ACIT, Ludhiana V. M/s Dhuri Wine, Dhuri

ITA 1176/CHANDI/2013

• Counselvise Citation: 117621514 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 23-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK GOYAL; SUDHIR SEHGAL
• Assessee Lawyers: S K MITTAL
• Keywords: Corroborative evidences
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.1155/CHD/2013 (ASSESSMENT YEAR : 2010-11) M/S DHURI WINE, VS. THE D.C.I.T., LOHAR BAZAR, NEAR PNB, CIRCLE-IV, DHURI. LUDHIANA. PAN: AAHFD0310M (APPELLANT) (RESPONDENT) AND C.O.NO.6/CHD/2014 ARISING OUT OF ITA NO. 1155/CHD/2013 (ASSESSMENT YEAR : 2010-11) THE A.C.I.T., VS. M/S DHURI WINE, CIRCLE-IV, LOHAR BAZAR, NEAR PNB, LUDHIANA. DHURI. PAN: AAHFD0310M AND ITA NO. 1176/CHD/2013 (ASSESSMENT YEAR : 2010-11) THE A.C.I.T., VS. M/S DHURI WINE, CIRCLE-IV, LOHAR BAZAR, NEAR PNB, LUDHIANA. DHURI. PAN: AAHFD0310M ASSESSEE BY : S/SHRI SUDHIR SEHGAL & ASHOK GOYAL RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 18.09.2015 DATE OF PRONOUNCEMENT : 09.10.2015 2 O R D E R PER RANO JAIN, A.M . : BOTH THE CROSS APPEALS AND THE CROSS OBJECTION FILE D BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF LE ARNED COMMISSIONER OF INCOME TAX (APPEALS)-II, LUDHIANA D ATED 23.10.2013 FOR ASSESSMENT YEAR 2010-11. ITA NO.1155/CHD/2013 : 2. THE ASSESSEE HAS RAISED FOUR GROUNDS OF APPEAL. HOWEVER, THE ONLY ISSUE IS ADDITION OF RS.7,91,05,3 85/- MADE BY THE ASSESSING OFFICER INVOKING THE PROVISIO NS OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF DEALING INDIAN MADE FOREIGN LIQUOR, COUNTRY LIQUOR AND ALL KINDS O F WINE AND BEER. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD MAINTAINED MORE THAN ONE LEDGER ACCOUNT IN RESPECT OF EACH PARTY FROM WHOM PURCHASES WERE MADE. THE EXPLANATION OF THE ASSESSEE WAS THAT THE ACCOUNTS H AVE BEEN MAINTAINED VEND-WISE SINCE THE PAYMENTS TO VAR IOUS PARTIES WERE ALSO MADE VEND-WISE. THE ASSESSING O FFICER FOUND THAT THE TOTAL PAYMENT MADE TO EACH PARTY ON SINGLE DAY WAS INVARIABLY MORE THAN RS.20,000/-, WHICH WAS IN EXCESS OF THE LIMIT PRESCRIBED UNDER SECTION 40A(3) OF THE 3 ACT. WHEN QUESTIONED ON THIS, THE REPLY OF THE ASS ESSEE WAS THAT SINCE THERE WERE 12 PARTNERS IN ASSESSEE F IRM, THE ASSESSEE COULD NOT OPEN THE BANK ACCOUNT AND, THEREFORE, ALL PAYMENTS HAD TO BE MADE IN CASH. TH E ASSESSING OFFICER REJECTED THIS EXPLANATION OF THE ASSESSEE AND OBSERVED THAT THOUGH THE PURCHASES MADE HAVE BE EN MADE SEPARATELY THROUGH DIFFERENT VENDS BUT THESE W ERE ADMITTEDLY MADE ON BEHALF OF THE ASSESSEE FIRM. ON CE A FIRM IS CONSTITUTED, THE CONCEPT OF SEPARATE GROUP OF VENDS CEASED TO EXIST. ACCORDINGLY, THE PAYMENT IN RESPE CT OF VARIOUS GROUPS OF VENDS SEPARATELY HAD NO MEANING. THESE WERE PAYMENTS MADE BY OR ON BEHALF OF THE FIR M. THE ASSESSING OFFICER WAS OF THE VIEW THAT TO BE EL IGIBLE FOR DEDUCTION AS EXPENDITURE, THE REQUISITE CONDITI ONS OF THE PROVISIONS OF THE ACT ARE TO BE FULFILLED. AS ALL THESE PAYMENTS WERE IN EXCESS OF LIMIT PRESCRIBED UNDER S ECTION 40A(3) OF THE ACT, THE ASSESSING OFFICER MADE DISAL LOWANCE OF RS.7,91,05,385/-. 4. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE SUBMITTED THAT THERE WERE 20 PERSONS INDIVIDUALLY W HO HAVE BEEN SUCCESSFUL BIDDERS IN RESPECT OF WINE CON TRACTS AT DIFFERENT PLACES AND THEY WERE ALLOTTED DIFFEREN T VENDS IN DIFFERENT AREAS INDIVIDUALLY. THESE PERSONS JOI NED HANDS TOGETHER TO FORM A PARTNERSHIP AND THE FIRM W AS FORMED IN ORDER TO AVOID COMPETITION AND TO CARRY O N THE BUSINESS MORE COLLECTIVELY AND EFFECTIVELY UNDER TH E NAME AND STYLE OF M/S DHURI WINE, I.E. THE ASSESSEE. I T WAS 4 FURTHER SUBMITTED THAT THE COMBINED BOOKS OF ACCOUN T HAD BEEN MAINTAINED BUT THE LICENCE FEE OF EACH AND EVE RY VEND, SALES AND PURCHASES HAD BEEN RECORDED SEPARAT ELY IN THE BOOKS OF ACCOUNT AND EVEN THE PURCHASES WERE MA DE ON THE BASIS OF PERMISSION OBTAINED FROM THE EXCISE AUTHORITIES IN INDIVIDUAL NAME OF EACH SUCCESSFUL B IDDER AND, THUS, THE COMMON BOOKS OF ACCOUNT WERE BEING MAINTAINED, BUT EACH AND EVERY ITEM OF EXPENSES, PURCHASE, SALES, LICENCE FEE OF DIFFERENT VENDS HAV E BEEN RECORDED SEPARATELY AND INDEPENDENTLY IN THE BOOKS OF ACCOUNT BY EACH OF THE VENDS OWNERS I.E. EACH OF TH E PARTNERS. IN THIS BACKGROUND, DETAILED SUBMISSIONS WERE MADE BEFORE THE LEARNED CIT (APPEALS) THAT THE PROV ISIONS OF SECTION 40A(3) OF THE ACT ARE NOT APPLICABLE TO THE FACTS OF THE ASSESSEE. THE REASONS FOR NOT OPENING BANK ACCOUNT WAS ALSO EXPLAINED TO THE LEARNED CIT (APPE ALS). IT WAS SUBMITTED THAT ALL PURCHASES, SALES AND PAYM ENTS WERE INDEPENDENT TO THE EXTENT THAT THE SANCTIONS I N RESPECT OF PURCHASES WERE MADE IN EACH PARTNERS NA ME. THE PROCEDURES FOR MAKING PURCHASES AGAINST THE CAS H PAYMENT WERE EXPLAINED TO THE LEARNED CIT (APPEALS) . RELIANCE WAS ALSO PLACED ON RULE 6DD(G) OF THE INCO ME TAX RULES TO THE EFFECT THAT SINCE THE ASSESSEE IS NOT MAINTAINING ANY BANK ACCOUNT, THE PROVISIONS OF SEC TION 40A(3) OF THE ACT ARE NOT APPLICABLE TO IT. RELIA NCE WAS ALSO PLACED ON CLAUSE (B) OF RULE 6DD OF THE INCOME TAX RULES TO THE EFFECT THAT SINCE THE PAYMENTS WERE MA DE AS PER RULES FRAMED BY THE EXCISE AUTHORITIES, WHICH I S A 5 GOVERNMENT AUTHORITY, ANY SUCH PAYMENT MADE UNDER T HE AUTHORITIES AND THE RULES FRAMED BY THE GOVERNMENT CANNOT BE DISALLOWED. FURTHER IT WAS ARGUED THAT SINCE THE PAYMENTS HAVE NOT BEEN HELD TO BE NOT GENUINE, THE SAME CANNOT BE DISALLOWED UNDER SECTION 40A(3) OF T HE ACT. THE JUDGMENT OF HON'BLE JURISDICTIONAL PUNJAB & HAR YANA HIGH COURT IN THE CASE OF ATTAR SINGH GURMUKH SING H VS. ITO (1991) 191 ITR 667 WAS RELIED UPON. THE LEARN ED CIT (APPEALS) FORWARDED THE SUBMISSIONS OF THE ASSESSEE TO THE ASSESSING OFFICER AND A REMAND REPORT WAS CALLED FO R. THE ASSESSING OFFICER IN HIS REMAND REPORT DATED 17.9.2013 REITERATED THE STAND TAKEN BY HIM IN THE ASSESSMENT ORDER AND FURTHER STATED THAT THE PROVIS IONS OF RULE 6DD CLAUSES (B) AND (G) THE INCOME TAX RULES AS SUBMITTED BY THE ASSESSEE ARE NOT APPLICABLE IN THE GIVEN CASE. COPY OF THE REMAND REPORT WAS PROVIDED TO TH E ASSESSEE, WHO FILED REJOINDER TO THE SAID REPORT AS ON 15.10.2013, WHERE AGAIN THE DETAILED SUBMISSIONS IN THIS REGARD WERE MADE AND IT WAS ALSO SUBMITTED THAT SIN CE TCS AS REQUIRED UNDER SECTION 206C OF THE ACT OF EA CH VEND SEPARATELY UNDER THE PAN NUMBER OF EACH PARTNE R,, THE PAYMENT MADE BY CASH CANNOT BE CLUBBED TOGETHER . THE SUBMISSIONS EARLIER MADE BEFORE THE ASSESSING O FFICER AND THE LEARNED CIT (APPEALS) WERE AGAIN REITERATED . 