ITO, Ward - 2(2), Asansol , Asansol V. Naba Kumar Mandal, Burdwan

ITA 1273/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1506 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 31-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHARJEE
• Assessee Lawyers: U DASGUPTA
• Keywords: Income from undisclosed sources
• Section: 40A(3)

Judgement Text

1 ITA NO.1273/KOL/2017 NABA KUMAR MANDAL, AY 2008-09 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA () BEFORE .., /AND . ' # $% % , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1273/KOL/2017 ASSESSMENT YEAR: 2008-09 INCOME-TAX OFFICER, WD-2(2), ASANSOL VS. NABA KUMAR MANDAL (PAN: AFDPM2235B) APPELLANT RESPONDENT DATE OF HEARING 28.08.2017 DATE OF PRONOUNCEMENT 06.09.2017 FOR THE APPELLANT SHRI ARINDAM BHATTACHARJEE, ADDL. CIT FOR THE RESPONDENT SHRI U. DASGUPTA, ADVOCATE ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), DURGAPUR DATED 20.01.2017 FOR AY 2008-09. 2. THE SOLE ISSUE RAISED BY THE REVENUE AS TO WHETH ER THE LD. CIT(A) HAS JUSTIFIED BY HOLDING THAT THE CASH PAYMENTS TO M/S. ASANSOL BOTT LING & PACKAGING CO. LTD., ASANSOL IS NOT A VIOLATION OF SECTION 40A(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL WHO DEALS IN COUNTRY SPIRITS. DURING THE ASSESSMENT YEAR IN QUESTION, T HE ASSESSEE MADE PURCHASES FROM A SINGLE PARTY NAMELY ASANSOL BOTTLING & PACKAGING CO. PVT. LTD. AND PAYMENT WAS MADE IN CASH AMOUNTING TO RS.45,40,624/-. ACCORDING TO THE AO, THE ABOVE PAYMENT CANNOT BE ALLOWED AS DEDUCTION IN COMPUTING THE TOTAL INCOME OF THE A SSESSEE BECAUSE OF THE VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. ON APPEAL , THE LD. CIT(A) DELETED THE DISALLOWANCE AND ALLOWED THE ASSESSEES GROUND OF A PPEAL BY FOLLOWING THE DECISION IN 2 ITA NO.1273/KOL/2017 NABA KUMAR MANDAL, AY 2008-09 ASSESSEES OWN CASE IN ITA NO. 164/KOL/2014 FOR AY 2010-11 DATED 12.08.2016. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE H AS PREFERRED THIS APPEAL BEFORE US. 4. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE C OORDINATE BENCH DECISION IN ASSESSEES OWN CASE IN ITA NO. 164/KOL/2014 FOR AY 2010-11 DAT ED 12.08.2016. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHOR ITIES. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT DURING THE ASSESSMENT YEAR IN QU ESTION, THE ASSESSEE MADE PURCHASES FROM A SINGLE PARTY NAMELY ASANSOL BOTTLING & PACKAGING CO. PVT. LTD. AND PAYMENT WAS MADE IN CASH AMOUNTING TO RS.45,40,624/-. ACCORDING TO THE AO, THE ABOVE PAYMENT CANNOT BE ALLOWED AS DEDUCTION IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE BECAUSE OF THE VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. ON APPEAL, THE LD. CIT(A) DELETED THE DISALLOWANCE AND ALLOWED THE ASSESSEES GROUND OF A PPEAL BY FOLLOWING THE DECISION IN ASSESSEES OWN CASE IN ITA NO. 164/KOL/2014 FOR AY 2010-11 DATED 12.08.2016. WE FIND THAT THE IDENTICAL ISSUE WITH REGARD TO THE DISALLO WANCE U/S. 40A(3) OF THE ACT IN THE CASE OF ASSESSEE WHO ARE ENGAGED IN THE BUSINESS OF COUNTRY SPIRITS WHICH HAD COME UP FOR CONSIDERATION BEFORE THIS BENCH IN THE CASE OF RAMN AGAR PACHWAI & C.S. SHOP VS. ITO VIDE ITA NO. 148/KOL/2015 AND 185 & 186/KOL/2014 FOR AY 2007-08, 2008-09 AND 2010-11 RESPECTIVELY, WHEREIN THE TRIBUNAL HAS HELD AS UNDE R: 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESSEE COMP RISING OF VARIOUS ORDERS OF LOWER AUTHORITIES VIDE PAGES 1 TO 42 OF THE PAPER BOOK, C OPY OF NOTIFICATION NO. 1208-EX DATED 29.08.2005 ISSUED BY THE EXCISE DEPARTMENT, GOVERNM ENT OF WEST BENGAL VIDE PAGES 43 TO 49 OF PB AND COPIES OF VARIOUS DECISIONS OF HIGH COURT S AND TRIBUNALS VIDE PAGES 50 TO 102 OF PB. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF TH E WEST BENGAL EXCISE RULES 2005 AND THE BENGAL EXCISE ACT, 1909. THE FACTS STATED HEREINAB OVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITERATED FOR THE SAKE OF BREVITY. AT TH E OUTSET, WE DEEM IT NECESSARY TO INCORPORATE THE FOLLOWING CLAUSES FROM THE NOTIFICATION ISSUED BY THE EXCISE DEPARTMENT, GOVERNMENT OF WEST BENGAL , DATED 29.8.2005 FOR THE SAKE OF BETTE R 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 TH E RULES PUBLISHED WITH THIS DEPARTMENT NOTIFICATION NO. 122-EX/O/1R-1/2000 DATED 23.2.2000 , AS SUBSEQUENTLY AMENDED, THE GOVERNOR IS PLEASED HEREBY TO MAKE THE FOLLOWING RU LES REGULATING THE ISSUE AND REMOVAL OF COUNTRY SPIRIT ON PAYMENT OF DUTY IN LABELLED AND C APSULED BOTTLES FROM COUNTRY SPIRIT BOTTLING PLANTS AND IN BULK FROM WAREHOUSES BY THE LICENSED WHOLESALE VENDORS OF THE SAME FOR THE PURPOSE OF SELLING COUNTRY SPIRIT BY WHOLESALE: 3 ITA NO.1273/KOL/2017 NABA KUMAR MANDAL, AY 2008-09 RULES 1. SHORT TITLE AND COMMENCEMENT.(1) THESE RULES MAY B E 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 TH E AUTHORIZED REPRESENTATIVE OF LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT IN FORM II APPEN DED TO THESE RULES; (III) RETAIL VENDOR MEANS THE PERSON HOLDING LICENSE IN THE PRESCRIBED FORM FOR RETAIL VENDING OF COUNTRY SPIRIT, GRANTED BY THE COLLECTOR; 189; (IV) STATE GOVERNMENT MEANS THE GOVERNMENT OF WEST BEN GAL; (V) THE ACT MEANS THE BENGAL EXCISE ACT, 1909 (BEN. A CT V OF 1909); (VI) TRANSPORT PASS MEANS THE TRANSPORT PASS ISSUED IN FORM III APPENDED TO THESE RULES; (VII) WAREHOUSE MEANS THE WAREHOUSE FOR SUPPLY OF COUNT RY SPIRIT TO RETAIL VENDORS, ESTABLISHED AT CONVENIENT PLACES BY THE COMMISSIONER AT THE EXP ENSE OF THE STATE GOVERNMENT, OR AT THE EXPENSE OF A PERSON TO WHOM THE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLING COUNTRY SPIRIT BY WHOLESALE HAS BEEN GRANTED UNDER SECTION 22 OF THE ACT, OR OF A LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT; (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 ASSIGNED TO THEM IN THE ACT. 3. ISSUE ONLY ON PAYMENT OF DUTY.NO COUNTRY SPIRIT IN LABELLED AND CAPSULED BOTTLES SHALL BE ISSUED WITHOUT PAYMENT OF DUTY FROM A COUNTRY SPIRI T BOTTLING PLANT. NO COUNTRY SPIRIT IN BULK SHALL BE ISSUED WITHOUT PAYMENT OF DUTY FROM A COUN TRY SPIRIT WAREHOUSE. 4. PERSONAL LEDGER ACCOUNT TO BE MAINTAINED BY THE WHOLESALE LICENSEE.THE WHOLESALE LICENSEE SHALL MAINTAIN A PERSONAL LEDGER ACCOUNT I N ACCORDANCE WITH THE DIRECTION ISSUED BY THE COMMISSIONER FROM TIME TO TIME FOR THE PURPOSE OF MAINTAINING AN ACCOUNTCURRENT OF THE DUTIES PAYABLE BY THE WHOLESALE LICENSEE FOR THE IS SUES 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 BALANCE IN THE A FORESAID PERSONAL LEDGER ACCOUNTS IN ORDER TO ENSURE THAT DUTY FOR DAILY ISSUES OF COUNT RY SPIRIT FROM THE COUNTRY SPIRIT BOTTLING PLANT OR WAREHOUSE MAY BE DEBITED FROM THE SAID ACCOUNT, LEAVING SUFFICIENT BALANCE 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 OF THE WHOLESALE LICENSEE, THROUGH EXCISE OFFICER-IN-CHARGE OF THE WAREHOUSE, A DEMAND FOR ISSUE OF COUNTRY SPI RIT IN FORM I APPENDED TO THESE RULES IN DUPLICATE. THE DUPLICATE COPY SHALL BE KEPT IN THE CUSTODY OF THE EXCISE OFFICER-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 WAREH OUSE CONCERNED. DUTY, COST PRICE, BOTTLING CHARGE, IF THERE BE ANY, AT THE PRESCRIBED RATE AND OTHER IMPOSITION, AS MAY BE PRESCRIBED BY LAW, SHALL BE PAID BY THE RETAIL VENDOR TO THE CRED IT OF THE WHOLESALE LICENSEE CONCERNED. (3) THE AUTHORIZED REPRESENTATIVE OF THE WHOLESALE LICENSEE SHALL REALIZE THE NECESSARY AMOUNT OF DUTY, COST PRICE AND BOTTLING CHARGE, IF THERE B E ANY, AT THE PRESCRIBED RATE AND SUCH OTHER IMPOSITION, AS MAY BE PRESCRIBED BY LAW, FROM THE