TaxTMI 
TaxTMI 
2023 (5) TMI 24
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.... Act, 1961 (hereinafter referred to as 'the Act') passed by ACIT, Circle-23(1), Hooghly, dated 07/11/2019. 2. Assessee has placed on record revised grounds of appeal for which ld. Counsel for the assessee gave assurance to the Bench that there are no new grounds taken while revising the grounds. These are merely to summarize and concise the grounds originally taken by the assessee. There are five issues involved in the present appeal which are dealt here in-seriatim. 3. Brief facts of the case are that assessee is proprietor of M/s. K D Pharma, which is in the business of distribution of wholesale in line of medicines. Assessee filed its return of income on 31/07/17, reporting total income at Rs.50,94,820/-. During the course of as....
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....e. We, considering the facts and material on record, find force in submissions made by ld. Counsel for assessee and accordingly delete addition made in this respect. 5. Second ground is in respect of disallowance made u/s 40A(3) of the Act of Rs.1,22,97,460/- on account of payments made to M/s. K D Enterprises (stockist of drugs and medicine) by depositing cash in bank account of supplier. In this respect, it was submitted that M/s. K D Enterprises is the stockiest of drugs and medicines from whom assessee has made purchases of Rs.2,46,96,376/- out of its total purchases for the year of Rs.31,23,68,302/-. It was stated that owing to business expediency and compelling requirements from the seller to make payments in cash over the counter ....
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....rough the paper book. We note that the transactions of purchases by the assessee from M/s. K D Enterprises are genuine, the supplier is identified, part of purchases are made by making payments through bank account and part of it by making deposit of cash directly into the bank account of the supplier. The genuineness of the payment is not doubted and, therefore, the provisions of Section 40A(3) of the Act cannot be made applicable to the facts of the present case. 5.3. It is pertinent to go into the intention behind introduction of provision of Section 40A(3) of the Act at this juncture. We find that the said provision was inserted by the Finance Act, 1968, with the objective of curbing expenditure in cash and to prevent tax evasion. CB....
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....the Hon'ble Court upheld the view of the Tribunal in not applying Section 40A(3) of the Act to the cash payments when ultimately such amounts were deposited in the bank of the payee. Also, the Co-ordinate Bench of ITAT Bangalore in the case of Sri Renukeshwara Rice Mills V ITO (2005) 93 ITD 263, held that cash payment in the bank account of payee is sufficient to get exemptions in terms of Rule 6DD inasmuch as it is ensured that payee alone receives the payment and to ensure that the payment is routed through bank channel so as to trace the origin and conclusion of the transactions is traceable thereby fulfilling the criterion of introduction of Section 40A(3) of the Act. 5.5. Accordingly, considering the above facts and judicial precede....
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....ect of Ground No. 4, which is also in respect of addition of Rs.12,947/-, on account of alleged suppressed credit note from M/s. Aditya Medisales Ltd., it was pointed out that it related to the sales return which has been duly reduced from the purchases made by the assessee and does not have any bearing on the profit reported by the assessee. Both the issues are purely questions of fact and having reference to the material on records as well as the discussion above, we are of the considered view to allow both the grounds and direct the deletion of addition on both these issues. 7. The last issue is in respect of disallowance of Rs. 1,04,05,481/- on account of sales commission paid by the assessee and claimed as expenditure which are rais....
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....made directly by the assessee and sales through these sales agents. Further, ld. Counsel for assessee referred to statements of salesman-wise as well as for each of the sales-man. These statements contained the details in respect of retailers, their addresses and the amount of sales made to these retailers by each of the salesmen. Ld. Counsel for assessee also referred to the chart giving comparison of sales and commission made by the assessee with all the salesmen, in the preceding three assessment years as well as the subsequent assessment year, to demonstrate that assessee has been consistently conducting its business through these salesmen and incurring expenditure towards sales commission. Ld. Counsel also referred to some of the confi....