5. THE LEARNED CIT (APPEALS) AFTER CONSIDERING THE SAID SUBMISSIONS OF THE ASSESSEE AND THE REMAND REP ORT AND AFTER ANALYZING IN DETAIL EACH AND EVERY ASPECT OF THE 6 APPLICABILITY OF SECTION 40A(3) OF THE ACT CONFIRME D THE ADDITION MADE BY THE ASSESSING OFFICER GIVING FOLLO WING REASONS : I) THE ASSESSEE BEING A PARTNERSHIP FIRM HAVING NO BANK ACCOUNT, DOES NOT ABSOLVE IT OF THE REQUIREMENTS OF SECTION 40A(3) OF THE ACT AS THERE ARE ADEQUATE BANKING FACILITIES IN DHURI. II) THE PAYMENT MADE BY DIFFERENT PARTNERS CANNOT BE TAKEN INDEPENDENTLY FOR THE PURPOSE OF COMPLIANCE WITH SECTION 40A(3) OF THE ACT. III) UNDER RULE 6DD(B), ONLY PAYMENTS MADE TO THE GOVERNMENT ARE EXEMPT FROM THE PROVISIONS OF SECTION 40A(3) OF THE ACT. NONE OF THE PARTIES TO WHOM PAYMENT HAS BEEN MADE BY THE ASSESSEE ARE GOVERNMENT UNDERTAKINGS. IV) THE APPLICABILITY OF RULE 6DD CLAUSE (G) WAS AL SO RULED OUT BY THE LEARNED CIT (APPEALS) AS THE ASSESSEE HAS NOT SHOWN A SINGLE CASE WHERE PAYMENTS WERE MADE TO A PERSON WHO WAS RESIDING IN VILLAGE OR TOWN, WHICH WAS NOT SERVED BY ANY BANK. V) ON THE ISSUE OF GENUINENESS OF EXPENDITURE INCURRED IN CASH, THE LEARNED CIT (APPEALS) WAS OF THE VIEW THAT THE LANGUAGE OF SECTION 40A(3) OF THE ACT IS CLEAR AND UNAMBIGUOUS AND, THEREFORE THE FULL EFFECT IS TO BE GIVEN TO THE LANGUAGE USED IN SECTION 40A(3) OF THE ACT. VI) ON THE ISSUE OF TCS BEING DEDUCTED SEPARATELY BY EACH VEND, THE LEARNED CIT (APPEALS) WAS OF THE VIEW THAT THE PAYMENTS MADE IN EXCESS OF LIMIT PRESCRIBED UNDER SECTION 43A(3) OF THE ACT 7 CANNOT BE SEEN WITH REFERENCE TO THE INDIVIDUAL PERSONS BUT HAS TO BE SEEN WITH REFERENCE TO THE ASSESSEE FIRM. 6. IN VIEW OF THE ABOVE FACTORS, THE LEARNED CIT (APPEALS) DISMISSED THE GROUND OF APPEAL RAISED BY THE ASSESSEE AND FOR EACH OF THESE REASONS, HE RELIED U PON A NUMBER OF JUDGMENTS OF VARIOUS HIGH COURTS AND THAT OF DIFFERENT BENCHES OF THE I.T.A.T. 7. AGGRIEVED BY THE SAID ORDER OF THE LEARNED CIT (APPEALS), THE ASSESSEE HAS COME UP IN APPEAL BEFOR E US. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE ARGUING BEFORE US REITERATED AGAIN IN DETAIL THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES BY REFERRING TO VARIOUS PAGES OF A VOLUMINOUS PAPER BOOK FILED BY IT. THE SUBMISSIONS WERE MADE TO EMPHASIZE THE FACT THAT ALL THE TRANSACTION S OF CASH PAYMENTS WERE MADE INDEPENDENT OF EACH OTHER B Y DIFFERENT PERSONS BEING PARTNERS AT DIFFERENT PLACE S. THOUGH THE ASSESSEE IS A REGISTERED FIRM, THE RECOR DS ARE BEING MAINTAINED BY EACH PARTNER SEPARATELY. EVEN THE STOCK REGISTER OF EACH AND EVERY VEND ON DAY-TO-DAY BASIS IS ALSO MAINTAINED SEPARATELY FOR DIFFERENT VENDS. A FEW SAMPLES OF THE STOCK RECORDS WERE ALSO SHOWN TO US. IN THE NUTSHELL, IT WAS ARGUED THAT EACH AND EVERY ITE M OF PURCHASE, SALE, LICENCE FEE, CAPITAL INVESTMENT, ST OCK REGISTERS WERE BEING RECORDED INDEPENDENTLY AND EAC H ONE OF THE INDIVIDUAL PERSONS WERE CARRYING ON THE BUSI NESS INDEPENDENTLY AND ONLY FOR THE LIMITED PURPOSE OF A VOIDING THE COMPETITION, THEY FORMED A PARTNERSHIP FIRM. THE 8 PAYMENT OF MORE THAN RS.20,000/- ON A SINGLE DAY HAPPENED ONLY IF THE CASH PAYMENT MADE BY DIFFERENT INDIVIDUAL VENDS ACTUALLY ARE CLUBBED TOGETHER, WHE REAS THE CASE OF THE ASSESSEE IS THAT IF THE PAYMENT IS TAKEN OF EACH SEPARATE VEND INDEPENDENTLY SINCE THE PURCHASE S AND SALES ARE MADE INDEPENDENTLY BY ALL DIFFERENT PARTI ES, THEN NO PAYMENT IN EXCESS OF RS.20,000/- ON A SINGLE DAY IS MADE. ANOTHER ARGUMENT MADE BY THE LEARNED COUNSE L FOR THE ASSESSEE WAS THAT NO DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT CAN BE MADE AS THE FIRST PROVISO TO SECTION 40A(3) OF THE ACT STATES VERY CLEARLY THAT NO DISALLOWANCE SHALL BE MADE HAVING REGARD TO THE NAT URE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDE RATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. I T WAS PRAYED THAT SINCE NONE OF THE LOWER AUTHORITIES HAV E QUESTIONED THE GENUINENESS OF THE PAYMENTS SO MADE, NO DISALLOWANCE IS CALLED FOR. THE LEARNED COUNSEL F OR THE ASSESSEE RELIED UPON A NUMBER OF JUDGMENTS OF VARIO US HIGH COURT AND BENCHES OF THE TRIBUNAL AND FILED A COMPILATION OF SUCH JUDGMENTS. A VERY HEAVY RELIAN CE WAS PLACED ON A LATEST JUDGMENT OF THE HON'BLE JURISDIC TIONAL PUNJAB & HARYANA HIGH COURT IN THE CASE OF GURDAS GARG VS. CIT IN ITA NO.413 OF 2014 DATED 16.7.2015. IT WAS SUBMITTED THAT IN THIS JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT, IT HAS BEEN HELD THAT ON CE THE TRANSACTIONS AND THE GENUINENESS THEREOF IS NOT QUESTIONED, THE CASE IS CLEARLY MADE OUT OF BUSINES S EXPEDIENCY, IN SUCH CIRCUMSTANCES, PROVISIONS OF SE CTION 9 40A(3) OF THE ACT CANNOT BE INVOKED. IT WAS PRAYED THAT DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT B E DELETED. 8. THE LEARNED D.R. RELIED UPON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT (APPEA LS) AND PRAYED THAT SINCE IT IS AN UNDISPUTED FACT THAT THE ASSESSEE FIRM HAS MADE CASH PAYMENTS ON A SINGLE DA Y TO A SINGLE ENTITY OF MORE THAT RS.20,000/- AND THE PROVISIONS OF SECTION 40A(3) OF THE ACT BEING VERY CLEAR, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS C ORRECT AND AS PER LAW. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE ONLY ISSUE TO BE DECIDED BY US IS WHETHER ON TH E GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, THE PROVISIONS OF SECTION 40A(3) OF THE ACT CAN BE APPLICABLE TO THE ASSESSEE OR NOT. SECTION 40A(3) OF THE ACT READS AS UNDER: 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 DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RU PEES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYM ENT 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, 10 OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RU PEES, IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE P RESCRIBED , HAVING REGARD TO THE NATURE AND EXTENT OF BANKING F ACILITIES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS :] 10. SINCE HEAVY RELIANCE WAS PLACED ON A LATEST JUDGMENT OF THE HON'BLE JURISDICTIONAL PUNJAB & HAR YANA HIGH COURT IN THE CASE OF GURDAS GARG (SUPRA), AFTER PE RUSING THE SAID JUDGMENT WE FIND THAT A VERY APT GUIDANCE IS P ROVIDED BY THE HON'BLE HIGH COURT IN DECIDING THE ISSUE IN QUE STION. THEREFORE, AT THE VERY FIRST INSTANCE, WE WOULD ANA LYZE THE SAID JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH CO URT. IN THIS CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN PROPERTIES. ADMITTEDLY, CERTAIN PAYMENTS WERE M ADE IN CASH IN EXCESS OF RS.20,000/- PER DAY. INVOKING TH E PROVISIONS OF SECTION 40A(3) OF THE ACT, THE ASSESS ING OFFICER MADE THE DISALLOWANCE. THE LEARNED CIT (APPEALS) IN HIS ORDER GAVE FINDING THAT THE IDENTITY OF THE PAYEES I.E. THE VENDER IN RESPECT OF THE LAND PURCHASED BY THE ASSE SSEE WAS ESTABLISHED. THE SALE DEEDS WERE PRODUCED, THE GEN UINENESS THEREOF WAS ACCEPTED. THE AMOUNT PAID IN RESPECT O F EACH OF THESE AGREEMENTS WAS CERTIFIED BY THE STAMP REGIST RATION AUTHORITY. IN THIS WAY, THE LEARNED CIT (APPEALS) HELD THAT THE BAR AGAINST THE GRANT OF DEDUCTIONS UNDER SECTI ON 40A(3) OF THE ACT WAS NOT ATTRACTED. THE TRIBUNAL DID NOT UPSET THESE FINDINGS GIVEN BY THE LEARNED CIT (APPEALS) INCLUDI NG AS TO THE GENUINENESS AND THE CORRECTNESS OF THE TRANSACTIONS . IN FACT, THE TRIBUNAL NOTED THE CONTENTION ON BEHALF OF THE ASSESSEE 11 THAT THERE WAS A BOOM IN THE REAL ESTATE MARKET, TH AT IT WAS NECESSARY, THEREFORE, TO CONCLUDE THE TRANSACTIONS AT THE EARLIEST AND NOT TO POSTPONE THEM, THAT THE ASSESSE E DID NOT KNOW THE VENDORS AND OBVIOUSLY, THEREFORE, INSISTED FOR PAYMENT IN CASH. THE TRIBUNAL DID NOT DOUBT THIS C ASE. HOWEVER, THE TRIBUNAL HELD THAT CLAIM FOR DEDUCTIO N 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 OF 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 REC EIVER BEING DISCLOSED, THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT CANNOT BE MADE. THE HON'BLE RAJASTHAN HIGH COURT R ELIED UPON A CIRCULAR OF THE CBDT DATED 31.5.1977 REPORTE D IN (1977) 108 (ST.) 8. FURTHER THE HON'BLE PUNJAB & HARYANA HIGH COURT ALSO MADE A REFERENCE TO A JUDGMENT OF T HE HON'BLE APEX COURT IN THE CASE OF ATTAR SINGH GURMUKH SIN GH VS. ITO (1991) 4SCC 385, WHEREBY IT WAS HELD THAT THE P ROVISIONS OF SECTION 40A(3) OF THE ACT AND RULE 6DD OF THE IN COME TAX RULES WERE INTENDED TO REGULATE THE BUSINESS TRANSA CTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE T HE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTION S. AFTER ANALYZING ALL THESE, THE HON'BLE HIGH COURT HELD TH AT THE TRIBUNAL HAS NOT DISBELIEVED THE TRANSACTIONS OR TH E GENUINENESS THEREOF, NOR HAS IT DISBELIEVED THE FAC T OF PAYMENTS HAVING BEEN MADE, MORE IMPORTANTLY, THE RE ASONS 12 FURNISHED BY THE ASSESSEE FOR MAKING THE CASH PAYME NTS HAVE NOT BEEN DISBELIEVED. THIS CLEARLY MAKES OUT A CAS E OF BUSINESS EXPEDIENCY. IN THIS VIEW, THE HON'BLE HIG H COURT HELD THE PAYMENTS TO BE OUTSIDE THE PURVIEW OF SECT ION 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 AS SESSEE. THE PROPOSITION LAID DOWN BY THE HON'BLE HIGH COURT IS QUITE UNAMBIGUOUS TO THE EFFECT THAT EVEN IF THE CA SE OF THE ASSESSEE DOES NOT FALL IN ANY OF THE CLAUSES OF RULE 6DD OF THE INCOME TAX RULES, INVOKING THE PROVISION S OF SECTION 40A(3) OF THE ACT CAN BE DISPENSED WITH IF THE ASSESSEE 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 VERIFIED. IN THE PRE SENT CASE, DETAILED SUBMISSIONS WITH CORROBORATIVE EVIDENCES W ERE FILED AT EVERY STAGE INCLUDING THAT OF THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT (APPEALS). EVEN BEFORE US, THE VOL UMINOUS PAPER BOOK HAS BEEN FILED . THE ELABORATE SUBMISS IONS WERE MADE TO PROVE THAT THE EXPENSES INCURRED IN CASH WE RE GENUINE WHICH WERE PAID TO DISTILLERIES THROUGH EXCISE DEPA RTMENT FOR PURCHASE OF LIQUOR AND THERE WERE PRACTICAL EXPEDIE NCY BECAUSE OF WHICH THE PAYMENTS HAVE TO BE MADE IN CASH. THI S IS AN UNDISPUTED FACT THAT THE ASSESSEE FIRM HAS TWELVE P ARTNERS, WHO ARE OPERATING BUSINESS THROUGH VENDS LOCATED AT DIS TINCT 13 PLACES. EACH PERSON HAS LICENCE IN HIS OWN NAME T O MAKE THE SALES AND PURCHASES AS PER THE TERMS OF THESE L ICENCE AGREEMENTS. FURTHER, IT IS QUITE A KNOWN FACT THAT IN THE BUSINESS OF THE LIQUOR, TRANSACTIONS ARE TO BE DONE IN CASH. ALL THESE FACTS HAVE NOT BEEN CONTROVERTED B Y THE ASSESSING OFFICER OR EVEN BY THE LEARNED CIT (APPEA LS). THIS MAKES OUT A CASE THAT THE ASSESSEE HAS BUSINES S EXPEDIENCY UNDER WHICH IT HAVE TO MAKE PAYMENTS IN CASH. FURTHER, NOT A SINGLE TRANSACTION HAS BEEN QUESTION ED AT ANY STAGE. THE LEARNED CIT (APPEALS) WHILE ADJUDIC ATING THE CONTENTION OF THE ASSESSEE WITH REGARD TO THE GENUINENESS HIMSELF HAS HELD THAT IT IS NOT SUFFICI ENT FOR THE ASSESSEE TO ESTABLISH THAT THE PAYMENTS WERE GE NUINE 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 PROVID ED 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 REA SONS GIVEN BY THE ASSESSEE AT EVERY STAGE HAVE NOT BEEN DISBELIEVED. SINCE THESE REASONS ARE CORRECT, THE Y REALLY MAKE OUT A CASE OF BUSINESS EXPEDIENCY. IN THIS V IEW, RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF GURDAS GARG (S UPRA), WE HOLD THAT THE PAYMENTS CANNOT BE DISALLOWED UNDE R SECTION 40A(3) OF THE ACT. THE ADDITION IS DELETE D 12. THE APPEAL OF THE ASSESSEE IS ALLOWED. 14 C.O.NO.6/CHD/2014 (IN ITA NO. 1155/CHD/2013) : 13. IN THE CROSS OBJECTION FILED BY THE DEPARTMENT , THE GROUND NO.1 RELATES TO DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3) OF THE ACT A ND CONFIRMED BY THE LEARNED CIT (APPEALS). 14. SINCE THIS GROUND ONLY SUPPORTS THE ORDER OF T HE LEARNED CIT (APPEALS) AND THE FINDING IN THIS REGAR D HAS ALREADY BEEN GIVEN IN ITA NO.1155/CHD/2013, WE DO N OT FIND ANY NEED TO ADJUDICATE THE SAME. 15. THE GROUND NO.2 IS WITH REGARD TO AHATA INCOME OF RS.6,40,000/-. 16. THE BRIEF FACTS OF THE CASE ARE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTED THAT THE ASSESSEE HAS NOT SHOWN ANY AHATA INCOME. THE REPLY OF THE ASSESSEE WAS THAT IT HAS NOT DEPOSITED ANY A HATA FEE AND SINCE THERE WAS NO AHATA INCOME, IT WAS NOT SHO WN IN THE PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSEE. HE REFER RED TO THE CASE OF THE SISTER CONCERN OF THE ASSESSEE M/S MEHT A & CO., WHICH HAS SHOWN INCOME OF RS.84,000/- FROM AHATA. HE POINTED OUT THAT M/S MEHTA & CO. WAS OPERATING FOUR LIQUOR VENDS AND HAD A TURNOVER OF RS.437.49 LACS, WHILE T HE ASSESSEE WAS OPERATING 42 VENDS WITH A TURNOVER OF RS.2153.63 LACS. APPLYING THE RATIO OF TURNOVER, T HE 15 ASSESSING OFFICER ESTIMATED AN AMOUNT OF RS.6,40,00 0/- AS AHATA INCOME AND MADE ADDITION IN THE HANDS OF THE ASSESSEE. 17. BEFORE THE LEARNED CIT (APPEALS), IT WAS CONTE NDED THAT THE ASSESSEE HAD NOT DEPOSITED ANY AHATA FEE A ND HENCE, NOT RECEIVED ANY AHATA INCOME. IT WAS ALSO SUBMITT ED THAT AS PER THE EXCISE POLICY, AHATA ARE ONLY ON OPTIONAL B ASIS WITH SOME SPECIFIED CONDITIONS. THE PERMISSION FROM TH E EXCISE DEPARTMENT FOR THIS HAS TO BE TAKEN, WHICH THE ASSE SSEE HAS NOT TAKEN. IN THIS WAY, IT HAS CONTENDED THAT THE ASSESSING OFFICER ON THE BASIS OF WILD ESTIMATE HAS MADE THIS ADDITION. IN THE REMAND REPORT DATED 17.9.2013, THE ASSESSING OFFICER REITERATING HIS STAND SUBMITTED THAT THE ASSESSEE I S RUNNING LIQUOR BUSINESS, WHICH IS CONSUMED WITH SOME EATABL ES AND SNACKS WHICH ARE COVERED BY MEANS OF AHATA. SINCE SIMILAR VENDS ARE OPERATED BY THE SISTER CONCERNS, THERE HA S TO BE SOME AHATA INCOME OF THE ASSESSEE, WHICH IT HAD NOT SHOWN. THE ASSESSEE FILED A REJOINDER TO THE REMAND REPORT REITERATING THE SUBMISSIONS EARLIER MADE. ON THE BASIS OF THESE SUBMISSIONS, THE LEARNED CIT (APPEALS) DELETE D THE ADDITION MADE BY THE ASSESSING OFFICER. 