ITO, Ward-1(4), Durgapur, Durgapur V. Sri Nemai Chandra Mondal, Burdwan

ITA 2052/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1653 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 10-11-2014
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH, KOLKATA (BENCH- C) BEFORE SHRI N. V. VASUDEVAN JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER, I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 ORDER PER M. BALAGANESH , AM THIS IS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-DURGAPUR (HEREINAFTER REFERRED TO AS THE LD. CIT(A)), ARISING FROM THE APPEAL NO. 50/CIT(A)/DGP/2013-14, DT. 11.08.2014, PASSED UNDER SECTION 250 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) RELATING TO ASSESSMENT YEAR 2010-11. I.T.O.- WD-1(4), DURGAPUR [PAN : AIIPM1749E ] -VS- SRI NEMAI CHANDRA MONDAL (APPELLANT) (RESPONDENT) FOR THE APPELLANT/ASSESSEE NONE FOR THE RESPONDENT/REVENUE NONE DATE OF HEARING 01.05.2017 DATE OF PRONOUNCEMENT 02.06.2017 2 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL 2. THE ONLY ISSUE TO BE DECIDED IN THESE APPEALS IS AS TO WHETHER THE LDCIT(A)WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S 40A(3) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF RETAIL TRADING OF LIQUOR. THE LD AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAD PURCHASED COUNTRY SPIRIT OF RS 47,16,740/- FROM M/S IFB AGRO INDUSTRIES LTD (IFBAIL IN SHORT). OUT OF THE PURCHASE , RS 12,67,837/- HAVE BEEN PAID THROUGH ACCOUNT PAYEE CHEQUES AND REMAINING SUM OF RS 34,39,930/- WAS PAID BY CASH IN EXCESS OF RS. 20,000/- TO IFBAIL FOR PURCHASE OF COUNTRY SPIRIT BY WAY OF CASH DEPOSITS INTO THE BANK ACCOUNT OF IFBAIL. THE LD AO SHOWCAUSED THE ASSESSEE AS TO WHY THE PROVISIONS OF SECTION 40A(3) OF THE ACT SHOULD NOT BE INVOKED ON THE ASSESSEE. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE REPLIED THAT THE PAYMENT FOR PURCHASE OF COUNTRY SPIRIT HAD TO BE MADE PRIOR TO DELIVERY OF THE BOTTLES OF COUNTRY SPIRIT BY M/S IFBAIL. THE PAY IN SLIP OF SBI , LAUDOHA BRANCH WAS FILLED BY THE ASSESSEE CORRESPONDING TO THE AMOUNT OF COUNTRY SPIRIT PURCHASED , THE RATE OF WHICH IS FIXED BY THE STATE GOVERNMENT AND IS KNOWN TO BOTH ASSESSEE AND IFBAIL AND THE AMOUNT IS DEPOSITED IN THE BANK ACCOUNT OF IFBAIL BY THE ASSESSEE. THE SIGNATURE IN THE PAY IN SLIP IS THAT OF REPRESENTATIVE OF THE ASSESSEE AND DEPOSIT COUNTERFOIL IS OBTAINED. THE DEPOSIT COUNTERFOIL IS PRESENTED TO IFBAIL PRIOR TO THE DELIVERY OF COUNTRY SPIRIT. ACCORDINGLY IT WAS ARGUED THAT THE PAYMENT IS MADE TO THE WHOLESALE LICENSEE WHO IS AN AGENT OF THE GOVERNMENT AND HENCE THE PAYMENT WOULD FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD(K) OF THE IT RULES. THE LD AO NOT CONVINCED WITH THIS REPLY PROCEEDED TO MAKE DISALLOWANCE U/S 40A(3) OF THE 3 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL ACT IN RESPECT OF CASH PURCHASES MADE BY THE ASSESSEE WHICH WAS DELETED BY THE LDCIT(A) ON FIRST APPEAL. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. NONE APPEARED ON BEHALF OF BOTH THE PARTIES. WE HAVE GONE THROUGH THE VARIOUS ORDERS OF THIS TRIBUNAL ON THE IMPUGNED ISSUE BEFORE US AND COPY OF NOTIFICATION NO. 1208-EX DATED 29.08.2005 ISSUED BY THE EXCISE DEPARTMENT, GOVERNMENT OF WEST BENGAL. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF THE WEST BENGAL EXCISE RULES 2005 AND THE BENGAL EXCISE ACT, 1909. THE FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITERATED FOR THE SAKE OF BREVITY. AT THE 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 BETTER UNDERSTANDING OF THE FACTS :- IN EXERCISE OF THE POWER CONFERRED BY SECTION 85 AND SECTION 86 OF THE BENGAL EXCISE ACT, 1909 (BEN. ACT V OF 1909) AND IN SUPERSESSION OF THE 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 RULES REGULATING THE ISSUE AND REMOVAL OF COUNTRY SPIRIT ON PAYMENT OF DUTY IN LABELLED AND CAPSULED 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: RULES 1. SHORT TITLE AND COMMENCEMENT.(1) THESE RULES MAY BE 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 THE AUTHORIZED REPRESENTATIVE OF LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT IN FORM II APPENDED 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 BENGAL; 4 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL (V) THE ACT MEANS THE BENGAL EXCISE ACT, 1909 (BEN. ACT 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 COUNTRY SPIRIT TO RETAIL VENDORS, ESTABLISHED 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 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 NOT 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 SPIRIT BOTTLING PLANT. NO COUNTRY SPIRIT IN BULK SHALL BE ISSUED WITHOUT PAYMENT OF DUTY FROM A COUNTRY SPIRIT WAREHOUSE. 4. PERSONAL LEDGER ACCOUNT TO BE MAINTAINED BY THE WHOLESALE LICENSEE. THE WHOLESALE LICENSEE SHALL MAINTAIN A PERSONAL LEDGER ACCOUNT IN 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 ISSUES OF COUNTRY SPIRIT TO THE RETAIL VENDORS OR TRANSPORT ON PAYMENT OF DUTY FROM THE CONCERNED COUNTRY 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 AFORESAID PERSONAL LEDGER ACCOUNTS IN ORDER TO ENSURE THAT DUTY FOR DAILY ISSUES OF COUNTRY 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 RETAIL 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 SPIRIT 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 DEPOSIT DUTY DIRECT INTO THE LOCAL TREASURY FOR ISSUE OF COUNTRY SPIRIT TO BE TAKEN BY HIM FROM THE WAREHOUSE CONCERNED. DUTY, COST PRICE, BOTTLING CHARGE, IF THERE BE ANY, AT THE 5 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL PRESCRIBED RATE AND OTHER IMPOSITION, AS MAY BE PRESCRIBED BY LAW, SHALL BE PAID BY THE RETAIL VENDOR TO THE CREDIT 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 BE ANY, AT THE PRESCRIBED RATE AND SUCH OTHER IMPOSITION, AS MAY BE PRESCRIBED BY LAW, FROM THE RETAIL VENDOR TO WHOM COUNTRY SPIRIT IS TO BE 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 WAREHOUSE. 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 PROVISIONS 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 IRRESPECTIVE OF MEASURE FROM THE BOTTLING CHARGE TO THE RETAIL COUNTRY SPIRIT LICENSEES WHOSE LICENSED PREMISES ARE LOCATED AT A DISTANCE OF 50 KILOMETRES OR MORE BY THE SHORTEST ROUTE FROM THE ISSUING WAREHOUSE ON THE BASIS OF A CERTIFICATE TO BE ISSUED BY THE COLLECTOR IN RESPECT OF DISTANCE. AT THE END OF THE MONTH, THE WHOLESALER SHALL SUBMIT A BILL IN DUPLICATE TO THE OFFICER-IN-CHARGE OF THE WAREHOUSE CLAIMING REFUND OF THE AMOUNT 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 LEDGER 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 CLAIM WITH HIS COMMENTS TO THE OFFICER-IN-CHARGE OF THE SUPPLIER BOTTLING PLANT, WHO SHALL REFUND THE AMOUNT RECOMMENDED TO THE WHOLESALER THROUGH ADJUSTMENT IN THE PERSONAL LEDGER ACCOUNT MAINTAINED FOR PRIVILEGE FEE. 4.1. WE FIND THAT THE CO-ORDINATE BENCH OF BANGALORE TRIBUNAL IN THE CASE OF SRI RENUKESWARA RICE MILLS VS ITO REPORTED IN 93 ITD 263 (BANG TRIB.) HAD HELD THAT THE CASH PAYMENT IN THE BANK ACCOUNT OF THE PAYEE IS SUFFICIENT TO GET EXEMPTION 6 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL IN TERMS OF RULE 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 ENSURING THE OBJECT OF INTRODUCTION OF SECTION 40A(3) OF THE ACT. 4.2. WE FIND THAT THE FOLLOWING FACTS ARE UNDISPUTED AND INDISPUTABLE:- (A) THE TRANSACTIONS MADE BY THE ASSESSEE IS GENUINE. (B) THE IDENTITY OF THE RECEIVER (WHOLESALE LICENSEE) IS ESTABLISHED BEYOND DOUBT. ( C) THE PAYMENT IS MADE IN THE BANK ACCOUNT OF THE SELLER (WHOLESALE LICENSEE). 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 RECEIPTS BY DIRECTLY DEPOSITING THE CASH IN THE BANK ACCOUNT OF THE PAYEE. MOREOVER, THE REGULATIONS 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 THE BANK ACCOUNT OF THE WHOLESALE LICENSEE. THIS FACT IS ALSO NOT DISPUTED BY THE REVENUE. 4.3. 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 THE 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 SHOWN TO HAVE BEEN INCURRED IN CASH WITH A VIEW TO FRUSTRATING PROPER 7 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL INVESTIGATION BY THE DEPARTMENT AS TO THE IDENTITY OF THE PAYEE AND REASONABLENESS OF THE PAYMENT . 4.4. IN THIS REGARD, IT IS PERTINENT TO GET INTO THE 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 (EXCEPT IN SPECIFIED CASES) IS NOT ARBITRARY AND DOES NOT AMOUNT TO A RESTRICTION ON THE FUNDAMENTAL RIGHT TO CARRY ON BUSINESS. IF READ TOGETHER WITH RULE 6DD OF THE INCOME-TAX RULES, 1962, 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 THE ASSESSING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RESPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED-CHEQUE OR CROSSED-BANK DRAFT. THE PAYMENT BY CROSSED-CHEQUE OR CROSSED BANK-DRAFT IS INSISTED UPON TO ENABLE THE ASSESSING AUTHORITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF INCOME FROM UNDISCLOSED SOURCES. THE TERMS OF SECTION 40A(3) ARE NOT ABSOLUTE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT 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 ASSESSING 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 THAT AN ASSESSEE CAN BE EXEMPTED 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 RULE 6DD THAT THEY ARE INTENDED TO REGULATE BUSINESS TRANSACTIONS 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 ) 8 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL THE CONTENTION OF THE ASSESSEE THAT HE PURCHASED GOODS 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 ESSENTIAL FOR CARRYING ON OF HIS BUSINESS, WAS ALSO NOT DISPUTED BY THE AO. THE GENUINITY OF TRANSACTIONS, 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 DRAFT BUT BY BEARER CHEQUES AND HAS COMPUTED THE PAYMENTS FALLING UNDER PROVISIONS TO SECTION 40A(3) FOR RS.78,45,580/- AND DISALLOWED @ 20% THEREON RS.15,69,116/-. IT IS ALSO MADE CLEAR THAT WITHOUT THE PAYMENT BEING MADE BY BEARER CHEQUE THESE GOODS COULD NOT HAVE BEEN PROCURED AND IT WOULD HAVE HAMPERED THE SUPPLY OF GOODS WITHIN THE STIPULATED TIME. THEREFORE, THE GENUINENESS OF THE PURCHASE HAS BEEN ACCEPTED BY THE ID. CIT (APPEAL) WHICH HAS ALSO 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 OFTHE TRANSACTION. THERE WAS NO DISPUTE THAT THE PURCHASES WERE GENUINE.' ANUPAM TELE SERVICES VS ITO IN (2014) 43 TAXMANN.COM 199 (GUJ) SECTION 40A(3) OF THE INCOME-TAX ACT, 1961, READ WITH RULE 6DD OF THE INCOME-TAX RULES, 1962 - BUSINESS DISALLOWANCE - CASH PAYMENT EXCEEDING PRESCRIBED LIMITS RULE 6DD(J) ASSESSMENT YEAR 2006-07 - ASSESSEE WAS WORKING AS AN 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 WOULD NOT DO, SINCE REALIZATION TOOK LONGER TIME AND SUCH PAYMENTS SHOULD BE MADE ONLY IN CASH IN THEIR BANK ACCOUNT - IF ASSESSEE WOULD NOT MAKE CASH PAYMENT AND MAKE CHEQUE PAYMENTS ALONE, IT WOULD HAVE RECEIVED RECHARGE VOUCHERS DELAYED BY 4/5 DAYS WHICH WOULD SEVERELY AFFECT ITS 9 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL 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 PAYMENT MADE TO PRINCIPAL - HELD, YES [PARAS 21 TO 23] [IN FAVOUR OF THE ASSESSEE]' SRI LAXMISATYANARAYANA OIL MILL VS CIT REPORTED IN (2014) 49 TAXMANN.COM 363 (ANDHRAPRADESH HIGH COURT) 'SECTION 40A(3) OF THE INCOME-TAX ACT, 1961, READ WITH RULE 6DD OF THE INCOME-TAX RULES, 1962- BUSINESS DISALLOWANCE - CASH PAYMENT EXCEEDING PRESCRIBED LIMIT (RULE 6DD) - ASSESSEE MADE CERTAIN PAYMENT OF PURCHASE OF GROUNDNUT IN CASH EXCEEDING PRESCRIBED LIMIT - ASSESSEE SUBMITTED THAT HE MADE PAYMENT IN CASH BECAUSE SELLER INSISTED ON THAT AND ALSO GAVE INCENTIVES AND DISCOUNTS - FURTHER, SELLER ALSO ISSUED CERTIFICATE IN SUPPORT OF THIS - WHETHER SINCE ASSESSEE HAD PLACED PROOF OF PAYMENT OF CONSIDERATION 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) - HELD, 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 TRIBUNAL 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. THE ASSESSEE HAD DIRECTLY DEPOSITED CASH IN THE BANK ACCOUNT OF THE SUPPLIER IFBAIL 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 TO NOTE THAT THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SMT.HARSHILACHORDIAVS ITO REPORTED IN (2008) 298 ITR 349 (RAJ) HAD HELD THAT THE EXCEPTIONS CONTAINED IN RULE 6DD OF INCOME TAX RULES ARE NOT EXHAUSTIVE AND THAT THE SAID RULE MUST BE INTERPRETED LIBERALLY. 10 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL 4.5. 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 ASHOK MONDALVS 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 THE OUTSET A PERUSAL OF THE DECISION IN THE CASE OF SMT.PUSHPALATAMONDAL SHOWS THAT THE TRIBUNAL HAD DECIDED THE CASE BY FOLLOWING THE DECISION OF HON'BLE KERALA HIGH COURT 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 UNDER THE RULES FRAMED BY THE GOVERNMENT AND SUCH PAYMENT WAS REQUIRED TO BE MADE IN LEGAL TENDER. A PERUSAL OF THE GOVERNMENT NOTIFICATION ISSUED BY THE GOVT. OF WEST BENGAL CLEARLY SHOWS THAT THE DEALERS ARE AGENTS OF THE GOVERNMENT AND THE PAYMENTS MADE ARE TO THE GOVERNMENT. IT ALSO MAKES IT CATEGORICALLY REQUIRED THAT THE PAYMENT IS TO BE MADE BEFORE LIFTING 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.AMRAIPACHWAI&C.S.SHOP REFERRED TO SUPRA WHEREIN IT HAS BEEN HELD AS FOLLOWS :- '6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT THE OUTSET A PERUSAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE AO HAS RECOGNIZED THE ASSESSEE'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, GOVT. OF W.B. WERE ALSO FOUND AT PAGES 177 AND 179 OF THE ASSESSEE'S PAPER BOOK. IN ANY CASE THE VALIDITY OF LICENCE OF THE ASSESSEE TO TRADE IN COUNTRY SPIRIT AND COUNTRY LIQUOR IS NOT THE ISSUE BEFORE US. THE ISSUE IS WHETHER THE PAYMENTS MADE BY THE ASSESSEE FOR THE PURCHASE OF COUNTRY SPIRIT FROM THE TERRITORIAL LICENSEE BOTTLING PLANT, IFB AGRO INDUSTRIES LTD., CITY CENTRE, DURGAPUR FALLS WITHIN THE EXEMPTION 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 BENGAL, DEPARTMENT OF EXCISE HAS ISSUED A NOTIFICATION, WHEREIN THE WAREHOUSE HAS BEEN IDENTIFIED TO MEAN THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO THE RETAIL VENDORS, ESTABLISHED 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 COUNTRY SPIRIT BY WHOLESALE HAS BEEN GRANTED U/S 22 OF THE ACT OF A LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT. FURTHER, IT HAS BEEN SPECIFICALLY IDENTIFIED THAT THE AUTHORISED REPRESENTATIVE OF THE WHOLESALE LICENSEE SHALL REALIZE THE NECESSARY AMOUNT OF DUTY, COST PRICE AND BOTTLING CHARGE, IF THERE BE ANY, AT THE PRESCRIBED RATE AND SUCH OTHER IMPOSITION, AS MAY BE PRESCRIBED BY LAW, FROM THE RETAIL VENDOR TO WHOM THE COUNTRY SPIRIT IS TO BE ISSUED FROM THE CONCERNED WAREHOUSE. IT IS ALSO SPECIFICALLY MENTIONED IN SECTION (2) OF THE SAID NOTIFICATION THAT NO 11 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL RETAIL VENDOR OF COUNTRY SPIRIT SHALL DEPOSIT DUTY DIRECT INTO THE LOCAL TREASURY FOR ISSUE OF COUNTRY SPIRIT TO BE TAKEN BY HIM FROM THE WAREHOUSE CONCERNED WHICH CLEARLY SHOWS THAT THE WAREHOUSE IS FOR THE SUPPLY OF THE COUNTRY LIQUOR, SPECIFICALLY, THE WAREHOUSE IS UNDER 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 ANY PAYMENT MADE TO THE WAREHOUSE, WHICH IS UNDER THE DIRECT CONTROL OF THE STATE GOVERNMENT, IS A PAYMENT MADE DIRECTLY TO THE GOVERNMENT. ONCE, THIS IS ACCEPTED THEN THE PROVISIONS OF RULE 6DD(B) OF THE I.T RULES, 1962 WHICH CLEARLY SPELLS OUT THAT THE PAYMENT MADE TO THE GOVERNMENT IN LEGAL TENDER UNDER THE RULES FRAMED BY THE GOVERNMENT, IS EXEMPTED FROM THE RIGOURS OF SECTION 40A(3) OF THE ACT. HERE, IT IS NOTICED THAT THE PAYMENTS MADE BY THE ASSESSEE FOR PURCHASE OF COUNTRY SPIRIT AND COUNTRY LIQUOR IS TO THE GOVERNMENT AS PER THE NOTIFICATION 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 COUNTRY LIQUOR AND COUNTRY SPIRIT FROM THE TERRITORIAL LICENSEE BOTTLING PLANT, IFB AGRO INDUSTRIES 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 AS CONFIRMED BY THE ID. CIT(A) BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE I T.ACT 1961 STANDS DELETED. 8. IN THE RESULT THE ADDITION AS CONFIRMED BY THE ID. CIT(A) STANDS DELETED WE FIND THAT THIS DECISION WAS RENDERED BY PLACING RELIANCE ON ITS EARLIER DECISION IN THE CASE OF M/S AMRAIPACHWAI&C.S.SHOP IN ITA NO. 1251/KOL/2011 DATED 15.1.2014 AND AFTER CONSIDERING THE CONTRARY DECISIONS RENDERED IN THE CASE OF PUSHPALATAMONDAL IN ITA NO. 965/KOL/2010 DATED 28.7.2011 AND HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS K ABDU & CO (170 TAXMAN 297). WE FIND THAT THE CO-ORDINATE BENCH DECISION IN THE CASE OF M/S AMRAIPACHWAI&C.S.SHOP IN ITA NO. 1251/KOL/2011 DATED 15.1.2014, AND THE HELD PORTION IS REPRODUCED HEREINABOVE. 12 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL 4.6. WE FIND THAT M/S IFBAIL IS A BOTTLING PLANT CUM WAREHOUSE UNDER RULE 2(VII) OF THE WEST BENGAL EXCISE RULES 2005 WITH PRIVILEGE GRANTED U/S 22 OF THE BENGAL EXCISE ACT, 1909. AT THIS JUNCTURE, 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 RULES 2005 , MEANS THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VENDORS, ESTABLISHED 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 COUNTRY SPIRIT BY WHOLESALE HAS BEEN GRANTED UNDER SECTION 22 OF THE ACT, OR OF A LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT. THE ABOVE DEFINITION MAKES IT CLEAR THAT THE WAREHOUSE REFERRED TO UNDER THE STATE EXCISE RULES IS UNDER THE DIRECT CONTROL AND AUTHORITY OF THE COMMISSIONER OF STATE EXCISE BECAUSE IT IS ESTABLISHED BY THE COMMISSIONER OF STATE EXCISE AND AS SUCH IS A STATE GOVERNMENT ESTABLISHMENT. IT IS ALSO PERTINENT TO NOTE THAT THE 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. HENCE IT COULD BE SAFELY CONCLUDED THAT THE WAREHOUSE SO ESTABLISHED BY THE STATE EXCISE COMMISSIONER IS A STATE GOVERNMENT ESTABLISHMENT. IT WOULD ALSO BE PERTINENT TO NOTE THAT THE SAID WAREHOUSE HAS BEEN SPECIFICALLY ESTABLISHED FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VENDORS (ASSESSEE HEREIN) ONLY AND NOT TO ANYBODY ELSE. IT WOULD BE PERTINENT TO LOOK INTO THE DEFINITION OF WHOLESALE LICENSEE AS PER RULE 2(VIII) OF THE EXCISE RULES 2005 AS BELOW:- 13 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL RULE 2(VIII) WHOLESALE LICENSEE MEANS THE WHOLESALE VENDOR OF COUNTRY SPIRIT TO WHOMLICENCE HAS BEEN GRANTED IN WEST BENGAL EXCISE FORM NO. 26. IT WOULD BE PERTINENT TO LOOK INTO SECTION 22 OF THE BENGAL EXCISE ACT, 1909 AT THIS JUNCTURE AS BELOW:- SECTION 22 GRANT OF EXCLUSIVE PRIVILEGE OF MANUFACTURE AND SALE OF COUNTRY LIQUOR OR INTOXICATING DRUGS (1) THE STATE GOVERNMENT MAY GRANT TO ANY PERSON, ON SUCH 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 SELLING RETAIL, OR (E) OF MANUFACTURING AND SUPPLYING BY WHOLESALE AND SELLING RETAIL, ANY COUNTRY LIQUOR OR INTOXICATING DRUG WITHIN ANY SPECIFIED LOCAL AREA: PROVIDED THAT PUBLIC NOTICE SHALL BE GIVEN TO THE INTENTION TO GRANT ANY SUCH EXCLUSIVE PRIVILEGE, AND THAT ANY OBJECTIONS MADE BY ANY PERSON RESIDING WITHIN THE AREA AFFECTED SHALL BE CONSIDERED BEFORE AN EXCLUSIVE PRIVILEGE IS GRANTED. (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 COLLECTOR OR THE EXCISE COMMISSIONER. HENCE IT COULD BE SAFELY CONCLUDED THAT M/S IFBAIL (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 RULE 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. 14 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL 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 IFBAIL AS PER RULE 6(2) OF THE EXCISE RULES 2005, IT HAS TO BE CONSTRUED AS PAYMENT MADE TO THE STATE GOVERNMENT AUTHORITY AND ACCORDINGLY FALLS UNDER THE EXCEPTION PROVIDED IN RULE 6DD(B) OF THE IT RULES. 4.7. IT IS NOT IN DISPUTE THAT M/S IFBAIL HAVE BEEN GRANTED LICENSE TO ACT AS A WHOLESALER FOR SUPPLY OF COUNTRY LIQUOR TO THE RETAIL VENDOR AS PER THE REGULATIONS OF THE EXCISE DEPARTMENT, GOVERNMENT OF WEST BENGAL. AT THE COST OF REPETITION, WE WOULD LIKE TO STATE THAT THE SAID REGULATION MANDATED 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 LIQUOR 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 AN AGENT OF THE STATE GOVERNMENT. FOR THE SAKE OF CONVENIENCE, THE RELEVANT RULE IS REPRODUCED HEREUNDER:- RULE 6DD(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. THE PAYMENT MADE BY THE ASSESSEE RETAIL VENDOR TO THE PRINCIPAL, GOVERNMENT OF WEST BENGAL THROUGH ITS WHOLESALE AGENT. THE RELATIONSHIP BETWEEN THE ASSESSEE (AUTHORIZED RETAILER) AND GOVERNMENT OF WEST BENGAL (THE SUPPLIER) ACTING UNDER 15 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL WEST BENGAL EXCISE RULES THROUGH ITS AUTHORISED WHOLESALE LICENSEE (AGENT), BOTH DEFACTO 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. 4.8. 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. ACCORDINGLY, THE GROUNDSRAISED BY THE ASSESSEE ARE ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 02.06.2017. SD/- SD/- [N. V. VASUDEVAN] [M. BALAGANESH] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 02.06.2017 {SC SPS} 16 I.T.A. NO. 2052/KOL/2014 ASSESSMENT YEARS: 2010-11 NEMAI CHANDRA MONDAL COPY OF THE ORDER FORWARDED TO: 1.ASSESSEE- SRI NEMAI CHANDRA MONDAL, PROP. OF LAODOHA PACHAI SHOP., LAODOHA, DIST.- BURDWAN- 713 363. 2.REVENUE I.T.O. WARD 1(4), DURGAPUR. 3.CIT(A)- KOLKATA. 4.CIT , KOLKATA. 5.CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE, DDO, KOLKATA BENCHES, KOLKATA.