SRI MALAY MONDAL,BURDWAN vs. ITO, WD-2(2), ASANSOL, ASANSOL

ORDER

PER N.V.VASUDEVAN, JM:

raised by the assessee reads as follows :-

1. For that the Ld. Commissioner of Income Tax (Appeals) erred in law & on facts in confirming disallowance u/s. 40A(3) - Rs.38,63,895/- made by the AO.

2. For that the assessment of business profit at Rs.39,96,615/- [as confirmed by Ld. CIT(A)] being more than the purchase price and 97 % of total Sales is absurd and bad in law & on facts.

3. The Assessee is an individual. He carries on the business of trading in country liquor. The assessee purchased country liquor from Asansol Bottling & Packaging Co. Ltd and paid a sum of Rs.38,63,895/- in respect of such purchase by cash. The AO was of the view that as per the provision of section 40A(3) of the Income Tax Act, 1961 (Act) any cash payment for any expenses exceeding rupees twenty thousand on a day is liable to be disallowed and added to the total income of an Shri Malay Mondal A.Y.2010-11 assessee. The AO accordingly added a sum of Rs.38,63,895/- to the total income of the assessee by way of disallowance u/s 40A(3) of the Act. On appeal by the assessee the CIT(A) confirmed the order of the AO.

4. At the time of hearing it was brought to our notice that similar issue came up for consideration in assessee’s own case for A.Y.2008-09 in dated 28.09.2016 and the tribunal was pleased to hold that the disallowance u/s 40A(3) of the Act cannot be sustained. The Tribunal following the decision rendered in another case of Prabir Kr. Mallik vs ITO in ITA No.1603/Kol/2011 order dated 01.06.2016 deleted the disallowance u/s 40A(3) of the Act. In short the tribunal held that the circumstances in which payments were made in cash were exceptional circumstances falling within the ambit of Rule 6DD(b) of the I.T.Rules, 1963 i.e. payment by way of legal tender to Government and Rule 6DD(k) i.e. payment made to an agent of the Government. Respectfully following the decision of the tribunal, we direct that the addition made be deleted.