SH. ANUP KUMAR JAITLY, JALANDHAR V. INCOME TAX OFFICER WARD -3(1), JALANDHAR

ITA 112/ASR/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4354 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 03-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GHANSHAM SHARMA
• Keywords: Benefit of exemption
• Section: 56; 40A(3); 192

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 112/Asr/2019 Assessment Year: 2012-13 Sh. Anoop Kumar Jaitly, Prop. M/s Mahavir Jeweller, Bazar Kalan, Jalandhar [PAN: AAMPJ 5297J] Vs. Income Tax Officer, Ward-3(1), Jalandhar (Appellant) (Respondent) Appellant by : None Respondent by: Sh. Ghansham Sharma, Sr. DR Date of Hearing: 15.09.2022 Date of Pronouncement: 22.09.2022 ORDER Per Dr. M. L. Meena, AM: This appeal has been filed by the assessee against the order dated 15.11.2018 passed by the Ld. Commissioner of Income Tax (Appeals)-2, Jalandhar, in respect of the Assessment Year 2012-13. 2. The assessee has raised the following grounds of appeal: ITA No. 112/Asr/2019 Anoop Kumar Jaitly v. ITO 2 “1. That the Ld. CIT(A) is not justified in sustaining addition of Rs. 9,88,200/- on account of purchase of 2 gold kadas weighting 366 gms. made in cash. 2. That the Ld.CIT(A) has failed to appreciate that the purchase of gold kadas has been accounted for in the quantity wise stock register maintained by assessee and thus the purchase of gold kadas has been undoubtedly established by the assessee and is genuine. 3. That the Ld.CIT(A) has failed to appreciate that genuineness of the gold purchased has not been doubted and has been accepted by the Assessing Officer with help of books of account and stock register maintained by the assessee. 4. That the Ld. CIT(A) has failed to appreciate that identity of the seller of gold kadas has been established by the assessee. 5. That the Ld. CIT(A) has failed to appreciate that seller of gold kadas could not be produced before the Assessing Officer on account of genuine reasons beyond the control of the Assessee. 6. That the appellant craves leave to amend, alter or add to the above grounds of appeal, before the appeal is heard or disposed off.” 3. The sole and common issue raised by the assessee pertains to the addition of Rs.9,88,200/- on account of cash purchases u/s 40A(3) of the Act. 4. In appeal, the Ld. CIT (A) has confirmed the addition by by observing as under: “4.2. have gone through the assessment order and submissions made by the appellant and find that it is not disputed that payment has been made in cash to S. Kartar Singh s/o Nirmal Singh r/o Vill, KapurPind, Jalandhar on 04.05.2011 for Rs. 9,88,200 for purchase of gold. Initially it was submitted that the cash purchase made in violation of the provisions of section ITA No. 112/Asr/2019 Anoop Kumar Jaitly v. ITO 3 40A(3) of the IT Act may be covered under the surrender of undisclosed income of Rs. 40 lakh made at the time of survey u/s 133 A of the IT Act. However, it was pointed out by the AO that no such amount has been covered in the offer of additional income made after the survey. Thereafter, it was submitted by the appellant that it is a normal trade practice to purchase gold & silve r in cash. It is also submitted that it was a first dealing with that person and he was in need of immediate funds, which could not be resolved by making payment in cheque. In the course of assessment proceedings u/s 143(3)/263 of the IT Act, it was submitted by the appellant that the payments made for cash purchase is covered under Rule 6DD of the IT Rules. 4.3. It is seen from the order passed by the AO that each of the contentions raised by the appellant have been discussed in the order passed and a finding was given that cash purchases made are covered under none of the clauses of Rule 6DD. Therefore, it was held that cash purchases of Rs. 9,88,200 have been made in contravention to the provisions of section 40A(3) of the IT Act, which put a bar on purchases made in cash exceeding Rs. 20,000. 4.4. For the sake of clarity the provisions of section 40A(3) of the IT Act are reproduced as under: ' **(3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. 4.5. However, a payment of any expenditure by an assessee in violation of provisions of section 40A(3) can only be allowed under this section, only if, the assessee’s case falls within the ambit of any of the clauses of Rule 6DD of IT Rules. It may be relevant to mention that the provisions of Rule 6DD which have been amended by the IT(seventh amendment) Rules 2008, w.e.f. assessment year 2009- 10, and it provides for specific circumstances under which payments made in cash arc to be allowed as a deduction. 4.6. For this purpose, the provisions of Rule 6DD of IT Rules are reproduced as under: ITA No. 112/Asr/2019 Anoop Kumar Jaitly v. ITO 4 *6DD, Cases and circumstances in which a payment or aggregate of payments exceeding twenty thousand rupees may be made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft.—No disallowance under sub-section (3) of section 40A shall be made and no payment sh a ll be deemed to be the profits and gains of business or profession under subsection (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees in the cases and circumstances specified hereunder, namely – (a) where the payment is made to— (i) the Reserve Bank of India or any banking company as defined in clause (c) o f se ct io n 5 o f the Banking Regulation Act, 1949 (1 0 of 1949); (ii) the State Bank of India or any subsidiary' bank as defined in section 2 of the State Bank of India (Subsidiary' Banks) Act, 1959 (38 of 1959); (iii) any co-operative bank or land mortgage bank ; (iv) any primary agricultural credit society or any primary credit society as defined under section 56 of the Banking Regulation Act, 1949 (10 of 1949) ; (v) the Life Insurance Corporation of India established, under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956); (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; (c) where the payment is made by— (i) any letter of credit arrangements through a bank, (ii) a mail or telegraphic transfer through a bank ; (iii) a book adjustment from any account in a bank to any other account in that or any other bank ; (iv) a bill of exchange made payable only to a bank ; (v)the use of electronic clearing system through a bank account; (vi) a credit card ; ITA No. 112/Asr/2019 Anoop Kumar Jaitly v. ITO 5 (vii) a debit card. Explanation.—For the purposes of this clause and clause (g), the term “bank” means any bank, banking company or society referred to in sub-clauses (i) to (iv) of clause (a) and includes any bank [not being a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)], whether incorporated or not, which is established outside India; (d) where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee ; (e) where the payment is made for the purchase of— (i) agricultural or forest produce ; or (ii) the produce of animal husbandry (including livestock, meat, hides and skins) or dairy or poultry farming ; or (iii) fish or fish products ; or (vi) the products of horticulture or apiculture, to the cultivator, grower or producer of such articles, produce or products ; (f) where the payment is made for the purchase of the products manufactured or processed without the aid of power in a cottage industry, to the producer of such products; (g) where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business/profession or vocation, in any such village or town ; (h) where any payment is made to an employee of the assessee or the heir of any such employee, on or in connection with the retirement, retrenchment, resignation, discharge or death of such employee, on account of gratuity, retrenchment compensation or similar terminal benefit and the aggregate of such sums payable to the employee or his heir does not exceed fifty thousand rupees ; (i) where the payment is made by an assessee by way of salary to his employee after deducting the income-tax from salary in accordance with the provisions of section 192 of the Act and when such employee— (i) is temporarily posted for a continuous period of fifteen days or more in a place other than his normal place of duty or on a ship ; and (ii) does not maintain any account in any bank at such place or ship ; ITA No. 112/Asr/2019 Anoop Kumar Jaitly v. ITO 6 (j) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike ; (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 ; (l) where the payment is made by an authorized dealer or a money changer against purchase of foreign currency or travellers cheques in the normal course of his business. Explanation.—For the purposes of this clause, the expressions “authorized dealer” or "money changer” means a person authorized as an authorized dealer or a money changer to deal in foreign currency or foreign exchange under any law for the time being in force. 4.7. It may be seen from the above that the payments made in cash by the appellant are not covered under any of the clauses of Rule 6DD. No details or any other evidence in support of the same has been filed in the appellate proceedings. It has also not been explained as to why the same could not be executed through the normal banking channels. Further, no material has been placed on record to justify the reasons which made the appellant to make the payment in cash. The quantum of payments made is substantial and could not be justified with evidence. No evidence has been placed on record as to how these payments are covered under the provisions of Rule 6DD. The appellant has failed to produce this customer at the stage of assessment or even in the course of appellate proceedings. This fact cannot he denied that payment has been made in a city- Jalandhar and further no evidence with regard to urgency of customer, non availability of banking facility has been brought on record. The onus clearly lies upon the appellant which has not been ''discharged. 4.7. Further, reliance is placed on the following decisions, where it has been held that burden lies on assessee for payments made in cash:- (i) 335 ITR 381 (Kerla) Raja and Co., Vs. CIT (ii) 021 ITR (Trib.) 0109 (Bangalore) !TO Vs. Nam Estate Pvt. Ltd. (iii) 295 FFR 349 (Allahabad) Evershine Platers Vs. CIT ITA No. 112/Asr/2019 Anoop Kumar Jaitly v. ITO 7 (iv) 295 ITR 0123(Kerla) Silk Fab Exports Vs. CIT (v) 006 ITR (Trib.) 229 (Ahmadabad) Leader Transport Co. Vs. ITO (vi) 301 11R 276 (H.P.) CJT Vs. Dalip Chand and Sons 4.9. In view of the above discussion, I hold that AO had rightly disallowed the amount of Rs. 9,88,200 on account of cash payments u/s 40A(3) of the IT Act.” 5. None attended for the assessee, however after hearing the Ld. Addl. DR and perusal of appeal record, we decided to consider the matter for hearing on merits in the interest of justice. The appellant assessee objected to the impugned order agitating that the Ld. CIT(A) was not justified in sustaining addition of Rs. 9,88,200/- on account of purchase of 2 gold kadas weighting 366 gms being made in cash; that the Ld. CIT(A) failed to appreciate the fact that the purchase of gold kadas has been accounted for in the quantity wise stock register maintained by assessee and thus the purchase of gold kadas has been undoubtedly established as genuine; that the gold purchased has not been doubted and accepted by the Assessing Officer with help of books of account and stock register maintained by the assessee and that identity of the seller of gold kadas has been established by the assessee, although the seller of gold kadas could not be produced before the Assessing Officer on account of genuine reasons beyond the control of the Assessee. ITA No. 112/Asr/2019 Anoop Kumar Jaitly v. ITO 8 6. Per contra, the Ld. Addl. CIT DR stands by the impugned order. 7. Having heard the rival contentions and perusal of the records, we find that the appellant assessee has made cash payment of Rs. 9,88,200 /- exceeding Rs. 20,000 to S. Kartar Singh s/o Nirmal Singh r/o Vill, Kapur Pind, Jalandhar on 04.05.2011 for purchase of gold Kada. Initially it was submitted that the cash purchase made in violation of the provisions of section 40A(3) of the IT Act may be covered under the surrender of undisclosed income of Rs. 40 lakh made at the time of survey u/s 133 A of the IT Act. However, it was pointed out by the AO that no such amount has been covered in the offer of additional income made after the survey. Thereafter, it was submitted by the appellant that it is a normal trade practice to purchase gold & silver in cash. It is also submitted that it was a first dealing with that person and he was in need of immediate funds, which could not be resolved by making payment in cheque. In the course of assessment proceedings u/s 143(3)/263 of the IT Act, it was submitted by the appellant that the payments made for cash purchase is covered under Rule 6DD of the IT Rules. 8. That the appellant has not produced supporting documentary evidences either before the authorities below or before us to satisfy the ITA No. 112/Asr/2019 Anoop Kumar Jaitly v. ITO 9 conditions/circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. The assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified in the Rule 6DD of the income tax rules 1952 in order to avail the provided benefit under the law. The citations relied upon by the appellant, are distinguishable on the peculiar facts of the case as the assessee is required to explain the exceptional circumstances under the payment could not be made by way of crossed cheques or crossed bank drafts to S. Kartar Singh. 9. Admittedly, the genuineness of the payment in cash, to S. Kartar Singh, is not doubted either by the AO or CIT appeal. It is seen that the assessee has merely focused on the genuineness of payments but he is required to explain that why the disputed payments could not be made by way of cross checks or by crossed bank draft in lieu of certain exceptional to claim the benefit of exemption under section 40A(3) read with rule 6DD to the satisfaction of the assessing officer. In our view, it is a fit case to be remanded back to the file of the AO, to enquire into the circumstances warranted the assessee to make the payments in cash to the seller of gold kadas under the provisions of section 40A(3) of the act, with conjoint ITA No. 112/Asr/2019 Anoop Kumar Jaitly v. ITO 10 reading with Rule 6DD of the IT rules after granting adequate opportunity of being heard to the assessee and considering the material evidence filed on record. The assessee is directed to cooperate in the fresh assessment proceedings before the AO. Accordingly, the matter is remanded back to the file of the AO, for the limited purpose to examine the claim of the assessee as regards to the benefit of Rule 6DD of the Income Tax Rules, in respect of the disputed payments made in cash to the gold Kada seller. 10. In the result, the appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on 22.09.2022 Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr/PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T True Copy By Order