BHANDARKAR JEWELLERS , NAGPUR V. INCOME TAX OFFICE WARD 1(1), NAGPUR

ITA 60/NAG/2019

AI Insights

The case involves Bhandarkar Jewellers appealing against the order of the CIT(A)-1, Nagpur, which disallowed an interest claim of Rs.7,62,973 made in cash for loans from various creditors. The primary legal contention was whether such cash payments of interest violated section 40A(3) of the Income Tax Act, 1961, which prescribes modes of payment. The Tribunal, referencing precedents from the Supreme Court and Gujarat High Court, concluded that the provision's intent was not to obstruct genuine business transactions, thus allowing the appeal and deleting the disallowance.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 136794 (ITAT-NAGPUR)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-11-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 10-02-2022
• Other Referred Cases: Attar Singh Gurmukh Singh vs. ITO [1991] 59 Taxman 11 (SC), Anupam Tele Services vs. ITO [2014] 366 ITR 122 (Gujarat)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR – VIRTUAL COURT BEFORE SHRI S. S. GODARA, JUDICIAL MEMBER आयकर अपील सं. / ITA No.60/NAG/2019 िनधाᭅरण वषᭅ / Assessment Year: 2013-14 Bhandarkar Jewellers, Shop No.1, Jyeshta Apartments, Ring Road, Bhamti Parsodi, Nagpur- 440022. PAN : AAIFB4042M Vs. ITO, Ward- 1(1), Nagpur. Appellant Respondent आदेश / ORDER PER S. S. GODARA, JM: This assessee’s appeal for assessment year 2013-14 arises against the CIT(A)-1, Nagpur’s order dated 20.12.2018 passed in case no. CIT(A)-1/60/2016-17, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short “the Act”. Case called twice. None appears at assessee’s behest. It is accordingly proceeded ex-parte. 2. It is noticed with the able assistance from the Revenue side that the assessee’s sole substantive grievance challenges correctness of both the learned lower authorities’ action disallowing interest Assessee by : None Revenue by : Shri G. J. Ninawe Date of hearing : 02.11.2022 Date of pronouncement : 27.12.2022 ITA No.60/NAG/2019 2 claim of Rs.7,62,973/- made in cash regarding identical cash loans availed from various creditors. Both the learned lower authorities hold that the impugned cash payments of interest invites section 40A(3) disallowance on account of violation of prescribed mode in absence of any justifiable reason. I have given my thoughtful consideration to Revenue’s vehement contention and find no merit therein. There is hardly any dispute that the hon’ble apex court’s landmark decision in Attar Singh Gurmukh Singh vs. ITO [1991] 59 Taxman 11 (SC) has settled the law that the purpose of the impugned statutory provision is to be costing flow of un-accounted money in business activity. Hon’ble Gujarat high court in Anupam Tele Services vs. ITO [2014] 366 ITR 122 (Gujarat) has equally considered the foregoing judicial precedent to conclude that the genuine business transactions are nowhere effected by the said provision. And that Rule 6 of the Income Tax Rules, 1962 defines the various circumstances of cash payments as not self exhaustive. I keep in mind the same and find that since the assessee has availed loans in cash from various creditors, the same found justifiable reason of its part to make interest payment in the very mode only. I therefore delete the impugned section 40A(3) disallowance of ITA No.60/NAG/2019 3 Rs.7,62,973/- in very terms. The assessee succeeds in its sole substantive grievance. 3. This assessee’s appeal is allowed in above terms. Order pronounced on this 27 th day of December, 2022. Sd/- (S. S. GODARA) JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 27 th December, 2022. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-1, Nagpur. 4. The Pr. CIT-1/2/3, Nagpur. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, नागपुर / DR, ITAT, Nagpur. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.