Swarn Singh Prop, Ambala City V. Income Tax Officer, Ambala

ITA 1079/CHANDI/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8909 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-11-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 14-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Corroborative evidences
• Section: 40A(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 1079/CHD/2016 ASSESSMENT YEAR: 2012-13 SHRI SWARAN SINGH , VS THE ITO, PROP. M/S SWARAN SINGH, WARD 4, RAILWAY ROAD, AMBALA. KALAL MAJRI, AMBALA CITY. PAN: AJIPS4358N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 15.12.2016 DATE OF PRONOUNCEMENT : 19.12.2016 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST T HE ORDER OF LD. CIT(APPEALS), PANCHKULA DATED 23.08.20 16 FOR ASSESSMENT YEAR 2012-13 ON THE FOLLOWING GROUNDS : 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (A) H AS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 30,37,000/- ON A CCOUNT OF ADDITION MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVI SIONS OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961. 2. THAT THE CONFIRMATION OF ADDITION BY THE CIT (A) IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE, IN AS MUCH, TH E CIT (A) HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE DID NOT HAVE ANY BANK ACCOUNT DURING THE YEAR UNDER CONSIDERATION AN D, THEREFORE, THE CASH PAYMENTS HAD TO BE MADE FOR PURCHASES ON A CCOUNT OF BUSINESS EXPEDIENCY. 3. THAT THE WORTHY CIT (A) HAS ALSO FAILED TO APPRE CIATE THE FACT THAT THE BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED U /S 145(3) AND ALL 2 THE CASH PAYMENTS AGAINST WHICH THE PURCHASES HAVE BEEN MADE ARE GENUINE AND REFLECTED IN OTHER PARTIES BOOKS OF ACC OUNTS. THAT THE WORTHY CIT (A) HAS GROSSLY ERRED IN NOT FO LLOWING THE JUDGMENTS OF JURISDICTIONAL BENCH OF THE ITAT, CHAN DIGARH BENCH AND OF PUNJAB & HARYANA HIGH COURT AS HE WAS BOUND TO FOLL OW SUCH JUDGMENTS AS THEY WERE BINDING UPON HIM. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. THE FACTS OF T HE CASE ARE THAT DURING ASSESSMENT PROCEEDINGS, THE AO NOT ED THAT THE ASSESSEE HAS MADE PURCHASES IN EXCESS OF RS.20, 000/- IN CASH IN CONTRAVENTION TO THE PROVISIONS OF SECTI ON 40A(3) OF THE ACT AS PER DETAILS MENTIONED ON PAGE 2 OF TH E ASSESSMENT ORDER. THE AO ASKED THE ASSESSEE TO EXPL AIN THE CASH PAYMENTS FOR THE PURCHASES IN VIEW OF ADDED FA CT THAT AS PER COLUMN NO. 17(A) OF AUDIT REPORT FILED BY TH E ASSESSEE, HE HAS HIMSELF CERTIFIED THAT PAYMENT U NDER SECTION 40A(3) FOR PURCHASES/EXPENSES WERE MADE BY ACCOUNT PAYEE CHEQUES DRAWN ON A BANK OR BANK DRAFT . THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT OUT OF TOTAL PAYMENT OF RS.62,59,000/-, THE PAYMENT OF RS.34,00,000/- HAVE BEEN MADE ON BANK HOLIDAYS, FOR REMAINING ENTRIES OF RS.28,59,000/- THE ASSESSEE FI LED ITS REPLY WHICH IS REPRODUCED ON PAGE 3 OF THE ASSESSME NT ORDER. AS PER REPLY THE ASSESSEE DOES NOT HAVE ANY BANK ACCOUNT AND THE COUNSEL OF THE ASSESSEE ALSO ADMITT ED THAT IN ABSENCE OF