TMI Blog2013 (5) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... ances - then to that extent it can be said that the assessee has advanced the money interest-free, otherwise also out of assessees’ own capital - Matter Remanded to AO - ITA.No.835 & 1471/PN/2010, ITA.No.836/PN/2010 & 1241/PN/2011, ITA.No.834/PN/2010 & 1242/PN/2011 & ITA.No.1472/PN/2010 - - - Dated:- 20-5-2013 - SHRI R.S.PADVEKAR, JUDICIAL MEMBER AND SHRI R.K.PANDA, ACCOUNTANT MEMBER. For the Petitioner : Shri Sunil Pathak For the Respondent : Shri Santosh Kumar ORDER PER R.S.PADVEKAR, JM: In this batch of seven appeals which are filed by the four assessees, the issues as well as facts are identical and, hence, this batch of seven appeals are disposed of by this consolidated order for the sake of convenience. The assessment years involved are 2006-07 and 2007-08. The assessees have challenged the respective orders of the Ld. CIT(A)-II, Pune, for the A.Ys. 2006-07 and 2007- 08. 2. The first issue which arises for our consideration is the disallowance made by the Assessing Officer invoking the provisions of section 40A(3) of the Income Tax Act, 1961. For avoiding the repetition of facts, we prefer to take appeal of Shri Manikchand for A.Y. 2006-07 bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006-07 836/PN/2011 25,81,731 6 Shri Santosh Manikchand Raisoni 2007-08 1242/PN/2011 41,92,284 7 Smt.Sapna Sanjay Raisoni 2007-08 1472/PN/2010 31,57,610 3. The issue was carried before the Ld. CIT(Appeals) in all these cases but without success. Now the assessees are in appeal before us. The Ld. Counsel for the assessees vehemently argued that section 40A(3) is brought on the statute book for curbing the circulation of black money and if payments made are bonafide, then there is no requirement, as per the intention of the Legislature, to make the disallowance. He further argues that for reducing the hardship, Rule 6DD is incorporated which is in the nature of proviso to sub-section (3) to section 40A. He submits that as per clause (b) to Rule 6DD, if payments are made to the Government, those payments are out of the harsh provisions of section 40A(3). The Ld. Counsel submits that assessees are to do the business and it is undisputed fact that as per the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment, Government of Maharasthra, etc., can be taken out of the provisions of section 40A(3). Admittedly, the provisions of section 40A(3) are brought on the statute book with intention to curb and also to keep check on the circulation of the black money. The said provision was judicially tested before the Hon ble Supreme Court in the case of Attar Singh Gurmukh Singh vs. ITO 191 ITR 667, in which the constitutional validity of the said provision was challenged. The Hon ble Supreme Court held that the said provision was constitutionally valid and to reduce the rigors or hardship which may be caused while implementing the said provision, care has been taken by the Parliament by introducing Rule 6DD. 5.1. So far as the cases before us are concerned, the facts are not in dispute. While participating in the auction for purchase of scrap these assessees have made the payment in cash which are in excess of ₹ 20,000/-. We have to consider the Rule 6DD as it was applicable for the A.Ys. 2006-07 and 2007-08. The main thrust of argument of the Ld. Counsel is that MSRTC, MSEB, Zilla Parishad, Public Works Department are instrumentalities of the Government, may be discharging the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question to be addressed is as to whether the Regulations in terms of which the payment has been made by the assessee, carry the force of law or not. In this connection, we may refer to the judgment of the Hon'ble Supreme Court in the case of U P Warehousing Corporation (supra) relied upon by the appellant before us. The status of the entity before the Hon'ble Supreme Court was analogous to that of the appellant before us. As has been observed earlier, the appellant is a Corporation established by the State Government in exercise of the powers conferred by sub-sections (1) (3) of section 28 of the Agricultural Produce (Development Warehousing) Corporation Act, 1956 (28 of 1956), which was subsequently replaced by Warehousing Corporation Act, 1962 (58 of 1962). The appellant is a statutory body fully controlled and managed by the Government. The entity before the Hon'ble Supreme Court was also a similarly established Corporation, being a statutory body wholly controlled and managed by the State Government of UP. The Hon'ble Supreme Court referred to its earlier decision in the case of Sukhdev Singh (supra) and addressed the question as to whether the Regulations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, who cannot deviate from the conditions of service. 11. The Hon'ble Supreme Court held that the regulations framed by the Corporations, being framed under the statutory provisions would have the force of law. The Hon'ble Supreme Court further went on to hold that there was no distinction on principle between a person directly under the employment of the Government and a person under the employment of an agency or instrumentality of the Government or a Corporation, set up under a statute or incorporated but wholly owned by the Government. 12. In the background of the legal position explained by the Hon'ble Supreme Court, in our view, the Service Regulations framed by the appellant Corporation for the terms and conditions of employment and services of their employees carry a statutory force. In this context, we have perused the Maharashtra State Staff Warehousing Corporation (Staff) Service Regulations and find that the same have been framed with the previous sanction of the Government of Maharasthra in exercise of the powers conferred by section 42 of the Warehousing Corporation Act, 1962 (58 of 1962). Therefore, the impugned contribution made by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur opinion, if we apply the test of the control and management as well as the equity participation, MSRTC is a State within Article 12 of the Constitution. Applying the above test, the Hon ble Supreme Court has held, as discussed hereinabove, that the autonomous bodies like State Road Transport Corporation or Warehousing Corporation where there is a full control by the Government, either Central or State, these are the instrumentalities of the Government only. 12. The term Government is very much wide under the constitutional set up. Government may be Central or State, or it may be Local Government which is envisaged by our Constitution, like Zilla Parishad, Municipal Corporations, Municipal Councils, Panchayat Samithis, etc. The Public Works Department is part of the Government. In our opinion, this aspect has not been considered by the authorities below and they have closed door to the assessees to make out the case for examination under Rule 6DD. We are, therefore, of the opinion that in the light of our above discussion, the plea of the assessees need reconsideration by the Ld. CIT(Appeals). We, therefore, set aside the issue in respect of the disallowance made u/s.40A(3) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntilal Bafna ₹ 15,000 4. Shri Chandrakant Rite ₹ 15,000 5. Shri Satish Chede ₹ 15,000 6. Ms.Nisha Chordiya ₹ 15,000 7. Shri Samir Mahesh Shah ₹ 15,000 8. Sagar S. Abad ₹ 15,000 Rs.14,55,000 16. The assessee did not file any confirmation letters nor the PANs before the Assessing Officer. Before the Ld. CIT(A) the assessee filed some additional evidence in the form of receipt of ₹ 13,59,678/- dated 20.03.2006 issued by MSRTC alongwith delivery vouchers issued for goods delivered. The assessee contended that the payment was directly made by Shri Mohammed Javed Subhedar to MSRTC on appellant s behalf on 20.03.2006. The fact remained that except filing the receipt from MSRTC, no other evidence has been filed. If the party has made direct payment to MSRTC, then the assessee could have filed con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing has been filed and argument made before the Ld. CIT(A) was reiterated. In our opinion, in the case of this assessee for A.Y. 2006-07, assessee has failed to discharge the burden by proving the identity of the creditor, genuineness of the transaction as well as creditworthiness of the said persons to advance the said huge amounts. In our opinion, no interference is called for as the Ld. CIT(A) has rightly confirmed the addition made by the Assessing Officer. Hence, relevant Grounds taken by the assessee in the A.Y. 2006-07 are dismissed. 20. In the case of the said assessee in the A.Y. 2007-08, the Assessing Officer made the addition of ₹ 40,98,148/-. Assessee had shown the credit balances in the names of following persons: 1. Shri Amjad Ali Khan Rs.21,80,000 2. Shri Ranjit Singh Rajpal Rs.12,34,713 3. Shri Javed M.Subedar Rs.11,78,148 21. Assessee produced before the Assessing Officer ledger extract of Shri Ranjit Singh Rajpal alongwith receipts/vouchers issued by MSRTC. The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Shri Santosh M.Raisoni 2006-07 ₹ 14,080 5. Shri Santosh M.Raisoni 2007-08 Rs.3,59,598 6. Smt.Sapna S.Raisoni 2007-08 Rs.1,23,728 24. In respect of Shri Manikchand in the A.Y. 2006-07 it was noticed by the Assessing Officer that the assessee has advanced ₹ 53,23,709/- but assessee has charged the interest only on the three parties consisting the amount of ₹ 12,70,150/-. Hence, the assessee did not charge the interest on the amount of ₹ 40,53,559/-. At the same time assessee had debited the amount of ₹ 1,62,572/- towards the interest which was claimed to have been paid to six individual and ₹ 65,240/- to G.E. Capital. Assessee explained before the Assessing Officer that the sum of ₹ 13,48,085/- is given as interest free loan to sister concern. In respect of ₹ 13,58,790/- money was advanced to different parties like Deepchand Oswal, S.B.Sankla, Ashok Jain, which was in the nature of trading advances. Assessee also pleaded that the capital account balance as on 31.03.2006 was to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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