TMI Blog2018 (12) TMI 1693X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence Ground No. 4, is dismissed. Disallowance u/s 40A(3) - AO as well as the ld. CIT(A) were of the opinion that such direct payment into the bank account of the seller is not covered by the exceptions specified in Rule 6DD of the Income Tax Rules, 1962 - HELD THAT:- It is a relevant consideration for the assessing authority under the Income-tax Act that before invoking the provisions of section 40A(3) in the light of Rule 6DD as clarified by the Circular of the CBDT that whether the failure on the part of the assessee in adhering to requirement of provisions of section 40A(3) has any such nexus which defeats the object of provision so as to invite such a consequence. We hold that the purpose of section 40A(3) is only preventive and to check evasion of tax and flow of unaccounted money or to check transactions which are not genuine and may be put as camouflage to evade tax by showing fictitious or false transactions. Admittedly, this is not the case in the facts of the assessee herein. The assessee had directly deposited cash in the bank account of the supplier M/s Pickme Feeds which fact is also acknowledged by the concerned supplier by crediting the said cash receipts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of ₹ 7,87,193/- on based on surmise, presumption and conjecture and should be deleted. 4. For that on the facts of the case the Ld. CIT(A) was wrong in dittoing the order of the A.O. and confirming the addition amounting to ₹ 1,74,429/- on suppression of purchase which is completely arbitrary unjustified and illegal. 5. For that on the facts of the case, the A.O. was wrong in disallowing amounting to ₹ 93,03,271/- u/s. 40A(3) of the I.T. Act which is completely arbitrary, unjustified and illegal. 6. For that on the facts of the case, the A.O. was wrong in not considering the facts that the amount to ₹ 93,03,271/- deposit in party's bank account and the Provision is covered by Rule 6DD, as such his finding is completely arbitrary, unjustified and illegal. 7. For that the interest u/s 234B charged mechanically is wrong illegal. 8. For that the appellant reserves the right to adduce any further ground or grounds, if necessary, at or before the hearing of the appeal. 3. Ground No. 1, is general in nature. 4. Ground Nos. 2 3 are against the disallowance of ₹ 7,87,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facility is provided at the home location. The Assessing Officer as well as the ld. CIT(A) were of the opinion that such direct payment into the bank account of the seller is not covered by the exceptions specified in Rule 6DD of the Income Tax Rules, 1962 (Rules), and hence the provisions of Section 40A(3) of the Act, apply. ASL has confirmed the receipt of all the payments in question. The genuineness of the payments are not doubted. Thus the disallowance is an hyper technical ground. No disallowance can be made u/s 40A(3) of the Act on these facts as per the propositions of law laid down by the Hon ble Punjab Haryana High Court in the case of CIT vs. Smt. Shelly Passi; 2013 350 ITR 227. Similar view was taken by the Jurisdictional Tribunal in the case of Rampada Panda v. ITO; 65 Taxmann.com 213, wherein it was been held as follows:- 3.3.3 We hold that since the genuinity of the payments made to the party is not doubted by the revenue, the provisions of section 40A(3) could not be made applicable to the facts of the instant case. It is observed that the assessee had taken enough precautions from his side to ensure that the payee also don't escape from the ambit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on who has received the cash payment. Rule 6DD 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 40A(3) and rule 6DD that they are intended to regulate business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions. CIT v. CPL Tannery [2009] 318 ITR 179/[2008] 175 Taxman 316 (Cal.) The second contention of the assessee that owing to business expediency, obligation and exigency, the assessee had to make cash payment for purchase of goods so essential for carrying on of his business, was also not disputed by the AO. The genuinity of transactions, rate of gross profit or the fact that the bona fide of the assessee that payments are made to producers of hides and skin are also neither doubted nor disputed by the AO. On the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Business disallowance - Cash payment exceeding prescribed limit (Rule 6DD) - Assessee made certain payment of purchase of groundnut in cash exceeding prescribed limit - Assessee submitted that he made payment in cash because seller insisted on that and also gave incentives and discounts - Further, seller also issued certificate in support of this - Whether since assessee had placed proof of payment of consideration for its transaction to seller, and later admitted payment and there was no doubt about genuineness of payment, no disallowance could be made under section 40A(3) - Held, yes [ Para 23] [In favour of the assessee] CIT v. Smt. Shelly Passi [2013] 350 ITR 227/213 Taxman 213/31 taxmann.com 173 (Punj. Har.) In this case the court upheld the view of the Tribunal in not applying section 40A(3) of the Act to the cash payments when ultimately, such amounts were deposited in the bank by the payee. 3.3.5 It is pertinent to note that the primary object of enacting section 40A(3) was two fold, firstly, putting a check on trading transactions with a mind to evade the liability to tax on income earned out of such transaction and, secondly, to inculcate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defeats the object of provision so as to invite such a consequence. We hold that the purpose of section 40A(3) is only preventive and to check evasion of tax and flow of unaccounted money or to check transactions which are not genuine and may be put as camouflage to evade tax by showing fictitious or false transactions. Admittedly, this is not the case in the facts of the assessee herein. The assessee had directly deposited cash in the bank account of the supplier M/s Pickme Feeds which fact is also acknowledged by the concerned supplier by crediting the said cash receipts in the ledger account of the assessee and the same ledger account has been obtained by the Learned AO u/s 133(6) directly from the concerned supplier M/s Pickme Feeds. It is also pertinent to note that the Hon'ble Rajasthan High Court in the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 had held that the exceptions contained in Rule 6DD of Income-tax Rules are not exhaustive and that the said rule must be interpreted liberally. In view of the aforesaid facts and circumstances and respectfully following the judicial precedents relied upon hereinabove, we have no hesitation in deleting the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