R ETAIL VENDOR TO WHOM COUNTRY SPIRIT IS TO BE 4 ITA NO.1273/KOL/2017 NABA KUMAR MANDAL, AY 2008-09 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 SEPARATELY FOR EACH OF THE RETAIL VENDORS TO WHOM COUNTRY SPIRIT IS TO BE ISSUED ON THE DAY. (4) ON RECEIPT OF THE REQUISITION IN FORM II, THE EXCISE OFFICER-IN-CHARGE OF THE WAREHOUSE SHALL ALLOW ISSUE OF COUNTRY SPIRIT FROM THE WAREHO USE. DUPLICATE COPY OF THE REQUISITION SHALL BE RETURNED TO THE AUTHORIZED REPRESENTATIVE OF THE WHOLESALE LICENSEE AFTER THE ISSUE HAS BEEN MADE. (5) THE EXCISE OFFICER-IN-CHARGE OF THE WAREHOUSE SHALL 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 SUPPLIERS OF COUNTRY SPIRIT IN LABELLED AND CAPSULED BOTTLES SHALL ALLOW A REBATE OF FIVE PAISE PER BOTTLE IRRESPECTIV E OF MEASURE FROM THE BOTTLING CHARGE TO THE RETAIL COUNTRY SPIRIT LICENSEES WHOSE LICENSED PREM ISES ARE LOCATED AT A DISTANCE OF 50 KILOMETRES OR MORE BY THE SHORTEST ROUTE FROM THE I SSUING WAREHOUSE ON THE BASIS OF A CERTIFICATE TO BE ISSUED BY THE COLLECTOR IN RESPEC T 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 AMOU NT GRANTED AS REBATE. THE OFFICER-IN-CHARGE SHALL, ON RECEIPT OF THE BILL , REFUND THE AMOUNT CLAIMED AFTER VERIFYING HIS RECORDS THROUGH ADJUSTMENT IN THE PERSONAL LEDG ER ACCOUNT MAINTAINED FOR THE PURPOSE OF PRIVILEGE FEE. IN CASE THERE IS NO PERSONAL LEDGER ACCOUNT FOR PRIVILEGE FEE AT THE WAREHOUSE, THE OFFICER-IN-CHARGE SHALL SEND A COPY OF THE CLAI M WITH HIS COMMENTS TO THE OFFICER-IN- CHARGE OF THE SUPPLIER BOTTLING PLANT, WHO SHALL RE FUND THE AMOUNT RECOMMENDED TO THE WHOLESALER THROUGH ADJUSTMENT IN THE PERSONAL LEDGE R ACCOUNT MAINTAINED FOR PRIVILEGE FEE. 14. WE FIND THAT THE RELIANCE PLACED ON THE DECIS ION OF CO-ORDINATE BENCH OF BANGALORE TRIBUNAL IN THE CASE OF SRI RENUKESWARA RICE MILLS VS ITO REPORTED IN 93 ITD 263 (BANG TRIB.) IS WELL FOUNDED , WHEREIN, IT WAS HELD THAT THE C ASH PAYMENT IN THE BANK ACCOUNT OF THE PAYEE IS SUFFICIENT TO GET EXEMPTION IN TERMS OF R ULE 6DD IN AS MUCH IT IS ENSURED THAT THE PAYEE AND PAYEE ALONE RECEIVES THE PAYMENT AND THE ORIGIN AND CONCLUSION OF THE TRANSACTION IS TRACEABLE THEREBY FULFILLING THE CRITERION FOR E NSURING THE OBJECT OF INTRODUCTION OF SECTION 40A(3) OF THE ACT. 15. WE FIND THAT THE FOLLOWING FACTS ARE UNDISPUT ED AND INDISPUTABLE:- (A) THE TRANSACTIONS MADE BY THE ASSESSEE IS GENUI NE. (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 APPLICABLE TO THE FACTS OF THE INSTANT CASE. IT IS OBSERVED THAT THE ASSESSEE HAD TAKEN ENOUGH PRECAUTIONS FROM ITS SIDE TO ENSURE THAT THE PAYEE ALSO DONT ESCAPE FROM THE AMBIT OF TAXATION ON THESE RE CEIPTS BY DIRECTLY DEPOSITING THE CASH IN THE BANK ACCOUNT OF THE PAYEE. MOREOVER, THE REGULATIO NS OF THE WEST BENGAL GOVERNMENT PURSUANT TO NOTIFICATION FROM ITS EXCISE DEPARTMENT DATED 29.8.2005 ALSO MANDATES THE PAYMENT TO BE MADE BY WAY OF DIRECT DEPOSIT INTO TH E BANK ACCOUNT OF THE WHOLESALE LICENSEE. THIS FACT IS ALSO NOT DISPUTED BY THE REVENUE. 5 ITA NO.1273/KOL/2017 NABA KUMAR MANDAL, AY 2008-09 16. IT WILL BE PERTINENT TO GO INTO THE INTENTION BEHIND INTRODUCTION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AT THIS JUNCTURE. WE FIND THAT T HE SAID PROVISION WAS INSERTED BY FINANCE ACT 1968 WITH THE OBJECT OF CURBING EXPENDITURE IN CASH AND TO COUNTER TAX EVASION. THE CBDT CIRCULAR NO. 6P DATED 6.7.1968 REITERATES THIS VIEW THAT THIS PROVISION IS DESIGNED TO COUNTER EVASION OF A TAX THROUGH CLAIMS FOR EXPENDITURE SHO WN TO HAVE BEEN INCURRED IN CASH WITH A VIEW TO FRUSTRATING PROPER INVESTIGATION BY THE DEP ARTMENT AS TO THE IDENTITY OF THE PAYEE AND REASONABLENESS OF THE PAYMENT. 17. IN THIS REGARD, IT IS PERTINENT TO GET INTO T HE 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 AFTER THE 1987 AMENDMENT) WOULD BE ALLOWED TO BE DEDUCTED ONLY IF MADE BY A CROSSED CHEQUE OR CROSSED BANK DRAFT (EXC EPT IN SPECIFIED CASES) IS NOT ARBITRARY AND DOES NOT AMOUNT TO A RESTRICTION ON THE FUNDAME NTAL 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 ACTIVITIES. THERE IS NO RESTRICTION ON THE ASSESSEE IN HIS TRADING ACTIVITIES. SECTION 40A(3) ONLY EMPOWERS TH E ASSESSING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RESPECT OF WHIC H PAYMENT IS NOT MADE BY CROSSED-CHEQUE OR CROSSED-BANK DRAFT. THE PAYMENT BY CROSSED-CHEQU E OR CROSSED BANK-DRAFT IS INSISTED UPON TO ENABLE THE ASSESSING AUTHORITY TO ASCERTAIN WHET HER THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF INCOME FROM UNDISCLOSED SOURCES. THE TER MS OF SECTION 40A(3) ARE NOT ABSOLUTE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELE VANT 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 ASSE SSING OFFICER THE 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. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECEIVED THE CASH PAYMENT. RULE 6DD PROVIDES TH AT AN ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED-CHEQUE OR CROSS ED-BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF SECTION 40A(3) AND RULE 6DD THAT THEY ARE INTENDED TO REGULATE BUSINESS TRANSAC TIONS AND TO PREVENT THE USE OF UNACCOUNTED 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 GO ODS 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 BUSINESS EXPEDIENCY, OBLIGATION AND EXIGENCY, THE ASSESSEE HAD TO MAKE CASH PAYMENT FOR PURCHASE OF GOODS SO ESSENTIA L FOR CARRYING ON OF HIS BUSINESS, WAS ALSO NOT DISPUTED BY THE AO. THE GENUINITY OF TRAN SACTIONS, RATE OF GROSS PROFIT OR THE FACT THAT THE BONAFIDE OF THE ASSESSEE THAT PAYMENTS 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 RS. 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 PROVISIONS TO SECTION 40 A(3) FOR RS.78,45,580/- AND DISALLOWED @ 20% THEREON RS.15,69,116/-. IT IS ALSO MADE CLEAR T HAT WITHOUT THE PAYMENT BEING MADE BY BEARER CHEQUE THESE GOODS COULD NOT HAVE BEEN PROCU RED AND IT WOULD HAVE HAMPERED THE 6 ITA NO.1273/KOL/2017 NABA KUMAR MANDAL, AY 2008-09 SUPPLY OF GOODS WITHIN THE STIPULATED TIME. THEREFO RE, THE GENUINENESS OF THE PURCHASE HAS BEEN ACCEPTED BY THE ID. CIT (APPEAL) WHICH HAS ALS O NOT BEEN DISPUTED BY THE DEPARTMENT AS IT APPEARS FROM THE ORDER SO PASSED BY THE LEARNED TRIBUNAL. IT FURTHER APPEARS FROM THE ASSESSMENT ORDER THAT NEITHER THE ASSESSING OFFICER NOR THE CIT (APPEAL) HAS DISBELIEVED THE GENUINENESS OF THE TRANSACTION. THERE WAS NO DISPUT E THAT THE PURCHASES WERE GENUINE.' ANUPAM TELE SERVICES VS ITO IN (2014) 43 TAXMANN.CO M 199 (GUJ) SECTION 40A(3) OF THE INCOME-TAX ACT, 1961, READ W ITH RULE 6DD OF THE INCOME-TAX RULES, 1962 - BUSINESS DISALLOWANCE - CASH PAYMENT EXCEEDI NG PRESCRIBED LIMITS RULE 6DD(J) ASSESSMENT YEAR 2006-07 - ASSESSEE WAS WORKING AS A N AGENT OF TATA TELE SERVICES LIMITED FOR DISTRIBUTING MOBILE CARDS AND RECHARGE VOUCHERS - PRINCIPAL COMPANY TATA INSISTED THAT CHEQUE PAYMENT FROM ASSESSEE'S CO-OPERATIVE BANK W OULD NOT DO, SINCE REALIZATION TOOK LONGER TIME AND SUCH PAYMENTS SHOULD BE MADE ONLY I N CASH IN THEIR BANK ACCOUNT - IF ASSESSEE WOULD NOT MAKE CASH PAYMENT AND MAKE CHEQUE PAYMENT S ALONE, IT WOULD HAVE RECEIVED RECHARGE VOUCHERS DELAYED BY 4/5 DAYS WHICH WOULD S EVERELY AFFECT ITS BUSINESS OPERATION - ASSESSEE, THEREFORE, MADE CASH PAYMENT - WHETHER IN VIEW OF ABOVE, NO DISALLOWANCE UNDER SECTION 40A (3) WAS TO BE MADE IN RESPECT OF PAYMEN T 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 EXCEEDIN G PRESCRIBED LIMIT (RULE 6DD) - ASSESSEE MADE CERTAIN PAYMENT OF PURCHASE