Income Tax Officer, Ward-17(3), Hyderabad V. Value Pharma Retail(Hyd) Private Limited , Hyderabad

ITA 2056/Hyd/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7703 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 19-04-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 16-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. DIPAK
• Keywords: Transfer pricing; Period of limitation; Fair market value; Time period of passing order; Set aside
• Section: 40A(3); 191; 13; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 2056/HYD/2018 ASSESSMENT YEAR: 2015-16 THE INCOME TAX OFFICER, WARD-17(3), HYDERABAD VS M/S.VALUE PHARMA RETAIL (HYD) PRIVATE LIMITED, HYDERABAD [PAN: AADCV5415G] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI R.DIPAK, DR FOR ASSESSEE : NONE DATE OF HEARING : 19-04-2021 DATE OF PRONOUNCEMENT : 26-08-2021 O R D E R PER S.S.GODARA, J.M. : THIS REVENUES APPEAL FOR AY.2015-16 ARISES FROM THE CIT(A)-5, HYDERABADS ORDER DATED 14-08-2018 PASSED IN CASE NO.0268 / 2017-18 / CIT(A)-5, IN PROCEEDINGS U/S.14 3(3) OF THE INCOME TAX ACT, 1961 [IN SHORT, THE ACT]. CASE CALLED TWICE. NONE APPEARED FOR THE ASSESSEES BEHEST. IT IS ACCORDINGLY PROCEEDED EX-PARTE. 2. THE REVENUE HAS RAISED THE FOLLOWING SUBSTANTIVE GROUNDS IN THE INSTANT APPEAL: 2. THE LD. CIT(A) ERRED IN HOLDING THAT THE PAYMEN T MADE IN CASH BY THE ASSESSEE TO ITS GROUP COMPANIES IS OUT OF THE P URVIEW OF SECTION 40A(3) OF THE IT ACT OVERLOOKING THE FACT THAT IT D ID NOT FALL UNDER ANY OF THE EXCEPTIONAL CLAUSES SPECIFIED IN RULE 6DD. ITA NO. 2056/HYD/2018 :- 2 -: 3. THE LD. CIT(A) ERRED IN GRANTING RELIEF BY PLACI NG RELIANCE ON THE APEX COURT RULING IN THE CASE OF ATTAR SINGH GURMUK H SINGH VS. ITO AND THE JURISDICTIONAL HIGH COURT DECISION IN THE C ASE OF SRI LAXMI SATYANARAYANA OIL MILLS VS. CIT REPORTED IN (2014) 49 TAXMAN 363 (AP HIGH COURT) WHICH WERE RENDERED BEFORE THE AMEN DMENT TO RULE 6DD ALLOWING EXCEPTIONS TO THE PROVISIONS OF SECTIO N 40A(3) OF THE IT ACT IN CASES WHERE GENUINENESS OF PAYMENT AND IDENT ITY OF PAYEE ARE ESTABLISHED, WAS DELETED. 3. LEARNED CIT-DR NEXT TOOK US TO THE CIT(A)S DETAILED DISCUSSION DELETING THE IMPUGNED SECTION 40A(3) DISAL LOWANCE AS UNDER: 6. DECISION: THE APPELLANT COMPANY IS IN A RETAIL BUSINESS OF ME DICINES AND OPTICAL INSTRUMENTS AND IS HAVING 50 MEDICAL SHOPS IN HYDERABAD AND BANGALORE. THE APPELLANT COMPANY MAINLY PURCHAS ES ITS MEDICINES AND OPTICAL INSTRUMENTS FROM TWO OF ITS G ROUP CONCERNS M/S VALUE PHARMA HOLISTIC REMEDIES PVT. LTD. (VPHRP L) AND M/S VALUE VISION OPTICALS PVT. LTD. (WOPL). THE APPELLA NT HAS A TURNOVER OF RS. 17,40,23,492/-. THE PURCHASES MADE DURING TH E YEAR WERE RS. 13,70,09,209/- AND THERE WAS AN INCREASE IN THE INV ENTORY BY 2,00,62,812/-. THUS, THE COST OF SALES WAS RS. 11,6 9,46,397/-. THUS, THERE WAS A GROSS PROFIT OF 49% APPROXIMATELY ON PU RCHASE VALUE. THE APPELLANT MADE A TOTAL PURCHASE FROM BOTH THE G ROUP COMPANIES OF RS. 12,07,28,583/- (RS.7,39,39,580/- FROM VPHRPL AND RS. 4,67,89,003/- FROM WOPL) OUT OF WHICH THE SUM OF RS . 5,42,45,189/WAS MADE IN CHEQUE AND RS. 7,59,00,557/ - WAS MADE IN CASH. THE CASH PAYMENT OF RS. 3,19,00,557/- WAS MADE TO VPHRPL AND RS. 4,40,00,000/- WAS MADE TO WOPL. THE APPELLANT THUS MADE 88% OF ITS PURCHASES FROM THE GROUP CONCE RNS. THE OVERALL GP OF THE APPELLANT WAS A HEALTHY 49% ON PURCHASE V ALUE AND 33% ON SALE VALUE. THE APPELLANT IN THE AUDIT REPORT HAS MENTIONED THA T THE PAYMENTS TO BOTH THE CONCERNS WERE MADE IN 'CASH'. THE APPELLANT LATER ON FILED AN AUDIT REPORT REVISING THE PAYMENT S REGARDING CASH. THE APPELLANT INCLUDING THE ABOVE TWO CONCERNS NAME LY VPHRPL AND WOPL ARE UNDER THE SAME MANAGEMENT AND P ROMOTERS. THE THREE CONCERNS HAVE THE SAME PROMOTER MR.SHRI D ILIP CHAKRAVARTHY BYRA. THE APPELLANT EXPLAINED THAT THE CASH SALES MADE AT THE COUNTER OF THE APPELLANT'S 50 ODD MEDIC AL SHOPS WAS DIRECTLY UTILISED BY THE TWO GROUP COMPANIES WHICH WERE THE SUPPLIER OF THE APPELLANT IN ORDER TO EXPEDITE THE PAYMENTS TO THEIR SUPPLIERS IN TERM. ITA NO. 2056/HYD/2018 :- 3 -: THUS THE CASH GENERATED OUT OF OVER THE COUNTER SAL ES MADE BY THE APPELLANT IN ITS OUTLETS WERE DIRECTLY PAID/COL LECTED TO/BY THE CONCERNS VPHRPL AND VVOPL. THE APPELLANT STATED THAT THE PAYMENT MADE WAS GENU INE, THE IDENTITY OF THE PURCHASE PARTY WAS ESTABLISHED AND A BONA FIDE EXPENDITURE WAS INCURRED BY THE APPELLANT AND THERE WAS NO INTENTION TO EVADE ANY TAX ON ACCOUNT OF THE SAME. THE APPELLANT FURTHER STATED THAT ALREADY A SIZABLE GROSS PROFIT HAS BEEN DECLARED BY THE APPELLANT. THE APPELLANT HAD A TOTAL TURNOVER OF RS. 17,40,23, 492/- AND THE CORRESPONDING PURCHASES WAS RS. 11,69,46,397/-, THUS A GROSS PROFIT OF RS. 5,70,77,095/- IMPLYING A GROSS PROFIT OF 33% ON SALES IN THE BUSINESS. THE ABOVE INCLUDED THE PURCHASES MADE FROM THE SISTER CONCERN BEING 90% OF THE TOTAL PURCHASES INCLUDING THE QUANTUM PAID IN CASH OF RS. 7,59,00,557/-. THUS ON A PRIMARY BAS IS THE GROSS PROFIT DECLARED BY THE APPELLANT WAS HEALTHY AND ALSO THE AO HAS NOT OBJECTED TO THE BOOK RESULTS OR THE ISSUE REGARDING THE ARMS LENGTH PRICE VIS-A-VIS PURCHASE FROM THE GROUP CONCERNS OF THE APPELLANT, WHICH THUS HAS BEEN FOUND TO BE IN ORDER. THE AO AL SO DID NOT FIND THAT THE PRICE DIFFERENCE PERTAINING TO THE PAYMENT S MADE IN CASH TO THE GROUP CONCERNS (OF QUANTUM OF RS.7,59,00,557/-) VIS-A-VIS THE PAYMENTS MADE IN CHEQUE (OF QUANTUM OF RS. 5,42,45, 189/-) TO THOSE GROUP CONCERNS. THE APPELLANT FURTHER FILED CONFIRMATIONS THAT THE CASH RECEIVED ON COUNTER SALES WERE DIRECTLY ALLOWED TO BE TAKEN BY THE RESPECTIVE PARTIES. THE APPELLANT STATED THAT THE CASH REALIZE D BY SALES WERE DIRECTLY REMITTED TO VPHRPL AND VVOPL AGAINST THEIR OUTSTANDING BALANCES. THUS, THE CONCLUSION PRIMA FACIE CAN BE DRAWN THAT THE APPELLANT WAS RUNNING A BONA FIDE AND A GENUINE BUS INESS AND REFLECTING PROPER BOOK RESULTS AND THE PURCHASES MA DE FROM THE GROUP CONCERNED WERE AT ARM'S LENGTH IRRESPECTIVE OF THE MODE OF PAYMENT BEING CHEQUE OR CASH. THE PROVISIONS OF SECTION 40A (2)(B) HAVE ALSO NOT BEEN INVOKED IN THE CASE OF THE SAID PURCHASES FROM THESE TWO GROUP CONCERNS. THE AO NOTED THAT THE PAYMENT ARE MADE IN CASH AND THEREFORE THE PROVISIONS OF SECTION 40A(3) OF THE INCOME TAX ACT WERE APPLICABLE IN THIS REGARD. THE AO OBSERVED THAT SECTION 40A(3) IS VERY CLEAR I N THIS REGARD, WHEREIN THE PAYMENTS MADE OF MORE THAN RS. 20,000/- WAS MADE BY THE APPELLANT WITHOUT ANY STRONG BUSINESS O BLIGATION AND EXIGENCY THAT WARRANTS PAYMENT IN CASH AS THE OTHER GROUP CONCERNS WERE BOTH THE SUPPLIERS OF THE SISTER CONCERN AND T HIS CONCEPT OF DIRECT COLLECTION IS NOT ACCEPTABLE IN THE INSTANT CASE AND THEREFORE THE ITA NO. 2056/HYD/2018 :- 4 -: CASE DOES NOT FALL UNDER THE CATEGORY OF EXCEPTIONS TO RULE 6DD OF THE INCOME TAX ACT, 1961. THUS, THE ISSUES IS TO EXAMINED IS WHAT 'CASH' PAYM ENTS CAN BE COVERED UNDER THE DOMAIN OF SECTION 40A(3) ON TH E BASIS OF THE EXAMINATION OF THE TRANSACTION UNDER CONSIDERATION IN AN EXHAUSTIVE MANNER AND NOT ON A PRIMA FACIE BASIS AND WHETHER R ULE 6DD IS EXHAUSTIVE OR NOT? THE HON'BLE SUPREME COURT IN THE CASE OF ATTAR SING H GURMUKH SINGH VS INCOME TAX OFFICER, LUDHIANA ETC VIDE JUDG EMENT DATED 7 AUGUST, 1991(191 ITR 667) OBSERVED AS UNDER: 'IN OUR OPINION, THERE IS LITTLE MERIT IN THIS CONT ENTION. SECTION 40A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSION O F RULE 6DD. THE SECTION MUST BE READ ALONG WITH THE RULE. IF READ T OGETHER. IT WILL BE CLEAR THAT THE PROVISIONS ARE NOT INTENDED TO RESTR ICT THE BUSINESS ACTIVITIES. THERE IS NO RESTRICTION ON THE ASSESSEE IN HIS TRADING ACTIVITIES. SECTION 40A(3) ONLY EMPOWERS THE ASSESS ING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RE SPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED CHEQUE OR CROSSED BA NK DRAFT. THE PAYMENT BY CROSSED CHEQUE OR CROSSED BANK DRAFT IS INSISTED ON TO ENABLE THE ASSESSING AUTHORITY TO ASCERTAIN WHET HER THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF THE INCOME FRO M DISCLOSED SOURCES. THE TERMS OF SECTION 40A(3) ARE NOT ABSOLUTE. CONSI DERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. THE GENUINE AND BONAFIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISF ACTION OF THE ASSESSING OFFICER THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A(3) WAS NOT PRACTIC ABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PER SON 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 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 THE BUSINESS TRANSACTIONS AND TO PREVENT T HE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLAC K-MONEY FOR BUSINESS TRANSACTIONS. SEE: MUDIAM OIL COMPANY V. ITO, [1973] 92 ITR 519 A .P. IF THE PAYMENT IS MADE BY A CROSSED CHEQUE DRAWN ON A BANK OR A CROSSED BANK DRAFT THEN IT WILL BE EASIER TO ASCERTAIN, WHE N DEDUCTION IS CLAIMED, WHETHER THE PAYMENT WAS GENUINE AND WHETHE R IT WAS OUT ITA NO. 2056/HYD/2018 :- 5 -: OF THE INCOME FROM DISCLOSED SOURCES. IN INTERPRETI NG A TAXING STATUTE THE COURT CANNOT BE OBLIVIOUS OF THE PROLIFERATION OF BLACKMONEY WHICH IS UNDER CIRCULATION IN OUR COUNTRY. ANY RESTRAINT INTENDED TO CURB THE CHANCES AND OPPORTUNITIES TO USE OR CREATE BLACK-MO NEY- SHOULD NOT BE REGARDED AS CURTAILING THE FREEDOM OF TRADE OR B USINESS. AS TO THE SECOND QUESTION IT MAY BE STATED THAT THE WORD 'EXP ENDITURE' HAS NOT BEEN DEFINED IN THE ACT. IT IS A WORD OF WIDE IMPOR T. SECTION 40A(3) REFERS TO THE EXPENDITURE INCURRED BY THE ASSESSEE IN RESPECT OF WHICH PAYMENT IS MADE. IT MEANS ALL OUTGOINGS ARE BROUGHT UNDER THE WORD 'EXPENDITURE' FOR THE PURPOSE OF THE SECTION. THE E XPENDITURE FOR PURCHASING THE STOCK-IN-TRADE IS ONE OF SUCH OUTGOI NGS. THE VALUE OF THE STOCK-IN-TRADE HAS TO BE TAKEN INTO ACCOUNT WHI LE DETERMINING THE GROSS PROFITS UNDER SECTION 280 ON PRINCIPLES OF CO MMERCIAL ACCOUNTING. THE PAYMENTS MADE FOR PURCHASES WOULD A LSO BE COVERED BY THE WORD 'EXPENDITURE' AND SUCH PAYMENTS CAN BE DISALLOWED IF THEY ARE MADE IN CASH IN THE' SUMS EXCEEDING THE AM OUNT SPECIFIED UNDER SECTION 40A(3). WE HAVE EARLIER OBSERVED THAT RULE 6DD HAS TO BE READ ALONG WITH SECTION 40A(3).THE RULE ALSO CON TEMPLATES PAYMENTS MADE FOR STOCK-IN-TRADE AND RAW MATERIALS. THIS RULE IS IN ACCORDANCE WITH THE TERMS OF SECTION 40A(3). THE RU LE PROVIDES THAT AN ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENTS O F PAYMENT BY CROSSED CHEQUE OR A CROSSED BANK DRAFT WHERE THE PU RCHASES ARE MADE OF CERTAIN AGRICULTURAL OR HORTICULTURAL COMMO DITIES OR FROM A VILLAGE WHERE THERE IS NO BANKING FACILITY. SECTION 40A(3) IS, THEREFORE. ATTRACTED TO PAYMENTS MADE FOR ACQUIRING STOCK-IN-T RADE AND OTHER MATERIALS. THIS IS ALSO THE VIEW TAKEN BY SEVERAL H IGH COURTS SEE SAJOWANLAL JAISWAL V. CIT, [1976] 103 ITR 706 ORISS A; UP. HARDWARE STORE V. CIT, [1976] 104 ITR 664 ALLAHABAD; RATAN U DYOG V. ITO, [1977] 109 ITR 1 ALLAHABAD; P.R. TEXTILES V. CIT. K ERALA, [19801 121ITR 237 KERALA; CIT, V. KISHAN CHAND MAHESWARI D ASS. [1980] 121ITR 23! P & H; KANTI LAL PURSHOTTAM AND CO. V. C IT, [1985] 155 ITR 519 RAJ; CIT, V. NEW LIGHT TIN MFG. CO., [1980] 121 ITR 229 P & H; FAKRI AUTOMOBILES V. CIT, [1986] 160 ITR 504 RAJ ; VENKATA SATAYANARAYANA TIMBER DEPOT V. ITR, [1987] 165 ITR 253 AP.; AND AKASH FILMS V. CIT, [1991] ITR 32 KARNATAKA. THE DE CISIONS OF THE HIGH COURTS OF ANDHRA PRADESH, ORISSA, ALLAHABAD, K ERALA, KARNATAKA, PUNJAB & HARYANA, RAJASTHAN AND PATNA AR E TO THE EFFECT THAT THE PAYMENTS MADE FOR PURCHASING STOCK-IN-TRAD E OR RAW MATERIALS SHOULD ALSO BE REGARDED AS EXPENDITURE FO R THE PURPOSE OF SECTION 40A(3). THE ONLY DISCORDANT NOTE STRUCK ON THIS ASPECT IS BY THE GAUHATI HIGH COURT IN CIT V. HARDWARE EXCHANGE, [1991] 190 ITR 61. THE GAUHATI HIGH COURT HAS OBSERVED THAT SECTIO N 40A(3) APPLIES' ONLY TO PAYMENTS MADE ON ACCOUNT OF 'EXPENDITURE IN CURRED' AND THE PAYMENT MADE PURCHASE OF STOCK-IN-TRADE CANNOT BE T ERMED AS 'EXPENDITURE INCURRED SINCE MONEY DOES NOT GO IRRET RIEVABLY IN SUCH CASES. WE ARE UNABLE TO AGREE WITH THE VIEW TAKEN B Y THE GAUHATI HIGH COURT. ' ITA NO. 2056/HYD/2018 :- 6 -: THUS FROM THE ABOVE JUDGEMENTS, THE PURCHASES MADE BY THE APPELLANT WOULD COME UNDER THE PURVIEW OF SECTION 4 0A(3) AS HELD BY THE HON'BLE APEX COURT, HOWEVER THE HON'BLE APEX CO URT FURTHER OBSERVES THAT THE TERMS OF SECTION 40A(3) ARE NOT A BSOLUTE AND THE APPELLANT CAN PROVE THE GENUINENESS AND BONAFIDES O F TRANSACTIONS, IDENTITY OF THE BUYER TO CLAIM TO BE NOT TO BE CONS IDERED WITHIN THE RIGOURS OF SECTION 40A(3). IN THE CASE OF WALFORD TRANSPORT (EASTERN INDIA) VS . CIT (1999) 240 ITR 902, IT WAS OBSERVED 'FROM A PERUSAL OF THE DECISION OF DIFFERENT HIGH C OURTS REFERRED TO ABOVE, IT CLEARLY EMERGES THAT THE PURPOSE OF SECTI ON 40A(3) OF THE ACT IS NOT TO PENALIZED THE ASSESSEE FOR MAKING CASH PA YMENT OF AN AMOUNT OF RS. 2,500/- OR ABOVE. THE PURPOSE IS ONLY PREVENT AND TO CHECK EVASION OF TAX AND FLOW OF UNACCOUNTED MONEY OR TO CHECK TRANSACTIONS WHICH ARE NOT GENUINE AND MAY BE PUT A S CAMOUFLAGE TO EVADE LOX BY SHOWING FICTITIOUS OF FALSE TRANSACTIO NS.' THE GUJARAT HIGH COURT IN THE CASE OF ANUPAM TELE S ERVICES VS ITO IN TA NO. 556 OF 2013 VIDE JUDGEMENT DATED 22.01.2014 FOR AN ISSUE UNDER CONSIDERATION FOR A.Y. 2006-07 WHICH WAS SUBS EQUENT TO THE AMENDMENT OF RULE 6DD OBSERVED 'IT COULD BE APPRECIATED THAT SECTION 40A AND IN PA RTICULAR SUB-CLAUSE (3) THEREOF AIMS AT CURBING THE POSSIBILITY OF ON-M ONEY TRANSACTIONS BY INSISTING THAT ALL PAYMENTS WHERE EXPENDITURE IN EX CESS OF A CERTAIN SUM [IN THE PRESENT CASE TWENTY THOUSAND RUPEES] MU ST BE MADE BY WAY OF ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCO UNT PAYEE BANK DRAFT. AS HELD BY THE APEX COURT IN CASE OF ATTAR SINGH GU RMUKH SINGH (SUPRA], ' .. IN OUR OPINION, THERE IS LITTLE MERIT IN THIS CONTENTION. SECTION 40A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSION OF RIDE 6DD. THE SECTION MUST BE READ ALONG WITH THE RULE. IF READ TOGETHER, IT WILL BE CLEAR THAT THE 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 TH E ASSESSING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RESPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED CHEQUE OR CROSSED BA NK DRAFT. THE PAYMENT BY CROSSED CHEQUE OR CROSSED BANK DRAFT IS INSISTED ON TO ENABLE THE ASSESSING AVTHORITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF THE INCOME FRO M UNDISCLOSED SOURCES. THE TERMS OF SECTION 40A(3) ARE ARE NOT AB SOLUTE. CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER REL EVANT FACTORS ARE NOT EXCLUDED. GENUINE AND BONAFIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSE E TO FURNISH TO THE SATISFACTION OF THE ASSESSING OFFICER THE CIRCUMSTA NCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A (3) WAS NOT ITA NO. 2056/HYD/2018 :- 7 -: PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WH O HAS RECEIVED THE CASH PAYMENT. RULE 6DD PROVIDES THAT AN ASSESSEE CA N BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSSED BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED UNDER THE RIDE. 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 P REVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLAC K MONEY FOR BUSINESS TRANSACTIONS. ' IT WAS BECAUSE OF THESE CONSIDERATIONS THAT THIS CO URT IN CASE OF HYNOUP FOODS PRIVATE LIMITED [SUPRA] OBSERVED THAT THE GENUINENESS OF THE PAYMENT AND THE IDENTITY OF THE PAYEE ARE TH E FIRST AND FOREMOST REQUIREMENTS TO INVOKE THE EXCEPTIONS CARV ED OUT IN RULE 6DD(J) OF THE INCOME-TAX RULES, 1962. IN THE PRESENT CASE, NEITHER THE GENUINENESS OF THE PAYMENT NOR THE IDENTITY OF THE PAYEE WERE IN ANY CASE DOUBTED. THE SE WERE THE CONCLUSIONS ON FACTS DRAWN BY THE APPELLATE COMMISS IONER. THE TRIBUNAL ALSO DID NOT DISTURB SUCH FACTS BUT RELIED SOLELY ON RULE 6DD (J) OF THE RULES TO HOLD THAT SINCE THE CASE OF THE ASSESSEE DID NOT FALL UNDER THE SAID EXCLUSION CLAUSE NOR WAS COVERED UND ER ANY OF THE CLAUSES OF RULE 6DD, CONSEQUENCES ENVISAGED IN SECT ION 40A(3) OF THE ACT MUST FOLLOW. IN OUR OPINION, THE TRIBUNAL COMMITTED AN ERROR IN COMING TO SUCH A CONCLUSION. WE WOULD BASE OUR CONCLUSIONS ON THE FO LLOWING REASONS [A] THE PARAMOUNT CONSIDERATION OF SECTION 40A(3) I S TO CURB AND REDUCE THE POSSIBILITIES OF BLACK MONEY TRANSACTION S. AS HELD BY THE SUPREME COURT IN ATTAR SINGH GURMUKH SINGH [SUPRA], SECTION 40A(3) OF THE ACT DOES NOT ELIMINATE CONSIDERATIONS OF BUS INESS EXPEDIENCIES. [B] IN THE PRESENT CASE, THE APPELLANT ASSESSEE WAS COMPELLED TO MAKE CASH PAYMENTS ON ACCOUNT OF PECULIAR SITUATION . SUCH SITUATION WAS AS FOLLOW - [I] THE PRINCIPAL COMPANY, TO WHICH THE ASSESSEE WA S A DISTRIBUTOR, INSISTED THAT CHEQUE PAYMENT FROM A COOPERATIVE BAN K WOULD NOT DO, SINCE THE REALIZATION TAKES A LONGER TIME; [II] THE ASSESSEE WAS, THEREFORE, REQUIRED TO MAKE CASH PAYMENTS ONLY; [III] TATA TELESERVICES LIMITED ASSURED THE ASSESSE E THAT SUCH AMOUNT SHALL BE DEPOSITED IN THEIR BANK ACCOUNT ON BEHALF OF THE ASSESSEE; [IV] IT IS NOT DISPUTED THAT THE TATA TELESERVICES LIMITED DID NOT ACT ON SUCH PROMISE; ITA NO. 2056/HYD/2018 :- 8 -: [V] IF THE ASSESSEE HAD NOT MADE CASH PAYMENT AND R ELIED ON CHEQUE PAYMENTS ALONE, IT WOULD HAVE RECEIVED THE RECHARGE VOUCHERS DELAYED BY 4/5 DAYS AND THEREBY SEVERELY AFFECTING ITS BUSINESS OPERATIONS. WE WOULD FIND THAT THE PAYMENTS BETWEEN THE ASSESSE E AND THE TATA TELESERVICES LIMITED WERE GENUINE. THE TATA TELESER VICES LIMITED HAD INSISTED THAT SUCH PAYMENTS BE MADE IN CASH, WHICH TATA TELESERVICES LIMITED IN TURN ASSURED AND DEPOSITED THE AMOUNT IN A BANK ACCOUNT. IN THE FACTS OF THE PRESENT CASE, RIG ORS OF SECTION 40A(3) OF THE ACT MUST BE LIFTED. WE NOTICE THAT THE DIVISION BENCH OF THE RAJASTHAN HIGH COURT IN CASE OF SMT. HARSHILA CHORDIA VS. INCOME-TAX OFFICER, RE PORTED IN [2008] 298 ITR 349 (RAJ) HAD OBSERVED THAT THE EXCEPTIONS CONTAINED IN RULE 6DD ARE NOT EXHAUSTIVE AND THAT THE SAID RULE MUST BE INTERPRETED LIBERALLY. BEFORE CLOSING, WE MAY CLARIFY THAT THE ABOVE OBSER VATIONS WOULD APPLY ONLY TO THE CASH PAYMENTS MADE BY THE ASSESSE E TO THE TATA TELESERVICES LIMITED. NO SUCH PECULIAR FACTS ARISE IN CASE OF PAYMENTS MADE TO THE OTHER TWO AGENCIES VIZ., RAJVI ENTERPRI SE AND R.D LNFOCOM. LEARNED COUNSEL FOR THE APPELLANT ALSO CLA RIFIED THAT THIS APPEAL IS CONFINED TO ONLY THE PAYMENTS MADE TO TAT A TE\ESERVICES LIMITED AND NO OTHERS. IN THE RESULT, THE QUESTION IS ANSWERED IN FAVOUR O F THE APPELLANT ASSESSEE AND AGAINST THE REVENUE. JUDGMENT OF THE T RIBUNAL IS REVERSED. TAX APPEAL IS ALLOWED. ORDER ACCORDINGLY. ' IN THE CASE OF APPELLANT, THE PAYMENT MADE TO THE G ROUP CONCERNS IS NOT DOUTED, IMPLYING THAT THE IDENTITY OF THE RECIP IENT IS PROVED AND ALSO THEY HAVE TAKEN INTO ACCOUNT THE TRANSACTIONS OF SALE TO APPELLANT AND THE RECEIPT IN CASH IN THE BOOKS OF A CCOUNTS AND THE SAME HAS BEEN DISCLOSED TO THE DEPARTMENT IN THE IN COME TAX RETURNS. THE TRANSACTION BETWEEN THE APPELLANT AND THE GROUP CONCERNS OF THE PURCHASES MADE IN CASH AND IN CHEQU E ARE AT THE SAME PRICES AND THE PROVISIONS OF SECTION 40A(2)(B) HAVE NOT BEEN INVOKED IN THE CASE OF THE SAID PURCHASES. THUS, IT CAN BE CONCLUDED THAT THE PURCHASES ARE MA DE AT FAIR MARKET VALUE AND THE IDENTITY OF THE SUPPLIER IS NOT DOUBT ED THEREFORE, THE SAID TRANSACTIONS ARE GENUINE AND ALSO THE APPELLAN T HAS REFLECTED A HEALTHY GROSS PROFIT OF 33%% WITH REGARD TO THE BUS INESS. THE APPELLANT HAS FURTHER FLIED THE REQUIREMENT OF RECEIPT ON COUNTER SALES TO BE COLLECTED BY THE SUPPLIER AS UNDER: VALUE VISION OPTICALS PVT. LTD THE INCOME TAX OFFICER, ITA NO. 2056/HYD/2018 :- 9 -: ..SIR, SUB: SUBMISSION OF CLARIFICATION LETTER FOR CASH CO UNTER SALES RECEIVED FROM VALUE PHARMA RETAIL PRIVATE LIM ITED DURING THE FY 2014-15 REG. REF: PAN: AADCV2130Q THE VALUE VIOSION OPTICAL PRIVATE LIMITED IS A GROU P COMPANY OF VALUE PHARMA RETAIN PRIVATE LIMITED, VALUE PHARMA HOLISTI C REMEDIES PRIVATE LIMITED AND IS INTO THE BUSINESS OF WHOLE S ALE TRADING OF PHARMACEUTICALS. DURING THE FINANCIAL YEAR 2014-15 OUR COMPANY HAS SUPPLIED OPTICLAS, FRAMES, LENSES AND CONTACT L ENSES ETC TO VALUE PHARMA RETAIL PRIVATE LIMITED AND WE WERE ALL OWED TO RECEIVE THE COUNTER COLLECTIONS DIRECTLY TO OUR ACCOUNT FOR SETTLEMENT OF AMOUNTS RECEIVABLES FROM VALUE VALUE PHARMA RETAIL PRIVATE LIMITED. ACCORDINGLY WE HAVE RECEIVED CASH COLLECTIONS TO OU R ACCOUNT DIRECTLY. WE ARE HEREWITH ENCLOSING LEDGER ACCOUNT COPY OF VA LUE PHARMA RETAIL PRIVATE LIMITED IN OUR BOOKS. WE REQUEST YOU TO CONSIDER THE ABOVE CLARIFICATION FOR THE PURPOSE OF SCRUTINY ASSESSMENT OF VALUE PHARMA RETAIL PRIVATE LIMITED. VALUE PHARMA HOLISTIC REMEDIES PRIVATE LIMITED THE INCOME TAX OFFICER SIR, SUB: SUBMISSION OF CLARIFICATION LETTER FOR CASH CO UNTER SALES RECEIVED FROM VALUE PHARMA RETAIL PRIVATE LIMITED D URINQ THE FY 2014-15 - REG. REF: PAN: AADCV2130Q THE VALUE PHARMA HOLISTIC REMEDIES PRIVATE LIMITED IS A GROUP COMPANY OF VALUE PHARMA RETAIL PRIVATE LIMITED, VAL UE VISION OPTICAL PRIVATE LIMITED AND IS INTO THE BUSINESS OF WHOLE S ALE TRADING OF PHARMACEUTICALS. DURING THE FINANCIAL YEAR 2014-15 OUR COMPANY HAS SUPPLIED MEDICINES, FOOD ITEMS, GENERAL ITEMS E TC. TO VALUE PHARMA RETAIL PRIVATE LIMITED AND WE WERE ALLOWED T O RECEIVE THE COUNTER COLLECTIONS DIRECTLY TO OUR ACCOUNT FOR SET TLEMENT OF AMOUNTS RECEIVABLES FROM VALUE VALUE PHARMA RETAIL PRIVATE LIMITED. ACCORDINGLY WE HAVE RECEIVED CASH COLLECTIONS TO OU R ACCOUNT DIRECTLY. WE ARE HEREWITH ENCLOSING LEDGER ACCOUNT COPY OF VA LUE PHARMA RETAIL PRIVATE LIMITED IN OUR BOOKS. WE REQUEST YOU TO CONSIDER THE ABOVE CLARIFICATION FOR THE PURPOSE OF SCRUTINY ASSESSMENT OF VALUE PHARMA RETA IL PRIVATE LIMITED. ITA NO. 2056/HYD/2018 :- 10 -: THE APPELLANT FURTHER FILED THE MODS WITH BOTH THE SUPPLIERS AS UNDER: MEMORANDUM OF UNDERSTANDING THIS MEMORANDUM OF UNDERSTANDING IS MADE AND EXECUT ED ON THIS THE DAY OF 1 ST MARCH OF 2014 IN HYDERABAD IN BETWEEN VALUE PHARMA RETAIL (HYD) PVT. LTD., AND VALUE PHARMA HOL ISTIC REMEDIES PVT. LTD VALUE PHARMA RETAIL (HYD) PUT. LTD HAS RETAIL PHARM ACY OUT LETS AND PURCHASES ALL ITS REQUIRED DRUGS/MEDICINES /GENERAL ITEMS FROM VALUE PHARMA HOLISTIC REMEDIES PUT LTD., VALUE PHARMA HOLISTIC REMEDIES PUT. LTD., IS A WHOLESALER IN PHARMACY AND SELLS DRUGS/ MEDICINES/ GENERAL ITEMS TO RETAILERS AGAINST CASH PURCHASE. HEREBY BOTH PARTIES AGREED THAT THE VALUE PHARMA RE TAIL (HYD) PUT. LTD WILL ACCESS THE AUTHORIZED PERSON OF PHARM A HOLISTIC REMEDIES PUT. TO ALL OF ITS RETAIL STORES TO COLLEC T THE CASH COLLECTIONS AND PHARMA HOLISTIC REMEDIES PUT. WILL PROVIDE ITS AUTHORIZED PERSON AND SENDS DAILY TO RETAIL STORES OF VALUE PHARMA RE TAIL (HYD) PUT. LTD., TO COLLECT THE CASH AND REMIT THE SAME AGAINS T PURCHASES ACCOUNT AND WILL FINALIZE THE BOOKS FROM TIME TO TI ME. MEMORANDUM OF UNDERSTANDING THIS MEMORANDUM OF UNDERSTANDING IS MADE AND EXECUT ED ON THIS THE DAY OF 1 ST MARCH OF 2014 IN HYDERABAD IN BETWEEN VALUE PHARMA RETAIL (HYD) PVT. LTD., AND VALUE PHARMA HOL ISTIC REMEDIES PVT. LTD., VALUE PHARMA RETAIL (HYD) PUT. LTD., HAS RETAIL PHA RMACY OUT LETS AND PURCHASES ALL ITS REQUIRED DRUGS/ MEDICINE S/ GENERAL ITEMS FROM VALUE PHARMA HOLISTIC REMEDIES PUT. LTD., VALU E PHARMA HOLISTIC REMEDIES PUT LTD IS A WHOLESALER IN PHARMACY AND SE LLS DRUGS/ MEDICINES/ GENERAL ITEMS TO RETAILERS AGAINST CASH PURCHASE. HEREBY BOTH PARTIES AGREED THAT 'THE VALUE PHARMA R ETAIL (HYD) PUT. LTD., WILL ACCESS THE AUTHORIZED PERSON OF PHA RMA HOLISTIC REMEDIES PUT. TO ALL OF ITS RETAIL STORES TO COLLEC T THE CASH COLLECTIONS AND PHARMA HOLISTIC REMEDIES PUT. WILL PROVIDE ITS AUTHORIZED PERSON AND SENDS DAILY TO RETAIL STORES OF VALUE PHARMA RE TAIL (HYD) PUT. LID., TO COLLECT THE CASH AND REMIT THE SAME AGAINS T PURCHASES ACCOUNT AND WILL FINALIZE THE BOOKS FROM TIME TO TI ME. THE MODS IS BETWEEN BOTH THE SUPPLIERS AND THE APPE LLANT FOR THE COLLECTION OF OVER THE COUNTER SALES MADE BY TH E APPELLANT TO BE DIRECTLY COLLECTED BY THE SUPPLIER PARTY. ITA NO. 2056/HYD/2018 :- 11 -: ITA NO. 2056/HYD/2018 :- 12 -: TERMS OF REPAYMENT REPAYABLE ON DEMAND NATURE OF SECURITY CASH CREDIT AVAILED FROM BANK OF BARODA, PUNJAGUTTA BRANCH, HYDERABAD, AGAINST PRIMARY SECURITY OF HYPOTHECATIO N OF ALL STOCKS AND RECEIVABLES AND COLLATERAL SECURITY OF PROPERTY BELONGING TO SRI. PAVANI BYRA, FLAT NO. 202, SAFA APARTMENT, RNO. 11- 5-397, RED HILLS, HYDERABAD AND OPEN PLOT NO. 74 ADMEASURING 400 SQ.Y ARDS SITUATED AT TANASHAH NAGAR RESIDENTIAL COMPLEX, SUR VEY NO 4, POKALWAD A VILLAGE, MANIKONDA JAGIR GRAMPANCHAYATH, RAJENDRA NAGAR MANDAI, RANGA REDDY DISTRICT AND ALSO PERSONA L GURANTEE OF DIRECTORS (SRI. DITEEP CHAKRAVARTHY BYRA AND PAVANI CHILIKURI FROM THE ABOVE IT CAN BE OBSERVED THAT VPHRPL WORKS ON A GROSS PROFIT MARGIN OF APPROXIMATELY 5 TO 6 PERCENT, WHER EIN AFTER THAT THE INTEREST COST IS APPROXIMATELY 2.04% AND A NET PROF IT OF 0.44%. THUS, THE GROUP COMPANY OF APPELLANT WORKS ON A THIN MARG IN AND THE INTEREST COST IS SUBSTANTIAL AND ANY SAVING OF INTE REST BY DIRECTLY ITA NO. 2056/HYD/2018 :- 13 -: DEPOSITING THE CASH SO RECEIVED, SUBSTANTIALLY REDU CES THE INTEREST BURDEN OF THE SUPPLIER GROUP COMPANY. THE INTEREST COST IS ALMOST FIVE TIMES THE NET PROFIT OF THE COMPANY SO ANY REDUCTIO N OF THE INTEREST COST WILL DRASTICALLY IMPROVE THE PROFITS OF THE SU PPLIER COMPANY VPHRPL, SIMILARLY IN THE CASE OF VVOPL IT IS SEEN ITA NO. 2056/HYD/2018 :- 14 -: TERMS OF REPAYMENT REPAYABLE ON DEMAND NATURE OF SECURITY CASH CREDIT AVAILED FROM BANK OF BARODA, PUNJAGUTTA BRANCH, AGAINST PRIMARY SECURITY OF HYPOTHECATION OF ALL ST OCKS AND RECEIVABLES AND ALSO PERSOAN1 GURANLEE OF DIRECTORS (SRI. DILEEP CHAKRAVARTHY BYRA AND PAVANI CHITIKURI AND COLLETER AL SECURITY OF PROPERTY BELONGING TO IN THIS CASE THE GROSS PROFIT IS AROUND 13% AND THE INTEREST COST IS AROUND 2.5 PERCENT, LEAVING A NET PROFIT OF APPROXI MATELY 0.32%. THUS, THE INTEREST COST IS APPROXIMATELY 8 TIMES TH E NET PROFIT AND ANY CHANGE IN THE REDUCTION OF INTEREST SERVICING WILL AFFECT THE PROFITABILITY OF THE GROUP COMPANY. IT IS IMPORTANT TO NOTE THAT VVOPL AND VVHRPL DO NO T HAVE A STRONG ASSET BASE AND THEY HAVE HYPOTHECATED STOCKS AND RE CEIVABLES ALONG WITH OTHER GUARANTEES. THUS, THE BORROWINGS OF 2.42 CRORE WHICH ARE SECURED BORROWINGS IN THE CASE OF VVHRPL AND THE BO RROWINGS OF 2.55 CRORES IN THE CASE OF VVOPL WHICH IS ALSO SECU RED BORROWINGS IS PRIMARILY BASED ON THE HYPOTHECATION OF RECEIVABLES . THUS, THE RECEIVABLES WHICH ARE PRIMARILY FROM THE APPELLANT COMPANY, IF ITA NO. 2056/HYD/2018 :- 15 -: DEPOSITED WELL BEFORE TIME REDUCES THE INTEREST COS T OF THE GROUP COMPANY AND ALSO DOES NOT CROSS THE THRESHOLDS OF T HE BORROWINGS. THUS, THE ARRANGEMENT MADE TO COLLECT THE COUNTER S ALES OF THE APPELLANT COMPANY BY THE SUPPLIER GROUP COMPANIES W AS ONLY TO REDUCE THEIR INTEREST COST BY MAKING DEPOSITS AT TH E EARLIEST. THOUGH THE ABOVE METHOD IS NOT THE BEST METHOD TO B E ADOPTED IN THE PRESENT AVAILABILITY OF E-TRANSACTIONS AND SUPER FA ST BANKING MODES, WHEREIN THE SAME AMOUNT OF CASH COLLECTION COULD HA VE BEEN DEPOSITED IN THE APPELLANT'S BANK ACCOUNT AND WOULD HAVE BEEN TRANSFERRED IMMEDIATELY TO THE GROUP COMPANY AND TH US THE TRANSACTION WOULD NOT HAVE BEEN MADE IN CASH AND TH E PROVISIONS OF SECTION 40A(3) WOULD NOT HAVE BEEN INVOKED BY A SIM PLE PROCESS OF DEPOSITING THE SAME AND CREDITING THE OTHER BANK AC COUNTS OF THE SUPPLIER COMPANIES ON THE EVEN DATE. HOWEVER, BY AD OPTING THE ALLOWANCE OF THE SUPPLIERS TO COLLECT THE CASH PERT AINING TO OVER THE COUNTER SALES ALSO IS NOT INTENDED TO EITHER EVADE TAX OR HIDE THE IDENTITY OF THE PURCHASE PARTY IN ANY MANNER. THE ALLAHABAD HIGH COURT VIDE ORDER DATED 28.07.201 1 IN ITA NO. 65 OF 2000 IN THE CASE OF M/S RAJESH CEMENT PIPE INDUS TRY VS. CIT HELD THAT AS THE GENUINENESS OF THE TRANSACTIONS WERE NO T IN DISPUTE, THE APPLICABILITY OF SECTION 40A(3) OF THE ACT AS A RUL E IS NOT TO DENY BASIC EXPENDITURE. THE JURISDICTIONAL HIGH COURT IN THE CASE OF SRI LA XMI SA TYANARAYANA OIL MILL VS. COMMISSIONER OF INCOME-TAX, R.C. NO.16 OF 2000 VIDE ORDER DATED JUNE 12, 2014 OBSERVED AS UNDER: '16-17. THE PURPORT OF SECTION 40 OF THE ACT FELL F OR CONSIDERATION AND INTERPRETATION BY THE HONBLE SUPREME COURT IN ATTAR SINGH GURMUKH SINGH V. ITO [1991] 191 ITR 667/59 TAXMAN 11. IT WA S IN THE CONTEXT OF A CHALLENGE UNDER SECTION 40A(3), THEIR LORDSHIP S OBSERVED, AS TO THE VALIDITY OF SECTION 40A(3), IT WAS URGED THAT, IF THE PRICE OF THE PURCHASED MATERIAL IS NOT ALLOWED TO BE ADJUSTE D AGAINST THE SALE PRICE OF THE MATERIAL SOLD FOR WANT OF PROOF OF PAY MENT BY A CROSSED CHEQUE OR A CROSSED BANK DRAFT, THEN THE INCOME-TAX LEVIED WILL NOT BE ON THE INCOME BUT IT WILL BE ON AN ASSUMED INCOME. IT IS SAID THAT THE PROVISION AUTHORIZING LEVY OF TAX ON AN ASSUMED INC OME WOULD BE A RESTRICTION ON THE RIGHT TO CARRY ON BUSINESS, BESI DES BEING ARBITRARY. 18. IN OUR OPINION, THERE IS LITTLE MERIT IN THIS C ONTENTION. SECTION 40A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCL USION OF RULE 6DD. THE SECTION MUST BE READ ALONG WITH THE RULE. IF RE AD TOGETHER, IT WILL BE CLEAR THAT THE PROVISIONS ARE NOT INTENDED TO RE STRICT THE BUSINESS ACTIVITIES. THERE IS NO RESTRICTION ON THE ASSESSEE IN HIS TRADING ACTIVITIES. SECTION 40A(3) ONLY EMPOWERS THE ASSESS ING OJJICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RE SPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED CHEQUE OR CROSSED BA NK DRAFT. THE ITA NO. 2056/HYD/2018 :- 16 -: PAYMENT BY CROSSED CHEQUE OR CROSSED BANK DRAFT IS INSISTED ON TO ENABLE THE ASSESSING AUTHORITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF THE INCOME FRO M UNDISCLOSED SOURCES. THE TERMS OF SECTION 40A(3) ARE NOT ABSOLU TE. CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS A RE NOT EXCLUDED. GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OU T 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 PRA CTICABLE 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 FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSS ED BANK' DRAFT IN THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT W ILL BE CLEAR FROM THE PROVISIONS OF SECTION 40A(3) AND RULE 6DD THAT THEY ARE INTENDED TO REGULATE BUSINESS TRANSACTIONS AND TO PREVENT THE U SE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTIONS. 19. SEVERAL HIGH COURTS FOLLOWED THIS DICTUM AND TO OK THE VIEW THAT THE PROVISION MUST BE INTERPRETED LIBERALLY AND THE ASSESSEES CANNOT BE SUBJECTED TO UNDUE RIGOR. THE RAJASTHAN HIGH COU RT IN SMT. HARSHILA CHORDIA V. ITO [2008/298 ITR 349 WENT A ST EP FURTHER, AND HELD THAT THE CIRCUMSTANCES MENTIONED IN THE CIRCUL AR OF THE CBDT CANNOT BE SAID TO BE EXHAUSTIVE, AND THAT THE BOARD CLEARLY EXPRESSED THE VIEW THAT CLAUSE OJ OF RULE 6DD MUST BE LIBERALLY CONSTRUED. 20. AS OBSERVED BY THE SUPREME COURT, ONCE AN ASSES SEE FURNISHES THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MA NNER PRESCRIBED IN SECTION 40A (3) LVAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE PROBLEMS, THE PROVISO, AND THEREBY T HE RULE 6DD, GET ATTRACTED. THE PARLIAMENT DID NOT INTEND THAT PAYME NT OF RS. 2, 500/- , OR MORE, MUST BE MADE ONLY THROUGH THE CROSSED CH EQUE. THIS IS EVIDENT FROM THE PROVISO TO SECTION 40A(3), RULE 6D D, AND THE CIRCULARS ISSUED FROM TIME TO TIME. CLAUSE (J)(2) O F RULE 6 DD TAKE IN THEIR FOLD, ALL THE CIRCUMSTANCES, UNDER WHICH AN A SSESSEE FACES IN THE COURSE OF HIS BUSINESS. PARAGRAPH 3(VI) OF THE CIRCULAR OF THE CBDT HAS FURTHER WIDENED THE SCOPE OF THE RULE, BY MENTI ONING THAT IF THE PAYMENT, OTHERWISE THAN THROUGH CHEQUE WAS MADE, ON BEING PROMISED AND SPECIFIC DISCOUNT BY THE SELLER, THE R IGOR OF SECTION 40A(3) DOES NOT APPLY. 21. CORNING TO THE FACTS OF THE CASE, THE CONSISTEN T PLEA OF THE APPLICANT WAS THAT IT HAD TO MAKE THE PAYMENT FOR P URCHASE OF THE GROUND-NUT, IN CASH, BECAUSE THE SELLER NOT ONLY IN SISTED ON THAT, BUT ALSO GAVE INCENTIVES, SUCH AS FACILITY OF PAYMENT W ITHIN ONE WEEK, AND DISCOUNT. THE CERTIFICATE ISSUED BY MIS SATYANA RAYANA TRADING COMPANY SUPPORTED THIS. THE QUESTION AS TO WHETHER THERE WAS ITA NO. 2056/HYD/2018 :- 17 -: JUSTIFICATION ON THE PART OF THE SELLER OF THE GOOD S IN IMPOSING SUCH CONDITIONS, IS OUTSIDE THE SCOPE OF THE ENQUIRY. AS A MATTER OF FACT, THERE EXISTED SOME JUSTIFICATION FOR THE TRADERS, A T LEAST AT THE RELEVANT POINT OF TIME, IN INSISTING THE PAYMENT OF AMOUNTS, IN CASH. THE REASON IS THAT THE BANKING ACTIVITY WAS NOT THAT PR OMINENT AND POPULAR, AND INSTANCES OF CHEQUES ISSUED BY AGENCIE S OR PERSONS, IN THE COURSE OF BUSINESS BEING BOUNCED, WERE NOT INFR EQUENT. THE DELAY IN RECEIVING THE CONSIDERATION FOR ANY MATERIAL SUP PLIED BY A TRADER WOULD HAVE ITS OWN CASCADING EFFECT ON THE BUSINESS ACTIVITIES. IT IS ONLY WHEN BOTH THE PARTIES TO THE CONTRACT ARE KNOW N TO EACH OTHER SO INTIMATELY, AND THE SELLER IS VERY CONFIDENT NOT ON LY OF THE SOLVENCY OF THE PURCHASER, BUT ALSO HIS BUSINESS ETHICS, THAT H E WOULD BE INCLINED TO RECEIVE THE CONSIDERATION THROUGH CHEQUE. 22. OBVIOUSLY BECAUSE THE PARLIAMENT AS WELL AS THE CBDT WERE LIVE 10 THESE ISSUES, THE PROVISIONS REFERRED TO ABOVE, WER ENACTED OR INCORPORATED. THE ASSESSING AUTHORITY HAS TAKEN A HYPER TECHNICAL VIEW AND FAILED TO DISCERN THE SPIRIT UNDERLYING TH E RELEVANT PROVISIONS. THOUGH THE APPELLATE AUTHORITY EXHIBITE D ON ELEMENT OF OBJECTIVITY, IT WAS ONLY IN A LIMITED ASPECT. THE TRIBUNAL HAS IGNORED THE PURPORT OF THE RELEVANT PROVISIONS OF LAW AND R EFUSED TO GRANT ANY RELIEF TO THE ASSESSEE. 23. WE ARE OF THE VIEW THAT ONCE THE ASSESSEE HAS P LACED THE PROOF OF PAYMENT OF THE CONSIDERATION, IN CASH, IN EXCESS OF RS.2,500/-, FOR ITS TRANSACTION TO THE SELLER, AND THE LATTER ADMITTED THE PAYMENT, THERE IS NO QUESTION OF DISALLOWING SUCH AMOUNT BY THE ASSES SING AUTHORITY. 24. THE QUESTION REFERRED TO IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. THE ABOVE INSTANCE IS SIMILAR TO THE CASE OF APPELL ANT WHERE THE GROUP CONCERNS HAD A LIEN ON THE SALES MADE OVER TH E COUNTER AS THEY WERE THE MAIN SUPPLIERS OF THE APPELLANT AND HAD IN TURN TAKEN OVERDRAFT FACILITY. THE IMMEDIATE DEPOSIT NOT ONLY REDUCE THE INTEREST COST BUT MORE IMPORTANTLY SAVED THE APPELLANT FROM CROSSING THE OVERDRAFT LIMIT WHICH WOULD HAVE CAUSED MORE PROBLE MS TO THE SUPPLIER GROUP COMPANIES. THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF GURD AS GARG V. CIT IN ITA NO.413 0[2014, DATED 16-7-2015 HELD AS UNDER 'IT IS IMPORTANT TO NOTE SOME OF THE FINDINGS OF FA CT BY THE CIT (APPEALS). THE IDENTITY OF THE PAYEES I.E. THE VEND ORS IN RESPECT OF THE LANDS PURCHASED BY THE APPELLANT, WAS ESTABLISHED. THE SALE DEEDS WERE PRODUCED. THE GENUINENESS THEREOF WAS ACCEPTED . THE AMOUNT PAID IN RESPECT OF EACH OF THESE AGREEMENTS WAS CER TIFIED BY THE STAMP REGISTRATION AUTHORITY. THE CIT (APPEALS) HEL D THE TRANSACTIONS TO BE GENUINE. ACCORDINGLY, THE CIT HELD THAT THE B AR AGAINST THE GRANT OF DEDUCTIONS UNDER SECTION 40A(3) OF THE ACT WAS NOT ATTRACTED. ITA NO. 2056/HYD/2018 :- 18 -: IT IS IMPORTANT TO NOTE THAT THE TRIBUNAL DID NAT U PSET THESE FINDINGS INCLUDING AS TO THE GENUINENESS AND THE CORRECTNESS OF THE TRANSACTIONS. IT IS ALSO IMPORTANT TO NOTE THAT THE TRIBUNAL NOTED THE CONTENTION ON BEHALF OF THE APPELLANT THAT THERE WA S A BOOM IN THE REAL ESTATE MARKET, THAT IT WAS NECESSARY, THEREFOR E, TO CONCLUDE THE TRANSACTIONS AT THE EARLIEST AND NOT TO POSTPONE TH EM; THAT THE APPELLANT DID NOT KNOW THE VENDORS AND OBVIOUSLY TH EREFORE, INSISTED FOR PAYMENT IN CASH AND THAT AS A RESULT THEREOF, P AYMENTS HAD TO BE MADE IMMEDIATELY TO SETTLE THE DEALS. THE TRIBUNAL DID NOT DOUBT HIS CASE. THE TRIBUNAL, HOWEVER, HELD THAT THE CLAIM FO R DEDUCTION WAS NOT SUSTAINABLE IN VIEW OF SECTION 40A(3) AS THE PA YMENTS WHICH WERE OVER RS 20,000/- WERE MADE IN CASH THE TRIBUNA L, THEREFORE. DISALLOWED THE SAME ONLY ON A CONSTRUCTION OF SECTI ON 40A(3) THE TRIBUNAL RESTRICTED THE AMBIT OF THE PROVISO TO THE CIRCUMSTANCES MENTIONED IN RULE,6DD OF THE INCOME TAX RULES, 1962 . AT THE COST OF REPETITION, THE TRIBUNAL HAS NOT DIS BELIEVED THE TRANSACTIONS OR THE GENUINENESS THEREOF. NOR HAS IT DISBELIEVED THE FACT OF PAYMENTS HAVING BEEN MADE. MORE IMPORTANT. THE REASONS FURNISHED BY THE APPELLANT FOR HAVING MADE THE CASH PAYMENTS, WHICH WE HAVE ALREADY ADVERTED TO, HAVE NOT BEEN DI SBELIEVED. IN OUR VIEW, ASSUMING THESE REASONS TO BE CORRECT. THEY CL EARLY MAKE OUT A CASE OF BUSINESS EXPEDIENCE. IN THE CIRCUMSTANCES, THE ORDER OF THE TRIBUNAL IN THIS REGARD IS SET ASIDE. THE PAYMENTS CANNOT BE DISALLOWED UNDER SECTION 40A(3) OF THE ACT.' THE CHANDIGARH BENCH OF ITAT IN THE CASE OF DREAMLA ND COLONIZERS PVT. LTD VIDE ORDER DATED 15-2-2016 HELD THAT WHERE EXPENSES INCURRED IN CASH WERE GENUINE WHICH WERE P AID TO THE SELLER FOR PURCHASE OF LAND AND THERE WERE PRACTICAL EXPED IENCY BECAUSE OF WHICH THE PAYMENTS HAVE TO BE MADE IN CASH NO DISAL LOWANCE UJ S. 40A(3) IS CALLED FOR AND ALSO IN THE CASE OF DHURI WINE, CHANDIGARH VIDE ORDER DATED 9-10-2015 HELD THAT WHERE THE EXPE NSES INCURRED IN CASH WERE GENUINE AND WERE PAID TO DISTILLERIES THR OUGH EXCISE DEPARTMENT FOR PURCHASE OF LIQUOR AND THERE WERE PR ACTICAL EXPEDIENCY BECAUSE OF WHICH THE PAYMENTS HAVE TO BE MADE IN CASH AND THEREFORE SUCH PAYMENT WERE NOT IN THE AMBIT OF DISALLOWANCE U/S. 40A(3). THE AMRITSAR BENCH OF ITAT IN CASE OF RAKESH KUMAR, MUKTSAR V. ASSESSEE ON 9 TH MARCH, 2016 STATED THAT- 'IN THE PRESENT CASE, THE GENUINENESS OF PAYMENT HA S NOT BEEN DOUBTED AS ASSESSING OFFICER HIMSELF HAS HELD THAT SALE DEEDS OF PROPERTIES WERE REGISTERED WITH THE REVENUE DEPARTM ENT OF GOVT. THEREFORE, THE CASE OF THE ASSESSEE IS FULLY COVERE D BY THE ABOVE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT.' ITA NO. 2056/HYD/2018 :- 19 -: IN THE CASE OF CIT V. SMT. SHELLY PASSI REPORTED IN (2013) 350 ITR 227 (P&H) HAS HELD AS UNDER: 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. WHICH IS ALSO THE CASE IN THE MATTER OF THE APPELLA NT THAT THE GROUP COMPANIES HAVE DIRECTLY DEPOSITED THE MONEY IN THEI R BANK ACCOUNT. THE HON'BLE KERALA HIGH COURT IN CASE OF M/S. KEERT HI AGRO MILLS (P) LTD., MATTOOR ON 3-10-2017 IN ITA.NO. 257 OF 2015 H AS HELD AS UNDER: ' .... SIMILARLY, IN ATTAR SINGH GURMUKH SINGH, THE SUPREME COURT HAS EXAMINED BOTH SECTION 40-A(3) AND RULE 6DD. IT HAS HELD THAT SECTION 40A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCL USION OF RULE 6DD; THE SECTION MUST BE READ ALONG WITH THE RULE. IF RE AD TOGETHER, IT WILL BE CLEAR THAT THE PROVISIONS ARE NOT INTENDED TO RE STRICT THE BUSINESS ACTIVITIES. SECTION 40A(3) ONLY EMPOWERS THE ASSESS ING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RE SPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED CHEQUE OR CROSSED BA NK DRAFT. THE PAYMENT BY CROSSED CHEQUE OR CROSSED BANK DRAFT IS INSISTED ON TO ENABLE THE ASSESSING AUTHORITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF THE INCOME FRO M DISCLOSED SOURCES. THE TERMS OF SECTION 40A(3) ARE NOT ABSOLU TE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS A RE NOT EXCLUDED. THE GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKE N OUT OF THE SWEEP OF THE SECTION. 25. IT IS OPEN TO THE ASSESSEE, ATTAR SINGH GURMUKH SINGH FURTHER OBSERVES, TO FURNISH TO THE SATISFACTION OF THE ASS ESSING OFFICER THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A(3) WAS NOT PRACTICABLE OR WOULD HAVE CA USED GENUINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PER SON WHO HAS RECEIVED THE CASH PAYMENT. RULE 6DD PROVIDES THAT A N ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CR OSSED CHEQUE OR CROSSED BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED U NDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF SECTION 40A(3) AND RULE 6DD THAT THEY ARE INTENDED TO REGULATE THE BUSINESS TRANSACT IONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK-MONEY FOR BUSINESS TRANSACTIONS .... ' THE ABOVE JUDGMENT IS ALSO SQUARELY APPLICABLE TO T HE TRANSACTIONS ENTERED INTO BY THE APPELLANT WITH THE GROUP CONCERNS TO BE NOT COVERED UNDER THE PROVISIONS FOR DISALLOWANC E U/S.40A(3) AS NO UNACCOUNTED MONEY WAS INVOLVED AND NOR IT WAS AN OUT OF BOOKS TRANSACTION. ITA NO. 2056/HYD/2018 :- 20 -: IT IS ALSO IMPORTANT TO NOTE THAT IN THE CASE LIKE THE APPELLANT'S, IF THE SALE MADE BY THE APPELLANT IS LET SAY Y AND THE PUR CHASES MADE ARE X AND LET US PRESUME THAT THERE IS A 5% NET PROFIT ON SALES AND THERE ARE NO EXPENSES FOR THE SAKE OF ASSUMPTION, WHICH I MPLIES THAT THE TAX HAS TO BE PAID ON 0.05 Y. IF THE COST OF INPUT IS IN CASH UNDER THE CIRCUMSTANCES MENTIONED ABOVE AND ALL OF IT IS IN C ASH, THE PROFIT WOULD THUS BE 0.05 Y + X WHICH IMPLIES THAT THE SAM E IS EQUIVALENT TO Y. THE APPELLANT WOULD THUS PAY TAX ON Y WHICH M EANS THAT ALL THE SALE ARE INCOME AND WOULD LAND UP PAYING A TAX OF 0 .3 Y WHICH IS HIGHER THAN THE PROFIT EVER MADE OR ENVISAGED BY TH E APPELLANT RATHER THE APPELLANT HAS LANDED UP PAYING A PENALTY TO THE EXTENT OF 5 TIMES THE PROFIT AND 20 TIMES THE TAX WHICH IT WOULD HAVE BEEN LIABLE UNDER BONAFIDE CIRCUMSTANCES. THEREFORE, THE BONAFIDE CIR CUMSTANCES CANNOT BE INCLUDED UNDER THE PURVIEW OF SECTION 40A (3) AS IT WAS INTRODUCED BY THE PARLIAMENT TO CURB BLACK MONEY AN D TAX EVASION AND NOT WITH THE PRIMARY INTENT TO PENALISE BONAFID E TRANSACTION. THEREFORE IN THE CASE OF THE APPELLANT, THE FOLLOWI NG WITH REGARD TO THE TRANSACTIONS PERTAINING TO CASH PAYMENT ARE OBSERVE D AS UNDER: I.THE GENUINENESS OF THE TRANSACTION HAS NOT BEEN D OUBTED BY THE AO. II.THE PRICE PAID BY THE APPELLANT HAS NOT BEEN DOU BTED BY THE AO AND THE TRANSACTION WAS AT ARM'S LENGTH PRICE AND S ECTION 40A(2)(B) HAS NOT BEEN INVOKED. THE APPELLANT HAS A HEALTHY G ROSS PROFIT OF 33% ON SALES. III.THE MONEY RECEIVED FROM THE APPELLANT FOUND THE WAY INTO THE BANK OF THE SUPPLIER COMPANIES OF THE SAME GROUP. IV.THE SUPPLIER COMPANY HAVE CONFIRMED THE TRANSACT ION AND HAVE ALSO DULY REFLECTED THE SAME IN THE P & L ACCOUNT A ND IN THEIR INCOME TAX RETURNS. V.THE GROUP COMPANY HAD BORROWED FUNDS FROM THE BAN K 3.....'1.D HAC AN OVERDRAFT AND REQUIRED THE LIEN OVER CASH CO UNTER SALE OF THE APPELLANT TO BE DEPOSITED IN THEIR BANK ACCOUNTS. VI.ALL THE TRANSACTIONS OF PURCHASE AND SALE ARE VE RIFIABLE AND THE PRICING IS NOT A POINT OF DISPUTE AND THE TRANSACTI ONS HAVE BEEN HELD AS GENUINE. VII.THE IDENTITY OF BOTH PARTIES INVOLVED IS ESTABL ISHED. VIII.THE APPELLANT COMPANY HAD ITS MAJOR SHARE OF S UPPLY FROM THE GROUP COMPANY AT CREDIT AND THEREFORE WERE LIABLE T O CONSENT TO THE REQUIREMENT OF PAYMENTS INSISTED BY THE SUPPLIERS. IX. THE WHOLE ARRANGEMENT COULD HAVE BEEN BETTER ST RUCTURED BUT JUST BECAUSE THE STRUCTURING WAS NOT UP TO THE MARK, IT WOULD BE GIVING ABSURD TAX LIABILITY IN THE CASE OF APPELLANT. IF T HE APPELLANT HAD 100% SUPPLY FROM THE GROUP COMPANY AND THE REPAYMEN T WAS IN CASH, IT WOULD RESULT IN AN INCOME OF 100% OF COST + NET PROFIT AND ITA NO. 2056/HYD/2018 :- 21 -: WOULD RESULT IN AN ARTIFICIAL TAX BURDEN, WHICH THE STATUE NEVER DESIRED. X. THE SECTION 40A(3) WAS TO CURB BLACK MONEY AND U NACCOUNTED TRANSACTIONS. BOTH THE ELEMENTS ARE ABSENT IN THE C ASE OF APPELLANT AS THE TRANSACTIONS ARE ACCOUNTED AND GENUINE. TO SUM UP THE TRANSACTION ENTERED BY THE GROUP COMP ANY WITH ITS ASSOCIATE GROUP COMPANY WAS NEITHER TO EVADE TAXES NOR INVOLVE BLACK MONEY OR TO GET INTO UNACCOUNTED TRANSACTIONS . RATHER THE TRANSACTIONS ARE GENUINE AND ACCOUNTED. THE APPELLA NT WAS ALSO AT THE MERCY OF THE SUPPLIER COMPANY WHO INSISTED ON C ERTAIN PAYMENTS TO BE RECEIVED IN CASH FOR THEIR BANKING LIMITS. TH US, AS THE TRANSACTIONS WERE FAIRLY PRICED, FOLLOWING THE RATI O OF THE APEX COURT IN THE CASE OF ATTAR SINGH, THE QUANTUM OF RS.7,59, 00,557/- MADE IN CASH FROM THE GROUP CONCERNS IS HELD OUT OF THE PUR VIEW OF SECTION 40A(3) AND THE ADDITION MADE BY THE AO IS DELETED. IN VIEW OF THE ABOVE, THE APPELLANT GETS RELIEF ON GROUND NO. 1 AND 2 AND THE GROUND NO. 3 NEEDS NO ADJUDICATION AS THE RELIEF HAS BEEN ALLOWED IN GROUND NO. 1 AND 2. TO SUM UP APPEAL IS ALLOWED. 4. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO REVENU ES FOREGOING STAND IN SUPPORT OF THE IMPUGNED SECTION 40A( 3) DISALLOWANCE AND FIND NO MERIT IN THE SAME. THERE IS HARDLY ANY DISPUTE ABOUT THE BASIC FACT THAT BOTH THE PAYER AND PAYEE(S) HEREIN ARE GROUP ENTITIES ONLY. THE REVENUE S ARGUMENT IN SUPPORT OF THE IMPUGNED SECTION 40A(3) CASH PAYMENT DISALLOWANCE IS THAT THE OPERATION THEREOF OUGH T TO BE EXCLUDED MERELY BECAUSE THE TWIN ENTITIES HEREIN ARE GROUP CONCERNS. WE NOTE FROM A PERUSAL OF THE LD.CIT(A)S D ETAILED DISCUSSION THAT NOT ONLY HE HAS EXAMINED ALL THE RELE VANT FACTUAL ASPECTS BUT ALSO CONSIDERED THE RELEVANT JUDICIA L PRECEDENTS (SUPRA) WHILST CONCLUDING THAT THE OVERWHELMI NG GENUINE EXPENDITURE PAYMENTS DESERVE TO BE ACCEPTED E VEN IF THEY HAVE BEEN MADE IN CASH. WE FURTHER TAKE NOTE OF THE HON'BLE APEX COURTS LANDMARK DECISION IN ATTAR SINGH GURMUKH SINGH VS. ITO (1991) 191 ITR 667 (SC) THAT THI S ITA NO. 2056/HYD/2018 :- 22 -: STATUTORY PROVISION COMES INTO PLAY SO AS TO PREVENT UN- ACCOUNTED CASH FROM BEING PLOUGHED IN THE SYSTEM. CAS E LAW HARSHITA CHORDIA (298 ITR 349) (SUPRA) AND ANUPAM TE LE SERVICES VS. ITO (2014) 366 ITR 122 (GUJ) HELD THAT S UCH OVERWHELMING GENUINE PAYMENTS OUGHT NOT TO BE DISALLOWE D IN LIGHT OF THE RESTRICTIVE INTERPRETATION OF RULE 6DD OF TH E INCOME TAX RULES WHICH IS NOT SELF-EXHAUSTIVE. WE THEREFORE Q UOTE HON'BLE APEX COURTS YET ANOTHER LANDMARK DECISION IN CIT VS. K.Y.PILLIAH (1967) [63 ITR 411] (SC) TO EXPRESS OUR COMPLETE AGREEMENT WITH THE CIT(A)S CONCLUSION DELETING THE IMPU GNED SECTION 40A(3) DISALLOWANCE IN ENTIRETY WITHOUT DELV ING MUCH DEEPER IN THE RELEVANT FACTS HEREIN. 5. WE LASTLY ACKNOWLEDGE THAT ALTHOUGH THE INSTANT LIS IS BEING DECIDED AFTER A PERIOD OF 90 DAYS FROM THE DATE OF HEARING AS PER RULE 34(5) OF THE IT(AT) RULES 1963, THE SAME HOWEVER, DOES NOT APPLY IN THE COVID LOCKDOWN SITUATI ON AS PER HON'BLE APEX COURTS RECENT DIRECTIONS DATED 27-04-2021 IN M.A.NO.665/2021 IN SM(W)C NO.3/2020 IN RE COGNIZANCE FOR EXTENSION OF LIMITATION MAKING IT CLEAR THAT IN SUCH CASES WHERE THE LIMITATION PERIOD (INCLUDING THAT PRESCRIBED FOR INS TITUTION AS WELL AS TERMINATION) SHALL STAND EXCLUDED FROM 14 TH OF MARCH, 2021 TILL FURTHER ORDERS IN ABOVE TERMS. 6. THIS REVENUES APPEAL IS DISMISSED IN ABOVE TERMS . ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 26-08-2021 TNMM ITA NO. 2056/HYD/2018 :- 23 -: COPY TO : 1.INCOME TAX OFFICER, WARD-17(3), HYDERABAD. 2.M/S.VALUE PHARMA RETAIL (HYD) PRIVATE LIMITED, PL OT NO.26, D.NO.8-2-248/1/7/26/2, NAGARJUNA HILLS, PUNJAGUTTA, HYDERABAD. 3.CIT(APPEALS)-5, HYDERABAD. 4.PR.CIT-5, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.