M/s Landmark Colonizers, Jalandhar V. The Income Tax Officer, Jalandhar

ITA 359/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0676 (ITAT-AMRITSAR)
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A N MISRA
• Assessee Lawyers: DINESH SARNA
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (CAMP AT JA LANDHAR ) BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.359(ASR)/2015 ASSESSMENT YEAR: 2010-11 M/S. LANDMARK COLONIZERS PRB BUILDING, NAKODAR ROAD, JALANDHAR. PAN: AACFL5129P VS. INCOME TAX OFFICER , WARD-I(2) JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. DINESH SARNA (ADV.) RESPONDENT BY: SH. A.N.MISRA (DR) DATE OF HEARING: 21.06. 2016 DATE OF PRONOUNCEMENT:2 2.06.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LEARNED CIT(A), JALANDHAR, DATED 12.05.2015 FOR ASST. YEAR: 2010-11. 2. THE ONLY GRIEVANCE RAISED BY ASSESSEE IS THE ACT ION OF LEARNED CIT(A) BY WHICH HE HAD CONFIRMED THE DISALLOWANCE O F RS.2,50,000/- WHICH THE ASSESSING OFFICER HAD MADE U/S 40A(3) OF THE ACT, FOR MAKING CASH PAYMENTS IN EXCESS OF RS.20,000/- 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSE SSMENT ORDER ARE THAT THE ASSESSEE IS IN THE BUSINESS AS BUILDER AND COLONIZERS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE MADE CASH PAY MENTS FOR PURCHASE ITA NO.35 9(ASR)/2015 ASST. YEAR: 2010-11 2 OF LAND AMOUNTING TO RS.2,50,000/-. THE ASSESSING O FFICER HELD THAT SINCE THE ASSESSEE HAD DEBITED THE EXPENDITURE IN P &L ACCOUNT AND WHERE PAYMENTS IN CASH IN EXCESS OF RS. 20,000/- AR E NOT ALLOWED THEREFORE, HE MADE THE ADDITION OF RS.2,50,000/-. 4. AGGRIEVED WITH THE ADDITION THE ASSESSEE FILED A PPEAL BEFORE LD. CIT(A), HOWEVER, LD. CIT(A) ALSO UPHELD THE SAME. 5. BEFORE US, LD. AR SUBMITTED THAT THE SAID TRANSA CTION WAS THE FIRST TRANSACTION WITH THE SELLER AND TRANSACTION WAS MAD E ON HOLIDAY AND THEREFORE, THE PAYMENT WAS COVERED IN THE EXCEPTION S TO RULE-6DD. 6. WITHOUT PREJUDICE THE LD. AR SUBMITTED THAT THE CASE OF THE ASSESSEE WAS DULY COVERED BY THE ORDER OF HONBLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF SH. GURDAS GARG WHEREIN T HE HONBLE HIGH COURT VIDE ORDER DATED 16.07.2015 HAS HELD THAT WHE RE THE GENUINENESS OF TRANSACTION WAS NOT IN DOUBT THE ADDITION U/S 40 A(3) CANNOT BE MADE. THE LD. AR IN THIS RESPECT FILED A COPY OF THE ORDE R OF HONBLE PUNJAB & HARYANA HIGH COURT. 7. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IN THE PRES ENT CASE THE AUTHORITIES BELOW HAS NOT DOUBTED THE GENUINENESS O F THE TRANSACTION ITA NO.35 9(ASR)/2015 ASST. YEAR: 2010-11 3 AND IN THE CASE LAW OF SH. GURDAS GARG, THE HONBLE PUNJAB & HARYANA HIGH COURT HAS HELD THAT WHERE THE GENUINENESS OF T RANSACTION IS NOT DOUBTED THE ADDITION U/S 40A(3) CANNOT BE MADE. THE RELEVANT FINDINGS OF THE HONBLE PUNJAB & HARYANA HIGH COURT ARE REPR ODUCED BELOW. 8. THE RESPONDENTS CASE IS ALSO SUPPORTED BY THE JUDGMENT OF THE SUPREME COURT IN ATTAR SINGH GURMUKH SINGH VS. ITO, (1991) 4 SCC 385. AFTER REFERRING TO RULE 6DD, THE SUPREME COURT HELD: 7. IN OUR OPINION, THERE IS LITTLE MERIT IN THIS CO NTENTION. SECTION 40- A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSI ON OF RULE 6-DD. THE SECTION MUST BE READ ALONG WITH THE RULE. IF READ T OGETHER, IT WILL BE CLEAR THAT THE PROVISIONS ARE NOT INTENDED TO RESTRICT TH E BUSINESS ACTIVITIES. THERE IS NO RESTRICTION ON THE ASSESEE IN HIS TRADI NG ACTIVITIES. SECTION 40-A (3) ONLY EMPOWERS THE ASSESSING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RESPECT OF WHICH PAYMENT IS NOT M ADE BY CROSSED CHEQUE OR CROSSED BANK DRAFT. THE PAYMENT BY CROSSED CHEQU E OR CROSSED BANK DRAFT IS INSISTED ON THE ENABLE THE ASSESSING AUTHO RITY TO ASCERTAIN WHERE THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF TH E INCOME FROM DISCLOSED SOURCES. THE TERMS OF SECTION 40-A(3) ARE NOT ABSOLUTE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELE VANT FACTORS ARE NOT EXCLUDED. THE GENUINE AND BONA FIDE TRANSACTIONS AR E 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 CIRCUMSTA NCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40-A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYE E. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECEIVED TH E CASH PAYMENT. RULE 6-DD PROVIDES THAT AN ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSSED BANK DRAFT I N THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF SECTION 40- A(3) AND RULE 6-DD THAT THEY ARE INTENDED TO REGULATE THE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTION S. [SEE: MUDIAM OIL COMPANY VS. ITO (1973) 92 ITR 519 (AP)]. IF THE PAYME NT IS MADE BY A CROSSED CHEQUE DRAWN ON A BANK OR A CROSSED BANK DR AFT THEN IT WILL BE EASIER TO ASCERTAIN, WHEN DEDUCTION IS CLAIMED, WHE THER THE PAYMENT WAS GENUINE AND WHETHER IT WAS OUT OF THE INCOME FROM D ISCLOSED SOURCE. IN INTERPRETING A TAXING STATUTE THE COURT CANNOT BE O BLIVIOUS OF THE PROLIFERATION OF BLACK MONEY WHICH IS UNDER CIRCULA TION IN OUR COUNTRY. ANY RESTRAINT INTENDED TO CURB THE CHANCES AND OPPORTUN ITIES TO USE OR CREATE BLACK MONEY SHOULD NOT BE REGARDED AS CURTAILING TH E FREEDOM OF TRADE OR BUSINESS. ITA NO.35 9(ASR)/2015 ASST. YEAR: 2010-11 4 9. AT THE COST OF REPLETION, THE TRIBUNAL HAS NOT D ISBELIEVED 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 DISBELIEVED. IN OUR VIEW, ASSUMING THESE REASONS TO BE CORRECT, THE CLEARLY MAKE OUT A CASE OF BUSINESS EXPEDIENCY. 10. IN THE CIRCUMSTANCES, THE ORDER OF THE TRIBUNA L IN THIS REGARD IS SET ASIDE. THE PAYMENTS CANNOT BE DISALLOWED UNDER SECTION 40A( 3) OF THE ACT. FINDING THE ISSUE PARI MATERIA WITH THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SH. GURDAS GARG, WE DELETE THE ADDITION MADE BY LD. CIT(A). 9. IN NUTSHELL, THE APPEAL FILED BY ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JUNE, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:22.06.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER