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TMI Blog2018 (2) TMI 1206X X X X Extracts X X X X X X X X Extracts X X X X ..... tanu Jain, Adv. Revenue by : Ms. Rachana Singh, CIT ( DR ) ORDER Per H. S. Sidhu : JM The Assessee has filed this Appeal against the impugned Order dated 02.7.2014 of the Ld. CIT(A)-XXXIII, New Delhi relevant to assessment year 2008-09. 2. The grounds raised in this Appeal read as under:- 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in not deleting the addition made despite there being no incriminating material found during search u/s. 132 of the Income Tax Act, 1961. 2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of AO in making disallowance of a sum of ₹ 32,87,330/- under provisions of section 40A(3) that too by treating the same as inventory and further erred in reducing the cost of land to the extent of disallowance u/s. 40A(3). 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of the AO in making disallowance of a sum of ₹ 28,29,600/- being finance charges on loan taken from parent company. 4. That in any case and in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that no incriminating material was found during the course of search, therefore, impugned disallowance was beyond the jurisdiction of AO. In support of his argument, he relied upon the following case laws especially the ITAT, C Bench, New Delhi decision dated 15.09.2017 passed in ITA No. 5293/Del/2013 3029/Del/2014 (Ayrs. 2006-07 2007-08) in the case of M/s Galaxy Dwellers (P) Ltd. vs. DCIT where the facts and circumstances of the case are similar and identical to the present case:- - ITAT, Jaipur A Bench decision dated 12.08.2011 passed in ITA No. 79/JP/2011 (AY 2007-08) in the case of M/s Ace India Abodes Ltd. vs. ACIT. - ITAT, SMC, Delhi Bench decision dated 17.8.2017 passed in ITA No. 5238/Del/2016 (AY 2012-13) in the case of Radhey Shyam Manchanda vs. ITO - ITAT, C Bench, New Delhi decision dated 11.9.2017 passed in ITA No. 5170/Del/2014 (AY 2006-07) in the matter of ACIT vs. Marigold Merchandise (P) Ltd. - ITAT, C Bench, New Delhi decision dated 15.09.2017 passed in ITA No. 5293/Del/2013 3029/Del/2014 (Ayrs. 2006-07 2007-08) in the case of M/s Galaxy Dwellers (P) Ltd. vs. DCIT. 5. On the contrary, Ld. CIT(DR) in support of her contention has f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh was added to the income during the year of search and not in relation to any of the other AYs i.e., AYs 2000-01 to 2004-05. The documents as stated by the Revenue in its Memorandum of Appeal in ITA No. 306/2017 viz., Annexures A1, A3 to A5 stated to pertain to AY 2003-04, 2005-06, 2004-05, and 2006-07 respectively have neither been described as such or in any detail by the Revenue either in these appeals. They have not been referred to or discussed in any of the orders of the AO or the CIT (A). Although it was repeatedly urged by Mr. Manchanda that there were hundreds of seized documents , what is necessary to examine is whether they were in fact 'incriminating documents'. Any and every document cannot be and is in fact not an incriminating document. The legal position, as will be discussed shortly, is that there can be no addition made for a particular assessment year without there being an incriminating material qua that assessment year which would justify such an addition. Therefore, the mere fact there may have been documents pertaining to the above assessment years does not satisfy the requirement of law that there must be incriminating material. In any event, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, learned Counsel placed reliance on various judgments in support of the proposition that no disallowance should be made under section 40A(3) when payees are identified and genuineness of payment is not doubted. 13. We noticed in this regard that Kolkata bench of Tribunal in the case of Sri Manoranjan Raha vs. ITO (supra) has decided this issue in favour of assessee by observing 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 Shri AmitDutta who had deposed before the learned AO and confirmed the fact of receipt of monies in cash. Hence the genuinity of payments made by the assessee stands clearly established beyond doubt. Even for the amounts enhanced by Learned CITA in the sum of ₹ 54,01,473/-, the genuineness of the payments and the necessity to incur the said expenditure for the purpose of business of the assessee was never disputed by the Learned CIT(A). We hold that since the genuinity of the payments made to the parties is not doubted by the revenue, the provisions of section 40A(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted 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 bonafide 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 2008 dated 30.7.2008 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed 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 payee4.5. It is pertinent to note that the primary object of enacting section 40A(3) was two fold, 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 the banking habits. Therefore, the consequence, which were to befall on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 14. The above judgment has been followed by Kolkata bench in the case of Mr. Nirmal Kumar Das vs. ACIT (supra). Similar view is taken by Hon ble Rajasthan High Court in the case of Smt. Harshila Chordia vs. ITO (supra). Similarly, Hon ble Punjab Haryana High Court in the case of Gurdas Garg vs. CIT (supra), has held that where genuineness of transactions made in cash in excess of ₹ 20,000 was not disbelieved by authorities, same cannot be disallowed under Section 40A(3). Thus, on this ground also, we find that disallowance made by Assessing Officer under section 40A(3) is not sustainable. 15. Therefore, keeping in view bot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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