TMI Blog2016 (3) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. That order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax (Appeals), Bathinda is against law and facts on the file in as much as he was not justified in upholding the action of the Ld. Assessing Officer in disallowing expenditure under section 40A(3) of the Act ibid on account of bonus payable/paid to commission agents on the purchase of agricultural land amounting to ₹ 16,70,000/-. 3. The brief facts of the case as noted in the assessment order are that the assessee is engaged in trading of properties. The case was selected for scrutiny. During the course of assessment proceedings, the Assessing Officer observed that assessee had purchased certain properties which were registered with Registrar of Revenue Department. The Assessing Officer further observed that the payment for purchase of such properties was made in cash. The Assessing Officer observed that since the properties in the case of assessee were stock in trade therefore, payment of cash attracted the provisions of section 40A(3) of the Act and such payments were liable to be disallowed. The Assessing Officer, therefore, relying upon the case law of Attar Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs V/s CIT 250 ITR 738 that unless the explanation of the assessee that the cash payment is covered by exceptional circumstances is supported by confirmatory letter from the concerned parties, the question that whether the provisions of section 40A(3) are applicable has to be decided against the appellant. 2.2 The contention of the A/R of the appellant that the payment fcr purchase of land is covered by Rule 6DD(e) is also not correct. The AO has dealt with this issue in his remand report and it has been stated by him in rebuttal that the said rebuttal that the said rule relates to purchase of agriculture produce from the cultivator, grower, or producer of the relevant agriculture product. It is not related to purchase of LAND from anybody, agriculturist or not. To that extent the grounds of the applicant assessee is plainly not entertainable. 2.3 The rebuttal of the AO in the remand report that the case of the appellant does not fall in the exception provided in rule 6DD(e) is also covered by the order of Jodhpur Bench of the ITAT in the case of Vaishali Builders Colonizers (2012) 138 ITD 227. The relevant part of the order in para 11.3 is reproduced as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 20,000/- was not disbelieved by authorities then the payments in excess of ₹ 20,000/- cannot be disallowed u/s 40A(3). 8. The learned DR, however, supported the order of authorities below. 9. We have heard the rival parties and have gone through the material placed on record. We find that the Hon ble Punjab Haryana High Court in the case of Gurdas Garg vs. CIT (supra), under similar facts and circumstances has held that where the genuineness of payments is not disbelieved the disallowance u/s 40A(3) cannot be made. We find from the order of Hon ble Punjab Haryana High Court that in this case also the assessee was engaged in trading of properties and had paid cash in excess of ₹ 20,000/- for purchase of properties. The Hon ble Punjab Haryana High Court has exhaustively dealt with the issue and has framed Question No.1 as below. Re: Question No.1 3. The appellant is engaged inter alia in trading in properties in his individual name. As noted in the assessment order, during the course of assessment proceedings, the details of the closing stock as on 31.03.2009 alongwith details of sales/purchases were placed on record. The consideration, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Circular and to consider the explanation submitted by the assessee on its own merit. 17. Significantly paragraph 5 reproduced herein below gives a clear indication that Rule 6DD(i) has to be liberally construed and ordinarily where the genuineness of the transaction and the payment and identity of the receiver is established, the requirement of Rule 6DD(i) must be deemed to have been satisfied. Paragraph 5 of the Circular reads as under [1977] 108 ITR (St.) 8, 9: 5. It can be said that it would, generally, satisfy the requirements of Rule 6DD(j), if a letter to the above effect is produced in respect of each transaction falling within the categories listed above from the seller giving full particulars of his address, sales tax number/permanent account number, if any, for the purposes of proper identification to enable the Income-tax Officer to satisfy himself about the genuineness of the transaction. The Income-tax Officer will, however, record his satisfaction before allowing the benefit of Rule 6DD(j). 18. It appears that fulfillment of the conditions of paragraph 5 of the circular has clearly escaped the attention of the Tribunal. The circular clearly indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the person who has received the cash payment. Rule 6-DD 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 the provisions of Section 40-A(3) and Rule 6-DD that they are intended to regulate the business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions. [See: Miidiam Oil Company v. ITO [(1973) 92 ITR 519 (API] ]. If the payment is made by a crossed cheque drawn on a bank or a crossed bank draft then it will be easier to ascertain, when deduction is claimed, whether the payment was genuine and whether it was out of the income from disclosed sources. In interpreting a taxing statute the court cannot be oblivious of the proliferation of black money which is under circulation in our country. Any restraint intended to curb the chances and opportunities to use or create black money should not be regarded as curtailing the freedom of trade or business. 9. At the cost of repetition, the Tribunal has not disbelieved the transactions or the genuineness thereof. Nor has it disbeli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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