TMI Blog2018 (6) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... an order dated 23.05.2017 of ld. Commissioner of Income Tax (Appeals)-10, Chennai, is aggrieved on a disallowance of ₹ 34,68,15,452/- made u/s.40A(3) of the Income Tax Act, 1961 (in short the Act ) which was confirmed by the ld. Commissioner of Income Tax (Appeals). 2. Facts apropos are that assessee claiming to be a commission agent had filed his return for the impugned assessment year declaring income of ₹ 9,23,600/-. Assessee was one of the bidders who participated in auctions of unredeemed old gold ornaments, conducted by one M/s. Manappuram Finance Limited. Though in his original return, sales/gross receipts shown in the profit and loss account was only ₹ 6,66,134/- in a revised return filed sales/gross receipts of ₹ 34,74,81,586/- was shown. Corresponding purchases were for ₹ 34,68,15,452/-. Assessee was required to explain how purchases of such huge volume could be made when his capital in the business was only ₹ 22,67,797/-. Thereupon assessee submitted that a group of persons who wanted to participate in the auctions held by M/s. Manappuram Finance Ltd formed a syndicate. As per the assessee, he was participating in the auction fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and. which was shown as purchase in my account. Since the Purchase was in auction from Mls Manappuram Finance Ltd and I was new customer to the company in buying auctioned gold from them, it was -insisted that only cash dealing was permitted to me This was one of points taken for consideration .ot business expediency. In the case of Mls Kanishk Gold Pvt Ltd Vs Dept of Income tax, ITAT Chennai has made the contention that the party had accepted old gold ornaments and in exchange sold the fresh gold jewellery in exchange and collected / refunded the differential amount which will not attract Sec 40(A)(3) and the purchasers was deleted from addition of income. In my case as mentioned above would like to clarify that 1. I had made cash payment as I was a new customer to M/s Manappuram Finance Limited. 2. The Company is a NDFC Company recognised by RBI and are into acceptance of deposit and lending finance on security and are not into any manufacturing or trading company. 3. Already I am over burdened with financial crises due to highly volatile market conditions and my prior commitments are huge and led to several cases of cheque bounce against me. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of taxes, had no application. Reliance was also placed on the judgment of Hon ble Jurisdictional High Court in the case of CIT vs. Chrome Leather Co. Pvt. Ltd, 235 ITR 708, that of Hon ble Rajasthan High Court in the case of Smt. Harshila Chordia vs. CIT vs. 298 ITR 349, that of Hon ble Delhi High Court in the case of CIT vs. Rhydburg Pharmaceuticals Ltd, 269 ITR 561 and Ramaditya Investments vs. CIT, 262 ITR 491, that of Hon ble Calcutta High Court in the case of Goenka Agencies vs. CIT, 263 ITR 145, that of Hon ble Punjab and Haryana High Court in the case of CIT vs. Nikko Auto Ltd, 256 ITR 476 and Aggarwal Steel Traders vs. CIT, 250 ITR 738, that of Hon ble Kerala High Court in the case of CIT vs. Eastern Condiments Pvt Ltd, 261 ITR 76, that of Hon ble Gauhati High Court in the case of Shri.Mahabir Industries vs. CIT, 220 ITR 459, that of Allahabad High Court in the case of CIT vs. Suresh Kumar Agarwal, 249 ITR 113, that of Hon ble Madhya Pradesh High Court in the case of CIT vs. Rajendra Rice Mill, 232 ITR 217 and CIT vs. Mahavir Stores, 232 ITR 300 and that of Hon ble Apex Court in the case of Attar Singh Gurmukh Singh vs. ITO, 191 ITR 667. 6. Ld. Commissioner of Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the authorities below. It is not disputed that assessee had made payments in cash for the bid amounts to M/s. Manappuram Finance Ltd. As per the assessee, cash was collected from various syndicate members who wanted old gold jewellery and assessee was representing such syndicate. In other words, as per the assessee, he was acting as conduit for the purchases of the old gold jewellery and bidding on behalf of the syndicate members who wanted to purchase old gold jewellery from M/s. Manappuram Finance Ltd.. However, ld. Assessing Officer has clearly noted that assessee in his revised return had admitted purchase of gold from M/s. Manappuram Finance Ltd for ₹ 34,68,15,452/- and sale thereof for ₹ 34,74,81,586/-. It is not disputed by the assessee that the amounts paid to M/s. Manappuram Finance Ltd were in cash and exceeded threshold limit of ₹ 20,000/- in each case. Contention of the assessee is that there were unavoidable circumstance which required him to pay the bid amount in cash and this was a relevant factor which needed to be considered while deciding whether Section 40A(3) of the Act was to be applied or not. Section 40A(3) of the Act, which is apposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified 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) ; (iii) any co-operative bank or land mortgage bank ; (iv) any primary agricultural credit society or any primary credit society as defined under section 56 of the Banking Regulation Act, 1949 (10 of 1949) ; (v) the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956) ; (b) where the payment is made to the Government and, under the rules framed by it, such payment is required to be made in legal tender ; (c) where the payment is made by- (i) any letter of credit arrangements through a bank, (ii) a mail or telegraphic transfer through a bank ; (iii) a book adjustment from any account in a bank to any other account in that or any other bank ; (iv) a bill of exchange made payable only to a bank ; (v) the use of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed either on account of holiday or strike ; (k) 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 ; (l) where the payment is made by an authorised dealer or a money changer against purchase of foreign currency or travellers cheques in the normal course of his business. Explanation.-- For the purposes of this clause, the expressions authorised dealer or money changer means a person authorised as an authorised dealer or a money changer to deal in foreign currency or foreign exchange under any law for the time being in force. Payments made by the assessee to M/s. Manappuram Finance Ltd for purchasing old gold ornaments did not fall within any limbs of Rule 6DD. 10. One of the contetnions of the assessee is that though the payments made by him in cash did not fall within any of the sub- clauses of Rule 6DD, still Section 40A(3) of the Act could not be applied, since business expediency and other relevant factors necessitated such payments. To a specific question raised by the Bench, it was stated by the ld. Counsel for the assessee that advertisements placed by M/s. Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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