RAZI AHMED,KOLKATA vs. ITO, WARD - 32(4), KOLKATA , KOLKATA

Shri Prem Narayn Khandwal, CA आवेदक क� ओर से/By Assessee Shri Radheshyam, CIT-DR राज�व क� ओर से/By Respondent 31-12-2018 सुनवाई क� तार�ख/Date of Hearing 31-12-2018 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R These two assessee’s appeals for assessment years 2013-14 & 2014-15 arise from the Commissioner of Income-tax (Appeals)-9, Kolkata’s separate orders; both dated 08.02.2018 passed in case No.341/CIT(A)-9/Wd-32(4)/2015-16/Kol & 128/CIT(A)-9/Wd-32(4)/2017-18/Kol affirming Assessing Officer’s identical action invoking u/s 40A(3) disallowance(s) / adding cash payments amounting to ₹6,43,530/- and ₹2,81,100/- as well as back interest of ₹3,546/- in former assessment year; respectively involving proceedings u/s. 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file(s) perused.

ITA No. No.876-877/Kol/2018 AYs 13-14 & 14-15 Razi Aahmed Vs. ITO Wd. 32(4), Kol. Page 2 There is further no quarrel about the assessee having made the impugned cash payments or genuineness thereof. The sole issue before me is that the said payments attracts sec.40A(3) or not. The Revenue’s vehement contention before me is that the taxpayer had made payments both in cash as well as in cheque and only the former component has been disallowed in both lower appellate proceedings. It fails to dispute the basic fact that the assessee has in fact purchased rubber from unorganized rural market in cash only whose genuineness has not been called into question in either of the lower proceedings. Hon'ble Gujarat high court’s judgment in Anupal Telle Services vs. ITO (2014) 366 ITR 122 (Guj) holds that the specific instances prescribed in Rule 6DD of the IT Rules, 1962 are not to be read in a restrictive sense. Hon'ble jurisdictional high court in CIT vs. Crescent Export Syndicate in of 2008 decided on 30.07.2008 also concludes that sec. 40A(3) is not attracted when genuineness of the payment in issue is not called into question as follows:- “The learned Counsel appearing for the appellant argued that the assessee is 100% export oriented firm, exporting leather goods viz. Wallets and different types of bags. The total export turnover during the year (FOB value) Rs.19,51,73,720/- and purchases shown at Rs.11,65,97,523/-. Out of the said purchase, the purchase from IS parties amounting to Rs.83,44,822/- and the seller could not be produced in assessment, hence the A.O. disallowed the entire purchase and added Rs.83,44,822/-. In appeal, before the Id. CIT(A)-XIX, Kolkata the appellant submitted that it maintains stock book inventorised the purchase of leather, leather issued for cutting, and issued to fabricator finally for finishing the goods as per export order. The Id. C!T(A) directed the A.O to examine those books and to submit the remand report. In the remand report the A.O. has admitted 'on verification of the purchase details, it is seen that the purchases amounting to Rs.83,44,822/- made from different parties are entered in the stock register and put to the various stages of manufacturing process. The assessee also produced bills in respect of all purchase made from these IS parties and finally the Id. CIT(A) has held 'as regards the purchase, it is seen that these were recorded in the stock register, their consumption is also recorded therein, up to the stage of final production. All these records are audited. They are produced before the Assessing Officer for examination who had not been able to point out any defect in it. Under the circumstances the purchases are considered to be genuine'. So the purchases have been held to be genuine. It also appears that the purchases have been held to be genuine by the learned CIT (Appeal) but the learned CIT(Appeal) has invoked Section 40A(3) for payment exceeding Rs.20,000/- since it is not made by crossed cheque or bank draft but by hearer cheques and has computed the payments falling under provisions to Section 40A(3) for Rs.78,45,580/- and disallowed @ 20% thereon Rs.15,69, 116/-. It is also made clear that without the payment being made by bearer cheque these goods could not have been procured and it would have hampered the supply of goods within the stipulated time. Therefore, the genuineness of the purchase has been accepted by the Id. CIT (Appeal) which has also not been disputed by the department as it appears from the order so passed by the learned Tribunal. It ITA No. No.876-877/Kol/2018 AYs 13-14 & 14-15 Razi Aahmed Vs. ITO Wd. 32(4), Kol. Page 3 further 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. Accordingly, in our opinion, the learned Tribunal has correctly came to the conclusion by deleting the addition of Rs.15,69,1l6/- under section 40A(3) of the Act. On the other ground as it appears that the CIT (Appeal) has been directed to reconsider the matter. In view of that we do not think that any substantial question of law is involved in this matter. Hence the appeal being of 2008 is dismissed.”