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TMI Blog2017 (10) TMI 1492X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded in the books of account and are genuine and also the identity of the payees are verifiable and payments have been made out of business expediency and are paid on dates on which banks were closed on account of holidays and, therefore, the payments are covered by exceptions as per Rule 6DD(j) of I.T.Rules. Since the farmers and land owners have insisted on cash payments, the assessee had no option but to make payments in cash. 5. The CIT(A) was not convinced with the arguments of the assessee and following the order of the CIT(A) in the case of M/s. Shine Infra Marketing Pvt Ltd vs JCIT, in ITA No.0272/2015-16 dated 19.1.2016, confirmed the addition. 6. Before us, ld A.R. of the assessee contended that the purchases made by the assessee for land against which cash payment of Rs. 1,67,69,200/- has been made are forming part of the stock in trade of the assessee and no amount has been debited in the profit and loss account and claimed as deduction. Therefore, no disallowance u/s.40A(3) is warranted. For this, he placed reliance on the decision of Hon'ble Rajasthan High Court in the case of CIT vs Motilal Khatri, 218 CTR 602 (Raj), wherein, it was held that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 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 in respect of each of the transactions was admittedly in excess of Rs. 20,000/-, was paid in cash. Payment by deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 indicates that ordinarily where the Income-tax Officer is satisfied about the genuineness of the transaction and payment and identific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 arc 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 disbelieved the fact of payments having been made. More important, the reasons furnished by the appellant for having made the cash payments, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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