2019 (9) TMI 90 - AT - Income Tax

Cash payments in excess of the prescribed limit u/s 40A(3) - HELD THAT - We note that the issue in no longer res integra and we note that the Tribunal s decision in a similar case where in the assessee purchased country liquor from dealers from their bonded warehouse appointed under the notification of Govt. of West Bengal this Tribunal has held the dealers are the agents of Govt. of West Bengal in the case of Riktwik Kumar Bera 2014 (3) TMI 259 - ITAT KOLKATA that the payment is covered under Rule 6DD(b) and, therefore, the provisions of sec. 40A(3) are not applicable - Decided against revenue

Summary

Issues Involved:
1. Interpretation of section 40A(3) regarding cash payments exceeding prescribed limits.
2. Application of Rule 6DD exceptions to cash transactions.
3. Discrepancy between transactions involving country spirit and foreign liquor.
4. Consideration of judicial precedents in similar cases.

Issue 1: Interpretation of section 40A(3) regarding cash payments exceeding prescribed limits:

The appellant challenged the Ld. CIT(A)'s decision to allow cash payments exceeding the limit under section 40A(3) without provisions for exceptions based on the genuineness of business transactions. The Ld. DR argued that even split cash payments below the limit on a single day fall under the purview of section 40A(3) as per CBDT circular No. 1 of 2009. Referring to the case of Attar Singh Gurmukh Singh, it was contended that transactions contravening statutory provisions cannot be exempted based on transaction genuineness alone. The Ld. DR sought a reversal of the Ld. CIT(A)'s decision, emphasizing the need to reconsider the scope of section 40A(3) in light of legal interpretations and amendments.

Issue 2: Application of Rule 6DD exceptions to cash transactions:

The respondent argued that the cash payments were made to agents of the Government of West Bengal for purchasing country liquor under specific regulations. Payments were made to field agents who later deposited the amounts into the bonders' bank accounts, following a prescribed process. The Ld. AR contended that these transactions fell under Rule 6DD(b) exceptions, as confirmed in previous ITAT and High Court judgments. Citing various cases, the respondent highlighted that genuine payments made through legitimate channels do not warrant disallowance under section 40A(3). The AR relied on judicial precedents and legal interpretations to support the claim that the transactions in question were covered by Rule 6DD exceptions, thereby justifying the Ld. CIT(A)'s decision.

Issue 3: Discrepancy between transactions involving country spirit and foreign liquor:

A distinction was drawn between transactions involving country spirit and foreign liquor, emphasizing the specific regulations governing each. The appellant highlighted that the cited judicial precedents pertained to retailers of country spirit regulated under specific rules, unlike the present case involving a retailer of foreign liquor. This discrepancy raised questions about the applicability of Rule 6DD exceptions and the interpretation of section 40A(3) in the context of different types of liquor transactions.

Issue 4: Consideration of judicial precedents in similar cases:

The Tribunal considered various judicial precedents and decisions in similar cases involving cash transactions exceeding prescribed limits. Relying on the decisions of the coordinate bench and the High Court, the Tribunal confirmed that transactions involving country liquor purchased through authorized dealers fell under Rule 6DD exceptions, thereby not attracting disallowance under section 40A(3). By aligning with previous legal interpretations and upholding the Ld. CIT(A)'s decision, the Tribunal dismissed the appellant's appeal, emphasizing consistency with established judicial precedents.

In conclusion, the Tribunal's judgment upheld the application of Rule 6DD exceptions to cash transactions involving the purchase of country liquor, emphasizing the genuineness and legitimacy of payments made through authorized channels. The decision underscored the importance of legal interpretations, precedents, and specific regulations governing different types of liquor transactions in determining the applicability of section 40A(3) and Rule 6DD exceptions.