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Narayan Rice Mill Versus Commissioner of Income-tax

Revision u/s 263 - addition u/s 40A(3) - cash payments made to West Bengal State Electricity Distribution Company Limited (WBSEDCL) - CIT assumed his jurisdiction only on the ground that the said cash payments were made on different dates and the same do not fall under any of the exceptions of Rule 6DD of the IT Rules - Held that:- Admittedly, the assessee paid such cash payments towards power charges to West Bengal State Electricity Distribution Company Limited (WBSEDCL) and debited the same to .....

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dhury, Advocate, ld.AR For the Respondent : None appeared/Adj. Petition filed, but rejected ORDER Shri S.S.Viswanethra Ravi, JM: This appeal by Assessee is against the impugned order dt. 27-03- 2015 passed u/s. 263 of the Act by the CIT(A), Burdwan for the assessment year 2010-11. 2. It is noticed that none appeared for the respondent Revenue, but, however, an application dt. 1-5-2017 filed seeking adjournment. The ld. AR of the assessee before us submits that the issue involved in this appeal i .....

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is appeal is to be decided by us as to whether the CIT has rightly exercised his jurisdiction u/s. 263 of the Act in declaring the assessment order dt. 17-12-2012 passed u/s. 143(3) of the Act is erroneous and prejudicial to the interest of the revenue in respect of cash payments made by the assessee to West Bengal State Electricity Distribution Company Limited (WBSEDCL) exceeding the prescribed limits in terms of Rule 6DD(b) of the I.T Rules 1962 r.w.s 40A(3) of the Act in the facts and circums .....

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ion found that the assessee has debited ₹ 3,03,957/- towards power charges payment made to West Bengal State Electricity Distribution Company Limited (WBSEDCL) in the P & L account. According to CIT the said payments were made in cash to West Bengal State Electricity Distribution Company Limited (WBSEDCL) in contravention of the provisions contemplated in Section 40A(3) of the Act. Under show cause, the assessee submitted that the revision initiated u/s. 263 by the CIT is barred by lim .....

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as well as prejudicial to the interest of revenue that the AO completely overlooked the payments made in cash to West Bengal State Electricity Distribution Company Limited (WBSEDCL) in the assessment proceedings and the said payments on different dates are in contravention of provisions of section 40A(3) of the Act and as such it did not fall under the exception provided under Rule 6DD(b) of the I.T Rules 1962. Relevant portion of finding of the CIT is reproduced herein below:- It may further b .....

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is outside the proviso of Section 40A(3). The assessee failed to make any submission on this point. In view of the above stated discussions the order passed by the AO is erroneous as well as prejudicial to the interest of Revenue. Therefore, proceedings initiated u/s. 263 is as per law. It may be mentioned here that under Rule 6DD(b) payment made to the Government and, under the rules framed by it, such payment is required to be made in legal tender. The payment made to West Bengal State Electr .....

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Company Limited (WBSEDCL) and the issue is covered by exception provided under Rule 6DD(b) of the IT Rules 1962 r.w.s 40A(3) of the Act. In support of the contention, the ld.AR of the assessee placed his reliance on the order of the ITAT Pune Bench, Pune reported in (2016) 70 Taxmann. Com 7 (Pune) (Trib) in the case of Smt. Sapna Sanjay Raisoni Vs. ITO, Ward 2(1) Pune and submitted that the assessee therein has made cash payment exceeding ₹ 20,000/- for the purpose of purchase of scrap fr .....

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DD(b) of the IT Rules r.w.s 40A(3) of the Act. 7. Heard the ld,AR and perused the material available on record. We find that there is no dispute in respect of said West Bengal State Electricity Distribution Company Limited (WBSEDCL) is controlled and owned by the Govt. of West Bengal. We also find that there is no dispute with regard to genuineness of such payments made to West Bengal State Electricity Distribution Company Limited (WBSEDCL). We find that the CIT assumed his jurisdiction only on .....

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ebited the same to its P & L account on different dates from April 09 to Feb 10. In such circumstances, the question arises before us for our consideration whether West Bengal State Electricity Distribution Company Limited (WBSEDCL) is a State amenable to the article 12 of the Constitution. The decision as relied on by the ld.AR of the assessee of the Co-ordinate Bench, ITAT Pune in the case of supra, the ITAT Pune has relied on the decision of the Hon ble Supreme Court in the case of supra .....

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sfies majority of the conditions. The entire share capital of MSRTC is owned by State and Central Government. The State has full control over the working, policies and the framework of the Corporation. The Corporation is providing public transport facility to the subjects of the State, even in for remote areas, where ITA Nos.1270 to 1272PN/2014 and others of Raisoni Group sometimes it is not economically viable to provide transport service. Thus, it is providing vital function of public importan .....

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14. Thus, in view of the facts of the case and in the light of observations of the Hon'ble Bombay High Court, we are of the considered opinion that the CIT(A) has erred in holding that MSRTC is not a "State" and cash payments made to MSRTC are hit by the provisions of section 40A(3) of the Act. 15. In so far as genuineness of the payments to MSRTC by the assessees, they are not disputed by the department. Once it has been held that MSRTC is a "State" within the meaning of .....

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aisoni Group disallowance can be made u/s.40A(3) in the facts of the present case. 16. Our view is fortified by the decision rendered in the case of Sri Laxmi Satyanarayan Oil Mill Vs. CIT (Supra). The Hon'ble High Court has held that no disallowance can be made u/s.40A(3) where genuineness of payment is not doubted. The relevant extract of the observation of the Hon'ble Court are as under : "18. . . . . . . . . . . Section 40A(3) must not be read in isolation or to the exclusion of .....

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sing authority to ascertain whether the payment was genuine or whether it was out of the income from undisclosed sources. The terms of section 40A(3) are not absolute. Considerations of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are no taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in section 40A(3) .....

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