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TMI Blog2017 (7) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in confirming the disallowance of ₹ 30,37,000/- on account of addition made by the Assessing Officer by invoking the provisions of section 40A(3) of the Income Tax Act, 1961. 2. That the confirmation of addition by the CIT (A) is against the facts and circumstances of the case, in as much, the CIT (A) has failed to appreciate the fact that the assessee did not have any bank account during the year under consideration and, therefore, the cash payments had to be made for purchases on account of business expediency. 3. That the Worthy CIT (A) has also failed to appreciate the fact that the books of accounts have not been rejected u/s 145(3) and all the cash payments against which the purchases have been made are genuine and reflected in other parties books of accounts. That the Worthy CIT (A) has grossly erred in not following the judgments of Jurisdictional Bench of the ITAT, Chandigarh Bench and of Punjab Haryana High Court as he was bound to follow such judgments as they were binding upon him. 2. I have heard ld. Representatives of both the parties and perused the material on record. The facts of the case are that during assessment proceedings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are genuine and no doubt have been raised by the AO and the party i.e. M/s Ambala Wine Traders is also being assessed to tax and such entries of purchases in the books of accounts have been reflected a sale in their books of accounts and, thus, the payments are genuine and for the purpose of business expediency. That even this business is being carried on under strict control of Excise department and the Excise department sanctions the particular quota and only then the purchases are made from the party concerned and, as such, the purchases are sanctioned by the Excise department and, thus, the payment cannot be doubted at all. The books of accounts of the assessee have been accepted and they have neither been rejected u/s 145 (3) and even the assessee had been maintaining regular books of accounts on day to day basis and maintaining all the vouchers of purchases and the business is being carried under the strict control of the Excise department and no discrepancy was noticed during the year by the AO or by the Excise department in respect of books of accounts regularly maintained. The complete quantitative details are maintained and no discrepancy has been pointed out by the AO. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(Appeals) functioning under the jurisdiction of Tribunal and High Court. In support of this contention, he has relied upon decision of Madhya Pradesh High Court in the case of Aggarwal Warehousing Leasing Ltd. Vs CIT 124 Taxman 440. On the other hand, ld. DR relied upon orders of the authorities below. 6. I have considered rival submissions. It is not in dispute that assessee is engaged in the business of retail trading of liquor. The assessee pleaded before authorities below that in the absence of bank account, all the payments were made in cash for the purchases. It was also submitted that maximum payments were made to M/s Ambala Wine Traders which was in need of funds. The assessee also filed confirmation of M/s Ambala Wine Traders in support of payment for purchases. The assessee, therefore, pleaded that since the assessee did not have any bank account and has to purchase the liquor and to lift the particular quota, therefore, for making the purchases, assessee made cash payments because the assessee did not have any bank account. It was, therefore, pleaded that payments for purchase of liquor are made for business expediency and for carrying on the business. The autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ana High Court in the case of Gurdas Garg (supra), after perusing the said judgment we find that a very apt guidance is provided by the Hon'ble High Court in deciding the issue in question. Therefore, at the very first instance, we would analyze the said judgment of the Hon'ble Jurisdictional High Court. In this case, the assessee was engaged in the business of trading in properties. Admittedly, certain payments were made in cash in excess of ₹ 20,000/- per day. Invoking the provisions of section 40A(3) of the Act, the Assessing Officer made the disallowance. The learned CIT (Appeals) in his order gave finding that the identity of the payees i.e. the vender in respect of the land purchased by the assessee was established. The sale deeds were produced, the genuineness thereof was accepted. The amount paid in respect of each of these agreements was certified by the Stamp Registration Authority. In this way, the learned CIT (Appeals) held that the bar against the grant of deductions under section 40A(3) of the Act was not attracted. The Tribunal did not upset these findings given by the learned CIT (Appeals) including as to the genuineness and the correctness of the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Rules, invoking the provisions of section 40A(3) of the Act can be dispensed with if the assessee is able to prove the business expediency because of which it have to make the cash payments, the genuineness of the transactions have also to be verified. In the present case, detailed submissions with corroborative evidences were filed at every stage including that of the Assessing Officer as well as the learned CIT (Appeals). Even before us, the voluminous Paper Book has been filed. The elaborate submissions were made to prove that the expenses incurred in cash were genuine which were paid to distilleries through Excise Department for purchase of liquor and there were practical expediency because of which the payments have to be made in cash. This is an undisputed fact that the assessee firm has twelve partners, who are operating business through vends located at distinct places. Each person has licence in his own name to make the sales and purchases as per the terms of these licence agreements. Further, it is quite a known fact that in the business of the liquor, transactions are to be done in cash. All these facts have not been controverted by the Assessing Officer or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat since the assessee was not having any bank account therefore, he has mentioned the bank account number of the partnership firm M/s Ambala Wine Traders in which he is a partner, in the return of income. He has also referred to PB-25 which is statement of account of Saving Bank Account of the assessee with State Bank of Patiala bearing account No. 65027077695. He has submitted that no business transactions have been carried out through this SB Account number. These facts, therefore, clearly show that assessee did not maintain any bank account of the liquor business conducted in his individual capacity. Therefore, these two bank accounts referred to by ld. CIT(Appeals) for the purpose of rejecting explanation of the assessee was wholly incorrect and without any valid reasons. It is, therefore, proved on record that findings recorded by ld. CIT(Appeals) are factually incorrect that assessee maintained bank accounts of the business under consideration. The assessee has been able to prove that for liquor business, no bank account have been maintained by the assessee. Therefore, explanation of the assessee that he has made cash payments for purchase of liquor to M/s Ambala Wine Trader ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made for business expediency and deleted the addition under section 40A(3) of the Income Tax Act. Since in the case of the assessee, assessee was not maintaining any bank account of his individual business of retail trading of liquor, therefore, there is no question of making payment through banking channel. The payments made for purchase of liquor have not been doubted which were paid to M/s Ambala Wine Traders and have been confirmed by the seller also in writing would clearly prove that assessee made genuine payments for business expediency in cash. The ld. CIT(Appeals) was, therefore, bound to follow the decision of the Division Bench of ITAT Chandigarh Bench in the case of M/s Dhuri Wine (supra). Further, the ld. CIT(Appeals) did not accept contention of the assessee that his case falls under proviso to Section 40A(3) of the Act because the factors provided under the proviso to Section 40A(3) of the Act shall have to be considered together. The findings of ld. CIT(Appeals) are incorrect because in the proviso to Section 40A(3) of the Act, the exceptions are provided having coma in different circumstances. Therefore, all the circumstances shall have to be read separately and in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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