Assistant Commissioner of income Tax, Circle - Jorhat , Jorhat V. Arup Dutta, Jorhat

ITA 107/GTY/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2033 (ITAT-GUWAHATI)
• Duration Of Justice: 2 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 05-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M HAOKIP J
• Assessee Lawyers: R P AGARWAL SR SHRI RAMESH G
• Keywords: Income from undisclosed sources
• Section: 40A(3); 143(3); 191

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL GUWAHATI BENCH, GUWAHATI BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 107 / GUA / 2016 ASSESSMENT YEAR :2013-14 ACIT, CIR-JORHAT, A.T. ROAD, TARAJAAN, JORHAT- 785001, ASSAM V/S . ARUP DUTTA C/O ANNAPURNA RICE MIL, BHAGAWATI PARA, TITABOR, ASSAM-785630 [ PAN NO.ACRPD 3366 P ] . /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI M. HAOKIP, JCIT-DR /BY RESPONDENT SHRI R.P. AGARWAL, SR. ADVOCATE SHRI RAMESH GOENKA, SR. ADVOCATE SHRI M.K. BORDOLOI, FCA /DATE OF HEARING 02-07-2019 /DATE OF PRONOUNCEMENT 06-09-2019 / O R D E R PER BENCH:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR2013-14 A RISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-JORHATS ORDER DATED 01.08.2016 PASSED IN CASE NO.JOR-39/2016-17, INVOLVING PROCEED INGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE REVENUES SOLE SUBSTANTIVE GROUND RAISED IN THE INSTANT APPEAL CHALLENGES CORRECTNESS OF THE CIT(A)S ACTION REVER SING ASSESSMENT FINDINGS DISALLOWING THE ASSESSEES PAYMENT OF 178,25,503/-, 37,76,792/- AND ITA NO. 107/GAU/2016 A.Y 2013-14 ACIT, CIR-JORHAT VS. ARUP DUTTA PAGE 2 11,30,000/-MADE TO M/S BORGOHAIN ENTERPRISES PVT LT D., DPM BARUAH BONDED WAREHOUSE PVT. LTD. SHIBSAGAR & JORHAT RESPE CTIVELY FOR PURCHASING INDIAN MADE FOREIGN LIQUOR (IMFL) FOR RUNNING HIS W INE SHOP BUSINESS. THERE IS NO DISPUTE BETWEEN THE PARTIES THAT ASSESSEES P AYEES ARE PERMIT HOLDER(S) FROM THE STATE EXCISE DEPARTMENT IN IMFL LIQUOR. TH IS TRIBUNALS CO-ORDINATE BENCHS ORDER IN ITA NO.502/KOL/2015 IN ITO WARD-2(3), DURGAPUR VS. M/S KAJORA PACHAI & C.S. SHOP HOLDS THAT SUCH PAYEES PERMITTED WAREHOUSE HOLDERS; WHO ARE ACTING AS A GOVERNMENT AGENTS, DO NOT ATTRACT THE IMPUGNED CASH PAYMENT DISALLOWANCE U/S 40A(3) AS UNDER:- 2. THE ONLY ISSUE TO BE DECIDED IN ALL THE APPEALS IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S 40A (3) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF RETAIL VENDING OF COUNTRY LIQUOR AN D PACHAI. THE COUNTRY LIQUOR IS AN EXCISABLE COMMODITY. ITS PURCHASE AND SALE ARE STRI CTLY CONTROLLED BY THE STATE GOVERNMENT. PREVIOUSLY, THE RETAIL DEALERS LIKE THE ASSESSEE USED TO DEPOSIT THE COST PRICE, EXCISE DUTY, BOTTLING CHARGES ETC IN THE TRE ASURY AGAINST FORM TR-7 IN CASH FOR GETTING SUPPLIES FROM THE WHOLESALE LICENSEE. SUBSE QUENTLY, THE EXCISE DEPARTMENT BY A NOTIFICATION DATED 29.8.2005 CHANGED THE PROCE DURE. AS PER THE REVISED PROCEDURE PRESCRIBED BY THE EXCISE DEPARTMENT, FOR LIFTING COUNTRY SPIRIT, THE ASSESSEE, WHO IS A RETAIL VENDOR, WAS REQUIRED TO M AKE THE ENTIRE PAYMENT CONSISTING OF COST OF THE STOCK IN TRADE, EXCISE DUTY AND BOTT LING CHARGES ETC ONLY TO THE WHOLESALE LICENSEE APPOINTED BY THE STATE GOVERNMEN T. FOLLOWING THE REVISED PROCEDURE, THE ASSESSEE MADE PAYMENTS TO M/S IFB AG RO INDUSTRIES LTD TOWARDS PURCHASES OF COUNTRY LIQUOR. AGAINST THE AFORESAID PURCHASES, THE ASSESSEE MADE PAYMENTS IN CASH BY DEPOSITING MONEY DIRECTLY TO TH E BANK ACCOUNT OF THE AFORESAID COMPANY. THE LD AO OBSERVED THAT THE PAYMENT FOR PU RCHASE WAS EXCEEDING RS 20,000/- RESULTING IN VIOLATION OF PROVISIONS OF SE CTION 40A(3) OF THE ACT AND ACCORDINGLY PROCEEDED TO DISALLOW A SUM OF RS.67,12 ,562/- IN THE ASSESSMENT. THIS DISALLOWANCE WAS DELETED BY THE LD CITA IN FIRST AP PEAL. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. WHETHER THE LD. COMMISSIONER OF INCOME TAX(APPEA LS), DURGAPUR HAS ERRED ON FACT AND LAW BY HOLDING THAT CASH PAYMENT TO M/S IFB AGRO INDUSTRIES LTD., PANAGARH IS NOT A VIOLATION OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961? 2. WHETHER THE LD. COMMISSIONER OF INCOME TAX (APPE ALS), DURGAPUR HAS ERRED BY HOLDING THAT THE CASH PAYMENT TO A BUSINES S ORGANIZATION I.E. M/S IFB AGRO INDUSTRIES LTD. IS PAYMENT TO GOVERNMENT F OR THE PURPOSE OF SECTION 40A(3)? 3. WHETHER THE LD. COMMISSIONER OF INCOME TAX(APPEA LS), DURGAPUR HAS ERRED BY HOLDING THAT CASH PAYMENT MADE TO M/S IFB AGRO INDUSTRIES LTD., PANAGARH IS EXEMPTED AS PER RULE 6DD(B) READ WITH S ECTION 40A(3) WHEN THERE ARE NO RULES TO SPECIFY THAT THIS PAYMENT WAS REQUIRED TO BE MADE IN CASH ONLY? ITA NO. 107/GAU/2016 A.Y 2013-14 ACIT, CIR-JORHAT VS. ARUP DUTTA PAGE 3 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), DURGAPUR FAILED TO RECOGNIZE THAT THERE WAS ANY BINDING/OBLIGATION ON THE ASSESSEE TO MAKE CASH PUR CHASE ONLY. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND, MODIFY, SUBSTITUTE, DELETE AND/OR RESCIND ALL OR ANY GROUNDS OF APPEAL ON OR BEFORE FINAL HEARING. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THA T THE ISSUE UNDER DISPUTE IS COVERED BY THE ORDER OF THIS TRIBUNAL IN THE CASE O F RAMNAGAR PACHAI & C.S. SHOP VS ITO IN ITA NO. 148/KOL/2015 (AY 2007-08) , ITA NO. 185/KOL/2014 (AY 2008-09) AND ITA NO. 186/KOL/2014 (AY 2010-11) DATED 5.8.2016 WH EREIN IT WAS HELD AS UNDER:- 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASS ESSEE COMPRISING OF VARIOUS ORDERS OF LOWER AUTHORITIES VIDE PAGES 1 TO 42 OF THE PAPER BOOK, COPY OF NOTIFICATION NO. 1208- EX DATED 29.08.2005 ISSUE D BY THE EXCISE DEPARTMENT, GOVERNMENT OF WEST BENGAL VIDE PAGES 43 TO 49 OF PB AND COPIES OF VARIOUS DECISIONS OF HIGH COURTS AND TRIB UNALS VIDE PAGES 50 TO 102 OF PB. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF THE WEST BENGAL EXCISE RULES 2005 AND THE BENGAL EXCISE ACT, 1909. THE FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME AR E NOT REITERATED FOR THE SAKE OF BREVITY. AT THE OUTSET, WE DEEM IT NECESSAR Y TO INCORPORATE THE FOLLOWING CLAUSES FROM THE NOTIFICATION ISSUED BY T HE EXCISE DEPARTMENT, GOVERNMENT OF WEST BENGAL , DATED 29.8.2005 FOR THE SAKE OF BETTER UNDERSTANDING OF THE FACTS :- 'IN EXERCISE OF THE POWER CONFERRED BY SECTION 85 A ND SECTION 86 OF THE BENGAL EXCISE ACT, 1909 (BEN. ACT V OF 1909) AND IN SUPERSESSION OF THE RULES PUBLISHED WITH THIS DEPARTMENT NOTIFICATI ON NO. 122- EX/O/1R-1/2000 DATED 23.2.2000, AS SUBSEQUENTLY AME NDED, THE GOVERNOR IS PLEASED HEREBY TO MAKE THE FOLLOWING RU LES REGULATING THE ISSUE AND REMOVAL OF COUNTRY SPIRIT ON PAYMENT OF D UTY IN LABELLED AND CAPSULED BOTTLES FROM COUNTRY SPIRIT BOTTLING PLANT S AND IN BULK FROM WAREHOUSES BY THE LICENSED WHOLESALE VENDORS OF THE SAME FOR THE PURPOSE OF SELLING COUNTRY SPIRIT BY WHOLESALE:-- RULES 1. SHORT TITLE AND COMMENCEMENT.--(1) THESE RULES M AY BE CALLED THE WEST BENGAL EXCISE (SUPPLY OF COUNTRY SPIRIT ON PAYMENT OF DUTY) RULES, 2005. (2) THESE RULES SHALL COME INTO FORCE FROM 19TH OCTOBER , 2005. 2. DEFINITIONS.--(1) IN THESE RULES, UNLESS THERE IS ANYTHING REPUGNANT IN THE SUBJECT OR CONTEXT (I) ' COMMISSIONER ' MEANS THE EXCISE COMMISSIONER; (II) ' REQUISITION ' MEANS THE REQUISITION SUBMITTED BY THE AUTHORIZED REPRESENTATIVE OF LICENSED WHOLESALE VENDOR OF COUN TRY SPIRIT IN FORM II APPENDED TO THESE RULES; (III) ' RETAIL VENDOR ' MEANS THE PERSON HOLDING LICENSE IN THE PRESCRIBE D FORM FOR RETAIL VENDING OF COUNTRY SPIRIT, GRANTED BY TH E COLLECTOR; 189; (IV) ' STATE GOVERNMENT ' MEANS THE GOVERNMENT OF WEST BENGAL; (V) ' THE ACT ' MEANS THE BENGAL EXCISE ACT, 1909 (BEN. ACT V OF 1909); (VI) ' TRANSPORT PASS ' MEANS THE TRANSPORT PASS ISSUED IN FORM III APPEN DED TO THESE RULES; (VII) ' WAREHOUSE ' MEANS THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VENDORS, ESTABLISHED AT CONVENIENT PLACES BY THE CO MMISSIONER 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 ITA NO. 148/K/2015, ITA NOS. 185 & 186/KOL/ 2014 RAMNAGAR PACHWAI & (S) C.S. SHOP, AY 2007-08, 2008-09 & 2010 -11 UNDER SECTION 22 OF THE ACT, OR OF A LICENSED WHOLESALE VENDOR OF CO UNTRY SPIRIT; ITA NO. 107/GAU/2016 A.Y 2013-14 ACIT, CIR-JORHAT VS. ARUP DUTTA PAGE 4 (VIII) ' WHOLESALE LICENSEE ' MEANS THE WHOLESALE VENDOR OF COUNTRY SPIRIT TO WHOM LICENSE HAS BEEN GRANTED IN WEST BENGAL EXCISE FORM NO. 26. (2) WORDS AND EXPRESSIONS USED IN THESE RULES AND N OT DEFINED, BUT DEFINED IN THE ACT, SHALL HAVE THE MEANINGS RESPECTIVELY ASSIG NED TO THEM IN THE ACT. 3. ISSUE ONLY ON PAYMENT OF DUTY.--NO COUNTRY SPIRI T IN LABELLED AND CAPSULED BOTTLES SHALL BE ISSUED WITHOUT PAYMENT OF DUTY FRO M A COUNTRY SPIRIT BOTTLING PLANT. NO COUNTRY SPIRIT IN BULK SHALL BE ISSUED WI THOUT PAYMENT OF DUTY FROM A COUNTRY SPIRIT WAREHOUSE. 4. PERSONAL LEDGER ACCOUNT TO BE MAINTAINED BY THE WHOLESALE LICENSEE.--THE WHOLESALE LICENSEE SHALL MAINTAIN A PERSONAL LEDGER ACCOUNT IN ACCORDANCE WITH THE DIRECTION ISSUED BY THE COMMISSIONER FROM TIME TO TIME FOR THE PURPOSE OF MAINTAINING AN ACCOUNT--CURRENT OF THE D UTIES PAYABLE BY THE WHOLESALE LICENSEE FOR THE ISSUES OF COUNTRY SPIRIT TO THE RETAIL VENDORS OR TRANSPORT ON PAYMENT OF DUTY FROM THE CONCERNED COU NTRY SPIRIT BOTTLING PLANT OR WAREHOUSE. 5. MINIMUM BALANCE IN PERSONAL LEDGER ACCOUNT.--THE COLLECTOR SHALL ISSUE DIRECTIONS FOR MAINTAINING THE MINIMUM AMOUNT OF BA LANCE IN THE AFORESAID PERSONAL LEDGER ACCOUNTS IN ORDER TO ENSURE THAT DU TY FOR DAILY ISSUES OF COUNTRY SPIRIT FROM THE COUNTRY SPIRIT BOTTLING PLA NT OR WAREHOUSE MAY BE DEBITED FROM THE SAID ACCOUNT, LEAVING SUFFICIENT B ALANCE AS MAY BE DETERMINED BY HIM. 6. PROCEDURE OF ISSUE OF COUNTRY SPIRIT.--(1) THE R ETAIL VENDOR OR HIS AUTHORIZED REPRESENTATIVE SHALL SUBMIT TO THE REPRESENTATIVE O F THE WHOLESALE LICENSEE, THROUGH EXCISE OFFICER-IN-CHARGE OF THE WAREHOUSE, A DEMAND FOR ISSUE OF COUNTRY SPIRIT IN FORM I APPENDED TO THESE RULES IN DUPLICATE. THE DUPLICATE COPY SHALL BE KEPT IN THE CUSTODY OF THE EXCISE OFF ICER-IN-CHARGE FOR HIS OFFICIAL RECORD. (2) NO RETAIL VENDOR OF COUNTRY SPIRIT SHALL DEPOSI T DUTY DIRECT INTO THE LOCAL TREASURY FOR ISSUE OF COUNTRY SPIRIT TO BE TAKEN BY HIM FROM THE WAREHOUSE CONCERNED. DUTY, COST PRICE, BOTTLING CHARGE, IF TH ERE BE ANY, AT THE PRESCRIBED RATE AND OTHER IMPOSITION, AS MAY BE PRESCRIBED BY LAW, SHALL BE PAID BY THE RETAIL VENDOR TO THE CREDIT OF THE WHOLESALE LICENS EE CONCERNED. (3) THE AUTHORIZED REPRESENTATIVE OF THE WHOLESALE LICENSEE SHALL REALIZE THE NECESSARY AMOUNT OF DUTY, COST PRICE AND BOTTLING C HARGE, IF THERE BE ANY, AT THE PRESCRIBED RATE AND SUCH OTHER IMPOSITION, AS M AY BE PRESCRIBED BY LAW, FROM THE RETAIL VENDOR TO WHOM COUNTRY SPIRIT IS TO BE ISSUED FROM THE CONCERNED WAREHOUSE. THE AUTHORIZED REPRESENTATIVE AS ABOVE SHALL THEN SUBMIT REQUISITION IN DUPLICATE IN FORM II APPENDED TO THESE RULES TO THE EXCISE OFFICER-IN-CHARGE OF THE WAREHOUSE SEPARATEL Y FOR EACH OF THE RETAIL VENDORS TO WHOM COUNTRY SPIRIT IS TO BE ISSUED ON T HE DAY. (4) ON RECEIPT OF THE REQUISITION IN FORM II, THE E XCISE OFFICER-IN-CHARGE OF THE WAREHOUSE SHALL ALLOW ISSUE OF COUNTRY SPIRIT FROM THE WAREHOUSE. DUPLICATE COPY OF THE REQUISITION SHALL BE RETURNED TO THE AU THORIZED REPRESENTATIVE OF THE WHOLESALE LICENSEE AFTER THE ISSUE HAS BEEN MAD E. (5) THE EXCISE OFFICER-IN-CHARGE OF THE WAREHOUSE S HALL ISSUE TRANSPORT PASS TO THE RETAIL VENDOR IN FORM III APPENDED TO THESE RULES. (6) NOTWITHSTANDING ANYTHING CONTAINED IN ANY PROVI SIONS OF THE RULES, ORDERS AND NOTIFICATIONS IN THIS CONTEXT, THE WHOLESALE SU PPLIERS OF COUNTRY SPIRIT IN LABELLED AND CAPSULED BOTTLES SHALL ALLOW A REBATE OF FIVE PAISE PER BOTTLE IRRESPECTIVE OF MEASURE ITA NO.148/K/2015, ITA NOS.185 & 186/KOL/2014 RAMNAGAR PACHWAI & (S) C.S. SHOP, AY 2007-08, 2008- 09 & 2010-11 FROM THE BOTTLING CHARGE TO THE RETAIL COUNTRY SPIRIT LI CENSEES WHOSE LICENSED PREMISES ARE LOCATED AT A DISTANCE OF 50 KILOMETRES OR MORE BY THE SHORTEST ITA NO. 107/GAU/2016 A.Y 2013-14 ACIT, CIR-JORHAT VS. ARUP DUTTA PAGE 5 ROUTE FROM THE ISSUING WAREHOUSE ON THE BASIS OF A CERTIFICATE TO BE ISSUED BY THE COLLECTOR IN RESPECT OF DISTANCE. AT THE END OF THE MONTH, THE WHOLESALER SHALL SUBMI T A BILL IN DUPLICATE TO THE OFFICER- IN-CHARGE OF THE WAREHOUSE CLAIMING REFUND OF THE AMOUNT GRANTED AS REBATE. THE OFFICER-IN-CHARGE SHALL, ON RECEIPT OF THE BILL , REFUND THE AMOUNT CLAIMED AFTER VERIFYING HIS RECORDS THROUGH ADJUSTMENT IN T HE PERSONAL LEDGER ACCOUNT MAINTAINED FOR THE PURPOSE OF PRIVILEGE FEE. IN CAS E THERE IS NO PERSONAL LEDGER ACCOUNT FOR PRIVILEGE FEE AT THE WAREHOUSE, THE OFFICER-IN-CHARGE SHALL SEND A COPY OF THE CLAIM WITH HIS COMMENTS TO THE O FFICER-IN-CHARGE OF THE SUPPLIER BOTTLING PLANT, WHO SHALL REFUND THE AMOUN T RECOMMENDED TO THE WHOLESALER THROUGH ADJUSTMENT IN THE PERSONAL LEDGE R ACCOUNT MAINTAINED FOR PRIVILEGE FEE.' 1 4. WE FIND THAT THE RELIANCE PLACED ON THE DECISION OF CO-ORDINATE BENCH OF BANGALORE TRIBUNAL IN THE CASE OF SRI RENUKESWARA R ICE MILLS VS ITO REPORTED IN 93 ITD 263 (BANG TRIB.) IS WELL FOUNDED , WHEREIN, IT WAS HELD THAT THE CASH PAYMENT IN THE BANK ACCOUNT OF THE PAYEE IS SUFFICIENT TO GET EXEMPTION IN TERMS OF RULE 6DD IN AS MUCH IT IS ENSURED THAT THE PAYEE AND PAYEE ALON E RECEIVES THE PAYMENT AND THE ORIGIN AND CONCLUSION OF THE TRANSACTION IS TRACEAB LE THEREBY FULFILLING THE CRITERION FOR ENSURING THE OBJECT OF INTRODUCTION OF SECTION 40A( 3) OF THE ACT. 15. WE FIND THAT THE FOLLOWING FACTS ARE UNDISPUTE D AND INDISPUTABLE:- (A) THE TRANSACTIONS MADE BY THE ASSESSEE IS GENUIN E. (B) THE IDENTITY OF THE RECEIVER (WHOLESALE LICENSE E) IS ESTABLISHED BEYOND DOUBT. (C) THE PAYMENT IS MADE IN THE BANK ACCOUNT OF THE SELLER (WHOLESALE LICENSEE). WE HOLD THAT SINCE THE GENUINITY OF THE PAYMENTS MA DE TO THE M/S ASANSOL BOTTLING & PACKAGING CO. PVT. LTD (WHOLESALE LICENSEE) IS NOT DOUBTED BY THE REVENUE, THE PROVISIONS OF SECTION 40A(3) COULD NOT BE MADE APPL ICABLE TO THE FACTS OF THE INSTANT CASE. IT IS OBSERVED THAT THE ASSESSEE HAD TAKEN EN OUGH PRECAUTIONS FROM ITS SIDE TO ENSURE THAT THE PAYEE ALSO DON'T ESCAPE FROM THE AM BIT OF TAXATION ON THESE RECEIPTS BY DIRECTLY DEPOSITING THE CASH IN THE BANK ACCOUNT OF THE PAYEE. MOREOVER, THE REGULATIONS OF THE WEST BENGAL GOVERNMENT PURSUANT TO NOTIFICATION FROM ITS EXCISE DEPARTMENT DATED 29.8.2005 ALSO MANDATES THE PAYMEN T TO BE MADE BY WAY OF DIRECT DEPOSIT INTO THE BANK ACCOUNT OF THE WHOLESA LE LICENSEE. THIS FACT IS ALSO NOT DISPUTED BY THE REVENUE. 