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TMI Blog2018 (9) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... ved which is the details of payment made by assesse to said M/s. Bhattacharya Bottling plant Pvt. Ltd. It clearly shows that all the payments were made by cheque from the account of one partner, Shri Sudip Kr. Chatterjee. An amount of ₹ 2,09,070/- was transferred to M/s. Bhattacharya Bottling Plant Pvt. Ltd vide cheque no. 927174. Likewise vide cheque nos. 927175, 927176 & 927177, which are matching with cheque nos. as discussed above in respect of page-32 of the paper book. Therefore, we find force in the submissions of the ld. AR that one of his partner, Shri Sudip Kr. Chatterjee made the payments through his individual account. In our opinion, it cannot be doubted as out of books as viewed by the AO, which confirmed by the CIT-A. Thus, the CIT-A was not justified in confirming the addition made by the AO on this issue. The order of CIT-A is set aside and deleted the addition made by AO. Ground no. 5 raised by the assessee is allowed. Addition on account of undisclosed purchase - Held that:- As contended that Sh. Sudip kr. Chatterjee is an authorized licencee to purchase liquor from IFB Agro Industries, which was not disputed by the AO. In view of above discussion, takin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be made u/s.40A(3) of the Act. 4. On the other hand, the ld. DR did not controvert the above submissions of the ld.AR. 5. After hearing both the parties and perused the record including the order dt. 05-08-2016, we find that the issue raised in this appeal of assesse is in favour of assesse, which has rightly been pointed out by the ld.AR of assesse. On perusal of order dt. 05-08-2016, we find that this Tribunal discussed the issue in detail analyzing with various case laws available in the said order and held that cash payments made by the assesse, who is retail vendor to the Principal, Govt. of West Bengal through its wholesale agent. The assesse i.e retail vendor had made payment to the said agent (wholesale licensee) would fall under the exception provided in Rule 6DD(k) of the IT Rules. Relevant portion of such order is reproduced herein below:- 13. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee comprising of various orders of lower authorities vide pages 1 to 42 of the Paper Book, copy of Notification No. 1208-Ex dated 29.08.2005 issued by the Excise Department, Government of Wes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untry spirit by wholesale has been granted under section 22 of the Act, or of a licensed wholesale vendor of country spirit; ( viii) wholesale licensee means the wholesale vendor of country spirit to whom license has been granted in West Bengal Excise Form No. 26. ( 2) Words and expressions used in these rules and not defined, but defined in the Act, shall have the meanings respectively assigned to them in the Act. 3. Issue only on payment of duty.-No country spirit in labelled and capsuled bottles shall be issued without payment of duty from a country spirit bottling plant. No country spirit in bulk shall be issued without payment of duty from a country spirit warehouse. 4. Personal Ledger Account to be maintained by the wholesale licensee.-The wholesale licensee shall maintain a Personal Ledger Account in accordance with the direction issued by the Commissioner from time to time for the purpose of maintaining an account-current of the duties payable by the wholesale licensee for the issues of country spirit to the retail vendors or transport on payment of duty from the concerned country spirit bottling plant or warehouse. 5. Minimum balance in Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of five paise per bottle irrespective of measure from the bottling charge to the retail country spirit licensees whose licensed premises are located at a distance of 50 kilometres or more by the shortest route from the issuing warehouse on the basis of a certificate to be issued by the Collector in respect of distance. At the end of the month, the wholesaler shall submit a bill in duplicate to the Officer-in-Charge of the warehouse claiming refund of the amount granted as rebate. The Officer-in-Charge shall, on receipt of the bill, refund the amount claimed after verifying his records through adjustment in the Personal Ledger Account maintained for the purpose of privilege fee. In case there is no Personal Ledger Account for privilege fee at the warehouse, the Officer-in-Charge shall send a copy of the claim with his comments to the Officer-in-Charge of the supplier bottling plant, who shall refund the amount recommended to the wholesaler through adjustment in the Personal Ledger Account maintained for privilege fee. 14. We find that the reliance placed on the decision of Co-ordinate Bench of Bangalore Tribunal in the case of Sri Renukeswara Rice Mills vs ITO rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2,500 (Rs. 10,000 after the 1987 amendment) would be allowed to be deducted only if made by a crossed cheque or crossed bank draft (except in specified cases) is not arbitrary and does not amount to a restriction on the fundamental right to carry