TaxTMI 
TaxTMI 
2017 (7) TMI 203
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....accounts have not been rejected u/s 145(3) and all the cash payments against which the purchases have been made are genuine and reflected in other parties books of accounts. That the Worthy CIT (A) has grossly erred in not following the judgments of Jurisdictional Bench of the ITAT, Chandigarh Bench and of Punjab & Haryana High Court as he was bound to follow such judgments as they were binding upon him. 2. I have heard ld. Representatives of both the parties and perused the material on record. The facts of the case are that during assessment proceedings, the AO noted that the assessee has made purchases in excess of Rs. 20,000/- in cash in contravention to the provisions of section 40A(3) of the Act as per details mentioned on page 2 of the assessment order. The AO asked the assessee to explain the cash payments for the purchases in view of added fact that as per column No. 17(A) of audit report filed by the assessee, he has himself certified that payment under section 40A(3) for purchases/expenses were made by account payee cheques drawn on a bank or bank draft. The Authorized Representative of the assessee submitted that out of total payment of Rs. 62,59,000/-, the payment ....
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....e have been accepted and they have neither been rejected u/s 145 (3) and even the assessee had been maintaining regular books of accounts on day to day basis and maintaining all the vouchers of purchases and the business is being carried under the strict control of the Excise department and no discrepancy was noticed during the year by the AO or by the Excise department in respect of books of accounts regularly maintained. The complete quantitative details are maintained and no discrepancy has been pointed out by the AO. It is stated that each and every purchase of liquor is controlled, monitored and sanctioned by the Excise department. That before making the purchases from the whole-seller, requisite permission and sanction is obtained from the Excise department and only then purchases made and no defect have been pointed out in the same by the AO. 3(i) The assessee stated that all the payments, which have been made in cash have not been disbelieved and they are for business expediency and since the quota is fixed and the license fees paid in advance, the assessee had to purchase and sell the liquor for the purposes of earning the profit and there it is a business compulsion and ....
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....ds. The assessee also filed confirmation of M/s Ambala Wine Traders in support of payment for purchases. The assessee, therefore, pleaded that since the assessee did not have any bank account and has to purchase the liquor and to lift the particular quota, therefore, for making the purchases, assessee made cash payments because the assessee did not have any bank account. It was, therefore, pleaded that payments for purchase of liquor are made for business expediency and for carrying on the business. The authorities below have accepted the fact that payments are genuine and no doubts have been raised by the Assessing Officer. All the purchases are recorded in the books of account. It is also not in dispute that liquor business is always carried on under control of Excise Department and Excise Department sanctions the particular quota and only then purchases are made from the concerned party and as such, the purchases are sanctioned by the Excise Department. Therefore, payment of purchases have not been doubted. The books of account of the assessee have not been rejected. The assessee produced complete details before the authorities below. 7. The Division Bench of ITAT Chandigarh Be....
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....nd purchased by the assessee was established. The sale deeds were produced, the genuineness thereof was accepted. The amount paid in respect of each of these agreements was certified by the Stamp Registration Authority. In this way, the learned CIT (Appeals) held that the bar against the grant of deductions under section 40A(3) of the Act was not attracted. The Tribunal did not upset these findings given by the learned CIT (Appeals) including as to the genuineness and the correctness of the transactions. In fact, the Tribunal noted the contention on behalf of the assessee that there was a boom in the real estate market, that it was necessary, therefore, to conclude the transactions at the earliest and not to postpone them, that the assessee did not know the vendors and obviously, therefore, insisted for payment in cash. The Tribunal did not doubt this case. However, the Tribunal held that claim for deduction was not sustainable in view of section 40A(3) of the Act as the payments were made in cash over Rs. 20,000/-. The Hon'ble High Court while deciding the issue relied upon the judgment of Hon'ble Rajasthan High Court in the case of Smt.Harshila Chordia Vs. ITO (2008) 298 ....
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....cy because of which the payments have to be made in cash. This is an undisputed fact that the assessee firm has twelve partners, who are operating business through vends located at distinct places. Each person has licence in his own name to make the sales and purchases as per the terms of these licence agreements. Further, it is quite a known fact that in the business of the liquor, transactions are to be done in cash. All these facts have not been controverted by the Assessing Officer or even by the learned CIT (Appeals). This makes out a case that the assessee has business expediency under which it have to make payments in cash. Further, not a single transaction has been questioned at any stage. The learned CIT (Appeals) while adjudicating the contention of the assessee with regard to the genuineness himself has held that it is not sufficient for the assessee to establish that the payments were genuine and the parties were identifiable. He was of the view that the assessee is further required to prove that due to exceptional and unavoidable circumstances as provided under the Rules, the payments were made in cash. Therefore, it is not a case of the Department that the payments so....
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....nation of the assessee was wholly incorrect and without any valid reasons. It is, therefore, proved on record that findings recorded by ld. CIT(Appeals) are factually incorrect that assessee maintained bank accounts of the business under consideration. The assessee has been able to prove that for liquor business, no bank account have been maintained by the assessee. Therefore, explanation of the assessee that he has made cash payments for purchase of liquor to M/s Ambala Wine Traders for business expediency was correct. The assessee in the absence of any bank account of liquor trade could not have made any payment for purchase of liquor through banking channel. 7(ii) The ld. CIT(Appeals) also noted in his findings that claim of the assessee of business expediency is only a paper creation. The ld. CIT(Appeals) noted that assessee being individual was making the transactions with the partnership firm in which he was a partner. This itself is wholly incorrect because every individual carrying on business of liquor could have transacted with the firm, having the same business of liquor with the partnership firm. The individual and partnership firm are all together different entities, ....