18. THE LEARNED D.R. RELIED UPON THE ORDER OF THE ASSESSING OFFICER, WHILE THE LEARNED COUNSEL FOR TH E ASSESSEE RELIED UPON THE ORDER OF THE LEARNED CIT (APPEALS). 19. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF B OTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIE S BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. ON A READING OF 16 THE ORDER OF LEARNED CIT (APPEALS), WE SEE THAT ON THIS ISSUE, HE HAS GIVEN HIS FINDING AT PAGE 31 IN PARA 5.5 WHI CH READS AS UNDER : 5.5 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. ADDITION HAS BEEN MADE PURELY ON AN ADHOC AND ESTIMA TED BASIS WITHOUT ANY SPECIFIC EVIDENCE REGARDING THE APPELLANT HAVING EARNED ANY AHATA INCOME. IT IS A FACT ON RECORD, AS EXPLAINED BY THE APPELLANT, THAT APPELLANT HAD NOT DEPOSITED ANY LICENS E FEE FOR TAKING THE AHATAS, WHICH IS CHARGED SEPARATELY BY THE GOVERNMENT. IN THESE CIRCUMSTANCES, THE FINDING OF T HE AO THAT THE APPELLANT WAS HAVING AHATA INCOME IS WITHOUT ANY MER IT. THE ADDITION MADE BY THE AO IS THEREFORE DELETED. THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 20. ON READING OF THIS, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE LEARNED CIT (APPEALS) AS REGARDS A HATA INCOME. THE ASSESSING OFFICER NOWHERE IN HIS ASSES SMENT ORDER, NOR IN THE REMAND REPORT CONTROVERTED THE FA CT THAT FOR RUNNING AHATA ONE HAS TO TAKE LICENCE FROM THE EXCI SE AUTHORITY. NEITHER THE ASSESSING OFFICER HAS PLAC ED ON RECORD ANY MATERIAL TO SHOW THAT THE ASSESSEE HAS TAKEN TH IS LICENCE OR IN FACT, THE ASSESSEE IS RUNNING THE AHATA. IN THIS VIEW, MAKING ADDITION ON ACCOUNT OF AHATA INCOME ON ESTIM ATE BASIS THAT TOO, COMPARING THE CASE OF THE ASSESSEE WITH T HAT OF ANOTHER ASSESSEE IS NOT CORRECT. THE ACTION OF TH E LEARNED CIT (APPEALS) IN DELETING THE ADDITION IS FOUND TO BE AS PER LAW. THIS GROUND OF CROSS OBJECTION IS DISMISSED. 21. THE GROUND NO.3 OF THE CROSS OBJECTION IS WITH REGARD TO ADDITION OF RS.20 LACS MADE BY THE ASSESS ING OFFICER ON ACCOUNT OF SUPPRESSION OF SALES. 17 22. THE FACTS OF THE CASE ARE THAT THE ASSESSING O FFICER DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE RE WAS SIGNIFICANT VARIATION IN THE PROFIT MARGIN OVER PUR CHASES IN RESPECT OF VARIOUS VENDS. REJECTING THE REPLY OF THE ASSESSEE FILED IN THIS BEHALF, THE ASSESSING OFFICER HELD TH AT THERE WAS NOT JUST POSSIBILITY OF SUPPRESSION OF SALES BUT TH E SALES HAVE ACTUALLY BEEN SUPPRESSED. ACCORDINGLY, AN ADDITIO N OF RS.20 LACS ON AN ESTIMATED BASIS WAS MADE BY THE ASSESSIN G OFFICER. 23. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE SUBMITTED THAT THE BOOKS OF ACCOUNT HAVE BEEN MAINT AINED AND ARE DULY AUDITED BY THE CHARTERED ACCOUNTANT AN D NO DISCREPANCY HAS BEEN NOTICED BY THE ASSESSING OFFIC ER DURING THE COURSE OF VARIOUS HEARINGS AND BOOKS HAVE BEEN REJECTED JUST BECAUSE PROFIT MARGIN IN RESPECT OF CERTAIN VE NDS WERE LOWER THAN THE OTHER VENDS. THE ADDITION ON ESTIMA TED BASIS CANNOT BE MADE. REGARDING VARIATION OF SALES IN R ESPECT OF EACH VEND, IT WAS SUBMITTED THAT DUE TO GEOGRAPHICA L CONDITION OF VARIOUS VENDS AND ITS LOCATION, THIS V ARIATION CANNOT BE DOUBTED. AS REGARDS NON-MAINTENANCE OF SALE BILLS AND SALES IN CASH, IT WAS SUBMITTED THAT IT IS COMM ON PRACTICE IN THIS TRADE. IN THE ALTERNATIVE, IT WAS SUBMITT ED THAT IF THE ADDITION ON ACCOUNT OF SUPPRESSION OF SALES IS MAD E, NO ADDITION UNDER SECTION 40A(3) OF THE ACT CAN BE MAD E. IN THE REMAND REPORT, THE ASSESSING OFFICER REPEATED THE C ONTENTION RAISED BY HIM IN THE ASSESSMENT ORDER. IN THE REJ OINDER, THE ASSESSEE ALSO REITERATED ITS EARLIER SUBMISSIONS. AFTER 18 CONSIDERING ALL THESE, THE LEARNED CIT (APPEALS) DE LETED THE ADDITION MADE BY THE ASSESSING OFFICER. 24. THE LEARNED D.R. RELIED UPON THE ORDER OF THE ASSESSING OFFICER, WHILE THE LEARNED COUNSEL FOR TH E ASSESSEE RELIED UPON THE ORDER OF THE LEARNED CIT (APPEALS). 25. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF B OTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIE S BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE FINDINGS OF LEARNED CIT (APPEALS) IN THIS REGARD ARE APPEARING AT PAGE 35 IN PARA 6.5 OF HIS ORDER, WHICH READ AS UNDER : 6.5 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. THE ADDITION HAS BEEN MADE PURELY ON AN ADHOC BASIS BASE D ON CONJECTURES AND SURMISES. IT IS A MATTER OF BUSINESS PRACTICE IN THE TYPE OF TRADE WHICH THE APPELLANT IS INVOLVED IN, THA T THE SALES ARE MADE IN CASH AND NO RECORD OF SUCH SALES IN THE FORM OF S ALES BILL CAN BE MAINTAINED. FROM THE FACTS AND CIRCUMSTANCES EX PLAINED BY THE APPELLANT, IT IS SEEN THAT THE APPELLANT HAS SATISFACTOR ILY EXPLAINED THE VIDE VARIATION IN THE PROFIT MARGINS OF DIFFERE NT VENDS. IN THESE FACTS AND CIRCUMSTANCES, ADDITION MADE BY THE AO ON THIS GROUND IS DELETED. THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 26. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LE ARNED CIT (APPEALS) SINCE IT IS A COMMON FACT THAT IN LIQUOR BUSINESS, TRANSACTIONS ARE DONE THROUGH CASH. WE OBSERVE TH AT THE ASSESSING OFFICER HAS THOUGH PROPOSED TO REJECT THE BOOKS OF ACCOUNTS, BUT HAS NOT GIVEN ANY FINDING AS TO THE R EJECTION OF THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE HAS NOT B EEN ABLE TO PINPOINT ANY INSTANCE OF SUPPRESSION OF SALES AND O NLY ON THE BASIS OF SUSPICION, HE HAS MADE THE ADDITION, THAT TOO ON 19 ESTIMATED BASIS. THESE REASONS ARE NOT ENOUGH TO MAKE SUCH AN ADDITION. IN THIS VIEW, WE CONFIRM THE ORDER OF THE LEARNED CIT (APPEALS). THE GROUND OF CROSS OBJECTION RAIS ED BY THE REVENUE IS DISMISSED. 27. THE CROSS OBJECTION FILED BY THE REVENUE IS DISMISSED. ITA NO.1176/CHD/2013 : 28. SINCE ALL THE ISSUES RAISED BY THE DEPARTMENT IN THIS APPEAL ARE SAME AS RAISED IN CROSS OBJECTION NO.6/C HD/2014. THE APPEAL OF THE REVENUE BECOMES INFRUCTUOUS AS AL L THESE ISSUES HAVE ALREADY BEEN ADJUDICATED UPON UNDER THE CROSS OBJECTION NO.6/CHD/2014. 29. THE APPEAL OF THE REVENUE IS DISMISSED. 30. IN THE RESULT : I) THE APPEAL OF THE ASSESSEE IS ALLOWED. II) THE CROSS OBJECTION AND APPEAL FILED BY REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF OCTOBER, 2015. SD/- SD/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACOUNTANT MEMBER DATED : 9 TH OCTOBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 20