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TMI Blog2014 (7) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. - ITA No.74/PN/2014 & SA No.31/PN/2014 - - - Dated:- 10-6-2014 - G S Pannu And R S Padvekar, JJ. For the Appellant : Mrs Deepa Khare For the Respondent : Mr S P Walimbe ORDER:- PER : G S Pannu The captioned appeal by the assessee is directed against an order of the Commissioner of Income Tax (Appeals)-III, Pune dated 26.11.2013 which, in turn, has arisen from an order dated 06.12.2010 passed by the Assessing Officer u/s 143(3) of the Income-tax Act, 1961 (in short the Act ) pertaining to the assessment year 2008-09. 2. In this appeal, the assessee has raised the following Grounds of Appeal :- 1. The learned CIT-A erred on facts and in law in making a disallowance of ₹ 54,79,648/- u/s.40A (3) of the Income Tax Act 1961. 2. The learned CIT-A erred in not appreciating that the provisions of Section 40A(3) of the Act are not applicable in respect of payments which are made through the bank account in AXIS Bank Ltd through ATM as the creditor has withdrawn from the said Account through ATM and thereby no cash payment in involved. 3. The learned CIT-A erred in not appreciating that the provisions of Section 40A(3) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 54,79,648/- by invoking section 40A(3) of the Act. 5. The CIT(A) has also sustained the addition, against which assessee is in further appeal before us. Before us, the learned counsel for the assessee, reiterated the plea that the payments were received by M/s Aircare Engineers (I) Pvt. Ltd., Pune by using the ATM Card of assessee s saving bank account and thus the payment was by way of banking channels and it complies with the requirements of section 40A(3) of the Act. However, she has also made a preliminarily objection to the effect that in the transactions of the present type, section 40A(3) of the Act has no applicability; and, in support a reference has been made to the decision of the Cochin Bench of the Tribunal in the case of S. Rahumathulla vs. ACIT, (2010) 127 ITD 440 (Cochin). 6. On the other hand, the learned Departmental Representative appearing for the Revenue has opposed the plea of the assessee by placing reliance on the orders of the authorities below. 7. We have carefully considered the rival submissions. In the present case, assessee is an individual who has undertaken dealings in mobile recharge vouchers on a wholesale basis. During the year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a), the assessee found favour with the Hon'ble jurisdictional High Court in view of the provision of rule 6DD(j) of the Rules, which provided that where the assessee satisfied the Assessing Officer that the payment(s) could not be made by crossed cheque drawn on a bank or a crossed bank draft due to exceptional or unavoidable circumstances or because the payment in the manner aforesaid was not practical, or would have caused genuine difficulty to the payee, having regard to the nature of the transaction and the necessity for expeditious settlement thereof, also furnishing evidence to the latter's satisfaction as to the genuineness of the payment and the identity of the payee, the assessing authority had the discretion to allow the expenditure, even where there was an apparent violation of the provision, so that the Revenue's appeal contesting the order of the Tribunal stood dismissed by the Hon'ble Court. At this stage, it would be relevant to point out that section 40A(3) has undergone material changes vide amendments per the Finance Act, 1995 w.e.f. 1/4/1996 and Finance Act (No.2), 1996 w.e.f. 1/4/1997. Vide the said amendments, firstly, the threshold limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure. In fact, per a subsequent amendment to the section, the prescribed mode gets further narrowed down to account payee banking instruments only, which would facilitate tracking of the payment to any extent. Reference in this context may be profitably made to the Order by the Special Bench of the Tribunal in the case of ITO vs. Kenaram Saha Subhash Saha, 301 ITR (AT) 171 (Kol.) (SB) wherein it was held as under: Held, that once there is payment of any expenditure in violation of section 40A(3), the assessee can escape the disallowance under the said section only if the assessee's case falls within the ambit of any of the clauses of Rule 6DD. The matter was required to be examined whether the assessee's case fell under any specific clause. Neither had the assessee properly claimed nor had the Assessing Officer examined the case with reference to the relevant rule. The orders of the authorities below were to be set aside and the matter restored to the Assessing Officer to allow adequate opportunity to the assessee to produce the necessary evidence in support of its claim and readjudicate the matter in accordance with law . The assessment year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king section 40A(3) in the present case is misplaced. 10. Before us, the learned Departmental Representative has referred to the discussion made by the CIT(A) in para 5.2 and 5.2.1 of the order to say that the decision of the Cochin Bench of the Tribunal in the case of S. Rahumathulla (supra) is inapplicable to the controversy in the present appeal. Firstly, as per the CIT(A), section 40A(3) of the Act refers to any expenditure in respect of which payment is made and it does not differentiate with the nature of purchase or the goods traded or exchanged. The learned Departmental Representative has submitted that the nature of expenditure is not a determining factor to consider the application of section 40A(3) of the Act. Therefore, even if there was a relationship of the principal and agent between the assessee and the ultimate service provider of mobile SIM cards, it would not make a difference to the invoking of section 40A(3) of the Act. In our view, the aforesaid aspect of the matter has been appropriately dealt with by the Cochin Bench of the Tribunal, where reliance has been placed on the judgement of the Hon ble Kerala High Court in the case of BPL Mobile Cellular Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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