on business. If read together with Rule 6DD of the Income-tax Rules, 1962, it will be clear that the provisions are not intended to restrict business activities. There is no restriction on the assessee in his trading activities. Section 40A(3) only empowers the Assessing Officer to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed-cheque or crossed-bank draft. The payment by crossed-cheque or crossed bankdraft is insisted upon to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of income from undisclosed sources. The terms of section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken 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 pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also not been disputed by the department as it appears from the order so passed by the learned Tribunal. It further appears from the assessment order that neither the Assessing Officer nor the CIT (Appeal) has disbelieved the genuineness of the transaction. There was no dispute that the purchases were genuine. Anupam Tele Services vs ITO in (2014) 43 taxmann.com 199 (Guj) 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 limits Rule 6DD(j) Assessment year 2006-07 - Assessee was working as an agent of Tata Tele Services Limited for distributing mobile cards and recharge vouchers - Principal company Tata insisted that cheque payment from assessee's co-operative bank would not do, since realization took longer time and such payments should be made only in cash in their bank account - If assessee would not make cash payment and make cheque payments alone, it would have received recharge vouchers delayed by 4/5 days which would severely affect its business operation - Assessee, therefore, made cash payment - Whether in view of above, no disallowance under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the cash has been deposited directly in the bank account of the supplier i.e M/s Asansol Bottling Packaging Co. Pvt Ltd by the assessee. 19. We find that the Hon ble Apex Court in the case of CTO vs Swastik Roadways reported in (2004) 3 SCC 640 had held that the consequences of non-compliance of Madhyapradesh Sales Tax Act , which were intended to check the evasion and avoidance of sales tax were significantly harsh. The court while upholding the constitutional validity negated the existence of a mens rea as a condition necessary for levy of penalty for noncompliance with such technical provisions required held that in the consequence to follow there must be nexus between the consequence that befall for non-compliance with such provisions intended for preventing the tax evasion with the object of provision before the consequence can be inflicted upon the defaulter. The Supreme Court has opined that the existence of nexus between the tax evasion by the owner of the goods and the failure of C F agent to furnish information required by the Commissioner is implicit in section 57(2) and the assessing authority concerned has to necessarily record a finding to this effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the rules framed by the Government and such payment was required to be made in legal tender. A perusal of the Government Notification issued by the Govt. of West Bengal clearly shows that the dealers are agents of the Government and the payments made are to the Government. It also makes it categorically required that the payment is to be made before lifting of the country spirit. Consequently we are of the view that the issue is squarely covered by the decision of the Coordinate Bench of this Tribunal in the case of M/s.Amrai Pachwai C.S.Shop referred to supra wherein it has been held as follows :- 6. We have considered the rival submissions. At the outset a perusal of the assessment order clearly shows that the AO has recognized the assessee's business in trading of country spirit and country liquor. Copy of Form of Licence issued by Durgapur Municipal Corporation and copy of Form III issued by Department of Excise, Govt. of W.B. were also found at pages 177 and 179 of the assessee's paper book. In any case the validity of licence of the assessee to trade in country spirit and country liquor is not the issue before us. The issue is whether the payments made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is noticed that the payments made by the assessee for purchase of country spirit and country liquor is to the government as per the notification issued by the government and is in legal tender specified by the notification. In the circumstances, we are of the view that the payment made by the assessee for the purchase of country liquor and country spirit from the territorial licensee bottling plant, IFB Agro Industries Ltd., City Centre, Durgapur is protected by the exemption in terms of Rule 6DD(b) of the 1.T.Rules 1962. In the circumstances, the addition as made by the AO and as confirmed by the Id. CIT(A) by invoking the provisions of section 40A(3) of the I. T.Act 1961 stands deleted. 