The Income Tax Officer, Jammu V. M/s Shri Atul Gupta, Rajouri.

ITA 465/ASR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7859 (ITAT-AMRITSAR)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-08-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 19-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Section: 40A(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER I.T.A NO.465/(ASR)/2016 ASSESSMENT YEAR: 2012-13 PAN: AAVPG5419Q INCOME TAX OFFICER, WARD-2(1), JAMMU. VS. M/S SHRI ATUL GUPTA PROP. M/S ATUL AGENCIES, CITY CHOWK, RAJOURI. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. RAHUL DHAWAN (D .R.) RESPONDENT BY: SH. P. N. ARORA (ADV.) DATE OF HEARING: 07.08.2017 DATE OF PRONOUNCEMENT: 24.08.201 7 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORDE R OF LD. CIT(A), JAMMU DATED 10.05.2016 FOR ASST. YEAR: 2012-13. 2. THE ONLY GROUND TAKEN BY REVENUE IS REPRODUCED B ELOW: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.98,61,470/ - U/S 40A(3) OF I. T. ACT, 1961 ON THE GROUNDS THAT PROVI SIONS OF RULE 6DD(J) WERE NOT APPLIED BY THE ASSESSING OFFIC ER AS PUBLIC HOLIDAYS OR SUNDAYS HAVE DULY BEEN EXCLUDED BY THE ASSESSING OFFICER WHILE APPLYING SECTION 40A(3) OF I.T. ACT, 1961. 3. AT THE OUTSET, THE LD. DR SUBMITTED THAT THE ASS ESSING OFFICER HAS CLEARLY BROUGHT ON RECORD THAT ASSESSEE HAD MADE PA YMENTS IN CASH, IN ITA NO. 465(ASR)/2016 ASSESSMENT YEAR: 2012-13 2 VIOLATION OF PROVISIONS OF SECTION 40A(3). THE LD. DR IN THIS RESPECT INVITED OUR ATTENTION TO PAGE 3 & 4 OF THE ASSESSME NT ORDER. THE LD. DR, FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAD AL READY REDUCED AN AMOUNT OF RS.5,50,000/- WHICH THE ASSESSEE HAD CLAI MED TO HAVE MADE PAYMENT ON SUNDAYS AND HOLIDAYS. HE FURTHER SUBMITT ED THAT LD. CIT(A) WITHOUT CONSIDERING THE EXPRESS PROVISIONS OF SECTI ON 40A(3) HAS ALLOWED RELIEF TO THE ASSESSEE WHICH IS NOT IN ACCORDANCE W ITH THE PROVISIONS OF LAW AND THEREFORE, THE ORDER OF ASSESSING OFFICER S HOULD BE UPHELD. 5. THE LD. AR ON THE OTHER HAND SUBMITTED THAT ASSE SSEE WAS A FRANCHISEE OF BHARAT SANCHAR NIGAM LTD. AND WAS CAR RYING ON BUSINESS OF PURCHASING SIM CARDS AND SALE AND PURCHASE OF MO BILES IN THE REMOTE AREA OF RAJOURI AND THEREFORE ON SOME OCCASIONS, KE EPING IN VIEW, THE BUSINESS EXPEDIENCY, HE HAD TO MAKE PAYMENTS IN CAS H. HE SUBMITTED THAT OUT OF TOTAL PAYMENTS OF RS.6,09,39,290/- THE CASH PAYMENTS WERE ONLY FOR AN AMOUNT OF RS.1,04,11,470/- WHICH IS ABO UT 15% OF THE TOTAL PAYMENTS AND REST OF THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS. THE LD AR FURTHER ARGUED THAT THE ASSESSI NG OFFICER WAS FULLY SATISFIED ABOUT THE GENUINENESS OF THE TRANSACTIONS AND IDENTIFICATION OF CASH PAYMENTS WAS ALSO ESTABLISHED AS THE ASSESSEE HAD FILED A CERTIFICATE FROM THE SUPPLIER M/S CHOUDHARY VISION PVT. LTD. WHICH IS PLACED AT PAPER BOOK PAGE 235. 6. THE LD. AR INVITED OUR ATTENTION TO THE CONTENTS OF CERTIFICATE SUBMITTED BY M/S CHOUDHARY VISION PVT. LTD. WHEREIN IT HAD CONFIRMED ITA NO. 465(ASR)/2016 ASSESSMENT YEAR: 2012-13 3 TO HAVE RECEIVED CASH PAYMENTS FROM THE ASSESSEE AN D HAS ALSO CONFIRMED THAT THESE CASH PAYMENTS HAS BEEN DULY RE CORDED IN ITS BOOKS OF ACCOUNTS. 7. THE LD. AR FURTHER SUBMITTED THAT THE ENTIRE PAY MENTS MADE AND RECEIVED BY PAYEE TALLY WITH EACH OTHER AND THERE W AS NO DIFFERENCE BETWEEN THE CREDITS AND DEBITS OF BOTH THE PARTIES. THE LD. AR SUBMITTED THAT THE ASSESSEE WAS CARRYING ON BUSINESS AT A REM OTE AREA OF RAJOURI WHICH IS VERY DANGEROUS AREA AND IS ALWAYS SUBJECT TO DISTURBANCES AND LOOKING TO THE BUSINESS EXPEDIENCY THE CASH PAYMENT S WERE MADE. THE LD. AR SUBMITTED THAT IN A NUMBER OF CASES, THE HON 'BLE COURTS HAS HELD THAT WHERE THE PAYMENTS WERE GENUINE AND IDENTITIES OF THE PAYEES WERE ESTABLISHED, ALL THAT ONE HAS TO CONSIDER IS THE PR ACTICALITY OF THE PAYMENT IN CASH, AND SUCH PRACTICABILITY HAS TO BE CONSIDER ED FROM THE POINT OF VIEW OF A BUSINESSMAN AND NOT FROM THE POINT OF VIE W OF THE TAX COLLECTOR. 8. THE LD. AR IN THIS RESPECT RELIED ON VARIOUS FOL LOWING CASE LAWS: (I) DECISION OF SUPREME COURT OF INDIA IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO REPORTED IN 191 ITR 667. (II) DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF GURDAS GARG VS. CIT (A), BATHINDA IN ITA NO.413 OF 2014 DATED 16/07/2015. (III) DECISION OF DELHI HIGH COURT IN THE CASE OF HONEY E NTERPRISES VS. CIT REPORTED IN (2016) 381 ITR 258 IN WHICH IT WAS HELD AS UNDER:- (IV) DECISION OF DELHI HIGH COURT IN THE CASE OF R.C. GO EL VS. CIT REPORTED IN 213 TAXMAN 213 TAXMAN 305. (V) DECISION OF RAJASTHAN HIGH COURT IN THE CASE OF SMT . HARSHILA CHORDIA VS. ITO. REPORTED IN (2008) 298 IT R 349. ITA NO. 465(ASR)/2016 ASSESSMENT YEAR: 2012-13 4 (VI) DECISION OF KARNATAKA HIGH COURT IN THE CASE OF TAM TAM PEDDA GURUVA REDDY VS. JCIT REPORTED IN 291 ITR 44. (VII) DECISION OF ANDHRA PRADESH HIGH COURT IN THE CASE O F SRI LAXMI SATYANARAYANA OIL MILLS VS. CIT, REPORTED IN 267 ITR 200 (AP) THE LD. AR ALSO INVITED OUR ATTENTION TO BOARD CIR CULAR NO. 220 DATED 31.05.1977, WHEREIN THE BOARD HAS ISSUED INST RUCTIONS WITH RESPECT TO CLAUSE J OF RULE 6DD OF I.T RULES 1962 AND WHEREIN IT HAS BEEN STATED THAT NO DISALLOWANCE U/S 40A(3) OF THE INCOME TAX ACT SHALL BE MADE WHERE THE ASSESSEE SATISFIES THE I.T.O. THA T THE PAYMENT COULD NOT BE MADE BY WAY OF CROSSED CHEQUE OR CROSSED BAN K DRAFT DUE TO UNEXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES AND THE ASSESSEE ESTABLISHES THE IDENTITY OF ASSESSEE TO THE SATISFA CTION OF ASSESSING OFFICER. 