TMI Blog2019 (9) TMI 721X X X X Extracts X X X X X X X X Extracts X X X X ..... Marigold Merchandise (P) Ltd. [ 2017 (9) TMI 1633 - ITAT DELHI] is squarely applicable to the facts of the case, wherein the Tribunal has dismissed the Departmental Appeal - Decided in favour of assessee. - ITA.No. 1888/Del/2017 - - - Dated:- 31-7-2019 - Shri H.S. Sidhu, Judicial Member And Dr. B.R.R. Kumar, Accountant Member For the Assessee : Shri Kapil Goel, Advocate For the Revenue : Shri Amit Katoch, Sr. DR. ORDER PER H.S. SIDHU, JM This appeal by assessee has been directed against the Order of the Ld. CIT(A), Meerut, Dated 08.3.2017, for the A.Y. 2013-2014, on the following grounds : 1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in sustaining the addition of ₹ 3,70,11,381/- made by AO on account of disallowance of expenditure u/s. 40A(3) of the Income Tax Act, 1961. 2. That the appellant craves leave to add/alter any / all grounds of appeal before or at the time of hearing of the appeal. 2. The brief facts of the case are that the assessee filed its return of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partly allowed the appeal of the assessee. Against the impugned order of the Ld. CIT(A), assessee is in appeal before the Tribunal. 3. Ld. Counsel for the assessee submitted that consistently before the lower authorities assessee has been harping upon the factum of genuineness of payment where payee to whom payment is made by assessee in prohibited made u/s. 40A(3), is also assessed with ACIT, Circle-2, Meerut where assessee is also assessed at Meerut itself, where there is no doubt on payment being received by identified seller which stands thoroughly uncontroverted. It was further submitted that the sale deed are registered which evidences and confirms beyond pale of doubt the genuineness of payment aspect. He further submitted that these contentions were addressed to AO at first stage itself which has not been adverted by lower authorities. It was further submitted that once genuineness of payment is not in dispute and payee is identifiable from payment is duly confirmed, rigors of section 40A(3) stands discharged. He further stated that exactly similar issue has already been adjudicated and decided in favour of the assessee by the various decisions of the ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old Merchandise (P) Ltd., (supra), is squarely applicable to the facts of the case, wherein the Tribunal vide its Order dated 11.09.2017 has dismissed the Departmental Appeal. The relevant portion of the order of the Delhi Tribunal in paras-6 to 8 is reproduced as under : 6. We have heard both the parties and perused the records available on record especially the impugned order. With regard to disallowance u/s. 40A(3) of the Income Tax Act is concerned, we find that assessee has purchased the land at Village NangliUmarpur Distt. Gurgaon for a sum of ₹ 3.69 Cr. from the seller parties namely Sh. Pohap Singh, Sh. Chet Singh, Sh. Chandra, Sh. Kishan, Smt. Vidhya, Smt. Jagwati, Smt. Veerwati and Smt. Lali. The purchase of agriculture land is evidenced through sale deed and the payment is also evidenced by way of the sale deed executed before the Sub Registrar. There is no dispute on the fact that the identity of e payee is proved, the genuineness of the transaction is proved and the source payment is also established in as much as such amount is found to be withdrawn from the HDFC bank account of the appellant company. The AO's case is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the necessity to incur the said expenditure for the purpose of business of the assesseee was never disputed by the Ld. CIT(A). We hold that since the genuinity of the payments made to the parties 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 will be pertinent to go into the intention behind introduction of provisions of section 40A(3) of the Act at this juncture. We find that the said provision was inserted by Finance Act 1968 with the object of curbing expenditure in cash and to counter tax evasion. The CBDT Circular No. 6P dated 6.7.1968 reiterates this view that this provision is designed to counter evasion of a tax through claims for expenditure shown to have been incurred in cash with a view to frustrating proper investigation by the department as to the identity of the payee and reasonableness of the payment. 4.4. In this regard, it is pertinent to get into the following decisions on the impugned subject:- Attar Singh Gurmukh Singh vs. ITO reported in (1991) 191 ITR 667 (SC) Section 40A(3) of the Income-tax Act, 1961, which provides t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 decided in favour of the assessee. CIT vs Crescent Export Syndicate in ITA No. 202 of 2008 dated 30.7.2008 - Jurisdictional High Court decision It also appears that the purchases have been held to be genuine by the learned CIT(Appeal) but the learned CIT(Appeal) has invoked Section 40A(3) for payment exceeding ₹ 20,000/- since it is not made by crossed cheque or bank draft but by hearer cheques and has computed the payments falling under provisions to Section 40A(3) for ₹ 78,45,580/- and disallowed @20% thereon ₹ 15,69,116/-. It is also made clear that without the payment being made by beater cheque these goods could not have been procured and it would have hampered the supply of goods within the stipulated time. Therefore, the genuineness of the purchase has been accepted by the ld. CIT(Appeal) which has also not been disputed by the department as it appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen ultimately, such amounts were deposited in the bank by the payee. 4.5 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 the banking habits amongst the business community. Apparently, this provision was directly related to curb the evasion of tax and inculcating the banking habits. Therefore, the consequence, which were to befall on account of non- observation of section 40A(3) must have nexus to the failure of such object. Therefore, the genuineness of the transactions it being free from vice of any device of evasion of tax is relevant consideration. 4.6. The Hon'ble Apex Court in the case of CIT vs Swastik Roadways reported in (2004) 3 SCC 640 had held that the consequences of noncompliance of Madhya Pradesh Sales Tax Act , which were intended to check the evasion and avoidance of sales tax were significantly harsh. The court while upholding the constitutional validity negated the existence of a mens rea as a condition ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income tax assessment particulars of Amit Dutta before the Learned AO. Moreover, the Learned AO himself had taken deposition from Sri Amit Dutta u/s 131 of the Act wherein he had confirmed the receipt of monies in cash as well as by cheque / DD from the assessee. Hence the acknowledgement of the payments made by the assessee by the payee is proved beyond doubt. The assessee had also stated that the payee had duly included these payments as his receipts in his returns. 4.8. We are unable to buy the argument of the Learned AR that the assessee had made payment to his agent Mr.Arnit Dutta for purchase of sim cards and others and hence would fall under the exception provided in Rule 6DD(k) of the IT Rules. For the sake of convenience, Rule 6DD(k) is reproduced herein below:- Rule 6DD(k) of the IT Rules 1962 6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid decision dated 18.11.2015 of the ITAT, B Bench, Kolkata passed in ITA No. 1448/Kol/2011 AY 2008-09 in the case of Sri ManoranjanRaha vs. ITO,the order of the Ld. CIT(A) is upheld and grounds raised by the Revenue stand rejected. 7.1. We further find that assessee has filed a copy of Application under Rule 27 of Appellate Tribunal Rules, 1963 dated 21.6.2017, but at the time of hearing, he has not pressed the same, hence, the same is dismissed as such. 8. In the result, the appeal of the Revenue is dismissed. 5.1 We further find that similarly, the ITAT, D Bench in the case of M/s KGL Network (P) Ltd. Vs. ACIT decided on 02.7.2018 in ITA No. 301/Del/2018 (AY 2014-15) on identical issue has followed the aforesaid decision of the Delhi Bench in the case of ACIT, Central Circle-2, Faridabad vs. M/s. Marigold Merchandise (P) Ltd. (supra). 5.2 Keeping in view of the facts and circumstances of the case and respectfully following the aforesaid precedents, we set aside the orders of the authorities below and delete the addition in dispute and allowed the ground raised by the Assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
