TaxTMI 
TaxTMI 
2016 (9) TMI 1154
X X X X Extracts X X X X
X X X X Extracts X X X X
....5 sowing the reason that as had violated provision of Section 40A(3) of Income Tax Act 1961. 2. Smt. Shila Mondal is the proprietor of South Nimcha C.S. Shop. South Nimcha C.S. Shop is a retail vendor of Country spirit in West Bengal as per Rule 2(iii) of West Bengal Excise (Supply of Country sprit on payment of Duty) Rules, 2005. 3. The Supply of Country Spirit is fully controlled by State Government as per West Bengal Excise Act 1909 and West Bengal Excise (Supply of Country Sprit on Payment of Duty) Rules, 2005. 4. M/s Asansol Bottling and Packaging Co. Pvt. Ltd., located at Dhadka, Asansol was originally granted exclusive privilege by State Government as per Section 22 of West Bengal Excise Act, 1909 and exclusively incorporated for Manufacturer and Supply of Country Spirit in West Bengal as per the Information Received from Office of the Superintendent of Excise under Right to Information Act 2005. The copy of such information and copy of Section 22 of West Bengal Excise Act, 1909 is attached herewith. 5. The assessee has to purchase / take issue of country spirit bottles from the wholesale vendor (Warehouse) after payment of Excise Duty, VA....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd there is no choice of purchase otherwise than from specified Warehouse of Government. Retail Vendors are allotted quota for purchase of the Bottles of country Spirit from the specified Vendor (ABPCPL) only by the State Government and if the Retail Vendor Fails to Maintain the minimum stipulated stock of Bottles of Country Spirit than there is a penalty of Rs. 25000/- per Day as Misc Case by State Excise Department. The composite Payment may be divided comprising (a) Cost of Product, (b) Excise Duty (c) VT and (d) TCS (Income Tax). 8. The Honorable ITAT Bench, SMC, Kolkata in Case of M/s ARPITA TRADERS vs ITO-WD-2/Cooch Bihar (ITA No. 1524/Kol/2012) has deleted the disallowance u/s. 40A(3) that I find that the assessee has to lift quota of spirit allotted to the assessee by excise authorities by paying Cash. The spirit has to be lifted from such manufacturing companies notified by the state government as the agent of the state government for the purpose of this trade. The System is to Pay the Cash to the government agent, which is the bottling company and lifted liquor quota allotted to an assessee. Therefore, it is compulsory on the part of the assessee to pay the price....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entative appeared on behalf of Revenue. 2. At the time of hearing Ld. AR for the assessee has stated that he has instructed by assessee not to press grounds No. 2 to 11. Hence, same are dismissed as not pressed. 3. Solitary inter-connection issue in Ground No. 1 raised in this appeal of assessee is that Ld. CIT(A) erred in confirming the action of AO by sustaining the disallowance of Rs.76,24,680/- u/s 40A(3) of the Act. 4. Brief facts are that assessee in the present case is an individual and engaged in the business of C.S. shop. The assessee for the year under consideration has filed her return of income on 30.09.2010 declaring total income of Rs.3,36,120/-. Thereafter case was selected for scrutiny and accordingly notices u/s 143(2)/142(1) of the Act with questionnaires were issued to assessee. The assessee, in the instant case, has made cash payment of Rs.76,24,680/- for the purchase of country liquor and violated the provision of Sec. 40A(3) read with Rule 6DD of the IT Rules, 1962. Accordingly, AO has disallowed the payment of Rs.76,24,680/- and added to the total income of assessee. 5. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who confirmed the ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 40A(3) of the Income-tax Act, 1961, which provides that expenditure in excess of Rs. 2,500 (Rs.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 income from undisclosed sources. The terms of section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Tele 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 cheque payments alone, it would have received recharge vouchers delayed by 4/5 days which would severely affect its business operation - Assessee, therefore, made cash payment - Whether in view of above, no disallowance under section 40A (3) was to be made in respect of payment made to principal - Held, yes [Paras 21 to 23] [in favour of the assesse....