9. THE LD. AR THEREFORE ARGUED THAT LD. CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE, KEEPING IN VIEW OF THE FACTS AND CIRC UMSTANCES OF THE CASE AND KEEPING IN VIEW OF THE JUDICIAL PRECEDENT RELIE D BEFORE HIM. 10. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THOUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS A FACT THAT AS SESSEE MADE CASH PAYMENT TO THE TUNE OF RS.1,04,11,470/- OUT OF WHIC H THE ASSESSING OFFICER FOUND THAT AMOUNT OF RS.5,50,000/- WAS PAID ON SUNDAYS AND HOLIDAYS AND THEREFORE, HE RESTRICTED THE ADDITION TO RS.98,61,470/-. IT IS ALSO AN UNDISPUTED FACT THAT ASSESSEE HAD MADE TOTA L PAYMENTS TO THE SUPPLIER TO THE TUNE OF RS. 6,09,39,290/- WHICH IS APPARENT FROM PAPER BOOK PAGE 48 TO 65 WHICH IS THE COPY OF ACCOUNT OF M/S CHOUDHARY ITA NO. 465(ASR)/2016 ASSESSMENT YEAR: 2012-13 5 VISION PVT. LTD. IN THE BOOKS OF ASSESSEE. IT HAS F URTHER BEEN OBSERVED THAT ABOUT THE 85% OF THE PAYMENTS WERE MADE THROUG H BANKING CHANNELS M/S CHOUDHARY VISION PVT. LTD. HAS ALSO CO NFIRMED TO HAVE RECEIVED THESE PAYMENTS IN CASH AND AS PER THIER CE RTIFICATE THESE PAYMENTS WERE DULY ENTERED IN ITS BOOKS OF ACCOUNTS . THE ASSESSING OFFICER U/S 133(6) OBTAINED A COPY OF ACCOUNT OF AS SESSEE IN THE BOOKS OF PAYEE AND AFTER PERUSAL OF THE SAID COPY OF ACCOUNT , IT WAS NOTICED BY HIM THAT BOTH COPIES OF ACCOUNT RECONCILE AND THEREFORE HE DID NOT OBSERVE ANY DISCREPANCY IN THE BOTH COPIES OF ACCOUNT. THIS FINDING HAS BEEN NOTED DOWN BY ASSESSING OFFICER AT PAGE 2 OF HIS OR DER. HIS ONLY OBJECTION FOR MAKING DISALLOWANCE WAS THAT THE ASSESSEE HAD M ADE CASH PAYMENTS WHEREAS HE DID NOT DOUBT THE GENUINENESS OF THE PAY MENTS AS THE RECEIVING PARTY HAD CONFIRMED THE SAME TO HAVE BEEN RECEIVED. 11. THE CENTRAL BOARD OF DIRECT TAXES VIDE CIRCULAR NO. 220 DATED 31.05.1977 HAS ISSUED INSTRUCTIONS REGARDING DISALL OWANCE U/S 40A(3) READ WITH RULE 6DD(J) OF THE IT RULES, AND WHEREIN THE BOARD HAS CLARIFIED THAT NO DISALLOWANCE U/S 40A(3) OF THE I.T. ACT SHA LL BE MADE WHERE THE ASSESSEE SATISFIES THE ITO THAT THE PAYMENT COULD N OT BE MADE BY WAY OF A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BA NK DRAFT DUE TO CERTAIN EXCEPTIONAL CIRCUMSTANCES. IN THE CIRCULAR THE BOARD HAS ALSO GIVEN CERTAIN ILLUSTRATIONS AND HAS FURTHER STATED THAT THE SAID ILLUSTRATIONS ARE ONLY ILLUSTRATIVE NOT EXHAUSTIVE AND THERE COULD BE OTHER CIRCUMSTANCES ALSO. ITA NO. 465(ASR)/2016 ASSESSMENT YEAR: 2012-13 6 12. IN THE PRESENT CASE, THE ASSESSEE IS WORKING FR OM AN AREA IN RAJOURI WHICH UNDISPUTEDLY IS A DISTURBED AREA. MOR EOVER CASH PAYMENTS HAS BEEN