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Indrajit Paul, C/o. D.K. De Sarkar and Co. Versus Income Tax Office, Asansol Ward-2 (3) , 54, Asansol

2016 (8) TMI 71 - ITAT KOLKATA

Disallowance of cash payment u/s 40A(3) - Held that:- Genuineness of the payment has not been doubted by the lower authorities and various courts have held the same issue in favour of the assessee, where genuineness of the parties to whom payment in cash was not subject matter of the dispute. We find in the similar facts and circumstances where the genuineness has not been doubted, the Hon’ble jurisdictional High Court in the case of Girdharilal Goenka vs. Commissioner of Income Tax (1988 (12) T .....

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ings is very law comparing to the status of the assessee as he was owing a multi-storey building, car etc. The drawings were utilised towards municipal tax liability, the electricity expenses, household expenses, using motor car running expenses, road tax, car insurance and maintenance, expenses towards social obligation, daughter’s education expenses. Accordingly, additions correctly made. - Decided against assessee - ITA No.2477/Kol/2013 - Dated:- 15-7-2016 - SHRI WASEEM AHMED, AM & SHRI S .....

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payment by your appellant and addition of ₹ 26,05,178.00 on account of cash payment is bad in law as well as on fact. 3. For that addition of ₹ 60,000.00 on account of short drawings is bad in law as well as on fact. 2. The first issue raised by the assessee in ground of appeal is that the Ld. CIT(A), erred in confirming the order of AO by disallowing the cash payment of ₹ 26,05,178.00 under the provisions of Section 40A(3) of the Act. 3. Facts of the case are that the assessee .....

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, copy of purchase and sale ledger, party ledger, books of account comprising cash book, ledger etc. The AO during assessment proceedings found that the payment exceeding ₹ 20,000/- in cash for the purchases of tickets has been made to M/s Vira Enterprises and M/s Best & Co. The AO gathered this information after issuing notice u/s.133(6) of the Act to the above stated parties. On query for the violation of the provisions of Section 40A(3) of the Act, read with rule 6DD of Income Tax R .....

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uppliers used to give statement of collections to the assessee and accordingly the assessee used to record in his books of account as the cash collected and simultaneously used to show the payment to the suppliers. However, factually there was no movement of cash at all. It was an adjustment entry which is allowed as per clause d of Rule 6DD of the Income Tax Rules. However, the AO has rejected the plea of the assessee by holding that there was no adjustment entries passed in the books of accoun .....

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y M/s Best & Co. and Vira Enterprises were collecting money from the retailers on behalf of the assessee. Thereafter the amount which was payable by the assessee to the suppliers on account of purchases of lottery tickets used to be adjusted with the collections made by the supplier. However, ld. CIT(A) disregarded the claim of the assessee by observing as under :- 10. The appellant claimed that Rule 6DD(d) applies in his case. Rule 6DD(d) reads as under :- (d) where the payment is made by w .....

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plies in the context of the case. 11. Considering all aspects discussed in paragraph 7 to 10, I hold that the Assessing Officer was justified in invoking section 40A(3) in the instant case. Accordingly, I dismiss the ground. Being aggrieved by this order of ld. CIT(A) assessee came in second appeal before us. 5. The ld. AR before us submitted that the retailers appointed by the assessee used to sell the tickets on a particular limited local area on cash basis. To increase sales and quick debt re .....

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accounting entry is correct but the so-called fact i.e. cash payment by the assessee is not correct. Ld. AR further submitted that the case of the assessee is duly covered under the Rule 6DD(k) of Income Tax Rules, 1962. This payment made in cash should also be allowed after considering the business expediency and other relevant factors. As many retailers were not having bank account then it was necessary to collect the cash from them and accordingly payment was realised in cash. Ld. AR also su .....

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sallowed cash payment under the provisions of Section 40A(3) of the Act and the same was confirmed by the ld. CIT(A). At the outset, we find that genuineness of the payment has not been doubted by the lower authorities and various courts have held the same issue in favour of the assessee, where genuineness of the parties to whom payment in cash was not subject matter of the dispute. We find in the similar facts and circumstances where the genuineness has not been doubted, the Hon ble jurisdictio .....

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supposes that the transaction must be genuine transaction. In this case, genuineness of the transactions has not been disputed by the Revenue authorities. The only ground is the delay in making payment. It is not in dispute that it is the first year of the business of the assessee which was started in December, 1973, and the accounting year ended on 22nd October, 1974, and this was the first year of assessment. The payments were made almost before the close of the accounting year before Dewali. .....

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transactions was not doubted or disputed. The ITO has to take a pragmatic view of the matter. The ITO should take a practical approach to problems and strike a balance between the direction of law and hardship to the assessee. He should not enmesh himself in technicalities. After all, the object is not to deprive the assessee of the deduction which he is otherwise entitled to claim. Where the amount was paid in cash or received in cash, the Assessing Officer has to find out whether the transact .....

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cash. A seller may not be willing to accept cheques; cash payment may be made at the request of the payee who is also an assessee and a certificate to that effect filed; absence of banking facilities in places where cash payments are made. All such cases would come within the purview of exceptional or unavoidable circumstances. On the facts of this case, where the assessee has satisfied the Assessing Officer as to the genuineness of the payment and the identity of the payee, the circumstance th .....

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lf would not take the case out of the ambit of exceptional or unavoidable circumstances referred to in r. 6DD(j). Further Ld. AR in support the claim of assessee that has submitted the confirmation from M/s Vira Enterprises stating that there was an agency between the assessee and Vira Enterprises which is placed on record. Respectfully following the aforesaid decisions, we are inclined to set aside the orders of lower authorities. AO is directed accordingly, hence, this ground raised by assesse .....

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