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2012 (12) TMI 1106 - ITAT PUNE

2012 (12) TMI 1106 - ITAT PUNE - TMI - C.O. No. 91/PN/2011 (Arising out of ITA No. 1143/PN/2011) , ITA No. 1040/PN/2011 - Dated:- 28-12-2012 - Shri G.S. Pannu, Accountant Member and Shri R.S. Padvekar, Judicial Member Assessee by : Shri. M.K. Kulkarni Respondent by : Smt. Vinita Menon O R D E R PER BENCH : This batch of two appeals and one Cross Objection are being disposed of by this common order as the same pertain to A.Y. 2008-09. ITA No. 1143/PN/2011 2. This appeal is filed by the Revenue ch .....

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n the circumstance of the case, the learned Commissioner of Income-tax (Appeals), Aurangabad was correct in relying the appeal by considering the decision of the CIT(A) for the immediately preceding year, as even if the Rule of re judicate has not application for tax proceedings in respect of the same assessee for different years. 3. Whether on the facts and in the circumstance of the case, the learned Commissioner of Income-tax (Appeals), Aurangabad was correct in holding that payments made by .....

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143(3) determining total income at ₹ 1,43,44,200/-, making major addition of ₹ 1,38,26,200/- for alleged violation of Sec. 40A(3) of the Act. It was noticed by the A.O that the assessee had made payments through bearer cheques for purchase of the goods from M/s. Seem Enterprises and M/s. J A Trading Company, amounting to ₹ 1,38,26,200/- in contravention of Sec. 40A(3) of the Act. The A.O. has given the details of the said payments in para 4.1 of his order and more particularly, .....

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n of the provisions of Sec. 40A(3) of the Act. The assessee filed the reply which is reproduced in para No. 4.3 of the assessment order. The assessee stated before the A.O that the payments to above parties were made by the bearer cheques since he was not aware of the provisions of Sec. 40A(3), but all the transactions are genuine. It is stated that statement of account of the parties and confirmation letters were obtained and from the invoices received against the purchases from them which were .....

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the Act. The A.O. was not impressed with the explanation of the assessee and he rejected same and made the addition of ₹ 1,38,26,200/-. 4. The assessee carried the issue before the Ld CIT(A) and found favour. The reasons recorded by the Ld CIT(A) for deleting the addition are as under : 7. I have carefully considered the facts of the case and rival contentions of the A.O and the appellant. Now I proceed to deal with the contentions raised by the A.O. and the appellant. 7.1 The A.O has rel .....

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sociate concerns, disallowance u/s 40A(3) is to be upheld. (iii) Mungi Brothers Vs. Asst. CIT (2007) 207 CTR 216(Karn-HC): In this case, the issue decided is that where explanation furnished for making cash payment is not found satisfactory such payments are to be disallowed u/s 40A(3). (iv) ITO Vs. Evershine Platers (2004) 90 TTJ 929 (Agra-trib): In this case, the issue decided is that the cash payments made to illiterate contractors are covered by disallowance u/s 40A(3). In the following case .....

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Attarsingh Gurumukh Singh Vs. Income Tax Officer, Ludhiana 191 ITR 667 From the above facts it is clear that the issue to be decided under appeal has not been decided in the above mentioned cases relied on by the A.O. 8. The first contention of the appellant is that the assessment order and the demand notice has not been properly served u/s 282 of the Act as the same has been served on the Authorised Representative/Chartered Accountant who was no authorized to accept any statutory notice. On pe .....

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all be deemed to have been done by the appellant. In view of the above fact, it cannot be said that the Chartered Accountant was not authorized to accept the assessment order and the demand notice. Further, on perusal of the appeal memo, it has been noticed that the appellant has filed appeal on 05/01/2011 and the appeal memo is signed by the appellant on 04/01/2011. This fact itself proves that after service of assessment order and demand notice on the Chartered Accountant, the fact has been im .....

