Sh. Vaneet Sood, Panchkula V. DCIT, Panchkula

ITA 22/CHANDI/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0093 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 13-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: AMRINDER SINGH
• Keywords: Business income; Business expenditure
• Section: 43B; 40A(3); 80IB; 6; 28; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.21/CHD/2016 (ASSESSMENT YEAR : 2007-08) SHRI VANEET SOOD, VS. THE ADDL.CIT, SCO 85, SECTOR 5, RANGE PANCHKULA. PANCHKULA. PAN: APXPS2727N AND ITA NO.22/CHD/2016 (ASSESSMENT YEAR : 2008-0) SHRI VANEET SOOD, VS. THE D.C.I.T., SCO 85, SECTOR 5, CIRCLE PANCHKULA. PANCHKULA. PAN: APXPS2727N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMRINDER SINGH RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 17.03.2016 DATE OF PRONOUNCEMENT : 18.04.2016 O R D E R PER RANO JAIN, A.M . : THESE TWO APPEALS FILED BY THE SAME ASSESSEE AR E DIRECTED AGAINST THE SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA, BOTH 2 DATED 2.11.2015 FOR ASSESSMENT YEARS 2007-08 AND 20 08- 09 RESPECTIVELY. 2. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL IN BOTH THE APPEALS, THE SAME WERE HEARD TOGETHER A ND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. WE WILL FIRST TAKE THE APPEAL OF TH E ASSESSEE IN ITA NO.21/CHD/2016. ITA NO.21/CHD/2016 : 3. THE GROUND NOS.1 AND 4 ARE GENERAL AND, HENCE NEED NO ADJUDICATION. 4. THE GROUND NO.3 IS CONSEQUENTIAL AND NO ADJUDICATION IS REQUIRED. 5. THE GROUND NO.2 READS AS UNDER : 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA GRAVELLY ERRED IN UPHOLDING THE ADDITION OF RS.3,37,424/- MADE BY THE ID. ASSESSING OFFICER ON ACCOUNT OF ALLEGED DELAYED PAYMENT OF PF. 6. BRIEFLY, THE FACTS ARE THAT THE ASSESSING OFFIC ER MADE DISALLOWANCE OF EMPLOYEES SHARE OF EPF DEPOSI TED BY THE ASSESSEE AFTER THE DUE DATE AS PROVIDED UNDE R THE EPF ACT, REJECTING THE CONTENTIONS OF THE ASSESSEE THAT THE SAME IS ALLOWABLE AS THE DEPOSIT IS MADE BEFORE THE DUE DATE OF FILING THE RETURN. RELIANCE WAS PLACED ON THE 3 JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF CIT V S. PAMWI TISSUES LTD. 215 CTR 150. 7. BEFORE THE LEARNED CIT (APPEALS), AGAIN THE SAM E CONTENTION WAS REITERATED. HOWEVER, THE LEARNED CI T (APPEALS) DID NOT FIND HIMSELF IN AGREEMENT WITH TH E SAME. HE WAS OF THE VIEW THAT EXPLANATION TO SECTION 36(1 )(VA) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) PROVI DES THE MEANING OF DUE DATE AS BEING THE DUE DATE PRESCRI BED UNDER THE RELEVANT FUND. RELIANCE WAS PLACED ON TH E JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F ALOM EXTRUSIONS LTD., 319 ITR 306 (SC). 8. AGGRIEVED, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE SH OWED US THAT THOUGH THE EMPLOYEES CONTRIBUTION WAS DEPO SITED AFTER THE DUE DATE AS PRESCRIBED UNDER THE EPF ACT, ALL THE PAYMENTS WERE MADE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME TAX. IN VIEW OF THIS, IT WAS ARGU ED THAT NO DISALLOWANCE CAN BE MADE ON THIS ACCOUNT. APAR T FROM RELYING ON THE JUDGMENTS THAT WERE CITED BEFORE THE LOWER AUTHORITIES, A COPY OF THE JUDGMENT OF THE JURISDIC TIONAL PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MARK AUTO INDUSTRIES LTD. IN ITA NO.57 OF 2009 WAS PLACE D ON RECORD. 9. THE LEARNED D.R. VEHEMENTLY ARGUED DEFENDING THE ORDER OF THE ASSESSING OFFICER AND THAT OF CIT (APPEALS), STATING THAT THE EXPLANATION BELOW SECTI ON 36(1)(VA) OF THE ACT HAS CLEARLY REFERRED TO THE DU E DATE AS 4 PRESCRIBED UNDER THE EPF ACT AND NOT THE DUE DATE O F FILING INCOME-TAX RETURN. IT IS THE ASSESSEES MISUNDERSTANDING OF THE CLEAR-CUT PROVISION OF SECT ION 36(1)(VA) OF THE ACT. FURTHER, IT WAS ARGUED THAT ALL THE JUDGMENTS REFERRED TO ARE IN THE CONTEXT OF EMPLOYE RS CONTRIBUTION TO EPF AND NOT WITH RESPECT OF EMPLOYE ES CONTRIBUTION. 10. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. FROM THE PERUSAL OF THE DETAILS OF DEPOSITS IN EPF, THE EMPLOYEES CONTRIBUTION, IT CANNOT BE DOUBTED THAT ALL THE DEPOSITS HAVE BEEN MADE BEFORE THE DUE DATE OF FILI NG OF THE INCOME-TAX RETURN BY THE ASSESSEE, THOUGH ADMI TTEDLY THESE WERE MADE AFTER THE DUE DATE OF SUCH DEPOSITS PROVIDED UNDER THE EPF ACT. THESE FACTS HAVE NOT B EEN DISPUTED BY ANY OF THE LOWER AUTHORITIES, NOR BEFOR E US ANY SUCH ARGUMENT WAS MADE. IN THIS BACKGROUND, ON LY ISSUE TO BE DECIDED BY US IS WHETHER THE EMPLOYEES CONTRIBUTION TO EPF MADE BY THE ASSESSEE BEFORE THE DUE DATE OF FILING OF INCOME-TAX RETURN IS ALLOWABLE O R NOT. IN ORDER TO GET TO THE ROOT OF THE CONTROVERSY, FIRST WE HAVE TO UNDERSTAND THE SCHEME OF THE INCOME TAX ACT IN THIS REGARD. 11. SINCE WE ARE DEALING ONLY WITH THE ISSUE OF EMPLOYEES CONTRIBUTION TO EPF, WE WILL RESTRAIN OU RSELVES 5 TO ONLY THOSE PROVISIONS WHICH ARE RELATED TO EMPLO YEES CONTRIBUTION AND NOT WITH THE EMPLOYERS CONTRIBUTI ON. 12. THE PROVISION OF SECTION 2, SUB-SECTION (24) CLAUSE (X) READS AS UNDER : 2(24) INCOME INCLUDES : (X) ANY SUM RECEIVED BY THE ASSESSEE FROM HIS EMPLOYEES AS CONTRIBUTIONS TO ANY PROVIDENT FUND OR SUPERANNUATI ON FUND OR ANY FUND SET UP UNDER THE PROVISIONS OF THE EMPLOYEE S' STATE INSURANCE ACT, 1948 (34 OF 1948 ), OR ANY OTHER FUND F OR THE WELFARE OF SUCH EMPLOYEES;] 13. AT THE FIRST INSTANCE ANY AMOUNT RECEIVED BY AN EMPLOYER FROM ITS EMPLOYEES AS THEIR CONTRIBUTIONS TO SUCH FUNDS IS TREATED AS INCOME IN THE HANDS OF THA T EMPLOYER. 14. PROVISION OF SECTION 36(1)(VA) READS AS UNDER: 36(1) THE DEDUCTION PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTER DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 _ (VA) ANY SUM RECEIVED BY THE ASSESSEE FROM ANY OF HIS EMPLOYEES TO WHICH THE PROVISIONS OF SUB- CLAUSE (X) OF CLAUSE (24) OF SECTION 2 APPLY, IF SUCH SUM IS CREDITED BY THE ASSESSEE TO THE EMPLOYEE' S ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE DUE DATE. 15. IT IS NOW CLEAR THAT THE AMOUNT WHICH WAS TREATED AS INCOME IN THE HANDS OF AN ASSESSEE UNDER 6 SECTION 2(24)(X) OF THE ACT, IS ALLOWED AS DEDUCTIO N IF THE SAME IS PAID IN THE SAID FUND ON OR BEFORE DUE DATE . 16. THE MEANING OF DUE DATE REFERRED TO IN SECTI ON 36(1)(VA) OF THE ACT IS PROVIDED IN THE EXPLANATION BELOW THE SAME SECTION : EXPLANATION :- FOR THE PURPOSE OF THIS CLAUSE, DUE DATE MEANS THE DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EMPLOYER TO CREDIT AN EMPLOYEES CONTRIBUTION TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND UNDER ANY ACT, R ULE, ORDER OR NOTIFICATION ISSUED THEREUNDER OR UNDER ANY STANDING ORDER, AWARD, CONTRACT OR SERVICE OR OTHERWISE. 17. NOW, SO FAR, THE CLEAR PROVISION EMERGING IS T HAT THE AMOUNT WHICH WAS CONSIDERED AS INCOME IN THE HA NDS OF AN ASSESSEE UNDER SECTION 2(24)(X) OF THE ACT IS ALLOWED AS DEDUCTION TO HIM WHILE COMPUTING HIS INCOME IF H E DEPOSITS THE SAME IN THE ACCOUNT OF THE EMPLOYEE WI TH THE FUND BEFORE THE DUE DATE PROVIDED FOR SUCH PAYMENT IN THOSE RESPECTIVE STATUTES. 18. NOW, THE PROVISIONS OF SECTION 43B(B) OF THE A CT READS AS UNDER : SECTION 43B. : (B) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUA TION FUND OR GRATUITY FUND OR ANY OTHER FUND FOR THE WELFARE O F EMPLOYEES, [OR] SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESS EE 7 ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMP LOYED BY HIM) ONLY IN COMPUTING THE INCOME REFERRED TO IN SECT ION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID B Y HIM : 19. SINCE THE SECTION STARTS WITH THE NON-OBSTANTE , CLAUSE, WITHOUT REFERRING TO ANY OTHER PROVISION OF THE ACT, WE CAN VERY EASILY CONFER THAT SUCH SUMS WILL NOW B E ALLOWED ONLY ON THE BASIS OF ACTUAL PAYMENT, I.E. I N THE YEAR IN WHICH IT HAS ACTUALLY BEEN PAID TO THAT FUN D ETC. 20. NOW, THERE IS ALSO A PROVISO TO SECTION 43B OF THE ACT, WHICH READS AS UNDER : PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO ANY SUM [***] WHICH IS ACT UALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE APPL ICABLE IN HIS CASE FOR FURNISHING THE RETURN OF INCOME UNDER S UB-SECTION (1) OF SECTION 139 IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID AND THE EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESS EE ALONG WITH SUCH RETURN. 21. NOW, IT BECOMES FURTHER CLEAR THAT SUCH SUMS WILL BE ALLOWED TO HIM (THE ASSESSEE IN QUESTION) W HILE COMPUTING HIS BUSINESS INCOME, IF THE SAID AMOUNT I S PAID BY HIM TO THAT FUND ETC. BEFORE THE DUE DATE OF FIL ING OF RETURN UNDER SECTION 139(1) OF THE ACT. 22. FROM THE ABOVE FLOW OF PROVISIONS, THIS PICTUR E IS QUITE CLEAR. HOWEVER, THERE MAY BE A DOUBT WHET HER THE SUMS AS REFERRED TO IN SECTION 43B(2) OF THE ACT IN CLUDES EMPLOYEES CONTRIBUTION TO SUCH FUNDS, OR WHETHER I T REFERS TO EMPLOYERS CONTRIBUTION ALONE. FOR THIS, WE 8 WOULD LIKE TO REFER TO SECOND PROVISO TO SECTION 43 B OF THE ACT, WHICH IS OMITTED BY THE FINANCE ACT, 2003, W.E .F. 1.4.2004. PRIOR TO ITS OMISSION, THE SECOND PROVIS O AS SUBSTITUTED BY THE FINANCE ACT, 1989 W.E.F. 1.4.198 9, READ AS UNDER : PROVIDED FURTHER THAT NO DEDUCTION SHALL, IN RESPECT OF ANY SUM REFERRED TO IN CLAUSE (B), BE ALLOWED UNLESS SUCH SU M HAS ACTUALLY BEEN PAID IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE ON OR, BEFORE THE DUE DATE AS DEFINED IN THE EXPLANATION BELOW CLAUSE (VA) OF SUBSECTION (1) OF SECT ION 36, AND WHERE SUCH PAYMENT HAS BEEN MADE OTHERWISE THAN IN CASH, THE SUM HAS BEEN REALISED WITHIN FIFTEEN DAYS F ROM THE DUE DATE.]] 23. HERE, THE REFERENCE IS THE EXPLANATION BELOW SECTION 36(1)(VA) OF THE ACT, WHICH CLEARLY REFERS TO EMPLOYEES CONTRIBUTION TO SUCH FUNDS ALONE. THE PROVISION OF THAT SECTION HAS BEEN REPRODUCED EARLI ER IN THIS ORDER. THIS CLEARLY BRINGS OUT THE INTENTION OF LEGISLATURE TO HAVE THE EMPLOYEES CONTRIBUTION ALS O INTO THE AMBIT OF SECTION 43B OF THE ACT. FURTHER, WE M AY ALSO EMPHASIZE THAT BY OMITTING SECOND PROVISO, THE INTE NTION OF LEGISLATURE ALSO BECOMES MORE CLEAR THAT THE AMO UNT RECEIVED BY THE ASSESSEE FROM HIS EMPLOYEES AS THE IR CONTRIBUTION TOWARDS THESE FUNDS ETC. ARE TO BE ALL OWED TO HIM AS BUSINESS EXPENDITURE, IF HE DEPOSITS THE SAM E IN THOSE FUNDS ETC. BEFORE THE DUE DATE OF FILING OF R ETURN OF INCOME. 9 24. THE LEARNED CIT (APPEALS) HAS RELIED ON THE JUDGMENT OF CIT VS. PAMWI TISSUES LTD. (SUPRA). WE FIND THAT THE SAID JUDGMENT STANDS REVERSED BY THE HON'B LE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIO NS LTD. (2009) 32 DTR (SC) 49(INCIDENTALLY, THE CIT (A PPEALS) HAS RELIED ON THIS JUDGMENT IN HIS ORDER), WHERE TH E HON'BLE SUPREME COURT HELD THAT OMISSION OF SECOND PROVISO TO SECTION 43B AND THE AMENDMENT TO FIRST P ROVISO BY FINANCE ACT, 2003, BRINGING ABOUT UNIFORMITY IN PAYMENT OF TAX, DUTY, CESS AND FEE ON ONE HAND AND CONTRIBUTION TO EMPLOYEES WELFARE FUNDS ETC. ON TH E OTHER HAND ARE CURATIVE IN NATURE AND HENCE RETROSPECTIVE LY APPLICABLE. 25. IN VIEW OF THE ABOVE, WE UNDERSTAND THAT THE EMPLOYEES CONTRIBUTION TO EPF PAID BY THE ASSESSEE BEFORE THE DUE DATE OF FILING RETURN OF INCOME IS A N ALLOWABLE EXPENDITURE. FOR THIS, WE ARE ALSO SUPPO RTED BY THE JUDGMENT OF THE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. LAKHANI INDIA LTD. (2 010) 39 DTR 210 (P&H) AND ALSO A LATEST JUDGMENT IN THE CAS E OF CIT VS. MARK AUTO INDUSTRIES LTD. (2013) 358 ITR 43 (P&H). 26. WE WOULD ALSO LIKE TO REFER TO A JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. AIMIL LTD. & ORS (2010) 321 ITR 508, WHICH WAS IN FAVOUR OF THE ASSE SSEE 10 WITH REGARD TO ALLOWABILITY OF EMPLOYEES CONTRIBUT ION. THE CASE WAS DELIVERED FOLLOWING THE JUDGMENTS OF H ON'BLE SUPREME COURT IN THE CASE OF CIT VS. VINAY CEMENT LTD. (2007) 213 CTR (SC) 268 AND THOSE OF DELHI HIGH COU RT IN THE CASES OF CIT VS. DHARMENDRA SHARMA (2007) 297 ITR 320 (DEL) 4, CIT VS. P.M.ETCRONICS LTD. (2008) 15 D TR (DEL) 258. AFTER ELABORATING THE PROVISIONS AND TH EIR INTERPRETATION, HOLDING THE CASE IN FAVOUR OF THE A SSESSEE, THE HON'BLE HIGH COURT OBSERVED AS UNDER : 17. WE MAY ONLY ADD THAT IF THE EMPLOYEES CONTRIBUT ION IS NOT DEPOSITED BY THE DUE DATE PRESCRIBED UNDER THE R ELEVANT ACTS AND IS DEPOSITED LATE, THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYED PAYMENT BUT CAN INCUR PENALTIES ALSO, FOR WHICH SPECIFIC PROVISIONS ARE MADE IN THE PROVIDENT FUND ACT AS WELL AS THE ESI ACT. THEREFORE, THE ACTS PERMIT THE EMPLOYER TO MAKE THE DEPOSIT WITH SOME DELAYS, SUBJECT TO THE AFO RESAID CONSEQUENCES. INSOFAR AS THE IT ACT IS CONCERNED, THE A SSESSEE CAN GET THE BENEFIT IF THE ACTUAL PAYMENT IS MADE BE FORE THE RETURN IS FILED, AS PER THE PRINCIPLE LAID DOWN BY THE SUPREME COURT IN VINAY CEMENT (SUPRA). 27. WE MAY FURTHER ADD THAT IN CASE THERE IS DEFAU LT ON THE PART OF AN EMPLOYER TO DEPOSIT THE EMPLOYEES CONTRIBUTION TO SUCH FUND, THE FACT THAT THE SAME I S DEPOSITED AFTER THE DUE DATE AS PROVIDED UNDER THER E RESPECTIVE STATUTE, THERE ARE CONSEQUENCES PROVIDED IN THOSE RESPECTIVE STATUTE, HOWEVER, THE ALLOWABILITY OF THOSE EXPENSES FOR THE PURPOSE OF INCOME TAX ARE TO BE LOOKED UNDER THE INCOME TAX ACT ONLY. 11 28. IN VIEW OF THE ABOVE, WE DO NOT HESITATE TO HO LD THAT THE EMPLOYEES CONTRIBUTION TO THE EPF DEPOSIT ED BY THE ASSESSEE BEFORE THE DUE DATE OF FILING THE RETU RN , IS AN ALLOWABLE EXPENSES. SINCE, IN THE PRESENT CASE, THE SAME IS DEPOSITED BEFORE THE DUE DATE OF FILING OF THE RETURN, THE GROUND NO.2 RAISED BY THE ASSESSEE IS A LLOWED. 29. THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.22/CHD/2016 : 30. THE GROUND NO.1 IN THIS APPEAL IS GENERAL IN NATURE, AND HENCE NEEDS NO ADJUDICATION. 31. THE GROUND NO.2 RAISED BY THE ASSESSEE READS A S UNDER : 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA GRAVELLY ERRED IN UPHOLDING THE ADDITION OF RS.3,26,550/- MADE BY THE ID. ASSESSING OFFICER ON THE ALLEGED GROUND THAT EPF WAS DEPOSITED LATE. 32. IT IS RELEVANT TO OBSERVE HERE THAT THE ISSUE IN GROUND NO.2 IS SIMILAR TO THE ISSUE IN GROUND NO. 2 RAISED BY THE ASSESSEE IN ITA NO.21/CHD/2016 AND THE FINDI NGS GIVEN IN ITA NO.21/CHD/2016 SHALL APPLY TO THIS CAS E ALSO WITH EQUAL FORCE. THE GROUND NO.2 RAISED BY THE AS SESSEE IS ALLOWED. 12 33. THE GROUND NO.3 RAISED BY THE ASSESSEE READS A S UNDER : 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), GRAVELLY ERRED IN UPHOLDING THE ADDITION OF RS.40,400/- MADE BY THE ID. ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE H AD MADE THE PAYMENTS FOR EXPENSES IN CASH IN VIOLATION OF PROVISIONS OF SECTION 40(A)(3) OF THE I.T. ACT, 1961 . 34. BRIEFLY, THE FACTS ARE THAT THE ASSESSEE HAS M ADE PAYMENT AMOUNTING TO RS.2,02,006/- BEING TRAILOR EXPENSES AND HYDRA CRANE REPAIRS IN CASH IN VIOLATI ON OF PROVISIONS OF SECTION 40A(A)(3) OF THE ACT. THE AS SESSING OFFICER DISALLOWED AN AMOUNT OF RS.40,400/- BEING 2 0% OF SUCH PAYMENTS. 35. BEFORE THE CIT (APPEALS), IT WAS STATED THAT THOUGH THIS AMOUNT MAY BE DISALLOWABLE BUT SINCE IT BECOMES GROSS INCOME AND DEDUCTION UNDER SECTION 80 IB OF THE ACT IS ALLOWABLE ON THE SAME. THE CIT (APPE ALS) DECIDED THE ISSUE AGAINST THE ASSESSEE STATING THAT THE ASSESSEE HAD FAILED TO CORRELATE THE PAYMENTS IN CA SH AS AGAINST THEIR RESPECTIVE BILLS. 36. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE ARGUING BEFORE US LIMITED HIS PRAYER TO THE EXTENT THAT THE EXPENSES INCURRED IN CASH EVEN IF DISALLOWED, BECOM ES PART OF HIS GROSS INCOME, SINCE ASSESSEE IS ELIGIBL E FOR 13 DEDUCTION UNDER SECTION 80IB OF THE ACT, THE DEDUCT ION ON THESE AMOUNTS SHOULD ALSO BE GIVEN. 37. THE LEARNED D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 38. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE PROVISIONS OF SECTION 40A(3) OF THE ACT HAVE BE EN FRAMED IN ORDER TO CURB THE TRANSACTIONS TO BE DONE IN CASH AND IN ORDER TO ENCOURAGE THE BANKING TRANSACT ION. IN FACT, THESE PROVISIONS APPEAR TO US AS IN TERRO REM IN NATURE. WE OBSERVE FROM THE ORDER OF THE LOWER AUTHORITIES THAT NO ASPERSION HAVE BEEN CAST ON HE GENUINENESS OF THESE EXPENSES. THEREFORE, WE FIND OURSELVES IN AGREEMENT WITH THE ARGUMENT OF THE LEA RNED COUNSEL FOR THE ASSESSEE THAT THE ADDITION WILL ENH ANCE THE INCOME EARNED FROM THE UNDERTAKING, THEREFORE, HE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE AC T. IN VIEW OF THIS, WE DIRECT THE ASSESSING OFFICER TO GI VE THE ASSESSEE THE BENEFIT OF THESE ADDITIONS, IF THE ASS ESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE AC T, SINCE THE ISSUE WAS NOT IN QUESTION BEFORE US, WE ARE NOT AWARE WHETHER THE ASSESSEE IS ELIGIBLE FOR SAID DEDUCTION OR NOT. THE GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. 39. THE GROUND NO.4 RAISED BY THE ASSESSEE IS 14 CONSEQUENTIAL IN NATURE AND, HENCE REQUIRES NO ADJUDICATION. 40. THE GROUND NO.5 RAISED BY THE ASSESSEE IS GENERAL AND NO ADJUDICATION IS REQUIRED. 41. THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 41. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I TA NO.21/CHD/2016 IS ALLOWED AND THE APPEAL IN ITA NO.22/CHD/2016 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF APRIL, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 18 TH APRIL, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH