Santosh Manikchand Raisoni, Pune V. Income-tax Officer,

ITA 1468/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1920 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 21-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASEEM SHARMA
• Keywords: Income from undisclosed sources
• Section: 40A(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , ! , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1466/PN/2014 #& & / ASSESSMENT YEAR : 2009-10 SHRI SANJAY MANIKCHAND RAISONI, A-301, SHRI SHANTINAGAR SOCIETY, S.NO.63/1/3, KONDHWA, PUNE 411037 PAN NO.AASPR4766Q . / APPELLANT V/S ITO, WARD-2(1), PUNE . / RESPONDENT . / ITA NO.1467/PN/2014 #& & / ASSESSMENT YEAR : 2009-10 SMT. SAPNA SANJAY RAISONI, A-301, SHRI SHANTINAGAR SOCIETY, S.NO.63/1/3, KONDHWA, PUNE 411037 PAN NO.ACDPR0459D . / APPELLANT V/S ITO, WARD-2(1), PUNE . / RESPONDENT . / ITA NO.1468/PN/2014 #& & / ASSESSMENT YEAR : 2009-10 SHRI SANTOSH MANIKCHAND RAISONI, A-301, SHRI SHANTINAGAR SOCIETY, S.NO.63/1/3, KONDHWA, PUNE 411037 PAN NO.AASPR4767R . / APPELLANT V/S ITO, WARD-2(1), PUNE . / RESPONDENT 2 ITA NOS.1466 TO 1469PN/2014 . / ITA NO.1469/PN/2014 #& & / ASSESSMENT YEAR : 2009-10 SHRI MANIKCHAND GANESHMAL RAISONI, FLAT NO.2, GREENLEAF APARTMENT, BEHIND TRENDZ FURNITURE, LULLANAGAR, PUNE 411037 PAN NO.AARPR3937J . / APPELLANT V/S ITO, WARD-2(1), PUNE . / RESPONDENT / ASSESSEES BY : SHRI NIKHIL PATHAK / REVENUE BY : SHRI ASEEM SHARMA / ORDER PER R.K. PANDA, AM : THE ABOVE BATCH OF APPEALS FILED BY THE RESPECTIVE ASSESS EES ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 31-03- 2014 OF THE CIT(A)-II, PUNE RELATING TO ASSESSMENT YEAR 2009-10. S INCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE RESPECTIVE ASSESSEES , THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE TAKE UP ITA NO.1467/PN/2014 (SMT. SAPNA SANJAY RAISONI) AS THE LEAD CASE. GROUNDS OF APPEAL NO.1 TO 5 BY THE ASSESSEE READ AS UNDER : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE T O EACH OTHER- ON FACTS AND IN LAW, 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALL OWANCE U/S. 40A (3) RS . 84,98,755 /- IN RESPECT OF CASH PAYMENTS MADE TO MAHARASHTRA STAT E ROAD TRANSPORT AND OTHER GOVT. ORGANISATIONS TOWARDS PU RCHASE OF SCRAP WITHOUT APPRECIATING THAT THE SAID PAYMENTS WERE COVERED UNDER THE EXCEPTIONS MENTIONED IN CLAUSE (B) OF RULE 6DD OF THE INCOME TAX / DATE OF HEARING :28.04.2016 / DATE OF PRONOUNCEMENT: 29.04.2016 3 ITA NOS.1466 TO 1469PN/2014 RULES AND THEREFORE, THERE WAS NO REASON TO MAKE ANY D ISALLOWANCE U/S. 40A(3) IN RESPECT OF THE SAME. 2] THE LEARNED CIT (A) ERRED IN HOLDING THAT 'MAHA RASHTRA STATE ROAD TRANSPORT ' COULD NOT BE CONSIDERED AS 'GOVERNMEN T' FOR THE PURPOSES OF RULE 6DD(B) AND HENCE, THE DISALLOWANCE U/ S. 40A(3) WAS ATTRACTED IN RESPECT OF CASH PAYMENTS MADE TO THE ABOV E PARTY . 3] THE LEARNED CIT (A) FAILED TO APPRECIATE THAT T HE MAHARASHTRA STATE ROAD TRANSPORT CORPORATION WAS UNDER THE CONTRO L OF THE GOVT. AND HENCE, ANY PAYMENT MADE TO THE SAID ENTITY WAS CO VERED WITHIN THE EXCEPTIONS PROVIDED IN CLAUSE (B) OF RULE 6DD AND HEN CE, NO DISALLOWANCE U/S. 40A(3) WAS WARRANTED. 4] THE LEARNED CIT (A) ERRED IN NOT APPRECIATING T HAT THE VARIOUS CASE LAW RELIED UPON BY HIM WERE DISTINGUISHABLE ON FA CTS AND HENCE, THE SAME WERE NOT APPLICABLE TO THE CASE OF THE ASSESSEE. 5] THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED T HAT THE PAYMENTS MADE IN CASE BY THE ASSESSEE TO VARIOUS GOVT. ORGANISATIO NS WERE FOR THE PURPOSE OF HIS BUSINESS AND THERE WAS A REASONABLE CAU SE FOR MAKING PAYMENTS IN CASH AND ACCORDINGLY, THE DISALLOWA NCE MADE U/S. 40A(3) WAS NOT JUSTIFIED IN LAW . 3. THIS IS THE SECOND ROUND OF LITIGATION BEFORE THE TRIBUNA L. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS THE PROPRIETOR OF M/S. MAHAVIR SALES CORPORATION CARRYING ON THE BUSINESS O F TRADING IN SCRAP MATERIALS. DURING THE COURSE OF ASSESSMENT PROC EEDINGS THE AO NOTED THAT THE ASSESSEE HAS MADE CASH PAYMEN T TO THE EXTENT OF RS.84,78,755/- TO MSRTC FOR PURCHASE OF SCRAP FO R WHICH THE PROVISIONS OF SECTION 40A(3) ARE ATTRACTED. FOLLOWING HIS ORDER IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEAR, THE AO MADE ADDITION OF RS.84,98,755/- U/S.40A(3). 4. IN APPEAL THE CIT(A) UPHELD THE ADDITION MADE BY THE AO U/S.40A(3) OF THE I.T. ACT, 1961. ON FURTHER APPEAL BY THE ASSESSEE THE TRIBUNAL RESTORED THE MATTER TO THE FILE OF THE CIT(A) WITH CERTAIN DIRECTIONS. SUBSEQUENTLY, THE LD.CIT(A) FOLLOWING HIS ORDERS FO R A.YRS. 2006-07, 2007-08 AND 2008-09 IN ASSESSEES OWN C ASE CONFIRMED THE DISALLOWANCE MADE BY THE AO U/S.40A(3) AMOUN TING TO RS.84,98,755/- 4 ITA NOS.1466 TO 1469PN/2014 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET FILED A COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE IT A NOS. 1267 TO 1269/PN/2014 ORDER DATED 29-02-2016 FOR A.YRS. 2006 -07 TO 2008-09 AND SUBMITTED THAT THE TRIBUNAL AFTER CONSIDERING THE ARGUMENTS ADVANCED BY THE ASSESSEE HAS DELETED THE D ISALLOWANCE MADE U/S.40A(3) HOLDING THAT PROVISIONS OF SECTION 40A(3) ARE NOT ATTRACTED TO THE CASH PAYMENTS MADE BY THE ASSESSEE TO MSRTC. THEREFORE, THIS BEING A COVERED MATTER THE GROUNDS RAISE D BY THE ASSESSEE SHOULD BE ALLOWED. 7. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE AO AND THE CIT(A). HE HOWEVER SUBMITTED THAT THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOU R OF THE ASSESSEE. 8. AFTER HEARING BOTH THE SIDES, WE FIND THE LD.CIT(A) FOLLOWING HIS ORDER FOR EARLIER YEARS IN ASSESSEES OWN CASE HAS C ONFIRMED THE DISALLOWANCE OF RS.84,98,755/- U.S.40A(3) IN RESPECT OF CASH PAYMENTS MADE TO MSRTC AND OTHER GOVERNMENT ORGANIZA TIONS TOWARDS PURCHASE OF SCRAP. WE FIND THE TRIBUNAL IN ASSESS EES OWN CASE AFTER ELABORATELY DISCUSSING THE ISSUE HAS DELETED S UCH DISALLOWANCE BY HOLDING AS UNDER : 8. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTA TIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORIT IES BELOW. THE ONLY ISSUE BEFORE US FOR ADJUDICATION IN THESE APPEALS I S; WHETHER THE PAYMENTS MADE IN CASH BY THE ASSESSEES TO MSRTC FOR PURCHA SE OF SCRAP IN AUCTION WOULD ATTRACT THE PROVISIONS OF SECTIO N 40A(3) OF THE ACT ? 5 ITA NOS.1466 TO 1469PN/2014 9. IN THE FIRST ROUND OF LITIGATION, SAME QUESTION WAS RAISED BEFORE THE TRIBUNAL IN ITA NO.845 & 1471/PN/2010, ITA NO.8 36/PN/2010 & ITA NO.1241/PN/2011, ITA NO.834/PN/2010 & ITA NO.12 42/PN/2011, ITA NO.1472/PN/2010. THE TRIBUNAL VIDE CONSOLIDATED ORDER DATED 20- 05-2013 HAD REMITTED THE ISSUE BACK TO THE FILE OF CI T(A) FOR DECIDING IT AFRESH IN THE LIGHT OF THE OBSERVATIONS MADE. THE REL EVANT EXTRACT OF THE OBSERVATIONS MADE BY THE TRIBUNAL ARE AS UNDER : 10. WE ARE UNABLE TO ACCEPT THE ARGUMENT CANVASSE D BY THE LD. DR. THE ARTICLE 12 OF THE CONSTITUTION READS AS UND ER: THE STATE INCLUDES THE GOVERNMENT AND PARLIAMENT O F INDIA AND GOVERNMENT AND THE LEGISLATURE OF THE STATES AND AL L LOCAL OR OTHER AUTHORITIES WITHIN THE TERRITORY OF INDIA OR UNDER THE CONTROL OF THE GOVERNMENT OF INDIA. 11. THE DEFINITION OF THE STATE UNDER ARTICLE 12 HA S COME FOR THE CONSIDERATION ON NUMBER OF OCCASIONS BEFORE THE HON BLE SUPREME COURT. THE STATE CONSISTS OF THREE DEPARTMENTS, THE LEGISLATURE, THE EXECUTIVE AND THE JUDICIARY. WE NEED NOT GO INTO AL L THE LIMBS OF THE STATE AS ONLY THE LIMITED ISSUE BEFORE US IS WHETHE R THE TERM GOVERNMENT USED IN CLAUSE (B) TO RULE 6DD INCLUDES EVEN THE AUTONOMOUS BODIES WHICH PARTAKES THE CHARACTER OF INSTRUMENTALITIES OF THE GOVERNMENT. THE CORE TEST TO BE APPLIED WHETHER A PARTICULAR CORPORATION WHICH IS AUTONOMOU S BODY IS A PART OF GOVERNMENT, TO BE SEEN IN THE CONTEXT OF DEGREE OF CONTROL OVER MANAGEMENT AND POLICY DECISIONS. WE FIND THAT IN TH E CASE OF MSRTC AS PER THE CERTIFICATE OF THE SHARE CAPITAL F ILED BEFORE US, THE ENTIRE SHARE CAPITAL IS CONTRIBUTED BY THE STATE GO VERNMENT AND THE CENTRAL GOVERNMENT AND THERE IS NO PRIVATE PARTICIP ATION. WE FURTHER FIND THAT MSRTC IS INCORPORATED UNDER SPECIAL LEGIS LATION I.E., ROAD TRANSPORT CORPORATION ACT, 1950. WE HAVE EXAMINED T HE PROVISIONS OF THE SAID ENACTMENT. AS PER SECTION 5 OF THE SAID ACT, THE STATE GOVERNMENT IS ONLY HAVING POWER TO APPOINT THE CHAI RMAN AND OTHER MEMBERS IN THE MANAGING BODY. THERE IS A FULL CONTROL OF THE STATE GOVERNMENT ON THE POLICY DECISIONS AS WELL AS MANAGEMENT. IN OUR OPINION, IF WE APPLY THE TEST OF THE CONTROL AND MANAGEMENT AS WELL AS THE EQUITY PARTICIPATION, MSRTC IS A STA TE WITHIN ARTICLE 12 OF THE CONSTITUTION. APPLYING THE ABOVE TEST, TH E HONBLE SUPREME COURT HAS HELD, AS DISCUSSED HEREINABOVE, T HAT THE AUTONOMOUS BODIES LIKE STATE ROAD TRANSPORT CORPORA TION OR WAREHOUSING CORPORATION WHERE THERE IS A FULL CONTR OL BY THE GOVERNMENT, EITHER CENTRAL OR STATE, THESE ARE THE INSTRUMENTALITIES OF THE GOVERNMENT ONLY. 12. THE TERM GOVERNMENT IS VERY MUCH WIDE UNDER THE CONSTITUTIONAL SET UP. GOVERNMENT MAY BE CENTRAL OR STATE, OR IT MAY BE LOCAL GOVERNMENT WHICH IS ENVISAGED BY OUR CONST ITUTION, LIKE ZILLA PARISHAD, MUNICIPAL CORPORATIONS, MUNICIPAL C OUNCILS, PANCHAYAT SAMITHIS, ETC. THE PUBLIC WORKS DEPARTMEN T IS PART OF THE GOVERNMENT. IN OUR OPINION, THIS ASPECT HAS NOT BEEN CONSIDERED BY THE AUTHORITIES BELOW AND THEY HAVE C LOSED DOOR TO THE ASSESSEES TO MAKE OUT THE CASE FOR EXAMINATION UNDER RULE 6DD. WE ARE, THEREFORE, OF THE OPINION THAT IN THE LIGHT OF OUR ABOVE DISCUSSION, THE PLEA OF THE ASSESSEES NEED RECONSID ERATION BY THE LD. CIT(APPEALS). WE, THEREFORE, SET ASIDE THE ISSU E IN RESPECT OF THE DISALLOWANCE MADE U/S.40A(3) TO THE FILE OF THE LD. CIT(A) TO DECIDE THE SAME DE NOVO IN THE LIGHT OF OUR ABOVE O BSERVATIONS AND DISCUSSION. ACCORDINGLY, THE RELEVANT GROUNDS TAKEN BY THE ASSESSEES IN ALL THESE APPEALS ARE ALLOWED FOR STAT ISTICAL PURPOSES. NEEDLESS TO SAY THE CIT(A) IS DIRECTED TO GIVE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEES AS PER THE PRINCIPLES OF NAT URAL JUSTICE. 6 ITA NOS.1466 TO 1469PN/2014 10. A BARE PERUSAL OF ARTICLE 12 SHOWS THAT THE DEFINI TION OF THE STATE GIVEN IN ARTICLE IS INCLUSIVE AND NOT EXHAUSTIV E. THE STATE INCLUDES : (A) THE GOVERNMENT AND PARLIAMENT OF INDIA; (B) THE GOVERNMENT AND THE LEGISLATURE OF EACH OF TH E STATES; (C) ALL LOCAL AND OTHER AUTHORITIES WITHIN THE TERRI TORY OF INDIA; AND (D) ALL LOCAL AND OTHER AUTHORITIES UNDER THE CONTRO L OF THE GOVERNMENT OF INDIA. 11. THE EXPRESSION OTHER AUTHORITIES USED IN ARTICLE 12 IS NEITHER DEFINED IN THE CONSTITUTION OF INDIA NOR IN ANY OTHE R STATUTE. THEREFORE, THE HONBLE SUPREME COURT OF INDIA AND THE HONBLE HIGH COURT HAVE INTERPRETED THIS EXPRESSION IN VARIOUS JUDGEMENTS. THE H ONBLE SUPREME COURT OF INDIA WHILE INTERPRETING THE EXPRE SSION OTHER AUTHORITIES IN THE CASE OF SOM PRAKASH REKHI VS. UNION OF INDIA REPORTED AS AIR 1981 SC 212 HAVE CULLED OUT CERTAIN TESTS TO DETERMINE AS TO WHEN A CORPORATION SHOULD BE SAID TO BE AN INSTRU MENTALITY OR AGENCY OF THE GOVERNMENT. THE TESTS LAID DOWN BY THE HONBLE APEX COURT ARE SUMMARIZED AS UNDER : 1. IF THE ENTIRE SHARE CAPITAL OF THE CORPORATION IS HELD BY THE GOVERNMENT, IT WOULD GO A LONG WAY TOWARDS INDICATI NG THAT THE CORPORATION IS AN INSTRUMENTALITY OR AGENCY OF THE GOVERNMENT. 2. EXISTENCE OF DEEP AND PERVASIVE STATE CONTROL M AY AFFORD AN INDICATION THAT THE CORPORATION IS A STATE AGENCY O R INSTRUMENTALITY. 3. WHETHER THE CORPORATION ENJOYS MONOPOLY STATUS W HICH IS STATE CONFERRED OR STATE PROTECTED. 4. IF THE FUNCTIONS OF THE CORPORATION ARE OF PUBLI C IMPORTANCE AND CLOSELY RELATED TO GOVERNMENTAL FUNCTIONS. IT WOULD BE A RELEVANT FACTOR IN CLASSIFYING THE CORPORATION AS A N INSTRUMENTALITY OR AGENCY OF THE GOVERNMENT. 5. IF A DEPARTMENT OF A GOVERNMENT IS TRANSFERRED T O A CORPORATION, IT WOULD BE A STRONG FACTOR SUPPORTING THIS INFERENCE OF THE CORPORATION BEING AN INSTRUMENTALITY OR AGENCY OF THE GOVERNMENT. AFTER APPLYING THE CUMULATIVE EFFECT OF ALL THE REL EVANT FACTORS MENTIONED ABOVE, IF THE BODY IS FOUND TO BE AN INSTRU MENTALITY OF THE AGENCY OF THE GOVERNMENT, IT WOULD BE AN AUTHORITY INCLUDED IN TERM STATE UNDER ARTICLE 12 OF THE CONSTITUTION OF INDI A. HOWEVER, THE TESTS INDICATED BY THE HONBLE APEX COURT IN THE CASE OF SOM PRAKASH REKHI ARE MERELY INDICATIVE AND NOT ABSOLUTE AND THUS, HAVE TO BE APPLIED DISCRETELY. IF ANY BODY OR ORGANISATION FALLS WITHIN THE CRITERIA AS LAID DOWN BY THE HONBLE APEX COURT IT CAN BE CONSIDERED THAT IT FALLS WITHIN THE TERM STATE. 12. IF THESE TESTS ARE APPLIED ON THE MSRTC, WE OBSERVE THAT THE CORPORATION SATISFIES MAJORITY OF THE CONDITIONS. THE ENTIRE SHARE CAPITAL OF MSRTC IS OWNED BY STATE AND CENTRAL GOVER NMENT. THE STATE HAS FULL CONTROL OVER THE WORKING, POLICIES AND THE F RAMEWORK OF THE 7 ITA NOS.1466 TO 1469PN/2014 CORPORATION. THE CORPORATION IS PROVIDING PUBLIC TR ANSPORT FACILITY TO THE SUBJECTS OF THE STATE, EVEN IN FOR REMOTE AREAS, W HERE SOMETIMES IT IS NOT ECONOMICALLY VIABLE TO PROVIDE TRANSPORT SERVICE. THUS, IT IS PROVIDING VITAL FUNCTION OF PUBLIC IMPORTANCE. 13. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MAH ARASHTRA STATE ROAD TRANSPORT CORPORATION VS. DIWAKAR MADHUKARRAO MA LKAPURE AND OTHERS IN WRIT PETITION NO.2762/2012 DECIDED ON 12-1 1-2013 WHILE DEALING WITH AN ISSUE RELATING TO PAYMENT OF COMPENSAT ION TO ONE OF THE EMPLOYEE OF MSRTC HAS OBSERVED AS UNDER : THE PETITIONER EMPLOYER IS A BODY CORPORATE AND IS STATE WITHIN THE MEANING OF ARTICLE 12 OF THE CONSTITUTION OF INDIA AND THEREFORE IT HAS TO ACT AS A MODEL EMPLOYER. 14. THUS, IN VIEW OF THE FACTS OF THE CASE AND IN THE LIGHT OF OBSERVATIONS OF THE HONBLE BOMBAY HIGH COURT, WE ARE OF THE CONSIDERED OPINION THAT THE CIT(A) HAS ERRED IN HOLDI NG THAT MSRTC IS NOT A STATE AND CASH PAYMENTS MADE TO MSRTC ARE HI T BY THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 15. IN SO FAR AS GENUINENESS OF THE PAYMENTS TO MSRTC BY THE ASSESSEES, THEY ARE NOT DISPUTED BY THE DEPARTMENT. ONCE IT HAS BEEN HELD THAT MSRTC IS A STATE WITHIN THE MEANING OF ARTICLE 12 OF THE CONSTITUTION OF INDIA, THE PAYMENTS CANNOT BE DISALLOW ED U/S.40A(3). THE PROVISIONS OF RULE 6DD WOULD PROTECT THE ASSESSEE FRO M SUCH DISALLOWANCE. THE ASSESSEES HAVE EXPLAINED THAT CASH PAY MENTS HAVE BEEN MADE TO MSRTC ON SUCCESSFUL BID OF SCRAP AUCTION. THE PAYMENTS ARE MADE IN CASH IMMEDIATELY TO GUARD AGAINST THE PIL FERAGE OF SCRAP. THUS, CASH PAYMENTS ARE ALSO MADE OUT OF BUSINESS EXPEDIE NCY. THEREFORE, IN OUR CONSIDERED VIEW, NO DISALLOWANCE CA N BE MADE U/S.40A(3) IN THE FACTS OF THE PRESENT CASE. 16. OUR VIEW IS FORTIFIED BY THE DECISION RENDERED I N THE CASE OF SRI LAXMI SATYANARAYAN OIL MILL VS. CIT (SUPRA). THE HO NBLE HIGH COURT HAS HELD THAT NO DISALLOWANCE CAN BE MADE U/S.40A(3) W HERE GENUINENESS OF PAYMENT IS NOT DOUBTED. THE RELEVANT E XTRACT OF THE OBSERVATION OF THE HONBLE COURT ARE AS UNDER : 18. . . . . . . . . . . SECTION 40A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSION OF RULE 6DD. THE SECTION MUST BE R EAD ALONG WITH THE RULE. IF READ TOGETHER, IT WILL BE CLEAR THAT T HE PROVISIONS ARE NOT INTENDED TO RESTRICT THE BUSINESS ACTIVITIES. THERE IS NO RESTRICTION ON THE ASSESSEE IN HIS TRADING ACTIVITIES. SECTION 40A (3) ONLY EMPOWERS THE ASSESSING OFFICER TO DISALLOW THE DEDUCTION CLA IMED AS EXPENDITURE IN RESPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED CHEQUE 0N CROSSED BANK DRAFT. THE PAYMENT BY CROSSE D CHEQUE OR CROSSED BANK DRAFT IS INSISTED ON TO ENABLE THE ASS ESSING AUTHORITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHE THER IT WAS OUT OF THE INCOME FROM UNDISCLOSED SOURCES. THE TERMS O F SECTION 40A(3) ARE NOT ABSOLUTE. CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. GENUIN E AND BONA FIDE TRANSACTIONS ARE NO TAKEN OUT OF THE SWEEP OF THE S ECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF T HE ASSESSING OFFICER THE CIRCUMSTANCES UNDER WHICH THE PAYMENT I N 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 TH E CASH PAYMENT. RULE 6DD PROVIDES THAT AN ASSESSEE CAN BE EXEMPTED 8 ITA NOS.1466 TO 1469PN/2014 FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSSED BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF SECTION 40A(3) AND RUL E 6DD THAT THEY ARE INTENDED TO REGULATE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO U SE BLACK MONEY FOR BUSINESS TRANSACTIONS. 17. IN THE CASE OF GURUDEV GARG VS. CIT THE HONBLE P UNJAB & HARYANA HIGH COURT HAS HELD THAT WHERE GENUINENESS OF TRANSACTION MADE IN CASH IN EXCESS OF RS.20,000/- WAS NOT DISBELIEVE D BY THE AUTHORITIES, THE SAME CANNOT BE DISALLOWED U/S.40A(3) O F THE ACT. 18. IN VIEW OF THE FACTS OF THE CASE AND THE CASE LAW S DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE PROVISI ONS OF SECTION 40A(3) ARE NOT ATTRACTED ON THE CASH PAYMENTS MADE B Y THE ASSESSEES TO MSRTC. THE PROVISIONS OF RULE 6DD (B) PROVIDE EXCEPT ION TO SECTION 40A(3) WHERE CASH PAYMENTS ARE MADE TO GOVERNMENT. T HE AFORESAID EXCEPTION WILL OPERATE IN THE CASE OF THE ASSESSEE. TH US, THE CIT(A) HAS ERRED IN HOLDING THAT DISALLOWANCE U/S.40A(3) IS TO BE MADE IN RESPECT OF CASH PAYMENTS MADE BY ASSESSEES TO MSRTC. THE IMPUGNED ORDERS ARE SET ASIDE AND THE AO IS DIRECTED TO DELETE THE DISA LLOWING MADE U/S.40A(3) IN THE IMPUGNED ASSESSMENT YEARS. ACCORDINGLY , GROUND NOS. 1 TO 5 RAISED IN THE APPEALS ARE ALLOWED. 9. SINCE THE CIT(A) HAS UPHELD THE DISALLOWANCE MADE BY TH E AO U/S.40A(3) BY FOLLOWING HIS ORDERS FOR EARLIER YEARS IN ASSESSE ES OWN CASE AND SINCE THE TRIBUNAL HAS ALREADY DELETED SUCH DISA LLOWANCE, THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE AGAINST THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE , WE HOLD THAT THE PROVISIONS OF SECTION 40A(3) IN RESPECT OF CASH PA YMENTS MADE TO MSRTC AND OTHER GOVERNMENT ORGANISATIONS TOWA RDS PURCHASE OF SCRAP MATERIALS ARE NOT ATTRACTED. ACCORDIN GLY, THE DISALLOWANCE U/S.40A(3) MADE BY THE AO AND UPHELD BY TH E CIT(A) ARE DELETED. GROUNDS OF APPEAL NO.1 TO 5 ARE ACCORDINGLY ALLOWED. 10. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROU NDS OF APPEAL NO.6 TO 8 IN RESPECT OF DISALLOWANCE OF INTEREST U/S. 36(1)(III) FOR WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJ ECTION. ACCORDINGLY, THE SECOND ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL NOS. 6 TO 8 ARE DISMISSED. 9 ITA NOS.1466 TO 1469PN/2014 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NOS. 1466, 1468 AND 1469/PN/2014 (SHRI SANJAY M. RAISONI, SHRI SANTOSH M. RAISONI AND SHRI MANIKCHAN D G. RAISONI : 12. THE FIRST ISSUE RAISED BY THE RESPECTIVE ASSESSEES IN GROUNDS OF APPEAL RELATE TO DISALLOWANCE U/S.40A(3) ON ACCOUNT OF CAS H PAYMENTS MADE TO MSRTC AND OTHER GOVERNMENT ORGANISA TIONS TOWARDS PURCHASE OF SCRAP. 13. THE GROUNDS RAISED BY THE ABOVE ASSESSEES ARE IDE NTICAL TO THE GROUNDS RAISED IN ITA NO.1467/PN/2014. WE HAVE ALREADY D ECIDED THE ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE HAVE BEEN ALLOWED. FOLLOWING THE SAME REASONINGS, THE FIRST ISSUE RAISED BY THE RESPECTIVE ASSESSEES REGARDING DISALLOWANCE U/S.40A(3) IS ALLOWED. 14. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR T HE SECOND ISSUE RAISED BY THE RESPECTIVE ASSESSEES IN THE GROUNDS OF APPEAL FOR WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJECT ION. ACCORDINGLY, THE SECOND ISSUE RAISED BY THE RESPECTIVE A SSESSEE IN THE GROUNDS OF APPEAL IS DISMISSED. 15. IN THE RESULT, THE APPEALS OF THE RESPECTIVE ASSESSEE S ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29-04-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K.PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED : 29 TH APRIL, 2016. 10 ITA NOS.1466 TO 1469PN/2014 ) *#,! -! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A ) - II , PUNE 4. 5. 6. THE CIT-II, PUNE $ ''(, (, / DR, ITAT, B PUNE; - / GUARD FILE. / BY ORDER , // $ ' //TRUE COPY // Y// / // $ ' //TRUE C // /0 ' ( / SR. PRIVATE SECRETARY (, / ITAT, PUNE