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Smt. Shila Mondal Versus Commissioner of Income Tax (Appeals) Asansol, Office of the ITO, Ward-2 (2) , Asansol

2016 (9) TMI 1154 - ITAT KOLKATA

Addition u/s 40A(3) r.w.r 6DD - payment in a sum exceeding 20,000 rupees - depositing cash into the Bank Account of Supplier Asansol Bottling and Packaging Co. Pvt. Ltd. (Warehouse) against issue / purchasers of Country Spirit - 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 bu .....

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ut 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. - Decided in favour of assessee. - ITA No.336/Kol /2014 - Dated:- 12-8-2016 - Shri Waseem Ahmed, Accountant Member and Shri S.S.Viswanethra Ravi, Judicial Member For The Appellant Shri U.Dasgupta, Advocate For The Respondent : Shri Sallong yaden, Addl. .....

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e Bank Account of Supplier Asansol Bottling and Packaging Co. Pvt. Ltd. (Warehouse) against issue / purchasers of Country Spirit as per Rule 6 of West Bengal Excise (Supply of Country Spirit on Payment of Duty) Rules 2005 sowing the reason that as had violated provision of Section 40A(3) of Income Tax Act 1961. 2. Smt. Shila Mondal is the proprietor of South Nimcha C.S. Shop. South Nimcha C.S. Shop is a retail vendor of Country spirit in West Bengal as per Rule 2(iii) of West Bengal Excise (Supp .....

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y Spirit in West Bengal as per the Information Received from Office of the Superintendent of Excise under Right to Information Act 2005. The copy of such information and copy of Section 22 of West Bengal Excise Act, 1909 is attached herewith. 5. The assessee has to purchase / take issue of country spirit bottles from the wholesale vendor (Warehouse) after payment of Excise Duty, VAT Tax, Cost Price, Bottling Charges as per Rule 6 of West Bengal Excise (Supply of Country Spirit on Payment of Duty .....

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nk draft in the cases and circumstances specified hereunder, namely:- (a) Where the payment is made to- (i) The Reserve bank of India or any banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); (ii) The State Bank of India or any subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959); (b) Where the payment is made to Government and under the rules framed by it, such payment is required to be .....

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nt as per Section 22 of West Bengal Excise Act 1909 and exclusively incorporated for Manufacture and Supply of Company Sprit in West Bengal. ABPCPL is a warehouse of the West Bengal State Government as per Rule 2(vii) of West Bengal Excise (Supply of Country Sprit on Payment of Duty) Rules, 2005. So ABPCPL is the agent of Stat Government. As the ABPCPL is the agent of the State Government. So the All Payment made by Depositing Cash in the bank Account of ABPCPL are made to the government by way .....

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d stock of Bottles of Country Spirit than there is a penalty of ₹ 25000/- per Day as Misc Case by State Excise Department. The composite Payment may be divided comprising (a) Cost of Product, (b) Excise Duty (c) VT and (d) TCS (Income Tax). 8. The Honorable ITAT Bench, SMC, Kolkata in Case of M/s ARPITA TRADERS vs ITO-WD-2/Cooch Bihar (ITA No. 1524/Kol/2012) has deleted the disallowance u/s. 40A(3) that I find that the assessee has to lift quota of spirit allotted to the assessee by excise .....

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circumstances, disallowance made u/s. 40A(3) was not justified. When the government makes it compulsory to make the Payment by Cash the assessee has no other option. The Payment made by the assessee to the agent of the government has to be treated as the Payment made to the government itself. Disallowance of as cash Payment cannot be made when such payments are made to government. In facts and circumstances of the case and following the order of the coordinate Bench of the Tribunal in the case .....

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her imposition, as may be prescribed by law, shall be paid by the retail vendor to the credit of the wholesale licensee concerned. 10. Section 40A(3) was introduced by the Finance Act 1968 as a provision designed to counter evasion of 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 the reasonableness of the payment. However in this case genuinity of purchase cannot be deni .....

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der the purview of Rule 6DD(a), (b), (k) & (l) of the Income Tax Rules, so the Disallowance of ₹ 76,24,680/- u/s 40A(A) should be deleted. Shri U. Dasgupta, Ld. Authorized Representative appeared on behalf of assessee and Shri Sallong Yaden, Ld. Departmental Representative appeared on behalf of Revenue. 2. At the time of hearing Ld. AR for the assessee has stated that he has instructed by assessee not to press grounds No. 2 to 11. Hence, same are dismissed as not pressed. 3. Solitary i .....

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cordingly notices u/s 143(2)/142(1) of the Act with questionnaires were issued to assessee. The assessee, in the instant case, has made cash payment of ₹76,24,680/- for the purchase of country liquor and violated the provision of Sec. 40A(3) read with Rule 6DD of the IT Rules, 1962. Accordingly, AO has disallowed the payment of ₹76,24,680/- 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 observi .....

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ernment the Private Company does not become Government for any purpose. 8. Having considered the submission of the appellant and may analysis as above, I uphold the decision of the Assessing Officer to make the disallowance under section 40A(3) of Income Tax Act 19661. No case is made to prove that payment is made to Government as per rules framed where payment by legal tender is mandatory. Rule 6DD(b) and 6DD(k) does not apply to the case of assessee. Accordingly grounds 2 and 3 are dismissed. .....

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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 c .....

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ed cheque or crossed bank draft (except in specified cases) is not arbitrary and does not amount to a restriction on the fundamental right to carry on business. If read together with Rule 6DD of the Income-tax Rules, 1962, it will be clear that the provisions are not intended to restrict business activities. There is no restriction on the assessee in his trading activities. Section 40A(3) only empowers the Assessing Officer to disallow the deduction claimed as expenditure in respect of which pay .....

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to furnish to the satisfaction of the Assessing officer the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from .....

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the AO. The genuinity of transactions, rate of gross profit or the fact that the bona fide of the assessee that payments are made to producers of hides and skin are also neither doubted nor disputed by the AO. On the basis of these facts it is not justified on the part of the AO to disallow 20% of the payments 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 Syndica .....

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e 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 the genu .....

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heque payment from assessee s co-operative bank would not do, since realization took longer time and such payments should be made only in cash in their bank account - If assessee would not make cash payment and make cheque payments alone, it would have received recharge vouchers delayed by 4/5 days which would severely affect its business operation - Assessee, therefore, made cash payment - Whether in view of above, no disallowance under section 40A (3) was to be made in respect of payment made .....

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ller insisted on that and also gave incentives and discounts - Further, seller also issued certificate in support of this - Whether since assessee had placed proof of payment of consideration for its transaction to seller, and later admitted payment and there was no doubt about genuineness of payment, no disallowance could be made under section 40A(3) - Held, yes [Para 23] [In favour of the assessee] CIT vs Smt. Shelly Passi reported in (2013) 350 ITR 227 (P&H) In this case the court upheld .....

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