BANK ACCOUNT, ALL PAYMENTS WERE MADE IN CASH FOR THE PURCHASES. THE ASSESSEE ALSO SUBMITTED THAT MAXIMUM PAYMENTS WERE MADE TO M/S AMBALA WINE TRADE RS WHICH WAS IN NEED OF THE FUNDS. THE ASSESSEE FILED A 3 CONFIRMATION OF M/S AMBALA WINE TRADERS, AMBALA CIT Y. THE AO FURTHER NOTED CASH PAYMENTS ON DIFFERENT DAT ES EXCEEDING RS.20,000/- FOR THE PURCHASES A MOUNTING TO RS.1,78,000/-. THE ASSESSEE COULD NOT EXPLAIN TH E REASON FOR SUCH PAYMENTS IN CASH. THE AO FOUND THAT BOTH PARTIES WERE HAVING BANKING FACILITY AND E-BANKING FACILITIES COULD HAVE BEEN UTILIZED. THE AO DID NOT AGREE WITH REASON GIVEN BY THE AND THEREFORE, PAYMENTS MADE IN CASH ABOVE RS.20,000/- AGAINST PURCHASES IN CONTRAV ENTION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT OF RS.30,37,000/- (RS.28,59,000/- & RS.1,78,000/-) WER E DISALLOWED AND ADDED TO THE INCOME. 3. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS). DURING APPELLATE PROCEEDINGS, THE COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DID NOT HA VE ANY BANK ACCOUNT AND ON THE OTHER HAND THE PURCHASES HA S TO BE MADE AND TO LIFT THE PARTICULAR QUOTA ARID, THER EFORE, FOR MAKING THE PURCHASES, THE REMITTANCE HAD TO BE MADE AND SINCE THE ASSESSEE HAD NO BANK ACCOUNT, THE PAYMENT IN CASH WAS THE ONLY ALTERNATIVE TO BE MADE TO THE PAR TIES AND, AS SUCH, THE PAYMENT WAS FOR BUSINESS EXPEDIEN CY AND FOR CARRYING ON THE BUSINESS. IT IS ALSO AN ACCEPTE D FACT THAT THE PAYMENTS ARE GENUINE AND NO DOUBT HAVE BEE N RAISED BY THE AO AND THE PARTY I.E. M/S AMBALA WINE TRADERS IS ALSO BEING ASSESSED TO TAX AND SUCH ENTR IES OF PURCHASES IN THE BOOKS OF ACCOUNTS HAVE BEEN REFLEC TED A SALE IN THEIR BOOKS OF ACCOUNTS AND, THUS, THE PAYM ENTS ARE 4 GENUINE AND FOR THE PURPOSE OF BUSINESS EXPEDIENCY. THAT EVEN THIS BUSINESS IS BEING CARRIED ON UNDER STRICT CONTROL OF EXCISE DEPARTMENT AND THE EXCISE DEPARTMENT SANC TIONS THE PARTICULAR QUOTA AND ONLY THEN THE PURCHASES ARE MA DE FROM THE PARTY CONCERNED AND, AS SUCH, THE PURCHASE S ARE SANCTIONED BY THE EXCISE DEPARTMENT AND, THUS, THE PAYMENT CANNOT BE DOUBTED AT ALL. THE BOOKS OF A CCOUNTS OF THE ASSESSEE HAVE BEEN ACCEPTED AND THEY HAVE NE ITHER BEEN REJECTED U/S 145 (3) AND EVEN THE ASSESSEE HAD BEEN MAINTAINING REGULAR BOOKS OF ACCOUNTS ON DAY TO DAY BASIS AND MAINTAINING ALL THE VOUCHERS OF PURCHASES AND T HE BUSINESS IS BEING CARRIED UNDER THE STRICT CONTROL OF THE EXCISE DEPARTMENT AND NO DISCREPANCY WAS NOTICED DU RING THE YEAR BY THE AO OR BY THE EXCISE DEPARTMENT IN R ESPECT OF BOOKS OF ACCOUNTS REGULARLY MAINTAINED. THE COMP LETE QUANTITATIVE DETAILS ARE MAINTAINED AND NO DISCREPA NCY HAS BEEN POINTED OUT BY THE AO. IT IS STATED THAT EACH AND EVERY PURCHASE OF LIQUOR IS CONTROLLED, MONITORED AND SAN CTIONED BY THE EXCISE DEPARTMENT. THAT BEFORE MAKING THE PURCHASES FROM THE WHOLE-SELLER, REQUISITE PERMISSI ON AND SANCTION IS OBTAINED FROM THE EXCISE DEPARTMENT AND ONLY THEN PURCHASES MADE AND NO DEFECT HAVE BEEN POINTED OUT IN THE SAME BY THE AO. 3(I) THE ASSESSEE STATED THAT ALL THE PAYMENTS, W HICH HAVE BEEN MADE IN CASH HAVE NOT BEEN DISBELIEVED AND THE Y ARE FOR BUSINESS EXPEDIENCY AND SINCE THE QUOTA IS FIXE D AND THE LICENSE FEES PAID IN ADVANCE, THE ASSESSEE HAD TO 5 PURCHASE AND SELL THE LIQUOR FOR THE PURPOSES OF EA RNING THE PROFIT AND THERE IT IS A BUSINESS COMPULSION AND CO UPLED- WITH, IT IS A GENUINE PAYMENT, NOT DOUBTED BY THE A O. IT IS FURTHER STATED THAT IN ACCORDANCE WITH THE PROVISO TO SECTION 40A(3), NO DISALLOWANCE SHALL BE MADE HAVIN G REGARD TO THE NATURE AND BANKING FACILITIES AVAILAB LE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER REL EVANT FACTORS. THE APPELLANT RELIED ON THE FOLLOWING DECI SIONS:- I) GURDAS GARG VS CIT IN ITA NO. 413/2014, DATED 16.07.2015 (P&H), II) M/S DHURI WINE VS. DCIT 48 ITR (TRIB.) 289 (ITAT CHD.) III) SMT. HARSHILA CHORDIA VS ITO 298 ITR 349 (RAJ.), IV) M/S SILVER OAKS TOWNSHIP LTD. IN ITA NO. 749/CHD/2014 (ITAT CHD.). 3(II) THE ASSESSEE FURTHER SUBMITTED THAT THE CRUX OF ALL THE JUDGMENT IS THAT IF THE GENUINENESS OF PAYMENT IS NOT DISBELIEVED AS IN THE PRESENT CASE, THE PURCHASES A RE FOR BUSINESS EXPEDIENCY, BECAUSE IF PURCHASES ARE NOT M ADE, THE ASSESSEE WOULD NOT BE ABLE TO CARRY ON THE BUSI NESS AND, AS SUCH, THE .PAYMENT FOR PURCHASES IS FOR BUS INESS EXPEDIENCY. 4. THE LD. CIT(APPEALS), HOWEVER, DISMISSED APPEAL OF THE ASSESSEE CONFIRMING THE ADDITION. THE LD. CIT(APPE ALS) DID NOT FOLLOW THE ORDER OF ITAT CHANDIGARH BENCH IN TH E CASE OF M/S DHURI WINE V DCIT (SUPRA) AND DECISION OF HO N'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF GURDAS G ARG VS CIT (SUPRA). 6 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMI TTED THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY JUDGEMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF GURDAS GARG VS CIT (SUPRA) AND DECISION OF ITAT CHANDIGARH BENCH IN THE CASE OF M/S DHURI WINE V DC IT (SUPRA). HE HAS SUBMITTED THAT THE DECISION OF JURISDICTIONAL ITAT CHD JURISDICTIONAL HIGH COURT A RE BINDING ON THE LD. CIT(APPEALS) FUNCTIONING UNDER T HE JURISDICTION OF TRIBUNAL AND HIGH COURT. IN SUPPOR T OF THIS CONTENTION, HE HAS RELIED UPON DECISION OF MADHYA P RADESH HIGH COURT IN THE CASE OF AGGARWAL WAREHOUSING & LE ASING LTD. VS CIT 124 TAXMAN 440. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW. 6. I HAVE CONSIDERED RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF RETAIL TRADING OF LIQUOR. THE ASSESSEE PLEADED BEFORE AUT HORITIES BELOW THAT IN THE ABSENCE OF BANK ACCOUNT, ALL THE PAYMENTS WERE MADE IN CASH FOR THE PURCHASES. IT W AS ALSO SUBMITTED THAT MAXIMUM PAYMENTS WERE MADE TO M/S AMBALA WINE TRADERS WHICH WAS IN NEED OF FUNDS. TH E ASSESSEE ALSO FILED CONFIRMATION OF M/S AMBALA WINE TRADERS IN SUPPORT OF PAYMENT FOR PURCHASES. THE ASSESSEE, THEREFORE, PLEADED THAT SINCE THE ASSESSE E DID NOT HAVE ANY BANK ACCOUNT AND HAS TO PURCHASE THE LIQUO R AND TO LIFT THE PARTICULAR QUOTA, THEREFORE, FOR MAKING THE PURCHASES, ASSESSEE MADE CASH PAYMENTS BECAUSE THE ASSESSEE DID NOT HAVE ANY BANK ACCOUNT. IT WAS, TH EREFORE, 7 PLEADED THAT PAYMENTS FOR PURCHASE OF LIQUOR ARE MA DE FOR BUSINESS EXPEDIENCY AND FOR CARRYING ON THE BUSINES S. THE AUTHORITIES BELOW HAVE ACCEPTED THE FACT THAT PAYME NTS ARE GENUINE AND NO DOUBTS HAVE BEEN RAISED BY THE ASSES SING OFFICER. ALL THE PURCHASES ARE RECORDED IN THE BOO KS OF ACCOUNT. IT IS ALSO NOT IN DISPUTE THAT LIQUOR BUS INESS IS ALWAYS CARRIED ON UNDER CONTROL OF EXCISE DEPARTMEN T AND EXCISE DEPARTMENT SANCTIONS THE PARTICULAR QUOTA AN D ONLY THEN PURCHASES ARE MADE FROM THE CONCERNED PARTY AN D AS SUCH, THE PURCHASES ARE SANCTIONED BY THE EXCISE DEPARTMENT. THEREFORE, PAYMENT OF PURCHASES HAVE N OT BEEN DOUBTED. THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVE NOT BEEN REJECTED. THE ASSESSEE PRODUCED COMPLETE DETAILS BEFORE THE AUTHORITIES BELOW. 7. THE DIVISION BENCH OF ITAT CHANDIGARH BENCH IN T HE CASE OF M/S DHURI WINE (SUPRA) CONSIDERED THE IDENT ICAL ISSUE IN THE LIGHT OF DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF GURDAS GARG (SUPRA) AS WE LL AS JUDGEMENT OF HON'BLE APEX COURT IN THE CASE OF ATTA R SINGH GURMUKH SINGH VS ITO (SUPRA) AND IN PARA 9 TO 12 HE LD AS UNDER : 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE TO BE DECIDED BY US IS WHETHER ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, THE PROVISIONS OF SECTIO N 40A(3) OF THE ACT CAN BE APPLICABLE TO THE ASSESSEE OR NOT. SECTION 40A(3) OF THE ACT READS AS UNDER: 8 SECTION 40A(3) : [(3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RE SPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAW N ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY T HOUSAND RUPEES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND NO PAY MENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINE SS OR PROFESSION UNDER SUB-SECTION (3) AND THIS SUB-SECTION WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON I N A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES A S MAY BE PRESCRIBED , HAVING REGARD TO THE NATURE AND EXTE NT OF BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUSINE SS EXPEDIENCY AND OTHER RELEVANT FACTORS :] 10. SINCE HEAVY RELIANCE WAS PLACED ON A LATEST JUDGMENT OF THE HON'BLE JURISDICTIONAL PUNJA B & HARYANA HIGH COURT IN THE CASE OF GURDAS GARG (SUPRA), AFTER PERUSING THE SAID JUDGMENT WE FIND THAT A VERY APT GUIDANCE IS PROVIDED BY THE HON'BLE HIGH COURT IN DECIDING THE ISSUE IN QUESTION. THEREFORE, AT THE VERY FIRST INSTANCE, WE WOULD ANALYZE THE SAID JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT. IN THIS CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN PROPERTIES. ADMITTEDLY, CERTAIN PAYMENTS WERE MADE IN CASH IN EXCESS OF RS.20,000/- PER DAY. INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE AC T, THE ASSESSING OFFICER MADE THE DISALLOWANCE. THE LEARNED CIT (APPEALS) IN HIS ORDER GAVE FINDING THA T THE IDENTITY OF THE PAYEES I.E. THE VENDER IN RESPE CT OF THE LAND PURCHASED BY THE ASSESSEE WAS ESTABLISHED. THE SALE DEEDS WERE PRODUCED, THE GENUINENESS THEREOF WAS ACCEPTED. THE AMOUNT 9 PAID IN RESPECT OF EACH OF THESE AGREEMENTS WAS CERTIFIED BY THE STAMP REGISTRATION AUTHORITY. I N THIS WAY, THE LEARNED CIT (APPEALS) HELD THAT THE BAR AGAINST THE GRANT OF DEDUCTIONS UNDER SECTION 40A(3) OF THE ACT WAS NOT ATTRACTED. THE TRIBUNAL DID NOT UPSET THESE FINDINGS GIVEN BY THE LEARNED CIT (APPEALS) INCLUDING AS TO THE GENUINENESS AND THE CORRECTNESS OF THE TRANSACTIONS. IN FACT, THE TRIBUNAL NOTED THE CONTENTION ON BEHALF OF THE ASSESSEE THAT THERE WAS A BOOM IN THE REAL ESTATE MARKET, THAT IT WAS NECESSARY, THEREFORE, TO CONCLUDE THE TRANSACTIONS AT THE EARLIEST AND NOT T O POSTPONE THEM, THAT THE ASSESSEE DID NOT KNOW THE VENDORS AND OBVIOUSLY, THEREFORE, INSISTED FOR PAYMENT IN CASH. THE TRIBUNAL DID NOT DOUBT THIS CASE. HOWEVER, THE TRIBUNAL HELD THAT CLAIM FOR DEDUCTION WAS NOT SUSTAINABLE IN VIEW OF SECTION 40A(3) OF THE ACT AS THE PAYMENTS WERE MADE IN CASH OVER RS.20,000/-. THE HON'BLE HIGH COURT WHILE DECIDING THE ISSUE RELIED UPON THE JUDGMENT O F HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SMT.HARSHILA CHORDIA VS. ITO (2008) 298 ITR 349, WHEREBY IT WAS HELD THAT THERE BEING NO DISPUTE ABOUT THE GENUINENESS OF THE TRANSACTION AND THE PAYMENT AND IDENTITY OF THE RECEIVER BEING DISCLOSED, THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT CANNOT BE MADE. THE HON'BLE RAJASTHAN HIGH COURT RELIED UPON A CIRCULAR OF THE CBDT DATED 31.5.1977 REPORTED IN (1977) 108 (ST.) 8. FURTHER THE HON'BLE PUNJAB & HARYANA HIGH COURT ALSO MADE A REFERENCE TO A JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO (1991) 4SCC 385, WHEREBY IT WAS HELD THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND RUL E 6DD OF THE INCOME TAX RULES WERE INTENDED TO REGULATE THE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS 10 TRANSACTIONS. AFTER ANALYZING ALL THESE, THE HON'B LE HIGH COURT HELD THAT THE TRIBUNAL HAS NOT DISBELIEVED THE TRANSACTIONS OR THE GENUINENESS THEREOF, NOR HAS IT DISBELIEVED THE FACT OF PAYMENT S HAVING BEEN MADE, MORE IMPORTANTLY, THE REASONS FURNISHED BY THE ASSESSEE FOR MAKING THE CASH PAYMENTS HAVE NOT BEEN DISBELIEVED. THIS CLEARLY MAKES OUT A CASE OF BUSINESS EXPEDIENCY. IN THIS VIEW, THE HON'BLE HIGH COURT HELD THE PAYMENTS TO BE OUTSIDE THE PURVIEW OF SECTION 40A(3) OF THE ACT . 11. TAKING THE GUIDANCE FROM THE ABOVE SAID JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT, WHICH IS ALSO A VERY RECENT JUDGMENT OF THE HON'BLE HIGH COURT WE NOW ADVERT TO ANALYZE THE CASE OF THE PRESENT ASSESSEE. THE PROPOSITION LAID DOWN BY THE HON'BLE HIGH COURT IS QUITE UNAMBIGUOUS TO THE EFFECT THAT EVEN IF THE CASE OF THE ASSESSEE DO ES NOT FALL IN ANY OF THE CLAUSES OF RULE 6DD OF THE INCOME TAX RULES, INVOKING THE PROVISIONS OF SECTIO N 40A(3) OF THE ACT CAN BE DISPENSED WITH IF THE ASSE SSEE IS ABLE TO PROVE THE BUSINESS EXPEDIENCY BECAUSE OF WHICH IT HAVE TO MAKE THE CASH PAYMENTS, THE GENUINENESS OF THE TRANSACTIONS HAVE ALSO TO BE VER IFIED. IN THE PRESENT CASE, DETAILED SUBMISSIONS WITH CORROBORATIVE EVIDENCES WERE FILED AT EVERY STAGE INCLUDING THAT OF THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT (APPEALS). EVEN BEFORE US, THE VOLUMIN OUS PAPER BOOK HAS BEEN FILED . THE ELABORATE SUBMISS IONS WERE MADE TO PROVE THAT THE EXPENSES INCURRED IN CA SH WERE GENUINE WHICH WERE PAID TO DISTILLERIES THROUG H EXCISE DEPARTMENT FOR PURCHASE OF LIQUOR AND THERE WERE PRACTICAL EXPEDIENCY BECAUSE OF WHICH THE PAYMENTS HAVE TO BE MADE IN CASH. THIS IS AN UNDISPUTED FAC T THAT THE ASSESSEE FIRM HAS TWELVE PARTNERS, WHO ARE OPERATING BUSINESS THROUGH VENDS LOCATED AT DISTINC T PLACES. EACH PERSON HAS LICENCE IN HIS OWN NAME TO MAKE THE SALES AND PURCHASES AS PER THE TERMS 11 OF THESE LICENCE AGREEMENTS. FURTHER, IT IS QUITE A KNOWN FACT THAT IN THE BUSINESS OF THE LIQUOR, TRANSACTIONS ARE TO BE DONE IN CASH. ALL THESE FAC TS HAVE NOT BEEN CONTROVERTED BY THE ASSESSING OFFICER OR EVEN BY THE LEARNED CIT (APPEALS). THIS MAKES OUT A CASE THAT THE ASSESSEE HAS BUSINESS EXPEDIENCY UNDER WHICH IT HAVE TO MAKE PAYMENTS IN CASH. FURTHER, NOT A SINGLE TRANSACTION HAS BEE N QUESTIONED AT ANY STAGE. THE LEARNED CIT (APPEALS) WHILE ADJUDICATING THE CONTENTION OF THE ASSESSEE WITH REGARD TO THE GENUINENESS HIMSELF HAS HELD THAT IT IS NOT SUFFICIENT FOR THE ASSESSEE TO ESTAB LISH THAT THE PAYMENTS WERE GENUINE AND THE PARTIES WERE IDENTIFIABLE. HE WAS OF THE VIEW THAT THE ASSESSEE IS FURTHER REQUIRED TO PROVE THAT DUE TO EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES AS PROVIDED UNDER THE RULES, THE PAYMENTS WERE MADE IN CASH. THEREFORE, IT IS NOT A CASE OF THE DEPARTMENT THAT THE PAYMENTS SO MADE IN CASH WERE NOT GENUINE. THE REASONS GIVEN BY THE ASSESSEE AT EVERY STAGE HAVE NOT BEEN DISBELIEVED. SINCE THESE REASONS ARE CORRECT, THEY REALLY MAKE OUT A CASE OF BUSINESS EXPEDIENCY. IN THIS VIEW, RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF GURDAS GARG (SUPRA), WE HOLD THAT THE PAYMENTS CANNOT BE DISALLOWED UNDER SECTION 40A(3) OF THE ACT. THE ADDITION IS DELETED 12. THE APPEAL OF THE ASSESSEE IS ALLOWED. 7(I) THE LD. CIT(APPEALS) REJECTED THE CLAIM OF THE ASSESSEE THAT IT HAS NOT MAINTAINED ANY BANK ACCOUNT BECAUSE THE ASSESSEE IN THE RETURN OF INCOME PROVIDED CURRENT B ANK ACCOUNT NO. 65081461384, THE LD. CIT(APPEALS) ALSO NOTED 12 THAT ASSESSEE IN THE STATEMENT SUBMITTED THAT ASSES SEE IS MAINTAINING BANK ACCOUNT WITH STATE BANK OF PATIALA HAVING NO. 65027077695 SHOWING THE TRANSACTION THRO UGH OUT THE ENTIRE YEAR UNDER CONSIDERATION AND HAS BAN K BALANCE ALSO. THE LD. CIT(APPEALS), THEREFORE, NOT ED THAT ASSESSEE MAINTAINED BANK ACCOUNTS, THEREFORE, SUBMI SSION OF THE ASSESSEE THAT ASSESSEE WAS NOT HAVING ANY BA NK ACCOUNT IS FACTUALLY INCORRECT. THE LD. COUNSEL FO R THE ASSESSEE, HOWEVER, SUBMITTED THAT ON THIS POINT, NO EXPLANATION FROM THE ASSESSEE WAS CALLED FOR. HE H AS REFERRED TO COPY OF THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR UNDER APPEAL, COPY OF WHICH IS FILE D IN THE PAPER BOOK AND AT PAGE 10, THE ASSESSEE IN THE RELE VANT COLUMN OF THE RETURN OF INCOME HAS MENTIONED HIS BA NK ACCOUNT NO. AS 65081461384. HE HAS ALSO REFERRED T O PB- 24 WHICH IS A STATEMENT OF ACCOUNT OF M/S AMBALA WI NE TRADERS HAVING THE SAME BANK ACCOUNT NUMBER. THE L D. COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT SINCE THE ASSESSEE WAS NOT HAVING ANY BANK ACCOUNT THEREF ORE, HE HAS MENTIONED THE BANK ACCOUNT NUMBER OF THE PARTNERSHIP FIRM M/S AMBALA WINE TRADERS IN WHICH H E IS A PARTNER, IN THE RETURN OF INCOME. HE HAS ALSO REFE RRED TO PB-25 WHICH IS STATEMENT OF ACCOUNT OF SAVING BANK ACCOUNT OF THE ASSESSEE WITH STATE BANK OF PATIALA BEARING ACCOUNT NO. 65027077695. HE HAS SUBMITTED THAT NO BUSINESS TRANSACTIONS HAVE BEEN CARRIED OUT THROUGH THIS SB ACCOUNT NUMBER. THESE FACTS, THEREFORE, CLEARLY SHOW THAT ASSESSEE DID NOT MAINTAIN ANY BANK ACCOUNT OF THE 13 LIQUOR BUSINESS CONDUCTED IN HIS INDIVIDUAL CAPACIT Y. THEREFORE, THESE TWO BANK ACCOUNTS REFERRED TO BY L D. CIT(APPEALS) FOR THE PURPOSE OF REJECTING EXPLANATI ON OF THE ASSESSEE WAS WHOLLY INCORRECT AND WITHOUT ANY VALID REASONS. IT IS, THEREFORE, PROVED ON RECORD THAT F INDINGS RECORDED BY LD. CIT(APPEALS) ARE FACTUALLY INCORREC T THAT ASSESSEE MAINTAINED BANK ACCOUNTS OF THE BUSINESS U NDER CONSIDERATION. THE ASSESSEE HAS BEEN ABLE TO PROVE THAT FOR LIQUOR BUSINESS, NO BANK ACCOUNT HAVE BEEN MAIN TAINED BY THE ASSESSEE. THEREFORE, EXPLANATION OF THE ASS ESSEE THAT HE HAS MADE CASH PAYMENTS FOR PURCHASE OF LIQU OR TO M/S AMBALA WINE TRADERS FOR BUSINESS EXPEDIENCY WAS CORRECT. THE ASSESSEE IN THE ABSENCE OF ANY BANK A CCOUNT OF LIQUOR TRADE COULD NOT HAVE MADE ANY PAYMENT FOR PURCHASE OF LIQUOR THROUGH BANKING CHANNEL. 7(II) THE LD. CIT(APPEALS) ALSO NOTED IN HIS FINDI NGS THAT CLAIM OF THE ASSESSEE OF BUSINESS EXPEDIENCY IS ONL Y A PAPER CREATION. THE LD. CIT(APPEALS) NOTED THAT AS SESSEE BEING INDIVIDUAL WAS MAKING THE TRANSACTIONS WITH T HE PARTNERSHIP FIRM IN WHICH HE WAS A PARTNER. THIS I TSELF IS WHOLLY INCORRECT BECAUSE EVERY INDIVIDUAL CARRYING ON BUSINESS OF LIQUOR COULD HAVE TRANSACTED WITH THE F IRM, HAVING THE SAME BUSINESS OF LIQUOR WITH THE PARTNER SHIP FIRM. THE INDIVIDUAL AND PARTNERSHIP FIRM ARE ALL TOGETHER DIFFERENT ENTITIES, THEREFORE, COULD NOT BE CONSIDE RED THAT THE BUSINESS EXPEDIENCY OF THE ASSESSEE WAS ONLY A PAPER CREATION. AS NOTED ABOVE, SINCE THE ASSESSEE IS IN THE BUSINESS OF TRADING IN LIQUOR, THEREFORE, THIS BUSI NESS IS 14 CONTROLLED BY EXCISE DEPARTMENT. THE ASSESSEE COUL D MADE PURCHASES ONLY WHEN QUOTA IS SANCTIONED BY THE EXCI SE DEPARTMENT FOR PURCHASE OF LIQUOR FROM A PARTICULAR TRADER. THEREFORE, THE SAME COULD NOT BE TREATED AS A PAPER CREATION BY THE ASSESSEE. THE LD. CIT(APPEALS) DID NOT FOLLOW THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S DHURI WINE (SUPRA) AS WELL AS JUDGEMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE GURDAS GARG (SUPRA) BECAUSE AT THE END OF THE JUDGEMENT IN THE CASE OF GURDAS GARG (SUPRA) HON'BLE HIGH COURT LEFT IT OPEN TO THE PARTIES TO TAKE UP ANY REVIEW PROCEEDINGS. HOWEVER, LD. DR WAS NOT ABLE TO POINT OUT IF THE JUDGEMENT IN THE CASE OF GURDAS GARG (SUPRA) HAVE BEEN REVIEWED AT THE INSTANCE OF THE REVENUE. THEREFORE, THE JUDGEMENT OF THE HON'BLE H IGH COURT IS BINDING ON ALL THE AUTHORITIES FUNCTIONING UNDER THE JURISDICTION OF THE HIGH COURT. THE LD. CIT(AP PEALS) IS ALSO BOUND TO FOLLOW DECISION OF THE DIVISION BENCH OF THE TRIBUNAL IN THE CASE OF M/S DHURI WINE (SUPRA). 7(III) THE ITAT CHANDIGARH BENCH IN THE CASE OF M /S DHURI WINE (SUPRA) FOLLOWING THE DECISION OF JURISD ICTIONAL HIGH COURT IN THE CASE OF GURDAS GARG (SUPRA) FOUND THAT, WHEN EXPENSES INCURRED IN CASH WERE GENUINE WHICH WERE PAID TO THE DISTILLERY THROUGH EXCISE DEPARTMENT FO R PURCHASE OF LIQUOR AND THERE WERE PRACTICAL EXPEDIE NCY BECAUSE OF WHICH PAYMENTS HAVE TO BE MADE IN CASH, ACCEPTED THE EXPLANATION OF THE ASSESSEE THAT PAYME NTS HAVE BEEN MADE FOR BUSINESS EXPEDIENCY AND DELETED THE ADDITION UNDER SECTION 40A(3) OF THE INCOME TAX ACT . SINCE 15 IN THE CASE OF THE ASSESSEE, ASSESSEE WAS NOT MAINT AINING ANY BANK ACCOUNT OF HIS INDIVIDUAL BUSINESS OF RETA IL TRADING OF LIQUOR, THEREFORE, THERE IS NO QUESTION OF MAKING PAYMENT THROUGH BANKING CHANNEL. THE PAYMENTS MADE FOR PURCHASE OF LIQUOR HAVE NOT BEEN DOUBTED WHICH WER E PAID TO M/S AMBALA WINE TRADERS AND HAVE BEEN CONFIRMED BY THE SELLER ALSO IN WRITING WOULD CLEARLY PROVE THAT ASSESSEE MADE GENUINE PAYMENTS FOR BUSINESS EXPEDIENCY IN CA SH. THE LD. CIT(APPEALS) WAS, THEREFORE, BOUND TO FOLLO W THE DECISION OF THE DIVISION BENCH OF ITAT CHANDIGARH B ENCH IN THE CASE OF M/S DHURI WINE (SUPRA). FURTHER, TH E LD. CIT(APPEALS) DID NOT ACCEPT CONTENTION OF THE ASSES SEE THAT HIS CASE FALLS UNDER PROVISO TO SECTION 40A(3) OF T HE ACT BECAUSE THE FACTORS PROVIDED UNDER THE PROVISO TO S ECTION 40A(3) OF THE ACT SHALL HAVE TO BE CONSIDERED TOGET HER. THE FINDINGS OF LD. CIT(APPEALS) ARE INCORRECT BECAUSE IN THE PROVISO TO SECTION 40A(3) OF THE ACT, THE EXCEPTION S ARE PROVIDED HAVING COMA IN DIFFERENT CIRCUMSTANCES. THEREFORE, ALL THE CIRCUMSTANCES SHALL HAVE TO BE R EAD SEPARATELY AND IN ISOLATION. THE CONSIDERATION OF B USINESS EXPEDIENCY AND OTHER RELEVANT FACTORS HAVE NOTHING TO DO WITH THE NATURE AND EXTENT OF BANKING FACILITIES AV AILABLE. 8. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTAN CES IN THE LIGHT OF DECISION OF HON'BLE HIGH COURT IN THE CASE OF GURDAS GARG SUPRA) AND DIVISION BENCH OF ITAT IN TH E CASE OF M/S DHURI WINE (SUPRA), I AM OF THE VIEW ASSESSE E HAS BEEN ABLE TO PROVE THAT DUE TO EXCEPTIONAL, UNAVOID ABLE CIRCUMSTANCES AND FOR BUSINESS EXPEDIENCY, THE PAYM ENTS 16 WERE MADE IN CASH WHICH WERE FOUND TO BE GENUINE BY THE AUTHORITIES BELOW, THEREFORE, EXPLANATION GIVEN BY THE ASSESSEE SHOULD NOT HAVE BEEN DISBELIEVED. I, THER EFORE, HOLD THAT SUCH PAYMENTS CANNOT BE DISALLOWED UNDER SECTION 40A(3) OF THE INCOME TAX ACT. I, ACCORDING LY, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DELETE TH E ENTIRE ADDITION. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 19 TH DECEMBER,2016. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH