AI Drafter 
TaxTMI 
TaxTMI 
2016 (9) TMI 1000
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.... f ied in sustaining the addi t ion of Rs. 13,050/- on A/c of tanker rent , and the same may please be deleted. 4. For that the appel lant craves leave to add, al ter, amend any further grounds of appeal before or at the t ime of hearing. " 3. Ground no.1 is general in nature and requires no adjudication. Hence, the same is dismissed. 4. During the course of hearing before us the ld.AR for the assessee has not pressed ground no.3. Hence, the same is dismissed 5. Ground 2 is against disallowance u/s 40A(3) amounting to Rs. 18,88,560/- made by the Assessing Officer. 6. The Assessee is a firm filed engaged in the business of acting as dealer in purchase and sale of kerosene oil. In the course of assessment proceedings, the Assessee filed list of persons/concerns from whom purchase of Kerosene Oil were made along with list of persons to whom the sales were made. The AO issued notice u/s.133(6) of the Income Tax Act, 1961 (Act) to verify the entries in the ledger account of the parties from whom the Assessee effected purchases and sales as per the books of accounts of the Assessee. The replies along copy of party ledger obtained from the parties from who....
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....ce to be charged from M.R. dealer is periodically determined by the Department of food and supplies. As per the allotment memo issued to the appellant ( in this case Crony Enterprise), by the Department of food and supplies for the purchase of kerosene oil, the assessee is required to make the payment in cash. (sample copies of allotment letters issued by sub-divisional controller, food and supply, Asansol , is already on record has been duly verified by the AO and found correct) In the allotment letter, there is clear direction to the AGENT to deliver the specified quantity of kerosene oil to the APPELLANT ( BIG DEALER ) on CASH PAYMENT. Therefore, when the appellant is working as a licensee being a part of the public distribution system of the Government of West Bengal, it is bound to make the payment as directed by the Government of West Bengal. He, therefore, submitted that in the case of the assessee neither the identity of the seller nor the genuineness of the purchase is doubtful. Moreover, the payment has been made as per the rate fixed by the Government of West Bengal. Against the above back drop, certain FACTS are admitted and uncontrov....
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.... appellant is also covered by exception to Rule 6 00 ( b ) of the I. T Rules'62, because payments made to the AGENT being representative of the Govt. of West Bengal, is payments made to the Govt. Itself. Further, on this issue we would like to draw your notice to the provisions of The Essential Commodities Act'55 . Sec 5 of the said Act '55 clearly specifies that " power to make orders or issue notification under section 3 shall, ---------- ---------------------------------------- --------------------------- direction, be exercised also by (a) such officer or authority subordinate to the Central Government, or ( b ) such State Government or such officer or such authority subordinate to a State Government" , Sec 2 of the said Act'55, empowers the Sub Divisional Office , with delegated powers of Collector. Sec 6 of the said Act: has overriding effect over all enactments : u Any order made under Section 3 shall have effect notwithstanding anything inconsistent herewith contained in any enactment other than this Act or ---------------------------- ------------------------------------------------ this Act". ....
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....ns of business expediency and other relevant factors. 11 [Emphasis supplied] From the above, it is evident that no disallowance under this sub-section shall be made where any payment in a sum exceeding Rs. 20,000/- is made otherwise than by a crossed cheque/crossed bank draft in such cases and under such circumstances as may be prescribed. Thus, the mandate of the proviso is to exempt the payment in violation of provisions of Sec. 40A (3) in such cases and under such circumstances as may be prescribed. The last sentence of the proviso, i. e. "having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors", is the guideline for the authority who has to prescribe the cases and circumstances under which the disallowance u/s. 40A (3) will not be made despite the payment exceeding Rs. 20,000/- other than by cross cheque/bank draft. In pursuance to this proviso, Rule 6DD has been brought into the Statute vide I. T. (Amendment) Rules, 1969 w. e.f 1.4. 1969. Rule 6DD prescribes the cases and the circumstances in which payment in a sum exceeding Rs. 20, 000/- may be made otherwise than by crossed, cheque draw....
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....factual verification with reference to each payment whether the payment was made on bank holiday or not. The date-wise details of the payments and whether on those dates it was bank holiday or not has not been placed before us. Therefore, we are unable to give any finding whether Rule 6DD(k) is applicable in the case or the assessee. 16.2. Rule 6DD(1) would be applicable where the payment is made by any person to his agent, who is required to make the payment in cash for goods or services on behalf of such person. Whereas Rule 600 (b) would be applicable "where the payment is made to Govt. and, under the rules framed by it, such payment is required to be made in legal tender." It was claimed by the assessee that as per the public distribution system in the state of West Bengal there is a chain of persons as follows - "Agent - Big dealer - M. R. dealers." The assessee purchases kerosene oil from the agent appointed by the Govt. of West Bengal and the assessee supplies kerosene oil to the M. R. dealers. However, whether the "agent" to whom the payment is made by the assessee can be said to be agent of the assessee within the meaning of clause (1) of Rule 6DD is an i....
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....he gist of factual submission made by appellant are as under: (a) Appellant is big dealer and has to pay M.R. Dealer. (b) Purchase price and sale price is fixed. (c) In allotment letter clear direction is made that payment is to be made in cash. (d) Chakdola Village, where appellant stays is not having banks. (e) Cheque payment from his account in Jamuria will take 15 days to clear. (f) His case is covered by Rule 6DD(b). 8. My views on the (a) to (f) above comments of Assessing Officer is as under: (a) Matter of fact. (b) Matter of fact. (c) The allotment letter is a printed order. In the order 'on cash payment at Govt. fixed price' is hand written, duly authenticated by Sub-Divisional Controller, Food and Civil supplies, Asansol. This order valid for 7 days is signed by two different persons implying that the hand written part was introduced later since as per Govt. Rules, at a particular point of time, only one person can hold charge of a post of officer. (d) The fact to be considered to decide availability of banks is point of payment and not point of sale. At point of pay....
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....see submitted that the ld.CIT(A) was not justified in sustaining the addition, when the said payment made in cash is covered by exception to Rule 6DD of the I.T Rules 1962 and such addition may please be deleted. On the other hand, the ld.DR has relied on the orders of the authorities below. 10. We have heard the rival submissions and perused the material available on record. Sec.40A(3) of the Act as applicable for AY 2006-07 reads thus: "Where the assessee incurs any expenditure** in respect of which payment is made, after such date (not being later than 31st day of March, 1969), as may be specified in this behalf by the Central Government by notification in the Official Gazette in a sum exceeding ***[twenty thousand] rupees otherwise than by $[an account payee cheque drawn on a bank or account payee bank draft] $$[twenty per cent of such expenditure shall not be allowed as a deduction]: Provided that where an allowance has been made in the assessment for any year not being an assessment year commencing prior to the 1st day of April, 1969, in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year the ....
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....." 12. Thus the Hon'ble jurisdictional High Court has approved the order of the Income-tax Appellate Tribunal by dismissing the Revenue's appeal, holding that no substantial question of law arises. Therefore, it would be relevant to refer the decision of the Income-tax Appellate Tribunal, which is approved by their Lordships. The Income-tax Appellate Tribunal in the said case, i.e., Sri Basudev Seth v. ITO vide I.T.A. No. 1460 (Kol)/2006 held as under: "Heard both the parties, perused the record and find force in the contention of the assessee that he has to make this cash payment to M/s. B.S.K.F3.S Ltd. out of business expediency in view of the fact that there was no branch of United Bank of India at the place where the business of the assessee is located. The assessee's case also finds support from the above mentioned decision in the case of ITO v. Shri Binod Kr. Aganuala decided by the hon'ble Income-tax Appellate Tribunal, Kolkata. We are therefore, of the opinion that the addition made by the Assessing Officer underSection 40A(3) of the Income-tax Act 1961 was not justified in the instant case." 13. From the above it is evident that the Income-ta....