CERTIFIED BY PAYEE TO HAVE BEEN RECEIVED B Y IT. THE ASSESSING OFFICER HAD NO DOUBT ABOUT THE GENUINENESS OF THESE TRANSACTIONS. CASH TRANSACTION CONSTITUTED ONLY ABOUT 15% OF THE TOTAL PAYMENTS. UNDER THESE CIRCUMSTANCES IT CAN SAFELY BE SAID THAT SUCH CASH PAYMENTS WERE MADE UNDER EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCE S. IN VIEW OF THE DISTURBED CONDITIONS DUE TO TERRORISM NO ONE WOULD LIKE TO KEEP CASH WITH HIMSELF AND THEREFORE IT IS PRUDENT ON THE PAR T OF ANY PERSON TO HAND OVER THE CASH TO SUPPLIER INSTEAD OF KEEPING W ITH HIMSELF. THE HON'BLE SUPREME COURT IN THE CASE OF ATTAR SINGH GU RMUKH SINGH VS. ITO 191 ITR 667 WHILE DEALING WITH THE VIOLATION OF PROVISIONS OF SECTION 40A(3) HAS HELD AS UNDER: IN OUR OPINION, THERE IS LITTLE MERIT IN THIS CONT ENTION. SEC. 40A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSION O F R. 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. SEC. 40A(3) ONLY EMPOWERS THE ASSESSING 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 UNDISCLOSED SOURCES. THE TERMS OF S. 40A(3) ARE NOT ABSOLUTE. C ONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE 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 FURNI SH TO THE SATISFACTION OF THE ASSESSING OFFICER THE CIRCUMSTANCES UNDER WH ICH THE PAYMENT IN THE MANNER PRESCRIBED IN S. 40A(3) WAS N OT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYE E. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECE IVED 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 S. 40A(3) AND R. 6DD T HAT THEY ARE ITA NO. 465(ASR)/2016 ASSESSMENT YEAR: 2012-13 7 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. [SEE MUDIAM OIL CO. VS. ITO (1973) 92 ITR 519 (AP) : TC18R.450]. IF THE PAYMENT IS MADE BY A CROSSED CHEQUE DRAWN ON A BANK OR A CROSSED BANK DRAFT, THEN IT WI LL BE EASIER TO ASCERTAIN, WHEN DEDUCTION IS CLAIMED, WHETHER THE P AYMENT WAS GENUINE AND WHETHER IT WAS OUT OF THE INCOME FROM D ISCLOSED SOURCES. IN INTERPRETING A TAXING STATUTE, THE COUR T CANNOT BE OBLIVIOUS OF THE PROLIFERATION OF BLACK MONEY 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 FREEDOM OF TRADE OR BUSIN ESS. THE HON'BLE DELHI HIGH COURT IN THE CASE OF R. C. G OEL VS. COMMISSIONER OF INCOME TAX HAS ALSO CONSIDERED THE APPLICATION OF PROVISIONS OF U/S 40A(3) UNDER EXCEPTIONAL CIRCUMST ANCES AND HAS ALLOWED THE APPEAL OF ASSESSEE BY HOLDING AS UNDER: - IN THE PRESENT CASE, THE ASSESSEE IN TERMS OF ITS CONTRACT IS BOUND TO MAINTAIN CONSTANT SUPPLIES IN THE TRAINS AND ENS URE THAT AT NO POINT IN TIME CAN THE PASSENGERS BE DEPRIVED OF THE SE ARTICLES. IN THE COURSE OF SUCH TRANSACTIONS, IT SOURCES THESE ARTIC LES FROM M/S SHRUTI ENTERPRISES, MUMBAI BASED CONCERN. APPARENTL Y, THAT CONCERN IS ALSO A SMALL TIME ONE AND INSISTS ON CAS H PAYMENTS FOR ENSURING CONTINUITY AND TIMELY SUPPLIES. WHILST, TH E COURT IS CONSCIOUS AND DOES NOT IN ANY MANNER WISH TO COMMEN T' ADVERSELY ON THE LARGER PUBLIC INTEREST ELEMENT EMBEDDED IN S ECTION 40A AND THE UNDERLYING PRINCIPLE, AT THE SAME TIME, THE COU RT ALSO NOTES THAT THE PROVISO SEEKS TO RELIEVE TO A CERTAIN EXTENT, T HE MEASURE OF HARDSHIP WHICH MIGHT BE IMPOSED UPON SMALL BUSINESS ES AND PROFESSIONALS WHO ARE ENGAGED IN ACTIVITIES AND ARE DEPENDENT ENTIRELY ON TIMELY CASH FLOW. IT IS IN SUCH CASES T HAT RULE 6DD - WHICH WAS FORMULATED AS A PROVISO TO SECTION 40A (3 ) - STEPS IN TO AID SUCH ASSESSEES AND CONCERNS. IN THIS CONTEXT, THE STATUT ORY MANDATE IN SECTION 6DD (K), AT LEAST IN THE CIRCUMSTANCES OF THE CASE, HAS TO BE SO CONSTRUED AS TO MEAN THAT BUR FO R THE CASH PAYMENT, THE ASSESSEE WOULD HAVE BEEN DEPRIVED THE BENEFIT OF SUPPLIES ITSELF. THIS COURT CLARIFIES THAT THE INTE RPRETATION OF THE EXPRESSION WHO IS REQUIRED TO MAKE PAYMENT IN CASH HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE IS FACT DEP ENDENT, AT LEAST IN THE PRESENT CASE. THE CONSEQUENCE OF INSTANCES OF P AYMENT THROUGH ACCOUNT PAYEE CHEQUES IN SMALL BUSINESS WHICH ARE D EPENDENT ON SUCH SUPPLIES WOULD BE TO COMPLETELY STIFLE, IF NOT STOP, THE BUSINESS ACTIVITIES. IT IS IN THAT SENSE THAT THE EXPRESSION REQUIRED WOULD HAVE TO BE CONSTRUED. ITA NO. 465(ASR)/2016 ASSESSMENT YEAR: 2012-13 8 IN THE OTHER CASE LAWS RELIED ON BY THE ASSESSEE I NCLUDING THE DECISIONS OF AMRITSAR BENCH IN THE CASE OF SH. RAKE SH KUMAR VS. ACIT, CIRCLE02, BATHINDA. THE AMRITSAR BENCH WHILE ALLOWI NG THE APPEAL OF ASSESSEE HAS ALSO FOLLOWED THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO (SUPRA). THE RELEVANT PART OF THE ORDER OF AMRITSAR BENCH I N THE CASE OF SH. RAKESH KUMAR VS. ACIT CIRCLE-II BATHINDA, IS REPROD UCED BELOW:- '14. ABOUT THIS CLAUSE, MANY DOUBTS WERE RAISED AND ENQUIRIES WERE DIRECTED TO THE BOARD AS TO WHAT SHALL CONSTIT UTE EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES WITHIN THE MEANING OF CLAUSE (J). THAT LED TO ISSUANCE OF CIRCULAR BY THE BOARD ON MA Y 31, 1977 ([1977] 108 ITR (ST.) 8), WHICH IS PUBLISHED IN TAX MANN, VOL. 1, 1988 EDITION. SIGNIFICANTLY PARAGRAPH 4 OF THE AFORESAID CIRCULAR OWS VERY CLEARLY THAT ALL THE CIRCUMSTANCES IN WHICH TH E CONDITIONS LAID DOWN IN RULE 6DD(J) COULD BE APPLICABLE CANNOT BE S PELT OUT. HOWEVER, SOME OF THEM WHICH WILL SEEM TO MEET THE R EQUIREMENTS OF THE SAID RULE ARE AS FOLLOWS: (A) THE PURCHASER IS NEW TO THE SELLER; OR (B) THE TRANSACTIONS ARE MADE AT A PLACE WHETHER EITHER THE PURCHASER OR THE SELLER DOES NOT HAVE A BANK ACCOUN T; OR (C) THE