16. IT WILL BE PERTINENT TO GO INTO THE INTENTION B EHIND INTRODUCTION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AT THIS JUNCTURE. WE FIND THAT THE SAID PROVISION WAS INSERTED BY FINANCE ACT 1968 WITH THE OBJECT OF CURBING EXPE NDITURE IN CASH AND TO COUNTER TAX EVASION. THE CBDT CIRCULAR NO. 6P DATED 6.7.1968 RE ITERATES THIS VIEW THAT ' THIS PROVISION IS DESIGNED TO COUNTER EVASION OF A TAX T HROUGH CLAIMS FOR EXPENDITURE SHOWN TO HAVE BEEN INCURRED IN CASH WIT H A VIEW TO FRUSTRATING PROPER INVESTIGATION BY THE DEPARTMENT AS TO THE ID ENTITY OF THE PAYEE AND REASONABLENESS OF THE PAYMENT. ' 17. IN THIS REGARD, IT IS PERTINENT TO GET INTO THE FOLLOWING DECISIONS ON THE IMPUGNED SUBJECT:- ATTAR SINGH GURMUKH SINGH VS ITO REPORTED IN (1991 ) 191 ITR 667 (SC) ' 3.3.4. SECTION 40A(3) OF THE INCOME-TAX ACT, 1961, WHICH PROVIDES THAT EXPENDITURE IN EXCESS OF RS. 2,500 (RS. 10,000 AFTE R THE 1987 AMENDMENT) ITA NO. 107/GAU/2016 A.Y 2013-14 ACIT, CIR-JORHAT VS. ARUP DUTTA PAGE 6 WOULD BE ALLOWED TO BE DEDUCTED ONLY IF MADE BY A C ROSSED CHEQUE OR CROSSED BANK DRAFT (EXCEPT IN SPECIFIED CASES) IS N OT ARBITRARY AND DOES NOT AMOUNT TO A RESTRICTION ON THE FUNDAMENTAL RIGHT TO CARRY ON BUSINESS. IF READ TOGETHER WITH RULE 6DD OF THE INCOME-TAX RULES, 196 2, IT WILL BE CLEAR THAT THE PROVISIONS ARE NOT INTENDED TO RESTRICT BUSINESS AC TIVITIES. THERE IS NO RESTRICTION ON THE ASSESSEE IN HIS TRADING ACTIVITI ES. SECTION 40A(3) ONLY EMPOWERS THE ASSESSING OFFICER TO DISALLOW THE DEDU CTION CLAIMED AS EXPENDITURE IN RESPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED-CHEQUE OR CROSSEDBANK DRAFT. THE PAYMENT BY CROSSED-CHEQUE OR CROSSED BANK- DRAFT IS INSISTED UPON TO ENABLE THE ASSESSING AUTHORITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF INCOME FROM UNDISCLOSED SOURCES. THE TERMS OF SECTION 40A(3) ARE NOT ABSOLU TE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE ASSESSING OFFICER THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GEN UINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECEIVED THE CASH PAYMENT. RULE 6DD PROVIDES THAT AN ASSESSE E CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED-CHEQUE OR CROSSED-BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT W ILL BE CLEAR FROM THE PROVISIONS OF SECTION 40A(3) AND RULE 6DD THAT THEY ARE INTENDED TO REGULATE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNA CCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTIONS.' CIT VS CPL TANNERY REPORTED IN (2009) 318 ITR 179 ( CAL) THE CONTENTION OF THE ASSESSEE THAT HE PURCHASED GOODS FROM SUPPLIERS WHO ARE PRODUCERS OF HIDES AND SKINS, HAS NOT BEEN REFUTED EITHER BY THE AO OR BY THE CITA. THE SECOND CONTENTION OF THE ASSESSEE THAT OWING TO BUS INESS EXPEDIENCY, OBLIGATION AND EXIGENCY, THE ASSESSEE HAD TO MAKE C ASH PAYMENT FOR PURCHASE OF GOODS SO ESSENTIAL FOR CARRYING ON OF H IS BUSINESS, WAS ALSO NOT DISPUTED BY THE AO. THE GENUINITY OF TRANSACTIONS, RATE OF GROSS PROFIT OR THE FACT THAT THE BONA FIDE OF THE ASSESSEE THAT PAYMEN TS ARE MADE TO M/S IFB AGRO INDUSTRIES LTD FOR PURCHASE OF COUNTRY SPIRIT ARE ALSO NEITHER DOUBTED NOR DISPUTED BY THE AO. ON THE BASIS OF THESE FACTS IT IS NOT JUSTIFIED ON THE PART OF THE AO TO DISALLOW 20% OF THE PAYMENTS MADE U/S 40A (3) IN THE PROCESS OF ASSESSMENT. WE, THEREFORE, DELETE THE ADDITION OF R S. 17,90,571/- AND GROUND NO.1 IS DECIDED IN FAVOUR OF THE ASSESSEE. CIT VS CRESCENT EXPORT SYNDICATE IN ITA NO. 202 OF 2008 DATED 30.7.2008 - JURISDICTIONAL HIGH COURT DECISION ' 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 DRAF T BUT BY BEARER CHEQUES AND HAS COMPUTED THE PAYMENTS FALLING UNDER PROVISI ONS TO SECTION 40A(3) FOR RS.78,45,580/- AND DISALLOWED @ 20% THEREON RS.15,6 9,116/-. IT IS ALSO MADE CLEAR THAT WITHOUT THE PAYMENT BEING MADE BY B EARER CHEQUE THESE GOODS COULD NOT HAVE BEEN PROCURED AND IT WOULD HAV E 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 O RDER SO PASSED BY THE LEARNED TRIBUNAL. IT FURTHER APPEARS FROM THE ASSES SMENT ORDER THAT NEITHER THE ASSESSING OFFICER NOR THE CIT (APPEAL) HAS DISB ELIEVED THE GENUINENESS OF THE TRANSACTION. THERE WAS NO DISPUTE THAT THE P URCHASES WERE GENUINE. ' ITA NO. 107/GAU/2016 A.Y 2013-14 ACIT, CIR-JORHAT VS. ARUP DUTTA PAGE 7 ANUPAM TELE SERVICES VS ITO IN (2014) 43 TAXMANN.CO M 199 (GUJ) 'SECTION 40A(3) OF THE INCOME-TAX ACT, 1961, READ WITH RULE 6DD OF THE INCOME-TAX RULES, 1962 - BUSINESS DISALLOWANCE - CASH PAYMENT EXCEEDING PRESCRIBED LIMITS RULE 6DD (J) ASSESSMENT YEAR 2006-07 - ASSESSEE WAS WORKING AS AN AGENT OF TATA TELE SER VICES LIMITED FOR DISTRIBUTING MOBILE CARDS AND RECHARGE VOUCHERS PRINCIPAL COMPANY TATA INSISTED THAT CHEQUE PAYMENT FROM ASSESSEE'S CO- OPERATIVE BANK WOULD NOT DO, SINCE REALIZATION TOOK LONGER TIME AND SUCH PAYMENTS SHOULD BE MADE ONLY IN CASH IN THEIR BANK ACCOUNT - IF ASSESSEE WOULD NOT MAKE CASH PAYMENT AND MAKE CHEQUE PAYMENTS ALONE, IT WOULD HAVE RECEIVED RECHARGE VOUCHERS DEL AYED BY 4/5 DAYS WHICH WOULD SEVERELY AFFECT ITS BUSINESS OPERATION - ASSE SSEE, THEREFORE, MADE CASH PAYMENT - WHETHER IN VIEW OF ABOVE, NO DISALLO WANCE UNDER SECTION 40A(3) WAS TO BE MADE IN RESPECT OF PAYMENT MADE TO PRINCIPAL - HELD, YES [PARAS 21 TO 23] [IN FAVOUR OF THE ASSESSEE]' SRI LAXMI SATYANARAYANA OIL MILL VS CIT REPORTED IN (2014) 49 TAXMANN.COM 363 (ANDHRAPRADESH HIGH COURT) 'SECTION 40A(3) OF THE INCOME-TAX ACT, 1961, READ W ITH RULE 6DD OF THE INCOME-TAX RULES, 1962- BUSINESS DISALLOWANCE - CASH PAYMENT EXCEEDING PRESCRIBED LIMIT (RULE 6DD ) - ASSESSEE MADE CERTAIN PAYMENT OF PURCHASE OF GROU NDNUT IN CASH EXCEEDING PRESCRIBED LIMIT - ASSESSEE SUBMITTED THAT HE MADE PAYMENT IN CASH B ECAUSE SELLER INSISTED ON THAT AND ALSO GAVE INCENTIVES AND DISCOUNTS - FURTHER, S ELLER ALSO ISSUED CERTIFICATE IN SUPPORT OF THIS - WHETHER SINCE ASSESSEE HAD PLACED PROOF OF PAYMEN T OF CONSIDERATION FOR ITS TRANSACTION TO SELLER, AND LATER ADMITTED PAYMENT A ND THERE WAS NO DOUBT ABOUT GENUINENESS OF PAYMENT, NO DISALLOWANCE COULD BE MA DE UNDER SECTION 40A(3) HELD, YES [PARA 23] [IN FAVOUR OF THE ASSESSEE] CIT VS SMT. SHELLY PASSI REPORTED IN (2013) 350 ITR 227 (P&H) IN THIS CASE THE COURT UPHELD THE VIEW OF THE TRIBUNAL IN NOT APPLYING SEC TION 40A(3) OF THE ACT TO THE CASH PAYMENTS WHEN ULTIMATELY, SUCH AMOUNTS WERE DEPOSIT ED IN THE BANK BY THE PAYEE. 18. WE ARE NOT INCLINED TO IGNORE THE INTENTION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT BY GIVING A PLAIN READING OF THE SAME AS AR GUED BY THE LD DR. WE FIND THAT THE DISALLOWANCE OF THE ENTIRE CASH PURCHASES RESULTS I N ABNORMAL TRADING PROFIT FOR THE ASSESSEE WHICH IT COULD NEVER EARN. WE FIND A PURPO SIVE CONSTRUCTION SHOULD BE RESORTED TO WHILE APPLYING THE PROVISIONS OF THE AC T. HENCE IT WOULD BE MORE RELEVANT TO GET INTO THE INTENTION OF THE LEGISLATURE. IN OU R OPINION, THE PRIMARY OBJECT OF ENACTING SECTION 40A(3) WAS TWO- FOLD, FIRSTLY, PUT TING A CHECK ON TRADING TRANSACTIONS WITH A MIND TO EVADE THE LIABILITY TO TAX ON INCOME EARNED OUT OF SUCH TRANSACTION AND, SECONDLY, TO INCULCATE THE BANKING HABITS AMONGST T HE BUSINESS COMMUNITY. APPARENTLY, THIS PROVISION WAS DIRECTLY RELATED TO CURB THE EVASION OF TAX AND INCULCATING THE BANKING HABITS. THEREFORE, THE CONS EQUENCE, WHICH WERE TO BEFALL ON ACCOUNT OF NON-OBSERVATION OF SECTION 40A(3) MUST H AVE NEXUS TO THE FAILURE OF SUCH OBJECT. THEREFORE, THE GENUINENESS OF THE TRANSACTI ONS IT BEING FREE FROM VICE OF ANY DEVICE OF EVASION OF TAX IS RELEVANT CONSIDERATION. IN THE INSTANT CASE, THE CASH HAS BEEN DEPOSITED DIRECTLY IN THE BANK ACCOUNT OF THE SUPPLIER I.E M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD BY THE ASSESSEE. ITA NO. 107/GAU/2016 A.Y 2013-14 ACIT, CIR-JORHAT VS. ARUP DUTTA PAGE 8 19. WE FIND THAT THE HON'BLE APEX COURT IN THE CASE OF CTO VS SWASTIK ROADWAYS REPORTED IN (2004) 3 SCC 640 HAD HELD THAT THE CONS EQUENCES OF NON-COMPLIANCE OF MADHYAPRADESH SALES TAX ACT , WHICH WERE INTENDED T O CHECK THE EVASION AND AVOIDANCE OF SALES TAX WERE SIGNIFICANTLY HARSH. TH E COURT WHILE UPHOLDING THE CONSTITUTIONAL VALIDITY NEGATED THE EXISTENCE OF A MENS REA AS A CONDITION NECESSARY FOR LEVY OF PENALTY FOR NON- COMPLIANCE WITH SUCH T ECHNICAL PROVISIONS REQUIRED HELD THAT ' IN THE CONSEQUENCE TO FOLLOW THERE MUST BE NEXUS BE TWEEN THE CONSEQUENCE THAT BEFALL FOR NON-COMPLIANCE WITH SUC H PROVISIONS INTENDED FOR PREVENTING THE TAX EVASION WITH THE OBJECT OF PROVI SION BEFORE THE CONSEQUENCE CAN BE INFLICTED UPON THE DEFAULTER.' THE SUPREME COURT HAS OPINED THAT THE EXISTENCE OF NEXUS BETWEEN THE TAX EVASION BY THE O WNER OF THE GOODS AND THE FAILURE OF C & F AGENT TO FURNISH INFORMATION REQUIRED BY T HE COMMISSIONER IS IMPLICIT IN SECTION 57(2) AND THE ASSESSING AUTHORITY CONCERNED HAS TO NECESSARILY RECORD A FINDING TO THIS EFFECT BEFORE LEVYING PENALTY U/S 5 7(2). THOUGH IN THE INSTANT CASE, THE ISSUE INVOLVED IS N OT WITH REGARD TO THE LEVY OF PENALTY, BUT THE REQUIREMENT OF LAW TO BE FOLLOWED BY THE ASSESSEE WAS OF AS TECHNICAL NATURE AS WAS IN THE CASE OF SWASTIK ROAD WAYS (3 SCC 640) AND THE CONSEQUENCE TO FALL FOR FAILURE TO OBSERVE SUCH NOR MS IN THE PRESENT CASE ARE MUCH HIGHER THAN WHICH WERE PRESCRIBED UNDER THE MADHYA PRADESH SALES TAX ACT. APPARENTLY, IT IS A RELEVANT CONSIDERATION FOR THE ASSESSING