TMI Blog2023 (6) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... he hands of the recipient. No enquiries have been made on behalf of the Revenue to dislodge the bona fides of the cash purchases. Nonetheless, the suppliers and recipients of cash are identified parties and well regulated. Case made out on behalf of the assessee for exoneration from the clutches of Section 40A(3) in the peculiar facts of the present case - Decided in favour of assessee. Additions on account of capital introduced by proprietor - CIT(A) rejected the explanation of the assessee on the ground that withdrawal made from the bank could be utilized for household expenses and the onus towards availability of cash is not discharged in the present case - HElD THAT:- As the assessee has failed to lead any cogent evidence to rebut the observations of the CIT(A). We thus are in no position to traverse the facts and decide independently. We thus see no reason to interfere with the approach of the CIT(A). - I.T.As No. 6115/Del/2018 And 4618/DEL/2019 - - - Dated:- 15-6-2023 - Shri Chandra Mohan Garg, Judicial Member And Shri Pradip Kumar Kedia, Accountant Member For the Appellant : Shri Manoj Kumar, CA For the Respondent : Ms. Meenakshi Dohare, Addl.CIT O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are also licensed and approved and monitored by the Government. The distilleries cannot sell their product to general public directly and they have to sell their product only to licensed vendors like assessee. Likewise, the licensed vendors is also obligated to procure the liquor from the licensed manufactures alone. The whole gamut of transaction is thus under lens and supervision of the Government. Noticeably, each and every time when license holder procures country liquor from the distilleries, it has to obtain permit from Government Department, i.e., Excise Authorities and the Government Department issues permit after taking permit fee. Furthermore, permit is issued for fixed number of bottles only for which the permit fee is paid. 6.1 Further, the license holder cannot purchase the country liquor from only one distillery of his choice but he is required to purchase from different distilleries as directed by the Government Department. Hence, he is effectively compelled by the Government to pay in cash. Further, the staff/employees of the distilleries are also wandering around the country liquor shops and collect cash almost on daily basis from these shops for the supplies ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits are made in the bank account of the respective parties to procure consignment of liquor on spot basis. (iv) The entire purchase transactions, be it in cash or in cheque, with these parties have been subjected to TCS as per the provisions of the Act. The parties are thus identifiable and the purchases are vouched by corresponding tax collection at source on such purchases. (v) The assessee is forced to pay cash to meet the immediate demand of certain items for which stocks get depleted and assessee in the absence of any alternative makes payment in cash to obtain immediate supplies. (vi) One of the supplier distillery company, namely, Panipat Co-operative Sugar Mills Ltd. operates under the dictate and command of the Government and therefore, the payment made to one of the parties is actually government owned and controlled. (vii) The object of Section 40A(3) is to prevent and curtail the creation of black money. The provisions of Section 40A(3) is designed to counter the evasion of tax from wrongful claims of unidentified expenditure shown to have incurred in cash with a view to frustrate proper investigation by the Department as to the identity of the payee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpediment unlike good old days. The Ld. DR thus urged for upholding the action. 10. We have carefully considered the rival submissions and perused the assessment order as well as the first appellate order and also the material referred to and relied upon in the course of hearing and the case law cited. 10.1 The applicability of Section 40A(3) towards cash purchases of the liquor from suppliers is in controversy. The provisions of Section 40A(3) read with Section 40A(3A) of the Act seeks to disincentivise the cash transactions in cash beyond prescribed unit (Rs. 20000 limit for the AYs in question). The Assessing Officer has thus disallowed the expenses incurred on purchases of liquor etc. where payments have in found to be made in cash in breach of prescribed limit under Section 40A(3) of the Act. 10.2 It is the case of the assessee that he is engaged in a very peculiar business of liquor trading where to meet the sudden demand, the assessee is called upon to make payment in cash to get uninterrupted supplies from the distillery companies. It is further case of the assessee that the business operates in a highly government regulated environment where the distillery compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. No. Name of Party TAN Number Cash Payment part Bank payment Total Purchase TCS 1. M/s. ADS Spirits Pvt. Ltd. DELA26813D 1178000 1795590 2973590 29736 2. The ADIE Broswon Distillers and Bottlers Pvt. Ltd. LKNA07119A 600000 1673694 2273694 22736.94 3. M/s. Oasis Commercial Pvt. Ltd. RTKO01614E 850000 17097648 17947648 179476 4. M/s. NV Distilleries Private Ltd. RTKN02286ELtd. 492000 15743664 16235664 162359 5. Associated Distilleries (Globus Spirit Ltd.) DELG06683F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Supreme Court and various High Courts on the schematic interpretation of provisions of Section 40A(3) of the Act and observed that the considerations of business expediency and other relevant factors embedded in provisions of Section 40A(3) and Section 40A(3A) are not diluted by the amendment in Rule 6DD of the IT Rules which is merely a delegated legislation. The Co-ordinate Bench discharged the assessee from the clutches of Section 40A(3) where the business expediency to make payment in cash was found to be reasonably established. In the instant case, the circumstances narrated on behalf of the assessee provide reasonable ground to show-case considerations of business expediency and existence of relevant factors which warranted cash payments in the wisdom and perspective of a businessman. Be that as it may, the cash transactions, in any case, have been subjected to TCS collections etc. and are thus duly made chargeable to tax in the hands of the recipient. No enquiries have been made on behalf of the Revenue to dislodge the bona fides of the cash purchases. Nonetheless, the suppliers and recipients of cash are identified parties and well regulated. 10.5 Thus in to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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