SRI BIRENDRA NATH MONDAL,ASANSOL vs. ITO, WD-2(2), ASANSOL, ASANSOL

This appeal filed by the assessee is directed against the order dated 19.02.2016 passed by the ld. Commissioner of Income Tax (Appeals), Asansol for the assessment year 2011-12 and the solitary issue involved therein relates to the disallowance of Rs.74,73,010/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 40A(3) of the Income Tax Act, 1961.

The assessee in the present case is an individual, who is engaged in the business of trading in Country Spirit and Pachwai in the name and style of his Proprietorship concern M/s. Damra C.S. Shop. The return of income for the under consideration was filed by him on 30.03.2012 declaring total income of Rs.2,97,342/-. As noticed by the Assessing Officer during the course of assessment proceedings, the assessee had ./2016 Assessment year: 2011-2012 Page 2 of 5 made purchases of Rs.74,73,010/- from M/s. Asansol Bottling & Packing Co. Pvt. Limited and payments against the same were made by depositing cash directly in the Bank account of M/s. Asansol Bottling & Packing Co. Pvt. Limited in the sums exceeding Rs.20,000/-. According to the Assessing Officer, the said payments were made by the assessee in contravention of section 40A(3) of the Income Tax Act, 1961 and since the assessee could not explain any exceptional circumstances as specified under Rule 6DD of Income Tax Rules, 1962 for making such payments in cash, he made a disallowance of Rs.74,73,010/- under section 40A(3) of the Act.

The disallowance made by the Assessing Officer under section 40A(3) was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and since the submission made by the assessee in support of its case on the issue was not found acceptable by him, the ld. CIT(Appeals) proceeded to confirm the disallowance made by the Assessing Officer under section 40A(3). Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the issue involved in this appeal of the assessee relating to the disallowance under section 40A(3) is squarely covered in favour of the assessee by the various decisions of this Tribunal. In one of such cases, namely M/s. Amrai Pachwai & C.S. Shop decided by the Tribunal vide its order dated 15.01.2014 passed in payments were made by the assessee against purchases made from the same party, namely M/s. Asansol Bottling & Packing Co. Pvt. Limited by depositing the cash directly in the Bank account of the said supplier in the sums exceeding Rs.20,000/- and the disallowance made for the same under section 40A(3) was deleted by the Tribunal for the following reasons given in paragraphs no. 21 & 22 of its order:- “21. We find that M/s. Asansol Bottling & Packaging Co. Pvt. Ltd. is a bottling plant cum warehouse under Rule 2(vii) of the West Bengal Excise Rules, 2005 with privilege granted ./2016 Assessment year: 2011-2012 Page 3 of 5 u/s 22 of The Bengal Excise Act, 1909. At this juncture, it would be relevant to go into the definition of warehouse as provided under the State Excise Rules, 2005, as below:- “Warehouse”, under Rule 2(vii) of the W.B. Excise Rules, 2005, means the warehouse for supply of country spirit to retail vendors, established at convenient places by the Commissioner at the expense of the State Government, or at the expense of a person to whom the exclusive privilege of supplying or selling country spirit by wholesale has been granted under section 22 of the Act, or of a licensed wholesale vendor of country spirit.

It is not in dispute that M/s Asansol Bottling & Packaging Co. Pvt Ltd have been granted licence to act as a wholesaler for supply of country liquor to the retail vendor as per the regulations of the Excise Department, Government of West Bengal. At the cost of repetition, we would like to state that the said regulation mandated the payments to be made directly into the bank account of the said wholesale licensee by the retail vendor (i.e assessee herein) for strict and effective regulation of the country liquor and for prevention of spurious stocks and black marketing transactions from the same. Hence it could be safely concluded that the said wholesale licensee had acted at the instance of the State Government. Once this is so, then the said wholesale licensee could be construed as an agent of the State Government. For the sake of convenience, the relevant rule is reproduced hereunder:- ./2016 Assessment year: 2011-2012 Page 5 of 5 Rule 6DD(k) - where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person.