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TMI Blog2019 (11) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... self, an exception is provided on account of nature and extent of banking facilities available, consideration of business expediency and other relevant factors. It is not in dispute that assessee-company was engaged in the business of liquor trading and obtain supplies from the breweries. The amounts in question have been tabulated above showing the extent of amounts paid in cash. These payments are made to the distillers and breweries. The nature of business of assessed shown the expediency of payment of cash to meet the requirements of the suppliers for payment of Excise duty and clearing of cheques by the suppliers. The authorities below have not doubted the identity of the payee and the genuineness of the transaction in the matter. The source of payment is also not been doubted by the authorities below. Hence, we accordingly, set aside the orders of the authorities below and delete the addition made u/s 40A(3). Disallowance of Depreciation - Motor Lorry - HELD THAT:- We find that the Assessing Officer and the ld. CIT (A) have disallowed the claim as the assessee could not produce any bills for allowance of such expenditure. Even before us, the assessee did not produce any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above the appellant disputes that the quantum of addition confirmed is on higher side. Difference in License Fee- Addition u/s 43B: 3. As per the P L account, the assessee has shown the payment of license fees as under: License Fees L-1 ₹ 25,00,000/- License Fees L-2/L-14 ₹ 74,32,10,400/- 4. The Assessing Officer called for information u/s 133(6) of the Income Tax Act from the Excise department dated 12.02.2013 from the office of Deputy/Asstt. Excise Taxation Officer, Gurgaon. Sl. No. Amount claimed in P L a/c Amount as per Taxation Commissioner, Gurgaon 1. 74,32,10,400 74,23,63,480 8,46,920 5. On receipt of information, the Assessing Officer held that the assessee could not reconcile the difference of ₹ 8,47,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.01.2013 confirmed short deposit of ₹ 7,26,450/- Letter dated 18.02.2013 confirmed the short deposit of ₹ 8,47,000/- Letter dated 18.02.2013 confirmed total deposit of ₹ 74,23,63,400/- Amount claimed in P L a/c of ₹ 74,32,10,400 The difference is about ₹ 8,47,000/- As per the letter dated 11.05.2010, the Excise authorities confirmed the payment of ₹ 74,32,10,400/- There was no outstanding balance payable as per the balance sheet. 10. The Provisions of Section 43B reads as under: Certain deductions to be only on the actual payment. 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable7 under this Act in respect of- 10[(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or] (b) any sum payable by the assessee as an employer by way of 11contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 74,32,10,400/- and claimed the same in the P L account. This fact of payment of ₹ 74,32,10,400/- has been confirmed by the Excise authorities vide letter dated 11.05.2010. The balance sheet does not reflect any outstanding payments by the assessee. Hence, keeping in view, the entirety of the fact, we hereby allow the payment made by the assessee on account of Excise duty as confirmed by the Excise authorities. The appeal of the assessee on this ground is allowed. 12. The Assessing Officer has made an addition of ₹ 92,27,520/- as per the provisions of section 40A(3) on account of cash payments to three parties namely, 1. M/s Skol Breweries Ltd. 2. M/s Ashoka Distillers Chemicals Pvt. Ltd. 3. M/s Allied Blenders Distillers Pvt. Ltd. 13. The Assessing Officer held that the case of the assessee is not covered under rule 6DD(j) of IT Rules. The exceptions laid out specially do not apply to the facts of the case. The ld. CIT (A) confirmed the addition on the grounds that the assessee has not explained as to why the payments were made in cash. 14. Before us, the ld. AR argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is pertinent to observe the following decision on the impugned subject duly referred in the order of the KGL Networks Pvt. Ltd. (supra) which are as under: Attar Singh Gurmukh Singh vs. ITO reported in (1991) 191 ITR 667 (SC) Section 40A(3) of the Income-tax Act, 1961, which provides that expenditure in excess of ₹ 2,500 (₹ 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 bank draft is insisted upon to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heque these goods could not have been procured and it would have hampered the supply of goods within the stipulated time. Therefore, the genuineness of the purchase has been accepted by the ld. CIT(Appeal) which has 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 Tete 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 ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 noncompliance 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 before levying penalty u/s. 57(2). Though in the instant case, the issue involved is not with regard to the levy of penalty, but the requirement of law to be followed by the assessee was of as technical nature as was in the case of Swastik Roadways (3 SCC 640) and the consequence to fall for failure to observe such norms in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsection (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees in the cases and circumstances specified hereunder, namely:- .. (k) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person; The said rule says that if the payment is made by a person to his agent who is required to make payment in cash for goods and services on behalf of such person: Admittedly, Shri Arnit Dutta is only the agent of Hutchison Essar Ltd and not the assessee as could be seen very clearly from the Associate Distributor Agreement entered into by the assessee which is on records before us and before the lower authorities. Hence, the payment made by the assessee to Shri Arnit Dutta would not fall under the exception clause of Rule 6DD(k). 4.9. We find that one of the grounds raised by the assessee is violation of principles of natural justice on the part of the Learned CIT(A) to enhance the assessment without giving enhancemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, [or use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed], exceeds ten thousand rupees,] in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors :] 20. Having considered the submissions and perused the entire facts and circumstances of the case, even though there is an amendment in Rule 6DD of I.T. Rules as is noted by the Ld. CIT(A), but in Section 40A(3) of the I.T. Act, 1961 itself, an exception is provided on account of nature and extent of banking facilities available, consideration of business expediency and other relevant factors. It is not in dispute that assessee-company was engaged in the business of liquor trading and obtain supplies from the breweries. The amounts in question have been tabulated above showing the extent of amounts paid in cash. These payments are made to the distillers and breweries. The nature of business of assessed shown the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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