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

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ITA 1034/KOL/2016Status: DisposedITAT Kolkata02 February 2018AY 2010-20113 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 40A(3) could not be sustained, following its own previous decisions. The cash payments were found to fall under exceptional circumstances as per Rule 6DD(b) and 6DD(k) of the IT Rules.

What were the facts?

The assessee, engaged in country liquor trading, paid Rs. 38,63,895 in cash for purchases. The AO disallowed this amount under Section 40A(3) for exceeding the cash payment limit. The CIT(A) upheld the AO's disallowance.

What were the issues?

Whether cash payments exceeding Rs. 20,000 for business purchases are disallowable under Section 40A(3) when exceptional circumstances exist as per Rule 6DD.

Which sections of the Income-tax Act were involved?

Section 40A(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BENCH ‘D’ KOLKATA

Before: Hon’ble Shri N.V.Vasudevan, JM & Shri Waseem Ahmed, AM ]

Heard together (3 matters)

ITA No.1034/Kol/2016
ITA No.903/Kol/2013
ITA No.1603/Kol/2011

Read from the judgment's own cause title. This page is filed under one of them.

ORDER

PER N.V.VASUDEVAN, JM:

1.

This is an appeal by the Assessee against the order dated 30.03.2016 of C.I.T- (A)-Asansol relating to A.Y.2010-11.

2.

Grounds of appeal

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.

For that your appellant craves leave to take / amend any other additional / alternative Ground / grounds of appeal before or at the time of hearing of this appeal.”

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.

5.

In the result the appeal of the assessee is allowed.

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