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raising additional ground during the appellate proceedings. The decision relied on by the AR of the appellant in the case of Mulay Brothers Vs. DCIT, Aurangabad bearing ITA No. 1436/PN/2002 A.Y. 1985-86 dated 11/09/2009 is on distinguishable facts. The contention and the additional ground raised by the appellant is, therefore, dismissed. 8.1. The second contention raised by the appellant is that the payment by bearer cheques amounts to payment by bill of exchange and hence are outside the purvie .....

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aft, exceeds 20,000 Rupees, no deduction shall be allowed in respect of such expenditure. Further, in the case decided by Hon ble High Court of Chhatisgarh relied on by the appellant, the payments were made by pay orders, banker s cheques and CDRs and not by bearer cheques. It is worth nothing here that the said pay orders, bankers cheques and CDRs were credited in the bank account of the payee. Therefore, the facts of the case relied on by the appellant are distinguishable. 8.2 The third conten .....

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n 40A(3) is to check the evasion of taxes and to ensure that the payment is made from the disclosure sources as laid down in the case of Giridharilal Goyanka Vs. CIT 179 ITR 122 (Calcutta). The CIT, Aurangabad has further held that the evidence produced by the appellant in the form of bank statements, ledger extract of parties, copies of bank cheques issued by the appellant which are duly signed and affixed by rubber stamp of the parties proved the genuineness of the payment by bearer cheques. T .....

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d to be supported by the ratio laid down in the case of Giridhari Goyanka Vs. CIT 179 ITR 122 (Calcutta). 8.4 The fifth contention of the appellant that the payments made by bearer cheques were as good as payments made by crossed cheques are found to be reasonable and correct for the reasons that (a) the statement of accounts and confirmation letters of the parties, invoices received against purchases bearing VAT Numbers confirms the genuineness of the actual payments made; (b) in the bank state .....

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005) 93 ITD 263(Bangalore). The Hon ble ITAT, Bangalore has held that the effect of issue of crossed cheque/DD is that the payee named therein receives the payment through banking channels. The purpose is dual. In the first instance, it is to see that the payee and payee alone receives the payment and to ensure that the payment is routed through banking channel so as to trace the origin and conclusion of the transaction. In the instant case, instead of issuing cheque/DD, the assessee prepared a .....

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unt without the payee actually receiving the cash; accordingly, such payment was not in violation of provision of section 40A(3) and, hence no disallowance was called for. 8.6. In the above mentioned decision of Hon ble ITAT, Bangalore, the assessee has not made payment of expenditure by crossed account payee cheque or demand draft to the payee but has deposited cash in the bank account of the payee. The Hon ble ITAT has held that on the above facts, the origin and conclusion of the transaction .....

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e payees/suppliers and the bank statements and copies of the cheques issued on the back of which stamp and signature of the payees is affixed/made ensures that the payment has been received by the payees. Further, the ledger extracts of the said parties in their books and payment of VAT also confirms that the said payments have been accounted for by both the parties. Therefore, on the facts of the case of the appellant the origin and conclusion of the transaction is traceable. Therefore, the eff .....

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. Therefore, both the cases i.e. the case decided by Hon ble ITAT, Bangalore and the case under appeal relates to the assessment year after the amended Rule-6DD(j). In view of the above facts, I am of the considered view that the ratio laid down by Hon ble ITAT, Bangalore relied on by the appellant is applicable to the facts of the case of the appellant. 8.7 In view of the above facts and discussion and respectfully following the ratio laid down by the Hon ble ITAT, Bangalore in the case of Sri. .....

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3 (Bang.). Rules 6DD has undergone amendment from the A.Y. 2009-10. So far as the decision in the case of Sri. Renukeshwara Rice Mills (Supra) is concerned, the said assessee was in the business of Rice Mills. The assessee purchased the rice from the Agriculture Produce Committee and deposited the amounts by preparing the challan & cash was deposited in Bank Account of the seller namely M/s. K. Parameshwarappa & Co. The A.O. made the disallowance for the violation of the Sec. 40A(3). Whe .....

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