8. In the result the addition as confirmed by the Id. CIT(A) stands deleted. We find that this decision was rendered by placing reliance on its earlier decision in the case of M/s Amrai Pachwai C.S.Shop in ITA No. 1251/Kol/2011 dated 15.1.2014 and after considering the contrary decisions rendered in the case of Pushpalata Mondal in ITA No. 965/Kol/2010 dated 28.7.2011 and Hon ble Kerala High Court in the case of CIT vs K Abdu Co (170 Taxman 297). We find that the Co-ordinate Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The State Government may grant to any person, on such conditions and for such period as it may think fit, the exclusive privilege ( a) of manufacturing, or supplying by wholesale, or ( b) of manufacturing, and supplying by wholesale, or ( c) of selling, by wholesale or retail, or ( d) of manufacturing or supplying by wholesale and selling retail, or ( e) of manufacturing and supplying by wholesale and selling retail, any country liquor or intoxicating drug within any specified local area: Provided that public notice shall be given to the intention to grant any such exclusive privilege, and that any objections made by any person residing within the area affected shall be considered before an exclusive privilege is granted. ( 2) No grantee of any privilege under sub-section (1) shall exercise the same unless or until he has received a license in that behalf from the Collector or the Excise Commissioner. Hence it could be safely concluded that M/s Asansol Bottling Packaging Co. Pvt Ltd (Bottling Plant) is a warehouse within the meaning of Rule 2(vii) of the Excise Rules 2005 and said warehouse is a State Government estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd accordingly the same would fall under the exception provided in Rule 6DD(a) of the Rules. We find that the assessee had made payments only to the customer of State Bank of India and not to State Bank of India. Hence the assessee s case does not fall under the exception provided in Rule 6DD(a) of the Rules. 24. We hold from the aforesaid findings that the assessee s case falls under the exceptions provided in Rule 6DD(b) and Rule 6DD(k) of the Rules. In view of the aforesaid facts and circumstances and respectfully following the judicial precedents relied upon hereinabove, we have no hesitation in deleting the disallowance made u/s 40A(3) of the Act in all the years under appeal. Accordingly, the grounds raised by the assessee for all the years under appeal are allowed. 6. In view of the above, finding of Co-ordinate Bench in the case of supra on similar set of facts and identical issue and discussion made herein above in para no. 5.1, we set aside the order of CIT-A and delete the addition made by the AO. Ground nos. 1 to 4 raised by the assesse are allowed. 7. Ground no. 5 is relating to confirmation of addition of ₹ 6,76,294/- made on account of alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s through his individual account. In our opinion, it cannot be doubted as out of books as viewed by the AO, which confirmed by the CIT-A. Thus, the CIT-A was not justified in confirming the addition made by the AO on this issue. The order of CIT-A is set aside and deleted the addition made by AO. Ground no. 5 raised by the assesse is allowed. 11. Ground no.6 is relating to confirmation of addition of ₹ 28,97,668/- on account of undisclosed purchase in the facts and circumstances of the case. 12. The ld.AR submits that the assesse and its partner, Sri Sudip Kr. Chatterjee both are engaged in the same business of alcohol and referred to trading, Profit Loss account filed for the A.Y under consideration placed at pages 21-27 of the paper book. He further referred to pages 19-20 of paper book and argued that TCS was collected during the A.Y under consideration. The entire purchase amount of ₹ 28,81,522/- was reflected in Sh. Sudip Kr. Chatterjee s Profit Loss account and referred to return of income at pages 24-27 of paper book. The ld. AR argued that without considering all these submission of assessee, the CIT-A confirmed the addition made by the AO on this issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. After hearing both the parties and perusing the record including paper book details, it is noted from assessment order that the assesse claimed expenditure to the tune of ₹ 68,522/- under many heads as detailed therein at page-10 of the AO s order. According to AO, the assesse could not produce any supporting evidence and as such disallowed the same at 20% i.e ₹ 13,704/- and added the same to the total income of assesse. Before the CIT-A also no substantial evidence was filed by assesse and as such he confirmed the same as disallowed by the AO. Before us also except making submission that bills and vouchers were destroyed during the agitation of local females and as such no evidence or whatsoever proving the same filed before us. In our view the reasons as stated by assessee before us for non submission of any substantial evidence in support of claim of expenditure is not acceptable, as we noted that no books of account were even produced before the AO. In such circumstances, we find no infirmity in confirming the order of AO. Therefore, ground no. 7 of assessee s appeal is dismissed. 17. In the result, the appeal of assesse is partly allowed. Order pronounce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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