TMI Blog2016 (9) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is against the order of Commissioner of Income Tax (Appeals)-Asansol dated 09.12.2013. Assessment was 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 order dated 20.12.2012 for assessment year 2010-11. The grounds raised by the assessee per its appeal are as under:- 1. The Ld. AO had disallow ₹ 7624680/- u/s 40A(3) for depositing cash into the 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 Dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was required to be made on a day on which the banks were closed either on account of holiday or strike; (l) Where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person; 7. As the assessee has made all the payments by depositing cash in the Bank Account of Asansol Bottling and packaging Co. Pvt. Ltd. (ABPCPL), which was originally granted exclusive privilege by Stat Government 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 of legal tender. The Trade of Country Spirit is fully controlled by State Government as per West Bengal Excise Act, 1909 and West Bengal Excise (Supply of Country Spirit on Payment of Duty) Rules, 2005 and there is no choice of pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see 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 denied or questionable because it can be verified because TCS has been deducted by the (ABPCPL) who is the agent of the Government as per Section 206CA of Income Tax Act, 1961 which can be viewed and shown in From 26AS of Income Tax Department. The Copy is attached herewith. 11. The Payments are Made to the (ABPCPL) agent and warehouse of government by way of legal tender as per West Bengal Excise Act, 1909 and West Bengal Excise (Supply of Country Sprit on payment of Duty) Rules, 2005 which fall under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Bench has decided the issue in favour of assessee in the case of Prabir Kumar Mullick Vs. ITO , in ITA No.1603/Kol/2011 dated 01.06.2016 and 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 Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, the consequence, which were to be fallen on account of non-observation of Section 40A(3) of the Act 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. 7. 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. 8. In the result, ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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