TMI Blog2016 (9) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/Kol/2014 - - - Dated:- 12-8-2016 - Shri Waseem Ahmed, Accountant Member and Shri S.S.Viswanethra Ravi, Judicial Member For The Appellant Shri Ravi Tulsiyan, FCA For The Respondent : Shri Sallong Yaden, Addl.CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- Both appeals filed by the assessee are against the different orders of Commissioner of Income Tax (Appeals), Asansol of even date 09.12.2013. Assessments were framed by ITO Ward-2(2), Asansol u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his orders dated 17.11.2011, 17.12.2012 13.12.2012 for assessment years 2009-10 2010-11 respectively. Shri Ravi Tulsiyan, Ld. Authorized Representative appeared on behalf of assessee and Shri Sallong Yaden, Ld. Departmental Representative appeared on behalf of Revenue. 2. Since common grounds are involved in both the appeal of assessee except figures, therefore they were heard together and are being disposed of by way of this consolidate order for the sake of convenience. We, therefore, are taking the facts of the case for the AY 2009-10 as a lead case for the sake of convenience. The grounds raised by the assessee per its ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier. The AO observed that there is a clear violation of the provisions of Sec. 40A(3) of the Act read with Rule 6DD of the IT Rules, 1962 ( the Rule for short). Accordingly, AO disallowed the sum of ₹62,48,722/- and added to the total income of assessee. 5. Aggrieved, assessee preferred an appeal before Ld. CIT(A), who confirmed the action of AO by observing as under:- 5. In response, after adjournments, the case was posted for 03.12.2013. The Authorized Representative submitted objections to my proposal in writing. I had gone through the same. The gist of submission is that in view of provisions of West Bengal Excise (Supply of Country Spirit on Payment of Duty) Rules, 2005, exemption under rule 6DD(b) and rule 6DD(k) are available. Reasons as to why rule 6DD(b) and rule 6DD(k) are not applicable has already been communicated in the notice issued by me but specific points raised have not been addressed. It was also claimed that the bottling plant has never accepted cash. Section 40A(3) mandates that payment other than by way of account payee cheque or Demand Draft entails disallowance. 6. Rules 4 and 5 of West Bengal Excise (Supply of Country Spirit on payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lkata in ITANo.1603/Kol /2011 dated 01.06.2016. The relevant extract of the order is reproduced below : 11.1 The provision of Section 40A(3) was inserted by the Finance Act 1968. The purpose for bringing the section was mentioned in the explanatory note Para 73 which read as under : It will be pertinent to go into the intention behind introduction of provisions of section 40A(3) of the Act at this juncture. We find that the said provision was inserted by Finance Act 1968 with the object of curbing expenditure in cash and to counter tax evasion. The CBDT Circular No. 6P dated 06.07.1968 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. 11.2 In this regard, it is pertinent to get into the following decisions on the impugned subject:- Attar Singh Gurmukh Singh vs ITO reported in (1991) 191 ITR 667 (SC) Section 40A(3) of the Income-tax Act, 1961, which provides that expenditure in excess of ₹ 2,500 (Rs.10,000 after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts made u/s 40A(3) in the process of assessment. We, therefore, delete the addition of ₹ 17,90,571/- and ground no.1 is decided in favour of the assessee. CIT vs Crescent Export Syndicate in ITA No. 202 of 2008 dated 30.7.2008 Jurisdictional High Court decision It also appears that the purchases have been held to be genuine by the learned CIT(Appeal) but the learned CIT(Appeal) has invoked Section 40A(3) for payment exceeding ₹ 20,000/- since it is not made by crossed cheque or bank draft but by hearer cheques and has computed the payments falling under provisions to Section 40A(3) for ₹ 78,45,580/- and disallowed @ 20% thereon ₹ 15,69,116/-. It is also made clear that without the payment being made by bearer cheque these goods could not have been procured and it would have hampered the supply of goods within the stipulated time. Therefore, the genuineness of the purchase has been accepted by the ld. CIT(Appeal) which has also not been disputed by the department as it appears from the order so passed by the learned Tribunal. It further appears from the assessment order that neither the Assessing Officer nor the CIT(Appeal) has disbelieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of tax on income earned out of such transaction and, secondly, to inculcate the banking habits amongst the business community. Apparently, this provision was directly related to curb the evasion of tax and inculcating the banking habits. Therefore, the consequence, which were to be fallen on account of non-observation of Section 40A(3) must have nexus to the failure of such object. Therefore, the genuineness of the transactions being free from vice of any device of evasion of tax is relevant consideration. With regard to the purpose of bringing the provisions of section there is no doubt about the identity of the party. The ld. AR has directly deposited the cash in the account of the companies and has produced the sales bills of the company. So in the instant case, there is no evasion of tax by claiming the bogus expenditure in cash. In view of above facts and circumstances of the case and relied on the various case laws cited above, we are inclined to reverse the order of lower authorities. Hence this ground of appeal of the assessee is allowed. 7. In the result, assessee s appeal stands allowed. Coming to ITA No.306/Kol/2014 for AY 10-11. 8. As stated earli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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