TaxTMI 
TaxTMI 
1997 (6) TMI 72
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....bted. Moreover on account of unavoidable and unexceptional circumstances, cash payments exceeded Rs.2500 were made and the assessee came within the benevolence of Rule 6DD(i) and the Board's Circular No. 220 dated 31st May, 1997. The Assessing Officer added the said sum of Rs.1,22,077. The addition of Rs.10,000 was made by the Assessing Officer because from out of total labour payments of Rs.2,04,078 most of the payments were not verifiable with supporting vouchers. He, therefore, made an addition of Rs.10,000. The assessee was unsuccessful before the A/C who confirmed both additions. 2. The assessee has filed written submissions have been placed on record along with some connected papers and copies of the Judgments of various Courts rendered on the addition under section 40A(3) of the Act. 3. We have given due consideration to the written submissions in respect of both the grievances and the various case laws, citations of which are given therein. We have also heard the DR who relied upon the orders of both the lower authorities. 4. We shall deal with the second grievance first. Admittedly the Assessing Officer has not doubted the genuiness of the payments made to M/s. ST....
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....e deem it fit and proper to restrict the addition in a sum of Rs.75,000 in labour payment account as against Rs.10,000 made by the Assessing Officer and confirmed by the A/C. 6. In the result, the appeal is partly allowed. ITA No. 348 (Pat.)/1992 A.Y. 1990-91 I have read carefully the order proposed by my ld. brother. I agree with his decision regarding upholding of an addition of Rs.7,500 as against Rs.10,000 upheld by the CIT(A) in Labour Payment Account. However, with respect, I am unable to come to the same conclusion as my learned brother with regard to a disallowance of Rs.1,22,077 made by the Assessing Officer under section 40A(3) of the Act, and upheld by the CIT(A). 2. In para 4 of the proposed order my ld. Brother has given weight to the assessee's contention on the ground that the Assessing Officer has not doubted the genuineness of the payments made to M/s. STP Limited. However, the ld. counsel for the assessee, in his second written submissions before the Tribunal, has referred to the decision of the Supreme Court in case of Attar Singh Gurmukh Singh v.ITO [1991] 191 ITR 667 and has given an extract also where it has been observed by the Hon'ble Supreme Cou....
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....sp; Date of cash payment Amount ---------------------------------------------------------------------------- DN/CB/90/0077 8-12-1989 10,982.60 DN/CB/90/0086 3-1-1990 17,35.92 DN/CB/90/0087 4-1-1990 23,124.96 DN/CB/90/0104 28-2-1990 ....
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....that M/s. STP Ltd. were ready to receive the payments through demand drafts. 8. in the Grounds of appeal before us it is stated that M/s. STP Ltd. did not have a Bank Account at Dhanbad and the assessee did not have a bank account there either and, therefore, the case was covered under Rule 6DD(1). It is also stated that an amount of Rs.17,136 was paid on 3-1-1990 which was a bank holiday on account of Guru Govind Singh's Birthday and a sum of Rs.41,647 was paid on 31-3-1990 on which date no bank draft is issued from the bank and these two payments were separately covered under Rule 6DD(1). In the written submissions, CBDT Circular No. 220 dated 31-5-1977 has also been invoked for the same reasons. 9. Rule 6DD(j) provides that no disallowance under section 40A(3) shall be made where the assessee satisfies the Assessing Officer that the payment could not be made by way of a crossed cheque drawn on a bank or by a crossed bank draft-- (a) due to exceptional or unavoidable circumstances; or (b) because payment in the manner aforesaid was not practicable, or would have caused genuine difficulty to the payee, having regard to the nature of the transaction and the necessity fo....
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....raft was acceptable to M/s. STP Ltd. The circumstances are totally different. Board's Circular No. 220, therefore, does not apply to this case. 12. We do not find any exceptional or unavoidable circumstances either and it is not a case where payment in the prescribed manner was not practicable, or would have caused genuine difficulty to the payee, having regard to the nature of the transaction and the necessity for expeditious settlement thereof. In any case, as per certificate dated 25-7-1991 of STP Ltd., the amounts were sent to the Calcutta office of STP Ltd. by STP Limited through demand draft. We do not see why the assessee could not have done the same. 13. In the peculiar facts and circumstance, I do not find merit in the further contention of the assessee that 3-1-1990 was bank holiday when Rs.17,136 was paid and 31-3-1990 was a bank yearly closing day when a sum of Rs.41,647 was paid. Even if this was so, the crossed drafts could have been prepared on the next day. There is nothing on record to show that the assessee insisted for payments on these very days. 14. For the above reasons, I hold that the sum of Rs.1,22,077 has been rightly disallowed under section 40A(....
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..../CB/90/0077 8-12-1989 10,982.60 DN/CB/90/0086 3-1-1990 17,135.92 DN/CB/90/0087 4-1-1990 23,124.96 DN/CB/90/0104 28-2-1990 12,245.05 DN/CB/90/0120 16-3-1990 &....
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....ur product sale." Since the letter says that M/s. STP Ltd. was accepting demand drafts, the ITO felt that the assessee should have made the payment by demand draft as provided under section 40A(3). Further, he got also the matter enquired into by the Inspector of Income-tax from M/s. STP Ltd. He also, in his report, stated that M/s. STP Ltd. was accepting drafts/cheques and cash from the customers and there is no separate agreement with the present assessee. Therefore, the ITO held that the assessee's contentions regarding terms of payment are totally wrong. Since the payment had been made in cash each time exceeding Rs.10,000, the case called for disallowance under section 40A(3) and hence he added a sum of Rs.1,22,077 to the total income of the assessee. Thus, as against the returned income of Rs.50,230, he completed the assessment on an income of Rs.1,50,168 after deduction of firm's tax. 3. Inter alia aggrieved by the addition of Rs.1,22,077, the assessee went in appeal before the CIT(A) but to no avail. The learned CIT(A), by his impugned order dated 22-1-1992, dismissed the appeal saying that the ITO proved beyond doubt that M/s. STP Ltd. was ready to receive the paymen....
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....lable either before him or before the Assessing Officer. It constitutes additional evidence. According to Rule 29 of the Tribunal Rules, only in exceptional circumstances, where the Tribunal is satisfied that the lower authorities have decided the case without giving sufficient opportunity to adduce evidence either on points specified by them or not specified by them as additional evidence can be admitted by the Tribunal. Even while submitting the additional evidence, the Tribunal has to record reasons for admitting such evidence. The above conditions are not satisfied and the additional evidence is not admissible, and if it is excluded, there is nothing on record to show that M/s. STP Ltd. is an income-tax assessee. The ld. Accountant Member stated that facts are to be thrashed out and fully discussed before coming to the conclusion whether the assessee is entitled to benevolent provisions of Rule 6DD(1). Afterwards, he had surveyed the reasons given by the Assessing Officer in his assessment order and the reasons given by the CIT(A) in his impugned order. Thereafter, the learned Accountant Member stated that in the grounds before the Tribunal it is stated that M/s. STP Ltd. did n....
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....dy stated, the assessee is a contractor and specializes in undertaking the work of arranging roof materials and they have purchased roof materials from M/s. STP Ltd. at Dhanbad. The office of the assessee registered firm was at Sindri. The work place was at Dhanbad. The distance between these two places is 30 to 40 kms. It is explained that for the assessee to make purchases at Dhanbad, if they have to come back to Sindri, make a draft and present it to M/s. STP Ltd, is most inconvenient and not practicable at all. Further, the actual purchase price would be known only after the purchases are made and not before hand. Therefore, it is not possible for the assessee to go with a crossed demand draft in its hands towards purchases it is going to make at Dhanbad. As far as the assessee is concerned, it has no bank account either at Dhanbad or at Calcutta where M/s. STP Ltd. has got its registered office. M/s. STP Ltd. is assessed to sales-tax as well as income-tax. The assessee is new to M/s. STP Ltd. inasmuch as it has no running account with M/s. STP Ltd. The certificate of M/s. STP Ltd. dated 25-7-1991, a copy of which is furnished at page 10 of the paper book, is as follows: TO ....
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....ent to our Calcutta Office through Demand Drafts, as per details mentioned above, since we have no Bank Account at Dhanbad. For STP Limited sd/- Sr. Unit Incharge." A perusal of the certificate would show that it was not possible immediately to send the amounts covered under each of the bills to M/s. STP Ltd. at Calcutta but it had taken one or two days or even week or 10 days also to send the amounts through D.Ds. after realising them in cash under each of the bills. It is made clear in the certificate that M/s. STP Ltd. has no bank account at Dhanbad. The ld. Accountant Member states that the certificate is a new material which was never there before the lower authorities and, therefore, he is not prepared to admit the same as additional evidence. I disagree with this conclusion. Under Rule 29 of the ITAT Rules, since the said certificate is a criucial document which would prove the justification for making cash payments at Dhanbad, in all fairness and with a view to meet the ends of justice, it should be held to be admissible in evidence. According to me, the reasons given for shunning it from evidence are unsupportable in law. Further, I am of the view that under....
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....a. Therefore, in a way, the letter dated 9-11-1989 can as well be construed in favour of the assessee. Suffice for me to cite the Punjab & Haryana Court judgment rendered in CIT v. Brij Mohan Singh.& Co. [1994] 209 ITR 753. At page 754 of the head-note, it had stated the facts as well as its judgment thereon. It is significant that the decision was rendered on the basis of the ratio in the case of Avtar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667 (SC). The facts of the Punjab & Haryana High Court as well as the decision thereon found extracted at pages 754 & 755 of the headnote are as follows: "Section 40A(3) of the Act must not be read in isolation or to the exclusion of rule 6DD of the Income-tax Rules, 1962. The section must be read along with the rule. The terms of section 40A(3) are not absolute. Considerations of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are 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 payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficul....