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TMI Blog2020 (3) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts with the support of some internal vouchers and complete bills and vouchers were not produced by the assessee before the revenue authorities. Therefore, we are in agreement with the findings recorded by the CIT(A). - ITA No.53/CTK/2018 - - - Dated:- 16-3-2020 - Shri C.M. Garg, JM And Shri L.P. Sahu, AM For the Assessee : Shri B.R.Panda/Satyajit Nanda, Advs. For the Revenue : Shri Subhendu Dutta, DR ORDER PER L.P.SAHU, AM : This is an appeal filed by the assessee against order of CIT(A), Cuttack, dated 18.10.2017 for the assessment year 2012-2013. 2. As per the office note/order sheet entry, the appeal of the assessee is barred by 48 days. In this regard, the ld. AR of the assessee has filed an application for condonation of delay along with an affidavit. Considering the application along with the affidavit of the assessee for condonation of delay, to which ld. DR did not object to the same, we condone the delay in filing the appeal and the appeal is heard finally. 3. The assessee has raised following grounds of appeal :- I. For that the addition of ₹ 21,46,046/- for alleged violation Sec.40A(3) of the IT. Act, without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manner to achieve the business objects and were recorded in the books of accounts on day to day basis, the percentage rate cannot be applied in this case. Hence the additions made on presumption basis are illegal and liable to be deleted. The other grounds will be urged at the time of hearing. 4. Brief facts of the case are that the assessee filed return of income on 02.03.2013 declaring total income of ₹ 37,75,199/-. The assessee derives income from retail sale of gold silver and transport contract. The case was selected for scrutiny and statutory notices were issued to the assessee. Due to change of incumbency the case was transferred to other AO. On perusal of the profit and loss account and ledger furnished by the assessee, it was noticed by the AO that the assessee has purchased ornaments from various dealers, among these dealers he has made purchase from M/s Lily Alankar, Cuttack and M/s Maa Santhosi Jewellers, Cuttack. On verification of ledger of purchases made from these two jewellers, the AO found that the assessee has made purchase by cash exceeding ₹ 20,000/- on various dates in one bill in violation of section 40A(3) of the Act. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 14.6.2011 -do- ₹ 22,786 22 5.12.2011 -do- ₹ 23,230 11 20.6.2011 -do- ₹ 22,167 23 13.12.2011 -do- ₹ 21,680 12 12.7.2011 -do- ₹ 24,813 Total: ₹ 5,66,634/- Purchase: M/s Maa Santhosi Jewellers, Cuttack. S.No Date Mode of payment Amount S.No Date Mode of Payment Amount 1 3.4.2011 Cash ₹ 24,570 17 10.9.2011 Cash ₹ 25,805 2 10.4.2011 -do- ₹ 25,482 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.12.2011 -do- ₹ 24,179 14 12.8.2011 -do- ₹ 24,371 30 21.12.2011 -do- ₹ 31,120 15 19.8.2011 -do- ₹ 24,497 31 27.12.2011 -do- ₹ 73,284 16 26.8.2011 -do- ₹ 27,145 Total: ₹ 10,13,625/- Purchase Register: S.No Date Mode of Payment Amount S.No Date Mode of Payment Amount 1 13.04.2011 Cash ₹ 27,000 10 27.09.2011 Cash ₹ 35,620 2 18.06.2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the purchase of cotton where all the agents have charged 1% commission from the assessee which means that such persons were acting on behalf of the assessee in the process of cotton. This is not same in the present case as the assessee was not charged any commission by the agents and without any commission payment assessee cannot claim that they acted as agent and distinguished the case law relied on by the assessee. Accordingly, the AO made addition of ₹ 21,.46,046/-. 6. Further, on scrutiny of accounts, the AO noted that the assessee has debited an amount of ₹ 42,65,200/- and ₹ 39,56,550/- towards business promotion expenses and travelling expenses, respectively. In this regard, the assessee was asked to produce the details of such expenses and evidence to substantiate the claim of expenses. In response to this, the assessee produced ledger for these expenses and some handmade vouchers in support of the claim. The AO further noticed that the assessee claiming same expenditure in both the heads i.e. business promotion expenses and travelling expenses and for better understanding the chart incorporated by the AO in the assessment order is reproduced as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s account, the AO found that the assessee has claimed expenses under the different heads which reads as under :- Heads of Expenses Amount Repair Maintenance ₹ 4,93,325/- Printing Stationary ₹ 2,49,231/- Fuel Lubricant ₹ 14,70,500/- Telephone Charges ₹ 2,62,010/- ₹ 24,75,066/- In regard to the above expenses debited into the profit and loss account, the assessee was asked to produce the details of such expenses and substantiated the claim of expenditure. In support of this, the assessee furnished the ledger copies of some expenses booked under the above heads and could not produce all the bills and vouchers for verification. The assessee submitted that all these expenses were incurred dully for the purpose of business, therefore, the AO in absence the details, like bills and vouchers and most of the expenses were paid in cash, concluded that the leakage of revenue cannot be denied in such circumstances, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness market price stability are not always in constant rate. So it has waited to procure * the gold from market to get good profit in such stiff market competition. Further the assessee who is staying far away from the supplier establishment, it was not preferable for payment in cheques or drafts due to fluctuation of price rate. Further non-availability of specified design of ornaments in the markets, the seller demanded for cash payment instead of demand draft or cheques, and the assessee for protection of business so also non-available of specific items agreed for cash transactions in compulsion. Therefore considering the exigency of business and genuineness of payment and identity of both payer and payees, the addition made for violation of Sec.40A(3) of the IT. Act should not have been applied and in the case of Attar Singh Gurmukh Singh v. Income Tax Officer (1991) 191 ITR 667, the Supreme Court considering sub-rule (j) of rule 6DD observed that where the assessee furnishes evidence to the satisfaction of the assessing officer as to the genuineness of the payments and the identity of the payee, such payments cannot be disallowed. 4. That so far the disallowance of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule of Rule 6DD of I.T.Rules, 1962, the assessee was compelled to make payment in cash. Both the creditors are belonged to Cuttack where there are ample banking facilities available. The CIT(A) has also discussed the issue in very judicial manner. The case laws relied on by the ld. AR of the assessee are not applicable in the present case in hand. Ld.AR of the assessee also unable to substantiate that these payments have been incorporated in the ledger account of the creditors and has paid due taxes thereon. Further in respect of ground Nos.2 3, ld. DR relied on the order of CIT(A) and submitted that the assessee could not produce external vouchers and some of the entries were supported in the books of accounts of the assessee by way of internal vouchers, which cannot be relied on fully that genuine expenses have been incurred by the assessee for smooth running of the business. Therefore, the CIT(A) has rightly restricted the addition made by the AO. 12. After hearing both the sides and perusing the entire material available on record and the orders of authorities below, in respect of ground No.1, the AR of the assessee has tried to justify that he may get the benefit of rule 6D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as during the month of February, 2012, generally marriages takes place and during odd hours, the assessee made transactions and in some cases seller was insisting for cash payments. The payments had been made to the seller because of that reason. The genuineness of purchases had not been doubted by the Assessing Officer. I find that in this case, there is no dispute to the fact that the genuineness of the transaction and the payment and identity of the receiver are established. This view is supported by the decision of Hon ble P H High Court in the case of Gurdas Garg (supra) and also the decision of Hon ble Supreme Court in the case of Attar Singh Gurmukh Singh (supra). Under such circumstances, I am of the opinion that the disallowance of these expenses by applying to section 40A(3) would not be justified. I, accordingly, set aside the order of ld CIT(A) on this count and allow the grounds of appeal of the assessee. In the result, appeal of the assessee is allowed. From the above observations of the Tribunal, it is clear that the decision cited by the ld. AR is a decision rendered by the SMC Bench of this Tribunal, which is not bound to follow by the Division ..... X X X X Extracts X X X X X X X X Extracts X X X X
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