverted the fact that for running ahata one has to take licence from the excise authority. Neither the Assessing Officer has placed on record any material to show that the assessee has taken this licence or in fact, the assessee is running the ahata. In this view, making addition on account of ahata income on estimate basis that too, comparing the case of the assessee with that of another assessee is not correct. The action of the learned Commissioner of Income-tax (Appeals) in deleting the addition is found to be as per law. This ground of cross objection is dismissed. 21. The ground No. 3 of the cross objection is with regard to the addition of ₹ 20 lakhs made by the Assessing Officer on account of suppression of sales. 22. The facts of the case are that the Assessing Officer during the assessment proceedings observed that there was significant variation in the profit margin over purchases in respect of various vends. Rejecting the reply of the assessee filed in this behalf, the Assessing Officer held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctorily explained the wide variation in the profit margins of different vends. In these facts and circumstances, addition made by the Assessing Officer on this ground is deleted. This ground of appeal is accordingly allowed. 26. Considering the facts and circumstances of the case, we do not find any infirmity in the order of the learned Commissioner of Income-tax (Appeals) since it is a common fact that in the liquor business, transactions are done through cash. We observe that the Assessing Officer has though proposed to reject the books of account but has not given any finding as to the rejection of the books of account of the assessee. He has not been able to pinpoint any instance of suppression of sales and only on the basis of suspicion, he has made the addition, that too on the estimated basis. These reasons are not enough to make such an addition. In this view, we confirm the order of the learned Commissioner of Income-tax (Appeals). The ground of cross objection raised by the Revenue is dismissed. 27. The cross objection filed by the Revenue is dismissed. ITA No. 1176/Chd/2013 28. Since all the issues raised by the Department in this appeal are the same as r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
