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TMI Blog2016 (9) TMI 1000X X X X Extracts X X X X X X X X Extracts X X X X ..... er rent , and the same may please be deleted. 4. For that the appel lant craves leave to add, al ter, amend any further grounds of appeal before or at the t ime of hearing. " 3. Ground no.1 is general in nature and requires no adjudication. Hence, the same is dismissed. 4. During the course of hearing before us the ld.AR for the assessee has not pressed ground no.3. Hence, the same is dismissed 5. Ground 2 is against disallowance u/s 40A(3) amounting to Rs. 18,88,560/- made by the Assessing Officer. 6. The Assessee is a firm filed engaged in the business of acting as dealer in purchase and sale of kerosene oil. In the course of assessment proceedings, the Assessee filed list of persons/concerns from whom purchase of Kerosene Oil were made along with list of persons to whom the sales were made. The AO issued notice u/s.133(6) of the Income Tax Act, 1961 (Act) to verify the entries in the ledger account of the parties from whom the Assessee effected purchases and sales as per the books of accounts of the Assessee. The replies along copy of party ledger obtained from the parties from whom the purchase and sales were made by the assessee notices u/s. 133(6) of the Act were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lotment memo issued to the appellant ( in this case Crony Enterprise), by the Department of food and supplies for the purchase of kerosene oil, the assessee is required to make the payment in cash. (sample copies of allotment letters issued by sub-divisional controller, food and supply, Asansol , is already on record has been duly verified by the AO and found correct) In the allotment letter, there is clear direction to the AGENT to deliver the specified quantity of kerosene oil to the APPELLANT ( BIG DEALER ) on CASH PAYMENT. Therefore, when the appellant is working as a licensee being a part of the public distribution system of the Government of West Bengal, it is bound to make the payment as directed by the Government of West Bengal. He, therefore, submitted that in the case of the assessee neither the identity of the seller nor the genuineness of the purchase is doubtful. Moreover, the payment has been made as per the rate fixed by the Government of West Bengal. Against the above back drop, certain FACTS are admitted and uncontroverted: 1) The APPELLANT is a resident of CHAKDOLA village and he carries out his business of distribution of Kerosene Oil, from the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue we would like to draw your notice to the provisions of The Essential Commodities Act'55 . Sec 5 of the said Act '55 clearly specifies that " power to make orders or issue notification under section 3 shall, ---------- ---------------------------------------- --------------------------- direction, be exercised also by (a) such officer or authority subordinate to the Central Government, or ( b ) such State Government or such officer or such authority subordinate to a State Government" , Sec 2 of the said Act'55, empowers the Sub Divisional Office , with delegated powers of Collector. Sec 6 of the said Act: has overriding effect over all enactments : u Any order made under Section 3 shall have effect notwithstanding anything inconsistent herewith contained in any enactment other than this Act or ---------------------------- ------------------------------------------------ this Act". The above provisions of the Act'55, read with sec 3 of the said Act, makes it clear that a direction issued u/s 3 of the EC Act'55, by the Sub- Divisional Officer, is binding on the appellant and provisions of Sec 6 of the said Act, provides the overridi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der such circumstances as may be prescribed. Thus, the mandate of the proviso is to exempt the payment in violation of provisions of Sec. 40A (3) in such cases and under such circumstances as may be prescribed. The last sentence of the proviso, i. e. "having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors", is the guideline for the authority who has to prescribe the cases and circumstances under which the disallowance u/s. 40A (3) will not be made despite the payment exceeding Rs. 20,000/- other than by cross cheque/bank draft. In pursuance to this proviso, Rule 6DD has been brought into the Statute vide I. T. (Amendment) Rules, 1969 w. e.f 1.4. 1969. Rule 6DD prescribes the cases and the circumstances in which payment in a sum exceeding Rs. 20, 000/- may be made otherwise than by crossed, cheque drawn on a bank or a crossed bank draft. Thereafter this rule has been amended from time to time. Rule 6DD, as applicable to the assessment years involved in the appeal before us, reads as under:- "Cases and circumstances in which payment in a sum exceeding [twenty thousand] rupees may be made otherwise th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16.2. Rule 6DD(1) would be applicable where the payment is made by any person to his agent, who is required to make the payment in cash for goods or services on behalf of such person. Whereas Rule 600 (b) would be applicable "where the payment is made to Govt. and, under the rules framed by it, such payment is required to be made in legal tender." It was claimed by the assessee that as per the public distribution system in the state of West Bengal there is a chain of persons as follows - "Agent - Big dealer - M. R. dealers." The assessee purchases kerosene oil from the agent appointed by the Govt. of West Bengal and the assessee supplies kerosene oil to the M. R. dealers. However, whether the "agent" to whom the payment is made by the assessee can be said to be agent of the assessee within the meaning of clause (1) of Rule 6DD is an important question, because Rule 6DD(i) would be applicable only where the payment is made by the assessee to his agent. While claiming exemption under Rule 6oo(b), it was claimed by the assessee that the agent is the representative Govt. of west Bengal and, therefore, payment made to the agent being representative of Govt. of West Bengal is a pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Jamuria will take 15 days to clear. (f) His case is covered by Rule 6DD(b). 8. My views on the (a) to (f) above comments of Assessing Officer is as under: (a) Matter of fact. (b) Matter of fact. (c) The allotment letter is a printed order. In the order 'on cash payment at Govt. fixed price' is hand written, duly authenticated by Sub-Divisional Controller, Food and Civil supplies, Asansol. This order valid for 7 days is signed by two different persons implying that the hand written part was introduced later since as per Govt. Rules, at a particular point of time, only one person can hold charge of a post of officer. (d) The fact to be considered to decide availability of banks is point of payment and not point of sale. At point of payment, even if a payer has no bank account" has the option to purchase crossed Demand Draft. It is not proved that payment to M.R. Dealer is made at a point where the person (here M.R. Dealer) "ordinarily resides, or is carrying as any business, profession or vocation, in any such viillage or town". M.R. Dealer in this case is not located in Chakdola. (e) The matter is covered in (d) above. The appellant had option to pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Where the assessee incurs any expenditure** in respect of which payment is made, after such date (not being later than 31st day of March, 1969), as may be specified in this behalf by the Central Government by notification in the Official Gazette in a sum exceeding ***[twenty thousand] rupees otherwise than by $[an account payee cheque drawn on a bank or account payee bank draft] $$[twenty per cent of such expenditure shall not be allowed as a deduction]: Provided that where an allowance has been made in the assessment for any year not being an assessment year commencing prior to the 1st day of April, 1969, in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year the assessee makes any payment in respect thereof in a sum exceeding ***[twenty thousand] rupees otherwise than by $[an account payee cheque drawn on a bank or account payee bank draft] the allowance originally made shall be deemed to have been wrongly made and the $$$[Assessing Officer] may recompute the total income of the assessee for the previous year in which such liability was incurred and make the necessary amendment, and the provisions of section 154 shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the record and find force in the contention of the assessee that he has to make this cash payment to M/s. B.S.K.F3.S Ltd. out of business expediency in view of the fact that there was no branch of United Bank of India at the place where the business of the assessee is located. The assessee's case also finds support from the above mentioned decision in the case of ITO v. Shri Binod Kr. Aganuala decided by the hon'ble Income-tax Appellate Tribunal, Kolkata. We are therefore, of the opinion that the addition made by the Assessing Officer underSection 40A(3) of the Income-tax Act 1961 was not justified in the instant case." 13. From the above it is evident that the Income-tax Appellate Tribunal arrived at the conclusion that Section 40A(3) is not applicable because there was no branch of the United Bank of India at the place where the business of the assessee is located. Though in the order it is not mentioned which specific clause of rule 6DD was applicable, yet inference to Clause (h) which still exempt cash payment at a place not served by a bank can explain the decision. Rule 6DD(h) provides: (h) where the payment is made in a village or town, which on the date of such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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