AUTHORITY UNDER THE INCOME TAX ACT THAT BEFORE INVOKING THE PROVISIONS OF SECT ION 40A(3) IN THE LIGHT OF RULE 6DD AS CLARIFIED BY THE CIRCULAR OF THE CBDT THAT WHETH ER THE FAILURE ON THE PART OF THE ASSESSEE IN ADHERING TO REQUIREMENT OF PROVISIONS O F SECTION 40A(3) HAS ANY SUCH NEXUS WHICH DEFEATS THE OBJECT OF PROVISION SO AS T O INVITE SUCH A CONSEQUENCE. WE HOLD THAT THE PURPOSE OF SECTION 40A(3) IS ONLY PRE VENTIVE AND TO CHECK EVASION OF TAX AND FLOW OF UNACCOUNTED MONEY OR TO CHECK TRANSACTI ONS WHICH ARE NOT GENUINE AND MAY BE PUT AS CAMOUFLAGE TO EVADE TAX BY SHOWING FI CTITIOUS OR FALSE TRANSACTIONS. ADMITTEDLY, THIS IS NOT THE CASE IN THE FACTS OF TH E ASSESSEE HEREIN. THE ASSESSEE HAD DIRECTLY DEPOSITED CASH IN THE BANK ACCOUNT OF THE SUPPLIER M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD WHICH FACT IS ALSO ACCEPTED B Y THE LD AO AND MANDATED BY THE NOTIFICATION DATED 29.8.2005 ISSUED BY THE EXCISE D EPARTMENT , GOVERNMENT OF WEST BENGAL. IT IS ALSO PERTINENT TO NOTE THAT THE HON'B LE RAJASTHAN HIGH COURT IN THE CASE OF SMT.HARSHILA CHORDIA VS ITOREPORTED IN (2008) 29 8 ITR 349 (RAJ) HAD HELD THAT THE EXCEPTIONS CONTAINED IN RULE 6DD OF INCOME TAX RULE S ARE NOT EXHAUSTIVE AND THAT THE SAID RULE MUST BE INTERPRETED LIBERALLY. 20. WE ALSO FIND THAT THE IMPUGNED ISSUE IS ALSO CO VERED BY THE DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ASHO K MONDAL VS ITO IN ITA NO. 873/KOL/2012 FOR ASST YEAR 2009-10 DATED 6.2.2014, WHEREIN IT WAS HELD THAT :- '7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E OUTSET A PERUSAL OF THE DECISION IN THE CASE OF SMT.PUSHPALATA MONDAL SHOWS THAT THE TRIBUNAL HAD DECIDED THE CASE BY FOLLOWING THE DECISION OF HON'B LE KERALA HIGH COURT IN THE CASE OF K.ABDU & CO. REFERRED TO SUPRA WHEREIN THE ISSUE WAS IN RELATION TO RULE 6DD(A) OF IT RULES. THE ISSUE IN THE ASESSEC'S CASE IS IN RESPECT OF THE PAYMENTS MADE UNDER THE RULES FRAMED BY THE GOVERNM ENT AND SUCH PAYMENT WAS REQUIRED TO BE MADE IN LEGAL TENDER. A PERUSAL OF THE GOVERNMENT NOTIFICATION ISSUED BY THE GOVT. OF WEST BENGAL CLEARLY SHOWS THAT THE DEALERS ARE AGENTS OF THE GOVERNMENT AND T HE PAYMENTS MADE ARE TO THE GOVERNMENT. IT ALSO MAKES IT CATEGORICALLY REQU IRED THAT THE PAYMENT IS TO BE MADE BEFORE LIFTING OF THE COUNTRY SPIRIT. CONSE QUENTLY WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.AMRAI PACHWAI & C. S. SHOP REFERRED TO SUPRA WHEREIN IT HAS BEEN HELD AS FOLLOWS :- ITA NO. 107/GAU/2016 A.Y 2013-14 ACIT, CIR-JORHAT VS. ARUP DUTTA PAGE 9 '6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E OUTSET A PERUSAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE AO H AS RECOGNIZED THE ASSESSEE'S BUSINESS IN TRADING OF COUNTRY SPIRIT AN D COUNTRY LIQUOR. COPY OF FORM OF LICENCE ISSUED BY DURGAPUR MUNICIPA L CORPORATION AND COPY OF FORM III ISSUED BY DEPARTMENT OF ITA NO . 148/K/2015, ITA NOS. 185 & 186/KOL/2014 RAMNAGAR PACHWAI & (S) C.S. SHOP, AY 2007-08, 2008-09 & 2010-11 EXCISE, GOVT. OF W.B. WE RE ALSO FOUND AT PAGES 177 AND 179 OF THE ASSESSEE'S PAPER BOOK. IN ANY CASE THE VALIDITY OF LICENCE OF THE ASSESSEE TO TRADE IN COU NTRY SPIRIT AND COUNTRY LIQUOR IS NOT THE ISSUE BEFORE US. THE ISSUE IS WHE THER THE PAYMENTS MADE BY THE ASSESSEE FOR THE PURCHASE OF COUNTRY SP IRIT FROM THE TERRITORIAL LICENSEE BOTTLING PLANT, IFB AGRO INDUS TRIES LTD., CITY CENTRE, DURGAPUR FALLS WITHIN THE EXEMPTION PROVIDED UNDER RULE 6DD(B) OF THE I.T.RULES, 1962. ADMITTEDLY, THE AO HAS RECOGNIZED THAT THE PROVISION OF RULE 6DD(B) OF THE I.T RULES, 1962 IS APPLICABLE IN CASE OF PAYMENTS MADE TO GOVERNMENT DIRECTLY. THIS IS FOUND IN PAGE 2 OF THE ASSESSMENT ORDER. A PERUSAL OF THE KOLKATA GAZETTE TUESDAY 20TH SEPT 2005 SHOWS THAT THE GOVERNMENT OF WEST BENGAL, DEPARTMENT OF EXCISE HAS ISSUED A NOTIFICATION, WHEREIN THE WAREH OUSE HAS BEEN IDENTIFIED TO MEAN THE WAREHOUSE FOR SUPPLY OF COUN TRY SPIRIT TO THE RETAIL VENDORS, ESTABLISHED AT CONVENIENT PLACES BY THE COMMISSIONER AT THE EXPENSE OF THE STATE GOVERNMENT, OR AT THE E XPENSE OF A PERSON TO WHOM THE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLING COUNTRY SPIRIT BY WHOLESALE HAS BEEN GRANTED U/S 22 OF THE ACT OF A LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT. FURTHER, IT HAS BEEN SPECIFICALLY IDENTIFIED THAT THE AUTHORISED REPRESENTATIVE OF TH E WHOLESALE LICENSEE SHALL REALIZE THE NECESSARY AMOUNT OF DUTY, COST PR ICE AND BOTTLING CHARGE, IF THERE BE ANY, AT THE PRESCRIBED RATE AND SUCH OTHER IMPOSITION, AS MAY BE PRESCRIBED BY LAW, FROM THE R ETAIL VENDOR TO WHOM THE COUNTRY SPIRIT IS TO BE ISSUED FROM THE CO NCERNED WAREHOUSE. IT IS ALSO SPECIFICALLY MENTIONED IN SEC TION (2) OF THE SAID NOTIFICATION THAT NO RETAIL VENDOR OF COUNTRY SPIRI T SHALL DEPOSIT DUTY DIRECT INTO THE LOCAL TREASURY FOR ISSUE OF COUNTRY SPIRIT TO BE TAKEN BY HIM FROM THE WAREHOUSE CONCERNED WHICH CLEARLY SHOW S THAT THE WAREHOUSE IS FOR THE SUPPLY OF THE COUNTRY LIQUOR, SPECIFICALLY, THE WAREHOUSE IS UNDER THE DIRECT CONTROL AND CUSTODY O F THE STATE GOVT. THE STATE GOVERNMENT HAS CLOSED ITS DOORS IN SO FAR AS THE LOCAL TREASURY IS CONCERNED AND THE PAYMENT FOR THE PURCH ASE OF COUNTRY SPIRIT OR COUNTRY LIQUOR HAS TO BE MADE TO THE WARE HOUSE, RUN BY THE GOVERNMENT. THIS SHOWS THAT ANY PAYMENT MADE TO THE WAREHOUSE, WHICH IS UNDER THE DIRECT CONTROL OF THE STATE GOVE RNMENT, IS A PAYMENT MADE DIRECTLY TO THE GOVERNMENT. ONCE, THIS IS ACCE PTED THEN THE PROVISIONS OF RULE 6DD(B) OF THE I.T RULES, 1962 WH ICH CLEARLY SPELLS OUT THAT THE PAYMENT MADE TO THE GOVERNMENT IN LEGA L TENDER UNDER THE RULES FRAMED BY THE GOVERNMENT, IS EXEMPTED FRO M THE RIGOURS OF SECTION 40A(3) OF THE ACT. HERE, IT IS NOTICED THAT THE PAYMENTS MADE BY THE ASSESSEE FOR PURCHASE OF COUNTRY SPIRIT AND COUNTRY LIQUOR IS TO THE GOVERNMENT AS PER THE NOTIFICATION ISSUED BY TH E GOVERNMENT AND IS IN LEGAL TENDER SPECIFIED BY THE NOTIFICATION. I N THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE PAYMENT MADE BY THE ASSESS EE FOR THE PURCHASE OF COUNTRY LIQUOR AND COUNTRY SPIRIT FROM THE TERRITORIAL LICENSEE BOTTLING PLANT, IFB AGRO INDUSTRIES LTD., CITY CENTRE, DURGAPUR IS PROTECTED BY THE EXEMPTION IN TERMS OF RULE 6DD( B) OF THE 1.T.RULES 1962. IN THE CIRCUMSTANCES, THE ADDITION AS MADE BY THE AO AND AS CONFIRMED BY THE ID. CIT(A) BY INVOKING THE PROVISI ONS OF SECTION ITA NO. 107/GAU/2016 A.Y 2013-14 ACIT, CIR-JORHAT VS. ARUP DUTTA PAGE 10 40A(3) OF THE I.T. ACT 1961 STANDS DELETED. 8. IN T HE RESULT THE ADDITION AS CONFIRMED BY THE ID. CIT(A) STANDS DELETED. WE F IND THAT THIS DECISION WAS RENDERED BY PLACING RELIANCE ON ITS EA RLIER DECISION IN THE CASE OF M/S AMRAI PACHWAI & C.S.SHOP IN ITA NO. 125 1/KOL/2011 DATED 15.1.2014 AND AFTER CONSIDERING THE CONTRARY DECISIONS RENDERED IN THE CASE OF PUSHPALATA MONDAL IN ITA NO. 965/KOL /2010 DATED 28.7.2011 AND HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS K ABDU & CO (170 TAXMAN 297). WE FIND THAT THE CO-ORDINATE BENCH DECISION IN THE CASE OF ITA NO. 148/K/2015, ITA NOS. 185 & 1 86/KOL/2014 RAMNAGAR PACHWAI & (S) C.S. SHOP, AY 2007-08, 2008- 09 & 2010-11 M/S AMRAI PACHWAI & C.S.SHOP IN ITA NO. 1251/KOL/20 11 DATED 15.1.2014 AND THE HELD PORTION IS REPRODUCED HEREIN ABOVE. 21. WE FIND THAT M/S ASANSOL BOTTLING & PACKAGING C O. PVT LTD IS A BOTTLING PLANT CUM WAREHOUSE UNDER RULE 2(VII) OF THE WEST BENGAL EXCI SE RULES 2005 WITH PRIVILEGE GRANTED U/S 22 OF THE BENGAL EXCISE ACT, 1909. AT T HIS 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 VE NDORS, ESTABLISHED AT CONVENIENT PLACES BY THE COMMISSIONER AT THE EXPENS E OF THE STATE GOVERNMENT, OR AT THE EXPENSE OF A PERSON TO WHOM T HE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLING COUNTRY SPIRIT BY WHOLESALE HA S BEEN GRANTED UNDER SECTION 22 OF THE ACT, OR OF A LICENSED WHOLESALE V ENDOR OF COUNTRY SPIRIT. THE ABOVE DEFINITION MAKES IT CLEAR THAT THE ' WAREHOUSE ' REFERRED TO UNDER THE STATE EXCISE RULES IS UNDER THE DIRECT CONTROL AND AUTHOR ITY OF THE COMMISSIONER OF STATE EXCISE BECAUSE IT IS ESTABLISHED BY THE COMMISSIONE R OF STATE EXCISE AND AS SUCH IS A STATE GOVERNMENT ESTABLISHMENT. IT IS ALSO PERTIN ENT TO NOTE THAT THE EXPENDITURE IN RELATION TO SUCH WAREHOUSE IS BORNE BY THE STATE GO VERNMENT OR BY THE LICENSEE TO WHOM THE EXCLUSIVE PRIVILEGE IS GRANTED U/S 22 OF T HE BENGAL EXCISE ACT, 1909. HENCE THERE COULD BE NO DOUBT THAT THE WAREHOUSE IS ESTAB LISHED BY THE STATE EXCISE COMMISSIONER. HENCE IT COULD BE SAFELY CONCLUDED TH AT THE WAREHOUSE SO ESTABLISHED BY THE STATE EXCISE COMMISSIONER IS A S TATE GOVERNMENT ESTABLISHMENT. IT WOULD ALSO BE PERTINENT TO NOTE THAT THE SAID WA REHOUSE HAS BEEN SPECIFICALLY ESTABLISHED FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VENDORS ( ASSESSEE HEREIN ) ONLY AND NOT TO ANYBODY ELSE. IT WOULD BE PERTINENT TO LOOK INTO THE DEFINITION O F ' WHOLESALE LICENSEE ' AS PER RULE 2(VIII) OF THE EXCISE RULES 2005 AS BELOW:- RULE 2(VIII) - ' WHOLESALE LICENSEE ' MEANS THE WHOLESALE VENDOR OF COUNTRY SPIRIT TO WHOM LICENCE HAS BEEN GRANTED IN WEST BEN GAL EXCISE FORM NO. 26. IT WOULD BE PERTINENT TO LOOK INTO SECTION 22 OF TH E BENGAL EXCISE ACT, 1909 AT THIS JUNCTURE AS BELOW:- SECTION 22 - GRANT OF EXCLUSIVE PRIVILEGE OF MANUFACTURE AND S ALE OF COUNTRY LIQUOR OR INTOXICATING DRUGS (1) THE STATE GOVERNMENT MAY GRA NT TO ANY PERSON, ON SUCH CONDITIONS AND FOR SUCH PERIOD AS IT MAY THINK FIT, THE EXCLUSIVE PRIVILEGE - (A) OF MANUFACTURING, OR SUPPLYING BY WHOLESALE, OR (B) OF MANUFACTURING, AND SUPPLYING BY WHOLESALE, O R (C) OF SELLING, BY WHOLESALE OR RETAIL, OR (D) OF MANUFACTURING OR SUPPLYING BY WHOLESALE AND SELLING RETAIL, OR ITA NO. 107/GAU/2016 A.Y 2013-14 ACIT, CIR-JORHAT VS. ARUP DUTTA PAGE 11 (E) OF MANUFACTURING AND SUPPLYING BY WHOLESALE AND SELLING RETAIL, ANY COUNTRY LIQUOR OR INTOXICATING DRUG WITHIN ANY SPEC IFIED LOCAL AREA: PROVIDED THAT PUBLIC NOTICE SHALL BE GIVEN TO THE I NTENTION TO GRANT ANY SUCH EXCLUSIVE PRIVILEGE, AND THAT ANY OBJECTIONS MADE BY ANY PERS ON RESIDING WITHIN THE AREA AFFECTED SHALL BE CONSIDERED BEFORE AN EXCLUSIVE PR IVILEGE IS GRANTED. (2) NO GRANTEE OF ANY PRIVILEGE UNDER SUB-SECTION (1) SHALL EXERCI SE THE SAME UNLESS OR UNTIL HE HAS RECEIVED A LICENSE IN THAT BEHALF FROM THE COLLECTO R OR THE EXCISE COMMISSIONER. HENCE IT COULD BE SAFELY CONCLUDED THAT M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD ( BOTTLING PLANT) IS A WAREHOUSE WITHIN THE MEANING OF RULE 2(VII) O F THE EXCISE RULES 2005 AND SAID WAREHOUSE IS A STATE GOVERNMENT ESTABLISHMENT, ESTABLISHED AND CONTROLLED BY THE EXCISE COMMISSIONER . IT WOUL D BE RELEVANT TO REPRODUCE RULE 6DD(B) OF THE IT RULES AT THIS JUNCTURE :- (B) WHERE THE PAYMENT IS MADE TO THE GOVERNMENT AND , UNDER THE RULES FRAMED BY IT, SUCH PAYMENT IS REQUIRED TO BE MADE IN LEGAL TENDER . IN THE INSTANT CASE, THE ASSESSEE (RETAIL VENDOR) H AD MADE CASH PAYMENTS FOR PURCHASE OF COUNTRY SPIRIT BY DEPOSITING CASH DIREC TLY INTO THE BANK ACCOUNT OF M/S ABPL AS PER RULE 6(2) OF THE EXCISE RULES 2005 , IT HAS TO BE CONSTRUED AS PAYMENT MADE TO THE STATE GOVERNMENT AUTHORITY AND ACCORDIN GLY FALLS UNDER THE EXCEPTION PROVIDED IN RULE 6DD(B) OF THE IT RULES. 22. 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 O F COUNTRY LIQUOR TO THE RETAIL VENDOR AS PER THE REGULATIONS OF THE EXCISE DEPARTMENT , G OVERNMENT 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 BL ACK MARKETING TRANSACTIONS FROM THE SAME. HENCE IT COULD BE SAFELY CONCLUDED THAT T HE 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 O F THE STATE GOVERNMENT. FOR THE SAKE OF CONVENIENCE, THE RELEVANT RULE IS REPRODUCE D HEREUNDER:- RULE 6DD(K) WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGEN T WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHAL F OF SUCH PERSON. THE PAYMENT MADE BY THE ASSESSEE RETAIL VENDOR TO T HE PRINCIPAL, GOVERNMENT OF WEST BENGAL THROUGH ITS WHOLESALE AGENT. THE RELATI ONSHIP BETWEEN THE ASSESSEE (AUTHORIZED RETAILER) AND GOVERNMENT OF WEST BENGAL (THE SUPPLIER) ACTING UNDER WEST BENGAL EXCISE RULES THROUGH ITS AUTHORISED WHO LESALER LICENSEE (AGENT), BOTH DE FACTO AND DEJURE , IS ONE OF 'PRINCIPAL' AND 'AG ENT'. WE HOLD THAT THE ASSESSEE RETAIL VENDOR HAD MADE PAYMENT TO THE SAID AGENT (WHOLESAL E LICENSEE) WOULD FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD(K) OF THE RULES. 23. THE LD AR HAD ADVANCED ANOTHER ARGUMENT THAT TH E PAYMENT IS MADE BY THE ASSESSEE TO STATE BANK OF INDIA AND ACCORDINGLY THE SAME WOULD FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD(A) OF THE RULES. WE FIND THAT THE ASSESSEE HAD MADE PAYMENTS ONLY TO THE CUSTOMER OF STATE BANK OF INDI A AND NOT TO STATE BANK OF INDIA. HENCE THE ASSESSEE'S CASE DOES NOT FALL UNDER THE E XCEPTION PROVIDED IN RULE 6DD(A) OF THE RULES. 24. WE HOLD FROM THE AFORESAID FINDINGS THAT THE AS SESSEE'S CASE FALLS UNDER THE EXCEPTIONS PROVIDED IN RULE 6DD(B) AND RULE 6DD(K) OF THE RULES. IN VIEW OF THE ITA NO. 107/GAU/2016 A.Y 2013-14 ACIT, CIR-JORHAT VS. ARUP DUTTA PAGE 12 AFORESAID FACTS AND CIRCUMSTANCES AND RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE HAVE NO HESITATION IN D ELETING THE DISALLOWANCE MADE U/S 40A(3) OF THE ACT IN ALL THE YEARS UNDER APPEAL . ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE FOR ALL THE YEARS UNDER APPEAL ARE ALLOWED. 25. IN THE RESULT, ALL THE APPEALS OF ASSESSEE ARE ALLOWED. WE ADOPT THE DETAILED REASONING MUTATIS MUTANDIS TO UPHOLD THE CIT(A)S FINDINGS UNDER CHALLENGE DELETING THE IMPUGNED ADDI TION SEC. 40A(3) DISALLOWANCE/ADDITION QUA ASSESSEES CASH PAYMENTS MADE TO THE STATE EXCISE DEPARTMENTS AUTHORIZED BONDED WAREHOUSES. 3. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN ACCORDANCE WITH RULE 34(3) OF THE ITAT RULES BY PUTTING ON NOTICE BOARD ON 06/09/2019 SD/- SD/- ( #) (%& #) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) GUWAHATI, *DKP '- 06 / 09 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT, CIR-JORHAT A.T. ROAD, TARAJAAN, JO RHAT-785001 2. / RESPONDENT-ARUP DUTTA, C/O. ANNAPURNA RICE MILL, BHAGAWATI PARA, TITABOR, ASSAM -785630 3. 2 3 8 / CONCERNED CIT GUWAHATI 4. 3- / CIT (A) JORHAT 5. ; &&2, 2, 8 / DR, ITAT, GUWAHATI 6. A / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY (ON TOUR) 2,