9911796707
TMI Blog2016 (8) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under Section 133(6) of the Act. So in the instant case there is no evasion of tax by claiming the bogus expenditure in cash. - Decided in favour of assessee. - ITA No.1198/Kol /2011 - - - Dated:- 22-6-2016 - Shri Waseem Ahmed, Accountant Member and Shri S.S.Viswanethra Ravi, Judicial Member For The Appellant Shri K.K.Khemka, Advocate Fpr The Respondent : Shri Rajat Kr. Kureel, JCIT-SR-DR ORDER PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is against the order of Commissioner of Income Tax (Appeals)-Durgapur dated 21.07.2011. Assessment was framed by ITO Ward-1(3), Durgapur u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 09.11.2010 for assessment year 2008-09. The grounds raised by the assessee per its appeal are as under:- 1(A) For that the Ld. Commissioner of Income Tax (Appeals) erred in law as well as on facts in confirming disallowance / addition us 40A(3) for purchases made ₹ 73,48,251/- from IFB Agro Industries Ltd. 1(B) For that the confirmation by Ld. CIT(A) of disallowance / addition u/s 40A(3) is legally FACTUALLY wrong, illegal unjustified. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , IFB Agro Industries Ltd City Centre, Durgapur - 713216 and Asansol Bottling Packaging Pvt Ltd. P.O. KALLACH - 713340, Burdwan. The wholesaler Agent of WB Govt. supplied printed paying slips of his Bank, wherein name and Bank A/c no. was printed in some paying slip even quantities supplies with rate has been mentioned on the back of the paying slip. In the invoice issued the supplier has specifically mentioned the amount of Bank deposit and cash received column was remained BLANK (see copies Paper Book Page 44 to 90. The ITO has verified the entire purchase from the wholesaler Agent and the supplier has confirmed the total sales made by them to the Assessee, IFB Agro Industries Ltd. Having PAN. AAACI6487L Bank A/c. No. 10306876975, SBI, City Centre Durgapur and Axis Bank, Durgapur A/e. No. 21301020001645 Excise No. 19200052155, CST No. 19200052252, Vat No. 19200052058, TAN No. CALl01584C. The entire material purchased and sold as an Agent franchise of WB. Government subject to strict checking by the State Excise Authority, who put their stamp and seal on Stock Register maintained ( see copies at page No: 184. to 196 paper book ). Even TCS u/s. 206C of the I. T. Act has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. Use a comma after terms that introduce a series or an example. FIRSTLY 3. After reading the original enactment and subsequent amendment and after reading the finance Minister's explanatory note the followings should be requirement to allow - Cash payment within meaning of section 40A(3). (a) Identity of the payee (b) Reasonableness of the payment (c) Considerations of business expediency and other relevant factors (d) The act as introduced in 1968 read with rules 6DDj requires to exempt the provision of section 40A(3) if cash payment is due to genuine difficulty and the evidence thereof is produced at the time of assessment. This rule 6DDj was incorporated in act itself by Finance Act 2007 by using the word considerations of business expediency and other relevant factors . (a) Circumstances as prescribed in the rule. (b) Extent of banking facility available. (c) Consideration of business expediency and other relevant factors. The intention of the Act is very clear by the fact that the Act has not used the word AND which denotes that cumulative conditions are Not required to be full filled. The absence of the word AND implies that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rized representative shall then submit requisition To the excise Officer in charge of a warehouse . 5B Rule 6DD(b) OF I. T. Rules Where the payment is made to the Government and under the Rules famed by it such payment is required to be made in legal tender. 5D. The ENTIRE PAYMENT, is therefore, to PRINCIPAL, WEST BENGAL GOVERNMENT through its wholesale Agent. The relationship, between the assessee (franchise Authorised Retailer) and W.B. GOVERNMENT (the supplier) acting under Bengal Excise Rules through its Authorised wholesaler Licensee (agent), both de facto and de jure, is one of Principal and agent . The retailer at all times acting only for and all behalf of the supplier (WB. Government) as link only in the supply chain and, thus, the payments by it to the principal - supplier are only in terms of and in pursuance of Gazette Notification. The question of no separate payment being made by the payee - principal (WB, Government) to the payer - Retailers i.e. towards remuneration or commission, etc, arises. Provisions of Sec. 40A(3), therefore, are not applicable to this case under rule 6DD(b) also. 6. On the other hand the ld. DR vehemently supported the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h regard to the business expediency of the assessee. From the submission of the assessee we find that the assessee was the only authorized dealer in for the supply of country liquor to the authorized Excise Vendors. The assessee can take the delivery of the goods only after depositing the payment with the company. The assessee was to keep sufficient stock of country liquor as prescribed by the Excise Department and in case stock falls short of the prescribed limit then the Department used to impose penalty. Therefore the assessee avoided the process of depositing the cash in his bank account and thereafter getting the demand draft in the name of the company in order to keep the stock within the prescribed limit at all the times. It is also important to note that the company was also not accepting the account payee cheque of the assessee as it will take couple of day s time in clearance. So in our considered view the exception provided in the provisions of section 40A(3) with regard of the business expediency then applicable for the assessment year 2008-09 is met by the assessee. 7.1 The provision of section 40A(3) was inserted by the Finance Act 1968. The purpose for bringing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of section 40A(3) and rule 6DD that they are intended to regulate business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions. CIT vs CPL Tannery reported in (2009) 318 ITR 179 (Cal) The second contention of the assessee that owing to business expediency, obligation and exigency, the assessee had to make cash payment for purchase of goods so essential for carrying on of his business, was also not disputed by the AO. The genuinity of transactions, rate of gross profit or the fact that the bona fide of the assessee that payments are made to producers of hides and skin are also neither doubted nor disputed by 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchase of ground nut in cash exceeding prescribed limit Assessee submitted that her made payment in cash because seller insisted on that and also gave incentives and discounts Further, seller also issued certificate in support of this Whether since assessee had placed proof of payment of consideration for its transaction to seller, and later admitted payment and there was no doubt about genuineness of payment, no disallowance could be made under section 40A(3) Held, yes [Para 23] [ In favour of the assessee] CIT vs Smt. Shelly Passi reported in (2013) 350 ITR 227 (P H) In this case the court upheld the view of the tribunal in not applying section 40A(3) of the Act to the cash payments when ultimately, such amounts were deposited in the bank by the payee. 7.3 It is pertinent to note that the primary object of enacting section 40A(3) were two folds, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
