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2016 (9) TMI 995 - ITAT KOLKATA

2016 (9) TMI 995 - ITAT KOLKATA - TMI - Addition u/s 40A(3) - bogus expenditure in cash - Held that:- The primary object of enacting Section 40A(3) were two folds- firstly, putting a check on trading transactions with the object to evade the liability 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, .....

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ny. So in the instant case, there is no evasion of tax by claiming the bogus expenditure in cash. - Decided in favour of assessee - ITA No.305-306/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 ( .....

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h 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 appeal are as under:- 1. That, the appellate order passed by Ld. CIT(A), is arbitrary, erroneous, and hence bad in law. 2. That, on the facts and circumstances of the relevant case, .....

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consider that the payment to excise had been made by the approved bottler here through its Current Account maintained with the State Bank of India, Asansol. iii) The Ld. AO had also failed to consider the circulars of Excise Deptt. Govt. of West Bengal issued with respect to the matter of payment of excise duty, VAT etc. AND; iv) The Ld. AO had failed to appreciate that the Circulars of Excise department, Govt. of West Bengal clearly says that Excise duty, VAT etc., to be paid through the whole .....

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l vendor of country spirit. The assessee for the year under consideration has filed his return showing business income of ₹1,76,520/- on 19.01.2010. Thereafter case was selected for scrutiny and accordingly notice u/s 143(2) r.w.s. 142(1) of the Act issued upon assessee on 15.09.2010. In compliance thereto, the assessee produced, books of account which were test checked with regard to balance-sheet and profit and loss account. 4.1 The assessee, during the year has made cash payment of S .....

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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 commu .....

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aid by individual dealers are debited to the advance. There is no remittance of case by case remittance of sums paid by dealers to bottling plant for subsequent remittance by bottling plant to Govt. the rules n where prescribe mandatory cash payment. 7. The appellant also relies on observations in paragraph 4 of the order of Hon'ble. Income Tax Appellate Tribunal in M/s Arpita Traders vs. ITO Ward-2 Cooch Behar in ITA No.1542/Kol/2012. Paragraph 4 is not a decision. It narrates a compulsive .....

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umstances of his case. If so established then naturally benefits (subject to meeting any other specified conditions, but what is needed is that compulsion is established by the appellant on the facts and circumstances of his case. If so established then naturally benefits (subject to meting any other specified conditions) of rule 6DD will follow. Here the appellant has failed to prove that there is a rule by which he has to pay the bottling plant by cash. No rule exists (even West Bengal Excise .....

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ee came in second appeal before us. 6. At the outset, we find that in the identical facts & circumstances this Co-ordinate Bench has decided the issue in favour of assessee in the case of Prabir Kumar Mullick Vs. CIT, Kolkata in ITANo.1603/Kol /2011dated 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 u .....

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vestigation 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 the 1987 amendment) would be allowed to be deducted only if made by a crossed cheque or crossed bank draft (except .....

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ossed bank draft. The payment by crossed cheque 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 A .....

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e 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) The second contention of the assessee that owing to business expediency, obligation and exigency, the assessee had to make cash payment for purchase of goods so essential for carrying on of his business, was also not disputed by the AO. The genuinity of transactions, r .....

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8 - 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 m .....

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dispute that the purchases were genuine. Anupam Tele Services vs ITO in (2014) 43 taxmann.com 199 (Guj) 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 limits (Rule 6DD(j)-Assessment year 2006-07 - Assessee was working as an agent of Tata Tele Services Limited for distributing mobile cards and recharge vouchers - Principal company Tata insisted that cheque payment from assessee s co-operativ .....

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[in favour of the assessee] Sri Laxmi Satyanarayana Oil Mill vs CIT reported in (2014) 49 taxmann.com 363 (Andhra Pradesh High Court) Section 40A(3) of the Income-tax Act, 1961, read with Rule 6DD of the Incometax 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 incent .....

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