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TMI Blog2023 (5) TMI 1372X X X X Extracts X X X X X X X X Extracts X X X X ..... iability which is not as per the mandate of law; and at the same time prevent leakage of any revenue to which the Government exchequer would be duly entitled for, restore the issue to the file of the A.O for afresh adjudication. A.O shall in the course of set-aside proceedings, as per the mandate of 2nd Proviso to Section 143(1)(a) of the Act consider the claim that was raised by the assessee vide its objection/response that was uploaded by him on 24.01.2019 (18:57:41) to the proposed adjustment that was intimated by the CPC, Bengaluru vide communication dated 21.01.2019, wherein he had claimed that no disallowance u/s.40A(3) of the payment made by him towards purchase of beer from State Government of Chhattisgarh was called for in his hands. We, thus, set-aside the order of the CIT(Appeals) and restore the matter to the file of the A.O. Needless to say, the A.O shall in the course of set-aside proceedings afford a reasonable opportunity of being heard to the assessee. - SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER For the Assessee : S/Shri Praveen Khandelwal Praveen Goyal, CAs For the Revenue : Shri Piyush Tripathi, Sr. DR ORDER PER RAVISH SOOD, JM: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been pressed into service by them to drive home their respective contentions. 7. Controversy involved in the present appeal lies in a narrow compass, i.e. sustainability of the disallowance of Rs.56,62,920/- made by the CPC, Bengaluru u/s.40A(3) of the Act. As is discernable from the records, the auditor of the assessee at Sr.No.21(d) of his audit report filed in Form 3CD, had reported that the assessee had incurred expenses of Rs.57,62,920/- towards purchases made from the State Government of Chhattisgarh in a manner otherwise than that contemplated u/s.40A(3) of the Act. For the sake of clarity, the qualification by the auditor is being culled out as under: 21 a Please furnish the details of amounts debited to the profit and loss account, being in the nature of capital, personal, advertisement expenditure etc. (d) Disallowance/deemed income under section 40A(3) (A) On the basis of the examination of books of account and other relevant documents/evidence, whether the expenditure covered under section 40A(3) read with rule 6DD were made by the account payee cheque drawn on a bank or account payee bank draft. If not, please furnish the details No. Date of payment Nature of payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce as was sought to be made u/s.40A(3) of the Act, the CPC, Bengaluru without considering the same, had thereafter, issued an intimation u/s.143(1) of the Act dated 26.08.2019, wherein the disallowance u/s.40A(3) of the Act of Rs.57,62,920/- was made. 9. The Ld. Authorized Representative (for short AR ) for the assessee has assailed the intimation issued by the CPC, Bengaluru u/s.143(1) of the Act dated 26.08.2019, inter alia, for the reason that the same had been passed without considering the response of the assessee to the proposed adjustment that was filed on 24.01.2019 (18:57:41), i.e. well within the stipulated time period of 30 days from the date of receipt of the communication. It was averred by the Ld. AR, that the very purpose of affording an opportunity to the assessee as per the mandate of 2nd proviso to Section 143(1) (a) of the Act would be rendered as redundant and otiose in case the response filed by an assessee was not to be considered. Our attention was drawn by the Ld. AR to the 2nd proviso to Section 143(1)(a) of the Act, wherein the same specifically provides that the response received from the assessee to the proposed adjustment to his returned income was man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) disallowance of deduction claimed under [sections 10AA, or under any of the provisions of Chapter VI-A under the heading C-Deductions in respect of certain incomes , if] the return is furnished beyond the due date specified under sub- section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return: Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode: Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made: Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018; Admittedly, it is a matter of fact borne from record that the assessee s auditor at Sr. No.21(d) of his audit report filed in Form 3CD r.w.s. 6G(2), had reported that payment of expenditure of Rs.57,62,920 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rules framed by it and such payment is required to be made in legal tender. Ostensibly, the assessee in his objection dated 24.01.2019 to the proposed adjustment that was sought to be made by the CPC, Bengaluru u/s.40A(3) of the Act, had clearly stated that the expenditure in question was incurred towards purchase of beer from the State Government which would not accept payment in any mode other than cash. To sum up, the assessee in his reply, had clearly demonstrated before the CPC, Bengaluru that the expenditure in question did fall within the realm of the exception carved out under Rule 6DD(b) of the Income Tax Rules, 1962. Be that as it may, in our considered view, now when the assessee had come forth with a specific objection which did clearly fit within the exception provided under Rule 6DD(b), then, it was obligatory on the CPC, Bengaluru to have either accepted the said explanation ; or in case the same was to be rejected, then provided certain cogent reasons for doing so. In case, the response/objections of the assessee as provided in the 2nd proviso to Section 143(1)(a) of the Act are taken as an idle formality; or an eye wash, as had been done in the present case befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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