TRANSACTIONS AND PAYMENTS ARE MADE ON A BANK HO LIDAY; OR (D) THE SELLER IS REFUSING TO ACCEPT THE PAYMENT BY WAY OF CROSSED CHEQUE/DRAFT AND THE PURCHASER'S BUSINESS I NTEREST WOULD SUFFER DUE TO NON-AVAILABILITY OF GOODS OTHER WISE THAN FROM THIS PARTICULAR SELLER ; OR (E) THE SELLER, ACTING AS A COMMISSION AGENT, IS REQUI RED TO PAY CASH IN TURN TO PERSONS FROM WHOM HE HAS PURCHASE T HE GOODS; OR (F) SPECIFIC DISCOUNT IS GIVEN BY THE SELLER FOR PAYME NT TO BE MADE BY WAY OF CASH. 15. IT WAS FURTHER CLARIFIED IN PARAGRAPH 6 THAT TH E ABOVE CIRCUMSTANCES ARE NOT EXHAUSTIVE BUT ILLUSTRATIVE. 16. .THEREFORE, IN OUR OPINION, THE TRIBUNAL WAS CL EARLY IN ERROR IN NOT TRAVELING BEYOND THE CIRCUMSTANCES REFERRED TO IN PARAGRAPH 4 OF THE CIRCULAR AND TO CONSIDER THE EXPLANATION SUBMIT TED BY THE ASSESSEE ON ITS OWN MERIT. 17 . SIGNIFICANTLY PARAGRAPH 5 REPRODUCED HEREIN BELOW G IVES A CLEAR INDICATION THAT RULE 6DD(J) HAS TO BE LIBERAL LY CONSTRUED AND ITA NO. 465(ASR)/2016 ASSESSMENT YEAR: 2012-13 9 ORDINARILY WHERE THE GENUINENESS OF THE TRANSACTION AND THE PAYMENT AND IDENTITY OF THE RECEIVER IS ESTABLISHED , THE REQUIREMENT OF RULE 6DD(I) MUST BE DEEMED TO HAVE BEEN SATISFIE D. PARAGRAPH 5 OF THE CIRCULAR READS AS UNDER [1977] 108 ITR (ST.) 8, 9: 5. IT CAN BE SAID THAT IT WOULD, GENERALLY, SATISFY THE REQUIREMENTS OF RULE 6DD(J), IF A LETTER TO THE ABOVE EFFECT IS PRO DUCED IN RESPECT OF EACH TRANSACTION FALLING WITHIN THE CATEGORIES LIST ED ABOVE FROM THE SELLER GIVING FULL PARTICULARS OF HIS ADDRESS, SALE S TAX NUMBER/PERMANENT ACCOUNT NUMBER, IF ANY, FOR THE PU RPOSES OF PROPER IDENTIFICATION TO ENABLE THE INCOME-TAX OFFI CER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE TRANSACTION. T HE INCOME-TAX OFFICER WILL, HOWEVER, RECORD HIS SATISFACTION BEFO RE ALLOWING THE BENEFIT OF RULE 6DD(J). 18. IT APPEARS THAT FULFILLMENT OF THE CONDITIONS OF PA RAGRAPH 5 OF THE CIRCULAR HAS CLEARLY ESCAPED THE ATTENTION OF T HE TRIBUNAL. THE CIRCULAR CLEARLY INDICATES THAT ORDINARILY WHERE TH E INCOME-TAX OFFICER IS SATISFIED ABOUT THE GENUINENESS OF THE TRANSACTION AND PAYMENT AND IDENTIFICATION OF THE CASH PAYMENT IS E STABLISHED, THE INCOME-TAX OFFICER SHALL RECORD HIS SATISFACTION AB OUT THE FULFILLMENT OF THE CONDITIONS FOR ALLOWING THE BENEFIT OF RULE 6DD(J). APPARENTLY, SECTION 40A(3)WAS INTENDED TO PENALIZE THE TAX EVAD ER AND NOT THE HONEST TRANSACTIONS AND THAT IS WHY AFTER FRAMING O F RULE 6DD (J), THE BOARD STEPPED IN BY ISSUING THE AFORESAID CIRCU LAR. 19. THIS CLARIFICATION, IN OUR OPINION, IS IN CONFO RMITY WITH THE PRINCIPLE ENUNCIATED BY THE SUPREME COURT IN CTO V. SWASTIK ROADWAYS AS NOTICED ABOVE. 20. IN THIS CASE, THERE IS NO DISPUTE ABOUT THE GEN UINENESS OF THE TRANSACTIONS AND THE PAYMENT AND IDENTITY OF THE RE CEIVER ARE ESTABLISHED. THEREFORE, THE CASE CLEARLY FELL WITHI N THE PARAMETERS OF PARAGRAPHS 4 AND 5 OF THE AFORESAID CIRCULAR READ T OGETHER.' 8. THE RESPONDENT'S CASE IS ALSO SUPPORTED BY THE J UDGMENT OF THE SUPREME COURT IN ATTAR SINGH GURMUKH SINGH V. I SO [19911 191 1TR 667/59 TAXMAN 11 . AFTER REFERRING TO RULE 6DD, THE SUPREME COURT HELD:- '7. IN OUR OPINION, THERE IS LITTLE MERIT IN THIS C ONTENTION. SECTION 40- A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUS ION OF RULE 6-DD. 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 40-A (3) ONLY EMPOWERS THE ASSE SSING 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 40-A(3) ARC NOT ABSOL UTE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELE VANT FACTORS ARE NOT EXCLUDED. THE GENUINE AND BONA FIDE TRANSACTION S ARE NOT TAKEN ITA NO. 465(ASR)/2016 ASSESSMENT YEAR: 2012-13 10 OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE ASSESSING OFFICER THE CI RCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTI ON 40-A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFIC ULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECEIVED THE 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 IN THE CIRCUMSTANCES S PECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF S ECTION 40-A(3) AND RULE 6-DD THAT THEY ARC INTENDED TO REGULATE THE BU SINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTIONS. [SEE: MIIDIAM OIL COMPANY V. ITO [(1973) 92 ITR 519 (API1 ]. IF THE PAYMENT IS MADE BY A CROSSED CHEQUE DRAWN ON A BANK OR A CROSSED BANK DRAFT THEN IT WILL BE EASIER TO ASCERT AIN, WHEN DEDUCTION IS CLAIMED, WHETHER THE PAYMENT WAS GENUI NE AND WHETHER IT WAS OUT OF THE INCOME FROM DISCLOSED SOU RCES. 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 OPPORTUNITIES TO USE OR CREATE BLACK MONEY SHOULD N OT BE REGARDED AS CURTAILING THE FREEDOM OF TRADE OR BUSINESS.' 9. AT THE COST OF REPETITION, THE TRIBUNAL HAS NOT DISBELIEVED 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, THE Y CLEARLY MAKE OUT A CASE OF BUSINESS EXPEDIENCY. 10. IN THE CIRCUMSTANCES, THE ORDER OF THE TRIBUNAL IN THIS REGARD IS SET ASIDE. THE PAYMENTS CANNOT BE DISALLOWED UND ER SECTION 40A(3) OF THE ACT. 9. IN VIEW OF THE ABOVE, FACTS AND CIRCUMSTANCES AN D IN VIEW OF THE JUDICIAL PRECEDENTS, WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF LD. CIT(A). THEREFORE, THE APPEAL FILED BY REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.08.2017 SD/- SD/- (N. K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24.08.2017. /GP/SR. PS . ITA NO. 465(ASR)/2016 ASSESSMENT YEAR: 2012-13 11 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