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TMI Blog2017 (8) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... rm loss against the income of the assessee need to be allowed. - ITA No.5238/Del/2016 - - - Dated:- 17-8-2017 - SHRI H.S. SIDHU, JUDICIAL MEMBER For The Assessee : SH. SOMIL AGGARWAL, ADV. For The Department : SH. T. VASANTHAN, SR. DR ORDER The Assessee has filed the Appeal against the impugned Order dated 29.7.2016 of Ld. CIT(A), Dehradun pertaining to assessment year 2012-13. The assessee has taken the following grounds:- 1. That in facts and circumstance of the case, the Learned CIT(A) has wrongly read the provisions of section 40A(3) stating the word business expediency has been deleted. 2. That in facts and circumstances of the case, the authorities below has not denied the genuineness and bonafide transactions made by the appellant but authorities below has arbitrarily added the payment made for the purchase of the land to the income of the appellant the same is unjustified. 3. That in facts and circumstances of the case, the authorities below have accepted the purchases as appearing in the balance sheet as a closing stock and on the other hand addition of payment made for purchase of land is bad at law. 4. That in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back to the income of assessee for the year under consideration. In response, it was submitted that the case was covered by the case of Attar Singh Gurmukh Singh Reported in 191 ITR 667 (SC) and Saral Motors General Finance ltd Vs Assistant Commissioner of Income Tax, ITAT, Delhi 'B' Bench reported in (2009) 121 ITD 50 (Del) and therefore it was prayed that no addition be made in this regard. The AO did not find this submission to be acceptable (though he did not state why) and the cash payment of ₹ 6 lacs was therefore disallowed u/s 40A(3) of Income Tax Act 1961 and added back to the income of the assessee. It was also observed that the assessee had claimed expenses of material purchase and labour at ₹ 1,62,855/-. The AO observed during verification of bills and vouchers of the same, that bills pertaining to material purchase for ₹ 58,315/- were not produced for verification. Therefore he asked the assessee to show cause as to why the same should not be disallowed. No explanation for the same was furnished. Therefore, expenses of material purchase for ₹ 58,315/- were disallowed and added back to the income of the assessee for the year under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted. In support of his contention, he filed the copy of the following decisions of the Tribunal and stated that the issue in dispute is squarely covered by the following decisions of the ITAT and by following the same in the present case the addition in dispute may be deleted and appeal of the assessee may be allowed. i) ITAT, B Bench, Kolkata Order dated 18.11.2015 passed in ITA No. 1448/Kol/2011 AY 2008-09 in the case of Sri Manoranjan Raha vs. ITO ii) ITAT, C Bench, Kolkata Order dated 11.12.2015 passed in ITA No. 391/Kol/2014 AY 2010-11 in the case of Shri Nirmal Kumar Das vs. ACIT. iii) ITAT, Amritsar Bench, order dated 9.3.2016 passed in ITA No. 102(Asr)/2014 (AY 2010-11) in the case of Rakesh Kumar vs. ACIT. iv) ITAT, Chandigarh Bench, order dated 09.10.2015 passed in ITA No. 1155/Cdh/2013 (AY 2010-11) ors. in the case of Dhrui Wine vs. DCIT. 6. On the contrary, Ld. DR relied upon the orders of the authorities below and stated that assessee had made total cash payment of ₹ 6,00,000/- to purchase stock in trade of land which includes ₹ 5,00,000/- paid to Shri Harpreet Singh and ₹ 1,00,000/- of Sh. Sagar Manchanda. The assessee was aske ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However authorities below failed to give the credit against income of the assessee neither they have carried forward the same in spite of full details on record and as well as the ITO called the information u/ s 131(6) from the respective companies, the act of the authorities below is erroneous and unwarranted and the credit of the short term loss against the income of the assessee need to be allowed. After carefully perusing the case laws cited by the Ld. Counsel of the assessee, as aforesaid, I am of the considered view that the issue in dispute is squarely covered by the said decisions. For the sake of convenience, I am reproducing the relevant finding of the ITAT, B Bench, Kolkata vide Order dated 18.11.2015 passed in ITA No. 1448/Kol/2011 AY 2008-09 in the case of Sri Manoranjan Raha vs. ITO as under:- 4.3 We have heard the rival submissions and perused the materials available on record. We find that the payments made by cash in violation of Section 40A(3) of the Act have been duly acknowledged by the recipient Sh. Amit Dutta who had deposed before the Ld. AO and confirmed the fact of receipt of monies in cash. Hence the genuinity of payments made by the assessee sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing officer the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. Rule 6DD provides that an assessee can 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) 318ITR 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 bonafide of the assessee that payments are made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to principal- Held, yes [ Paras 21 to 23] [in favour of the assesse] Sri Laxmi Satvanaravana Oil Mill vs CfT reported in (2014) 49 taxmann.com 363 (Andhrapradesh High Court) Section 40A(3) of the Income-tax Act, 1961, read with Rule 6DD of the Income-tax Rules, 1962 - Business disallowance - Cash payment exceeding prescribed limit (Rule 6DD) - Assessee made certain payment 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at whether the failure on the part of the assessee in adhering to requirement of provisions of section 40A(3) has any such nexus which defeats the object of provision so as to invite such a consequence. We hold that the purpose of section 40A(3) is only preventive and to check evasion of tax and flow of unaccounted money or to check transactions which are not genuine and may be put as camouflage to evade tax by showing fictitious or false transaction. Admittedly, this is not the case in the facts of the assessee herein. The payments made in cash to Shri. Amit Dutta had been duly acknowledged by him in an independent deposition given by him before the Learned AO which was admittedly taken behind the back of the assessee. It is also pertinent to note that the Hon'ble Rajasthan High Court in the case of Smt.Harshila Chordia vs ITO reported in (2008) 298 ITR 349 (Raj) had held that the exceptions contained in Rule 6DD of Income Tax Rules are not exhaustive and that the said rule must be interpreted liberally. 4.7. The assessee has also given the income tax assessment particulars of Amit Dutta before the Learned AO. Moreover, the Learned AO himself had taken deposition from Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. We find that the assessee had not come on any affidavit before us refuting this finding. Hence the enhancement made by the Learned AO cannot be faulted with on violation of principles of natural justice. 4.10. In view of the aforesaid facts and circumstances and respectfully following the judicial precedents relied upon hereinabove, we have no hesitation in deleting the addition made in the sum of ₹ 60,50,8901- and 54,01,473/- u/s 40A(3) of the Act. Accordingly, the grounds raised by the assesee in this regard are allowed. 5. In the result, the appeal of the assessee is allowed. 8. After perusing the aforesaid decision of the ITAT, Kolkata, I am of the considered view that the issue in dispute is squarely covered by the aforesaid decision, because the facts and circumstances of the present case are exactly similar and identical to the aforesaid case law Therefore, respectfully following the aforesaid decision dated 18.11.2015 of the ITAT, B Bench, Kolkata passed in ITA No. 1448/Kol/2011 AY 2008-09 in the case of Sri Manoranjan Raha vs. ITO, addition in dispute are hereby deleted. 9. In the result, the appeal of the Assessee is allowed. Order pron ..... 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