OF GROUND NUT IN CASH EXCEEDING PRESCRIBED LIMIT - ASSESSEE SUBMITTED THAT HE MADE PAYMENT IN CASH BEC AUSE SELLER INSISTED ON THAT AND ALSO GAVE INCENTIVES AND DISCOUNTS - FURTHER, SELLER ALSO ISS UED CERTIFICATE IN SUPPORT OF THIS - WHETHER SINCE ASSESSEE HAD PLACED PROOF OF PAYMENT OF CONSI DERATION FOR ITS TRANSACTION TO SELLER, AND LATER ADMITTED PAYMENT AND THERE WAS NO DOUBT ABOUT GENUINENESS OF PAYMENT, NO DISALLOWANCE COULD BE MADE UNDER SECTION 40A(3) - H ELD, 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 TRIBU NAL IN NOT APPLYING SECTION 40A(3) OF THE ACT TO THE CASH PAYMENTS WHEN ULTIMATELY, SUCH AMOUNTS WERE DEPOSITED 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 ARGUE D 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 PURPOSIVE CO NSTRUCTION SHOULD BE RESORTED TO WHILE APPLYING THE PROVISIONS OF THE ACT. HENCE IT WOULD BE MORE RELEVANT TO GET INTO THE INTENTION OF THE LEGISLATURE. IN OUR OPINION, THE PRIMARY OBJE CT OF ENACTING SECTION 40A(3) WAS TWO-FOLD, FIRSTLY, PUTTING A CHECK ON TRADING TRANSACTIONS W ITH A MIND TO EVADE THE LIABILITY TO TAX ON INCOME EARNED OUT OF SUCH TRANSACTION AND, SECONDLY , TO INCULCATE THE BANKING HABITS AMONGST THE BUSINESS COMMUNITY. APPARENTLY, THIS PROVISION WAS DIRECTLY RELATED TO CURB THE EVASION OF TAX AND INCULCATING THE BANKING HABITS. THEREFORE, THE CONSEQUENCE, 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 TRANSACTIONS IT B EING FREE FROM VICE OF ANY DEVICE OF EVASION OF TAX IS RELEVANT CONSIDERATION. IN THE INSTANT C ASE, THE CASH HAS BEEN DEPOSITED DIRECTLY IN THE BANK ACCOUNT OF THE SUPPLIER I.E M/S ASANSOL BOTTLI NG & PACKAGING CO. PVT LTD BY THE ASSESSEE. 19. WE FIND THAT THE HONBLE APEX COURT IN THE CASE OF CTO VS SWASTIK RO ADWAYS REPORTED IN (2004) 3 SCC 640 HAD HELD THAT THE CONSEQUENCES OF NON-COMPLIANCE O F 7 ITA NO.1273/KOL/2017 NABA KUMAR MANDAL, AY 2008-09 MADHYAPRADESH SALES TAX ACT , WHICH WERE INTENDED T O CHECK THE EVASION AND AVOIDANCE OF SALES TAX WERE SIGNIFICANTLY HARSH. THE COURT WHIL E UPHOLDING THE CONSTITUTIONAL VALIDITY NEGATED THE EXISTENCE OF A MENS REA AS A CONDITION NECESSARY FOR LEVY OF PENALTY FOR NON- COMPLIANCE WITH SUCH TECHNICAL PROVISIONS REQUIRED HELD THAT IN THE CONSEQUENCE TO FOLLOW THERE MUST BE NEXUS BETWEEN THE CONSEQUENCE THAT BE FALL FOR NON-COMPLIANCE WITH SUCH PROVISIONS INTENDED FOR PREVENTING THE TAX EVASION WITH THE OBJECT OF PROVISION 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 THE COMMIS SIONER IS IMPLICIT IN SECTION 57(2) AND THE ASSESSING AUTHORITY CONCERNED HAS TO NECESSARILY RE CORD A FINDING TO THIS EFFECT BEFORE LEVYING PENALTY U/S 57(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 W AS OF AS TECHNICAL NATURE AS WAS IN THE CASE OF SWASTIK ROADWAYS (3 SCC 640) AND THE CONSEQ UENCE TO FALL FOR FAILURE TO OBSERVE SUCH NORMS IN THE PRESENT CASE ARE MUCH HIGHER THAN WHIC H 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 P ROVISIONS OF SECTION 40A(3) IN THE LIGHT OF RULE 6DD AS CLARIFIED BY THE CIRCULAR OF THE CBDT T HAT WHETHER 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 TO INVITE SUC H A CONSEQUENCE. WE HOLD THAT THE PURPOSE OF SECTION 40A(3) IS ONLY PREVENTIVE AND TO CHECK E VASION OF TAX AND FLOW OF UNACCOUNTED MONEY OR TO CHECK TRANSACTIONS WHICH ARE NOT GENUIN E AND MAY BE PUT AS CAMOUFLAGE TO EVADE TAX BY SHOWING FICTITIOUS OR FALSE TRANSACTIONS. ADMITTEDLY, THIS IS NOT THE CASE IN THE FACTS OF THE ASSESSEE HEREIN. THE ASSESSEE HAD DIRECTLY DEP OSITED CASH IN THE BANK ACCOUNT OF THE SUPPLIER M/S ASANSOL BOTTLING & PACKAGING CO. PVT L TD WHICH FACT IS ALSO ACCEPTED BY THE LD AO AND MANDATED BY THE NOTIFICATION DATED 29.8.2005 ISSUED BY THE EXCISE DEPARTMENT , GOVERNMENT OF WEST BENGAL. IT IS ALSO PERTINENT T O NOTE THAT THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SMT.HARSHILA CHORDIA VS ITO RE PORTED IN (2008) 298 ITR 349 (RAJ) HAD HELD THAT THE EXCEPTIONS CONTAINED IN RULE 6DD OF I NCOME TAX RULES ARE NOT EXHAUSTIVE AND THAT THE SAID RULE MUST BE INTERPRETED LIBERALLY. 20. WE ALSO FIND THAT THE IMPUGNED ISSUE IS ALSO COVERED 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'BLE KERALA HIGH CO URT 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 U NDER THE RULES FRAMED BY THE GOVERNMENT AND SUCH PAYMENT WAS REQUIRED TO BE MADE IN LEGAL T ENDER. A PERUSAL OF THE GOVERNMENT NOTIFICATION ISSUED BY THE GOVT. OF WEST BENGAL CLE ARLY SHOWS THAT THE DEALERS ARE AGENTS OF THE GOVERNMENT AND THE PAYMENTS MADE ARE TO THE GOV ERNMENT. IT ALSO MAKES IT CATEGORICALLY REQUIRED THAT THE PAYMENT IS TO BE MADE BEFORE LIFT ING OF THE COUNTRY SPIRIT. CONSEQUENTLY 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 :- '6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E OUTSET A PERUSAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE AO HAS RECOGNIZED THE ASSESS EE'S BUSINESS IN TRADING OF COUNTRY SPIRIT AND COUNTRY LIQUOR. COPY OF FORM OF LICENCE ISSUED BY DURGAPUR MUNICIPAL CORPORATION AND COPY OF FORM III ISSUED BY DEPARTMENT OF EXCISE, GO VT. OF W.B. WERE ALSO FOUND AT PAGES 177 AND 179 OF THE ASSESSEE'S PAPER BOOK. IN ANY CASE T HE VALIDITY OF LICENCE OF THE ASSESSEE TO TRADE IN COUNTRY SPIRIT AND COUNTRY LIQUOR IS NOT T HE ISSUE BEFORE US. THE ISSUE IS WHETHER THE PAYMENTS MADE BY THE ASSESSEE FOR THE PURCHASE OF C OUNTRY SPIRIT FROM THE TERRITORIAL LICENSEE BOTTLING PLANT, IFB AGRO INDUSTRIES LTD., CITY CENT RE, DURGAPUR FALLS WITHIN THE EXEMPTION 8 ITA NO.1273/KOL/2017 NABA KUMAR MANDAL, AY 2008-09 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 20 TH SEPT 2005 SHOWS THAT THE GOVERNMENT OF WEST BENGA L, DEPARTMENT OF EXCISE HAS ISSUED A NOTIFICATION, WHEREIN THE WAREH OUSE HAS BEEN IDENTIFIED TO MEAN THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO THE RETAI L VENDORS, ESTABLISHED AT CONVENIENT PLACES BY THE COMMISSIONER AT THE EXPENSE OF THE STATE GOV ERNMENT, OR AT THE EXPENSE OF A PERSON TO WHOM THE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLIN G COUNTRY SPIRIT BY WHOLESALE HAS BEEN GRANTED U/S 22 OF THE ACT OF A LICENSED WHOLESALE V ENDOR OF COUNTRY SPIRIT. FURTHER, IT HAS BEEN SPECIFICALLY IDENTIFIED THAT THE AUTHORISED REPRESE NTATIVE OF THE WHOLESALE LICENSEE SHALL REALIZE THE NECESSARY AMOUNT OF DUTY, COST PRICE AND BOTTLI NG CHARGE, IF THERE BE ANY, AT THE PRESCRIBED RATE AND SUCH OTHER IMPOSITION, AS MAY BE PRESCRIBE D BY LAW, FROM THE RETAIL VENDOR TO WHOM THE COUNTRY SPIRIT IS TO BE ISSUED FROM THE CONCER NED WAREHOUSE. IT IS ALSO SPECIFICALLY MENTIONED IN SECTION (2) OF THE SAID NOTIFICATION T HAT NO RETAIL VENDOR OF COUNTRY SPIRIT SHALL DEPOSIT DUTY DIRECT INTO THE LOCAL TREASURY FOR ISS UE OF COUNTRY SPIRIT TO BE TAKEN BY HIM FROM THE WAREHOUSE CONCERNED WHICH CLEARLY SHOWS THAT TH E WAREHOUSE IS FOR THE SUPPLY OF THE COUNTRY LIQUOR, SPECIFICALLY, THE WAREHOUSE IS UNDE R THE DIRECT CONTROL AND CUSTODY OF THE STATE GOVT. THE STATE GOVERNMENT HAS CLOSED ITS DOORS IN SO FAR AS THE LOCAL TREASURY IS CONCERNED AND THE PAYMENT FOR THE PURCHASE OF COUNTRY SPIRIT OR COUNTRY LIQUOR HAS TO BE MADE TO THE WAREHOUSE, RUN BY THE GOVERNMENT. THIS SHOWS THAT A NY 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 ACCEPTED THEN THE PROVISI ONS OF RULE 6DD(B) OF THE I.T RULES, 1962 WHICH CLEARLY SPELLS OUT THAT THE PAYMENT MADE TO T HE GOVERNMENT IN LEGAL TENDER UNDER THE RULES FRAMED BY THE GOVERNMENT, IS EXEMPTED FROM TH E RIGOURS OF SECTION 40A(3) OF THE ACT. HERE, IT IS NOTICED THAT THE PAYMENTS MADE BY THE A SSESSEE FOR PURCHASE OF COUNTRY SPIRIT AND COUNTRY LIQUOR IS TO THE GOVERNMENT AS PER THE NOTI FICATION ISSUED BY THE GOVERNMENT AND IS IN LEGAL TENDER SPECIFIED BY THE NOTIFICATION. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE PAYMENT MADE BY THE ASSESSEE FOR THE PURCHASE OF CO UNTRY LIQUOR AND COUNTRY SPIRIT FROM THE TERRITORIAL LICENSEE BOTTLING PLANT, IFB AGRO INDUS TRIES 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 A S CONFIRMED BY THE ID. CIT(A) BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE I. T.ACT 19 61 STANDS DELETED. 8. IN THE RESULT THE ADDITION AS CONFIRMED BY THE I D. CIT(A) STANDS DELETED. WE FIND THAT THIS DECISION WAS RENDERED BY PLACING RELIANCE ON ITS EARLIER DECISION IN THE CASE OF M/S AMRAI PACHWAI & C.S.SHOP IN ITA NO. 1251/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 HONBLE KERALA HIG H COURT IN THE CASE OF CIT VS K ABDU & CO (170 TAXMAN 297). WE FIND THAT THE CO-ORDIN ATE BENCH DECISION IN THE CASE OF M/S AMRAI PACHWAI & C.S.SHOP IN ITA NO. 1251/KOL/2011 D ATED 15.1.2014 AND THE HELD PORTION IS REPRODUCED HEREINABOVE. 21. WE FIND THAT M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD IS A BOTTLING PLANT CUM WAREHOUSE UNDER RULE 2(VII) OF THE WEST BENGAL EXCI SE RULES 2005 WITH PRIVILEGE GRANTED U/S 22 OF THE BENGAL EXCISE ACT, 1909. AT THIS JUNCTUR E, 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 R ULES 2005 , MEANS THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VENDORS, ESTABLI SHED AT CONVENIENT PLACES BY THE COMMISSIONER AT THE EXPENSE OF THE STATE GOVERNMENT , OR AT THE EXPENSE OF A PERSON TO WHOM THE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLING COU NTRY SPIRIT BY WHOLESALE HAS BEEN GRANTED UNDER SECTION 22 OF THE ACT, OR OF A LICENSED WHOLE SALE VENDOR OF COUNTRY SPIRIT. THE ABOVE DEFINITION MAKES IT CLEAR THAT THE WAREH OUSE REFERRED TO UNDER THE STATE EXCISE RULES IS UNDER THE DIRECT CONTROL AND AUTHORITY OF THE COMMISSIONER OF STATE EXCISE BECAUSE IT 9 ITA NO.1273/KOL/2017 NABA KUMAR MANDAL, AY 2008-09 IS ESTABLISHED BY THE COMMISSIONER OF STATE EXCISE AND AS SUCH IS A STATE GOVERNMENT ESTABLISHMENT. IT IS ALSO PERTINENT TO NOTE THAT T HE EXPENDITURE IN RELATION TO SUCH WAREHOUSE IS BORNE BY THE STATE GOVERNMENT OR BY THE LICENSEE TO WHOM THE EXCLUSIVE PRIVILEGE IS GRANTED U/S 22 OF THE BENGAL EXCISE ACT, 1909. HENCE THERE COULD BE NO DOUBT THAT THE WAREHOUSE IS ESTABLISHED BY THE STATE EXCISE COMMISSIONER. HENC E IT COULD BE SAFELY CONCLUDED THAT THE WAREHOUSE SO ESTABLISHED BY THE STATE EXCISE COMMIS SIONER IS A STATE GOVERNMENT ESTABLISHMENT. IT WOULD ALSO BE PERTINENT TO NOTE THAT THE SAID WAREHOUSE HAS BEEN SPECIFICALLY ESTABLISHED FOR SUPPLY OF COUNTRY SPIR IT 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 WHOL ESALE VENDOR OF COUNTRY SPIRIT TO WHOM LICENCE HAS BEEN GRANTED IN WEST BENGAL 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 MANUFA CTURE AND SALE OF COUNTRY LIQUOR OR INTOXICATING DRUGS (1) THE STATE GOVERNMENT MAY GRANT TO ANY PERSON, ON SU CH 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, OR (C) OF SELLING, BY WHOLESALE OR RETAIL, OR (D) OF MANUFACTURING OR SUPPLYING BY WHOLESALE AND SELL ING RETAIL, OR (E) OF MANUFACTURING AND SUPPLYING BY WHOLESALE AND SEL LING RETAIL, ANY COUNTRY LIQUOR OR INTOXICATING DRUG WITHIN ANY SPECIFIED 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 PRIVILEGE IS GRAN TED. (2) NO GRANTEE OF ANY PRIVILEGE UNDER SUB-SECTION ( 1) SHALL EXERCISE THE SAME UNLESS OR UNTIL HE HAS RECEIVED A LICENSE IN THAT BEHALF FROM THE COLL ECTOR 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) OF THE EXCISE RULES 2005 AND SAID WAREHOUSE IS A STATE GOVERNMENT ESTABLISHMENT, ESTABLISHED AND CONTROLLED BY THE EXCISE COMMISSIONER . IT WOULD BE RELEVANT TO REPRODUCE RU LE 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) HAD MADE CASH PAYMENTS FOR PURCHASE OF COUNTRY SPIRIT BY DEPOSITING CASH DIRECTLY INTO THE BANK ACCOUNT OF M/S ABPL AS PER RULE 6(2) OF THE EXCISE RULES 2005 , IT HAS TO BE CONSTRUED A S PAYMENT MADE TO THE STATE GOVERNMENT AUTHORITY AND ACCORDINGLY FALLS UNDER THE EXCEPTION PROVIDED IN RULE 6DD(B) OF THE IT RULES. 22. IT IS NOT IN DISPUTE THAT M/S ASANSOL BOTTLIN G & PACKAGING CO. PVT LTD HAVE BEEN GRANTED LICENCE TO ACT AS A WHOLESALER FOR SUPPLY OF COUNTR Y LIQUOR TO THE RETAIL VENDOR AS PER THE REGULATIONS OF THE EXCISE DEPARTMENT , GOVERNMENT O F WEST BENGAL. AT THE COST OF REPETITION, 10 ITA NO.1273/KOL/2017 NABA KUMAR MANDAL, AY 2008-09 WE WOULD LIKE TO STATE THAT THE SAID REGULATION MAN DATED 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 LIQU OR AND FOR PREVENTION OF SPURIOUS STOCKS AND BLACK MARKETING TRANSACTIONS FROM THE SAME. HENCE IT COULD BE SAFELY CONCLUDED THAT THE SAID WHOLESALE LICENSEE HAD ACTED AT THE INSTANCE OF THE STATE GOVERNMENT. ONCE THIS IS SO, THEN THE SAID WHOLESALE LICENSEE COULD BE CONSTRUED AS A N AGENT OF 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 PERS ON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON. THE PAYMENT MADE BY THE ASSESSEE RETAIL VENDOR TO T HE PRINCIPAL, GOVERNMENT OF WEST BENGAL THROUGH ITS WHOLESALE AGENT. THE RELATIONSHIP BETW EEN THE ASSESSEE (AUTHORIZED RETAILER) AND GOVERNMENT OF WEST BENGAL (THE SUPPLIER) ACTING UND ER WEST BENGAL EXCISE RULES THROUGH ITS AUTHORISED WHOLESALER LICENSEE (AGENT), BOTH DE FAC TO AND DEJURE , IS ONE OF PRINCIPAL AND AGENT. WE HOLD THAT THE ASSESSEE RETAIL VENDOR HAD MADE PAYMENT TO THE SAID AGENT (WHOLESALE LICENSEE) WOULD FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD(K) OF THE RULES. 23. THE LD AR HAD ADVANCED ANOTHER ARGUMENT THAT THE PAYMENT IS MADE BY THE ASSESSEE TO STATE BANK OF INDIA AND ACCORDINGLY THE SAME WOU LD FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD(A) OF THE RULES. WE FIND THAT THE ASSESS EE HAD MADE PAYMENTS ONLY TO THE CUSTOMER OF STATE BANK OF INDIA AND NOT TO STATE BANK OF IND IA. HENCE THE ASSESSEES CASE DOES NOT FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD(A) OF THE RULES. 24. WE HOLD FROM THE AFORESAID FINDINGS THAT THE ASSESSEES CASE FALLS UNDER THE EXCEPTIONS PROVIDED IN RULE 6DD(B) AND RULE 6DD(K) OF THE RULES. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES AND RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE HAVE NO HESITATION IN DELETING THE DISALLOWANCE MADE U/S 40A(3) OF THE ACT IN ALL THE YEARS UNDER APPEAL. ACCORDINGLY, THE GROUND S RAISED BY THE ASSESSEE FOR ALL THE YEARS UNDER APPEAL ARE ALLOWED. 6. AS THE ISSUE INVOLVED IN THE PRESENT APPEAL AS W ELL AS THE MATERIAL FACTS ARE SIMILAR TO THE CASE CITED SUPRA AND IN VIEW OF NO C ONTROVERTING MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE, WE RESPECTFULLY F OLLOWING THE DECISION OF THE TRIBUNAL CITED SUPRA DELETE THE DISALLOWANCE MADE B Y THE AO U/S. 40A(3) OF THE ACT AND UPHOLD THE ACTION OF THE LD. CIT(A). APPEAL OF REVENUE IS DISMISSED. 7. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 06.09.2017 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 6TH SEPTEMBER, 2017 JD.(SR.P.S.) 11 ITA NO.1273/KOL/2017 NABA KUMAR MANDAL, AY 2008-09 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ITO, WD-2(2), ASANSOL 2 RESPONDENT SHRI NABA KUMAR MANDAL, PROP. SANCTORI A (S) C.S. SHOP . VILL & POST SANCTORIA, DIST. BURDWAN. 3 . THE CIT(A), DURGAPUR 4. 5. CIT , DURGAPUR DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY