Shakti Singh Gulia, Bahadurgarh V. ITO, Ward- 4, Rohtak

ITA 6115/DEL/2018

AI Insights

The case involves appeals by Shakti Singh Gulia against the orders of the Commissioner of Income Tax (Appeals), Rohtak, which arose from the assessment orders passed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961. The primary contention in the appeals was the disallowance of expenses under Section 40A(3) due to cash payments exceeding Rs. 20,000 for purchases, which the assessee argued were necessary for the liquor business under government regulation. The Tribunal found merit in the assessee's arguments regarding the business expediency and the regulatory framework governing the liquor trade, leading to the reversal of the disallowances under Section 40A(3). However, the Tribunal upheld the CIT(A)'s decision regarding the addition of Rs. 50,000 as capital introduced by the proprietor.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121682 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: G
• Next Hearing Date: 05-06-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 24-09-2018
• Other Referred Cases: Gurdas Garg vs. CIT(A), ITO vs. Suresh Kumar, Geo Connect Ltd. vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G” DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.As No.6115/Del/2018 & 4618/DEL/2019 Assessment Years 2014-15 & 2015-16 Shakti Singh Gulia H.No.305/26, Palika Colony Killa Mohalla, Bhadurgarh Distt Jhajja Bahadurgarh Haryana v. ITO Ward-4 Rohtak TAN/PAN: ACWPG1881D (Appellant) (Respondent) Appellant by: Shri Manoj Kumar, CA Respondent by: Ms. Meenakshi Dohare, Addl.CIT Date of hearing: 06 06 2023 Date of pronouncement: 15 06 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he ca ptioned ap peals have been file d b y the asse ssee agains t t he orders of t he C ommi ss io ner of Income Tax (A ppeals ), Rohta k (‘ CIT (A )’ in sh ort ) dated 23. 07.2 018 a nd 27.03. 20 19 ar isi ng fro m t he assess ment orders dated 30.12. 2016 and 26. 12.2017 passed b y t he Assess ing Office r (A O ) under Se ct ion 143(3) of the Inc ome T ax A ct, 1961 (t he A ct ) c on cerni ng AY 2013-14 a nd 2 015- 16 respecti vel y. 2. T he ca pt ione d appeals w ere h ea rd togethe r a nd are bei ng dis posed o f b y w a y o f this c onso li dat ed ord er. For the sake of conve ni ence, we sha ll firs t take up ITA N o. 6115 /D el/20 18 I.T.A No. 6115/Del/2018 & 4618/Del/2019 2 conce rn ing A ssess ment Y ea r 2014-15 for the pu rposes o f adju dicati on. ITA N o. 6 11 5 /D e l / 2 01 8 A sse s s me n t Y e ar 20 14 - 1 5 3. T he g r o un ds o f a pp e a l r ai s e d b y t h e as se s se e re ad a s u nd e r : “ 1 T h a t t h e L d C I T( A ) - R o h t a k h a s e r r e d i n l a w a n d on f a c t s i n s u s t a i n i n g t h e a d d i t i o n u / s . 4 0 A ( 3 ) m a d e b y t h e L d AO o f R s . 5 6 ,5 1 ,9 0 0 . 0 0 o n u n t e n a b l e a n d i l l e g a l g ro u n d s . He n c e , t h e a d d i t i o n a s s u c h m a y b e d e l e t e d . 2 T h a t t h e L d C I T ( A ) - R o h t a k h a s e r r e d i n l a w a n d o n f a c t s i n s u s ta i n i n g t h e a d d i t i o n m a d e b y t h e L d A O o f R s . 5 0 ,0 0 0 . 0 0 o n ac c o u n t o f c a p i t a l i n t r o d u c e d b y p r o p r i e t o r o n u n t e n a b l e a n d i l l e g a l gr o u n d s . H e n c e , t h e a d d i t i o n a s s u c h m a y b e d e l e t e d . ” 4. A s per t he G round N o. 1 of th e appeal, the as sesse e has chall enged t he a ddit ion of Rs. 56, 51, 900/ - und er Secti on 40A (3 ) of the A ct. 5. Br ie fl y stated, the assessee is eng aged in the bus iness of trad in g of liq uor and als o deri ving inc ome f rom salar y/ pe nsi on fro m Ha r yana G ov er nment. T he asses see fi le d re tur n of income at Rs. 13, 21,210/- w hich w as s ubj ec ted t o scru tin y assess ment. In the cours e of scr uti ny assess ment, the Assessing O fficer int er ali a obs erve d t ha t the assessee has mad e cash pa yments in exce ss of Rs. 20, 000/- aga ins t p urc hases t o ce rt ain part ies. Th e cash pa yment aggrega ting t o R s.56, 51, 90 0/- w as f ound t o be in cont rave nt ion of pro visions of Sect ion 40A (3 ) of the A ct. T he A ssessing O fficer accordi ngl y di sal low ed the expe nse s t o the af oresaid extent b y res ort ing t o Sect ion 40A (3) of the A ct. 6. A gg rieve d b y the dis al lowa nce made unde r Secti on 40 A(3), the asse ssee p re fer re d a ppeal before the C IT (A ). It was submi t te d I.T.A No. 6115/Del/2018 & 4618/Del/2019 3 be fore the C IT (A ) t hat the asses se e is e ngaged i n tradin g o f countr y liquor w here t he Go vernme nt iss ues lic ens e for t ra di ng. The dis ti lleries w ho ma nuf ac tures c oun tr y li quor a re al so license d and approv ed a nd monit ored by t he G ove rnment. The dis ti lle ri es canno t sel l thei r prod uct to g en eral public di rect ly a nd the y h ave to sel l t hei r produc t o nl y to l ice nsed vendors like assess ee. Likew ise, the l ice nsed ve ndors is a lso obli ga te d t o procure the liqu or from the l ic ensed ma nufact ure s alone. T he w hol e ga mu t of trans ac tion is t hus unde r le ns and supervis ion of the G ove rnment. N oticea bl y, each and e ver y time w hen lic ens e holder procures countr y l iquor from the di st il ler ies, it has to o btai n permit fro m G ove rnment Depart ment, i. e., Exci se A ut hor it ies and the G ove rnment D epa rt ment iss ues pe rmi t a ft e r ta ki ng permit fee. Furthe rmo re, perm it is iss ued fo r f ix ed nu mbe r of bot t les o nl y f or w hich the per mi t f ee is paid. 6. 1 Fur th er, the li cense hol de r cannot pur chase the count ry liqu or from on ly one d ist ille r y o f his cho ice but he is requi re d t o purchase from di ff erent dist il le ries a s di rec te d b y the Gove rnment D epa rt me nt. H ence, he is e ffecti ve l y c omp el led by the G ove rnment to pa y i n cash. Furt her , the s taf f/ employees of the dis ti l le ri es a re als o w ande ring a roun d th e c ount r y l i quor shops and colle ct cas h al mo st on dai l y bas is fro m these shops for the suppl ies made. I n the pecul iar bus i ness of t he assess e e-compan y, use o f cas h as a spot pa yment i s a ma tte r of busi ness expedienc y. 6. 2. T he ass essee reli ed upo n se ve ra l judgme nt s t o su pport it s case of bona f ides and non appl ica bili t y of Sec tion 40 A(3) of the A ct in the ba ck drop of peculia ri t y of bus iness. 6. 3 T he C IT (A) how eve r did not find me rit in the plea of the I.T.A No. 6115/Del/2018 & 4618/Del/2019 4 assessee tow a rds exis te nce o f b us iness exped ie nc y and reaso nable caus e ass oc iated f or cas h purchases. T he C IT(A ) observed th at the onus is upo n t he a ssessee t o es tabl is h his case for excl usi on fro m the a mbi t of Sec ti on 40A( 3) of t he Act h avi ng regard to Rule 6DD of the IT Rules. T he C IT (A ) obs e rve d t ha t t he ass essee has fa ile d in making out a ca se t ha t his c ase is cov ered b y R ul e 6DD of the Rules. T he C IT (A ) t hus uphel d the acti on of t he A sses sing Of fi ce r tow ard s a ddi tions for violati on of provisions of Sect ion 40A (3 ) of the A ct r. w . Rule 6DD of the Income T ax R ules. 7. Fur th er aggr ieve d, the assess ee pref er re d appea l bef ore the Trib una l. 8. When the matter w as calle d fo r hearin g, the ld. couns el for the asses see s ubmit te d a t t he outset that F inancia l Y e ar 2013- 14 re le vant t o A ssess ment Year 20 14-15 w as the f irs t year o f his liqu or busi nes s and t he asse ssee was engaged i n t his bu siness onl y for two Assess me nt Y ea rs 20 14-15 and 2015-1 6 i n quest io n. The bus iness was clos e d w ithi n tw o years of ope ra tions. 8. 1 T o support his ca se for no n appl ica bilit y of Sec tio n 40A (3) in the context of t he fa cts of t he ca se, the ld. couns el su bmi tted that ; (i ) the ass essee is a new ent rant an d an unknown na me in the bus i ness and t herefore, t he t rust quot ient a nd g oodw ill in the ma rket is compa ra tive l y l ow . To su ppor t the fac t of bei ng new ent rant, the ld. counsel re ferred to ann ual state me nt fro m 26 AS and su bmi tted tha t the first p urc hase w as carr ied out o n 3 1. 03. 20 13 a nd the l ast p urchase was made on 2 1. 03. 20 15 and thus the as sessee w as enga ged i n I.T.A No. 6115/Del/2018 & 4618/Del/2019 5 effec tive busi ness for onl y tw o Financi al Y ea rs 2013- 14 and 20 14-15. (i i ) The aggregate cash pu rc has e of 56. 51 lakh unde r scan ner is from four pa rt ies. T he t ot al p urchase f rom t hese fo ur pa rties is about 365. 44 lakh and the ca sh c ompone nt is on ly 56.51 l akh. L ikew ise, i n A sses s me nt Y ea r 2015-16 s ix pa rt ies a re i nvo lved and the cas h pa yment to these six pa rt ies is 96. 14 lakh as a ga ins t th e total purchas es fro m suc h pa rt ies is 690. 31 la kh. (i i i) Mos t of t he cash deposi ts a re made i n the bank acc ount of the res pe ct ive pa rt ies t o procure consi gnment of li quo r on sp ot bas is. (i v) The enti re purch ase t ra nsa ct ions, be i t in cas h or i n che que, w ith t hese parti es ha ve been subj ected to TCS as pe r the p rovis ions of t he A ct. T he pa rt ies a re thus ide ntif iable and the purchases are vouch ed b y corr espo nding tax col lect io n at source on suc h pur ch ase s. (v ) The ass essee is forced t o pa y c ash to me et the i mmedia te de mand of ce rtai n items fo r w hi ch stocks get deplete d and asse ssee in the abs ence of a ny alte rnative makes pa yme nt in cash to obtai n i mm edi ate supp lie s. (v i) O ne of the s upplier dis til le r y c ompan y, namel y, Pani pat C o-operati ve Suga r Mi lls L t d. operate s u nder the dic ta te and co mma nd of the Governme nt a nd t he re fore, the pa yment made to one of the parties is act uall y go vernment ow ne d and cont rol l ed. I.T.A No. 6115/Del/2018 & 4618/Del/2019 6 (v ii) The o bj ec t of Sect ion 4 0A (3) is to pre ve nt a nd c urtail the c rea ti on of black mone y. T he pr ovis ions of Secti on 40A (3) i s de si gne d t o count er t he evas ion of ta x fro m w rongful clai ms of uni de nt ified e xpend iture s how n to have inc urred i n c as h w i th a view to frus trate prope r inves tiga tio n b y t he D epartment as to t he ide ntit y of the pa ye e and t he reas o nab le ness of the payme nt. The conseque nces, w hich w e re to befal l on acc ount o f non obs ervance of Se cti on 40A (3) mu st have nexus t o the fa ilu re of such o bject. The par ti es bein g ident ifiabl e and pu rc hase subj ec t t o TCS provis ions, the object sought to be ach ie ved b y Sec ti on 40A (3) is not e rode d in t he i nstant case. viii. Rule 6D D is il lust rati ve ra ther t han e xhaus t iv e. A reference w as ma de t o t he j udgme nt in the cas e o f G urdas G arg vs. CIT(A ) (2015) 63 t axm an n. com 2 89 (P &H ) in this rega rd al be it i n t he context of Rule 6D D (j ) of R ules whic h now sta nds omitted. ix. The genuineness o f trans act i on ma de in cas h i n exc ess of R s. 2 0, 000/- ha s no t been dis be li e ved b y the a ut horit ies but the dis all ow an ce has be en carri ed out me rel y on account of breach of Sec tion 40A (3) o f the A ct as a ro ut in e exercise. 8. 2 T he ld. couns el thus essentia ll y sub mi ts t ha t the dis al low ance u nder Section 40A( 3) i s not prope r when due w eighta ge is gi ven t o the totali ty of t he ci rc ums tances a nd consi derati ons of bus iness expe di enc y ex ist ing in the prese nt case as co ntemplat ed i n Secti on 40A (3A ) of the A ct and me re re mo val of c la use (j) to Rule 6DD from A sses s me nt Yea r 1996-97 b y i tself I.T.A No. 6115/Del/2018 & 4618/Del/2019 7 is no t a c ompel l ing fa ct or to ne cessaril y dis allow expenses incu rred unde r the umbre l la of Sect ion 4 0A (3) of t he A ct w he n cogen t evid ences a re availa ble to prove the bona f id es of the cas h trans ac tions in q uesti on toge ther wit h identit y of recipie nts. 8. 3 T he ld. cou nsel t hus u rge d fo r a ppro pria te re lief b y w ay of canc el lati on of the disa ll ow anc e ca rrie d out by the Assessi ng O fficer and e rr one ous l y confi rmed b y th e CIT (A ). 9. T he D R for t he R evenue, on the ot he r hand, re lied upon th e orders of t he l ow e r authorit ies an d in furt he ra nce s ub mi tted t hat pro visions of Section 40A( 3) im pos ing rest riction s on cas h pa yme nts w ould be tri gge re d in t he case of t he ass esse e exce pt in the c ircu mstances l isted un der Rule 6D D of the Income Tax R ules. The Ld. DR submi tte d t ha t t he cas e of the assess ee ha ve not bee n show n to fal l wi thin an y of th e clau s es of R ul e 6D D of the R ules and therefore, t he assessee is not e nt itle d to any rel i ef f rom th e appl icabil it y o f Section 40A( 3) of the A ct. The L d. D R also submit ted that ha ving regard t o rob ust banking fac ili ti e s available these da ys a nd s ophis t ica ted di git al platfo rm for banki ng, the trans fe r of mo ney throu gh bank ing c hanne l s houl d n ot be seen as an y i mpedi ment u nl ik e good old days. The L d. D R thus ur ge d f or upholding the acti on. 10. We have ca re ful l y c onsi de re d t he rival s ub mi ss ion s and pe rus ed t he asses s ment or de r as w e ll as t he fi rs t appellate o rde r and als o t he ma te rial refer re d t o a nd relie d upon in the course of hear ing and the case law cited. 10. 1 T he applicabili t y of Se cti on 40A (3) tow ards cas h p urchas es of the l iquor f rom suppl iers i s i n cont rovers y. T he pro visions of I.T.A No. 6115/Del/2018 & 4618/Del/2019 8 Sect ion 40A( 3) re ad w ith Se ction 40A (3A) of the A ct see ks t o dis in ce nt iv ise the cash t ra nsac t io ns i n cas h be yo nd pres cr ib ed unit (Rs. 20 000 li mi t for t he AY s in ques tion). The A ssess i ng O f fice r has th us disall ow ed t he exp ens es i nc urred on pu rchas e s of liquor etc. w he re pa yme nts h ave i n foun d to be ma de in c ash i n breach of presc ri bed l i mi t unde r Sect ion 40A (3) of the Act. 10. 2 It i s the case of t he assess ee that h e is e ngaged in a ver y pecul iar b us iness of liquor t ra ding w here t o meet the s udde n de ma nd, the ass essee is cal led upon t o make pa yment i n cash t o get un in te rru pted sup pl ies from the disti ll er y compa nies. It is fur th er case of t he assessee t ha t the bus iness opera tes in a hi ghl y govern me nt re gula ted environment w he re t he d ist i ll er y companies are licensed s upp li ers as als o it s c us t ome rs incl uding t he asse ssee w ho is a ls o a pe rm it hol de r for purchase of liqu or bot t les. Coup led w ith this, the ass essee being a new ent rant in the bus iness, do es not e nj o y the goodw ill needed fo r su ppli es on c re dits a nd wit hout act ua l trans fer of fun ds. T he asse ssee is thus pe rfo rc e requi re d to ma ke cash pa yme nts on cer ta in oc casions to obtain immed ia te suppl ies. The ass essee further s ubmi ts tha t the s uppl ies w ere recei ved fro m exis ti ng parties. B oth cash pa yments as w ell as in chequ e pa yments were equall y su bj ected t o TCS provis ions. A ll trans ac tions a re thus i de nt ifi able and on t he rec ord of the Income Tax D e partmen t. T his being so, the prop ri et y of cash t ra nsacti on is be yon d an y as pers io n n or has t he A ssessi ng O ff icer dis be lieve d the cash t ra nsac t io ns carrie d out w i th i dent if ied pa rties alt hough a pa rt of t ot al pa yme nt was re imbursed in cas h. 10. 3 T o ap precia te the fac ts i n its perspe cti ve, t he ass essee has pro vi ded tabu la r s tate ment of trans action w it h par ti es in both the I.T.A No. 6115/Del/2018 & 4618/Del/2019 9 assess me nt yea rs i n quest io n as reproduc ed hereunder: A sse s s me nt Y e ar 2 01 4- 1 5 S . N o . N a m e o f P a r t y T A N N u m b e r C a s h P a y m e n t p a r t B a n k p a y m e n t T o t a l P u r c h a s e T C S 1 . M / s . A D S S p i r i t s P v t . L t d . D E L A 2 6 8 1 3 D 3 5 9 4 9 0 0 7 6 2 0 1 4 6 1 1 2 1 5 0 4 6 1 1 2 1 5 1 2 . T h e P a n i p a t C o - o p S u g a r M i l l s L t d . R T K T 0 1 3 2 9 G 1 3 0 0 0 0 0 6 2 9 7 8 0 1 9 2 9 7 8 0 1 9 2 9 8 3 . M / s . F r o s t F a l c o n D i s t i l l e r y D E L F 0 2 2 5 4 A 1 5 0 0 0 0 3 7 1 5 0 6 8 3 8 6 5 0 6 8 3 8 6 5 0 4 . M / s . N V D i s t i l l e r i e s P r i v a t e L t d . R T K N 0 2 2 8 6 E L t d . 6 0 7 0 0 0 1 8 9 2 8 0 0 4 1 9 5 3 5 0 0 4 1 9 5 3 4 9 T o t a l 5 6 5 1 9 0 0 3 0 8 9 2 9 9 8 3 6 5 4 4 8 9 8 3 6 5 4 4 8 A sse s s me nt Y e ar 2 01 5- 1 6 S . N o . N a m e o f P a r t y T A N N u m b e r C a s h P a y m e n t p a r t B a n k p a y m e n t T o t a l P u r c h a s e T C S 1 . M / s . A D S S p i r i t s P v t . L t d . D E L A 2 6 8 1 3 D 1 1 7 8 0 0 0 1 7 9 5 5 9 0 2 9 7 3 5 9 0 2 9 7 3 6 2 . T h e A D I E B r o s w o n D i s t i l l e r s a n d B o t t l e r s P v t . L t d . L K N A 0 7 1 1 9 A 6 0 0 0 0 0 1 6 7 3 6 9 4 2 2 7 3 6 9 4 2 2 7 3 6 . 9 4 3 . M / s . O a s i s C o m m e r c i a l P v t . L t d . R T K O 0 1 6 1 4 E 8 5 0 0 0 0 1 7 0 9 7 6 4 8 1 7 9 4 7 6 4 8 1 7 9 4 7 6 4 . M / s . N V D i s t i l l e r i e s P r i v a t e L t d . R T K N 0 2 2 8 6 E L t d . 4 9 2 0 0 0 1 5 7 4 3 6 6 4 1 6 2 3 5 6 6 4 1 6 2 3 5 9 5 . A s s o c i a t e d D i s t i l l e r i e s ( G l o b u s S p i r i t L t d . ) D E L G 0 6 6 8 3 F 5 1 7 7 5 0 0 5 2 0 5 0 0 4 1 0 3 8 2 5 0 4 1 0 3 5 2 5 6 . G l o b u s S p i r i t L t d . D E L G 0 6 6 8 3 F 1 5 4 3 5 0 0 1 7 6 7 5 2 2 1 9 2 1 8 7 2 2 1 9 2 1 8 4 . 2 6 T o t a l 9 8 4 1 0 0 0 5 9 1 9 0 8 2 2 6 9 0 3 1 8 2 2 6 9 0 0 1 7 . 2 6 10 . 4 O n a pe ru sa l o f t h e p a r t y -w i s e de t a i l s ta b ul ate d he r e i na bo ve , it I.T.A No. 6115/Del/2018 & 4618/Del/2019 10 i s s e e n t h a t t he c as h p a y me n t s m ad e t o t h e pa rt i e s a r e co mp ar a t i ve l y l ow an d t h e m aj o r i t y o f t ra ns a c ti o n a p pe a r s t o h av e b e e n c ar ri e d o ut t hr o u gh b a n k i n g c ha nn el . T h i s n o t w i t hs t a nd i n g, t a x on l i qu o r pu r c h a s es h a v e b e e n co ll e c t e d o n a l l t he pa rt y- w i se p u r c ha se s a n d re fl e c te d i n t he A n nu a l In f o r ma t i on S t at e m e n t ( A I S ) pr e p a re d by t he In c o me T a x D ep a r t me nt . T hu s , t h e t r a n sa c t i o ns c a rr ie d o ut i n c a sh a re d ul y r e p o rt ed a nd m a de a v a i l a bl e un de r t he l e ns o f t he In co me Ta x D e p a r t m e n t . 10 . 5 A t t hi s ju nc t u re , w e ma y r e c k o n t h at t e r m s o f S e c ti o n 4 0A (3 ) r. w . s. 4 0A ( 3A ) ar e n o t a bs o l u t e . C on s i d e r a t i o n o f bu si ne ss e xp e d i e nc y a n d ot he r r e l ev an t fa c t o r s a re n ot e xc lude d f ro m t h e a m bi t o f t h e se pr o vi s i o ns. G e n ui ne a nd b o n a f i d e t r an s a ct i o n s a re no t t ak en o ut o f th e sw e e p o f su c h p r ovi si on s. I n th e l ig ht o f n a t ur e o f bu si n e ss, t he a sse ss e e ha s su ff i c i en t ly d e m on s t rat e d th a t st ri ct a dh e r e n c e t o pa y m e nt th r o u gh ba n ki n g c h a nn e l is , a t t i m e s, no t pr a c t i ca bl e a n d h a s t h e po t e nt i al t o sev er a l l y h a m pe r t he o ng o i n g bu s in es s . N o m a l a f i d e , i n ou r v i e w , c an b e a t t r i b u t e d t o t he a c t io n o f t he a sse ss e e w he r e he i s n e w e n t r a n t a n d t h e d e ma nd o f l i q u o r i n suc h bu si n e s s i s g e ne ra l l y a s y mm e t ri c. N o e v a s i o n of t a x t hr ou g h c as h p a y me n t c a n be e n v i s ag ed in t h e pr e s en t c a s e ow i n g t o su c h t ra ns a c t i o n s. T h e R e v e n u e on i t s pa r t ha s n o t a t t e mp t e d t o d i s co ve r a ny e v a si on by m a ki n g e nq ui ri e s fr o m th e p a r t i e s and ha s me re l y a pp l i ed t h e pr o v i si on s o f Se c t i o n 4 0 A (3 ) su m m a r i l y a s a m a t t e r o f c ou r s e ba se d o n d at a pr ov i d ed b y a sse s s ee . T o o ur min d, t he di s a l l o w a n c e s a re no t j u s t i fi e d i n t he t o t a li t y o f fa c t s an d c ir cu ms t a nc e s pl ac e d b e f o re us . 10 . 4 T he C o- o r d i n at e B e nc h o f t h e T ri bu n a l in t h e ca s e o f I T O v s. Su r es h Ku m a r ( 20 21) 1 2 4 t ax m a nn . c o m 56 3 (D e l h i T ri bu n al ) a n d G eo Co nne c t L t d. v s. D C I T , 28 9 6 / D el / 2 0 1 8 ha s t a k e n n o t e o f I.T.A No. 6115/Del/2018 & 4618/Del/2019 11 j ud g me n t de l i v er ed b y th e H on ’b le S u pr e m e C ou r t a n d v a r i o u s H ig h Co u rt s o n t he s ch e ma ti c i n te rp re t at i on o f p ro vi si o ns o f S ec t i o n 40 A ( 3) o f t he A c t an d o b se r ve d th a t t h e co ns i d e r a t io ns o f b u si ne s s e xp e d i e nc y a n d o t h er r e l e v a nt fa c t o r s e m b e d d e d i n pr ov i si o n s o f S ec t i on 40 A ( 3) a nd S e c t i o n 4 0A ( 3 A ) a re n o t d i l u t e d by t h e a me nd me nt i n Rul e 6D D of t h e I T R u l e s w hi c h i s me rel y a de l eg at e d l eg is l a t i o n. T h e C o -or di na t e Be n c h d i s c ha r g e d th e as se s se e fr o m t he c lu tc he s o f S e c ti o n 40 A ( 3) w h e r e t he b u si n e s s e xp e die nc y t o ma k e pa y m e nt i n c a sh w as fo u n d t o b e r e a s on ab ly e st a b l i she d. I n t he i ns t a n t c a s e, t he c i rc u m st a n c e s na rr a te d on b eh a l f o f t h e a ss e s se e pr o vi de r e a s on ab l e g ro u n d t o sh ow - c a se c o ns i d e r at i on s o f b us i n e s s e xp e d i e nc y a nd ex i st e nc e o f r e le v a n t f ac t o r s w h i c h w a r r a nt e d c a sh pa y m e nt s i n t he w i sd o m a n d pe r s pe ct i ve o f a bu si n e ss ma n. B e t h a t a s i t m a y, t h e c a sh t r a n s ac t i o ns, i n a n y c a se , h av e b e e n su bj e c t e d t o TC S c o l l e ct i o n s e t c . a nd a re t h us d u l y ma de ch a r ge abl e t o t a x in t he ha n d s o f t h e re c ip i e n t. N o e n q u i r i e s ha ve be en ma d e on b e h a l f o f t he Re ve n u e t o d i s l o dg e t h e b o na f i d e s o f t h e ca s h p ur ch ase s. N one t he l e s s, t h e s up p li e r s a n d re c i p i en ts o f c a s h ar e i de nt i fi e d pa r t i e s a n d w el l r e g u l a t e d. 10 . 5 T h u s i n t o t a l i t y, w e fi n d me r i t i n t h e c a s e mad e ou t on b e ha l f o f t he a ss e s se e fo r e xo ne ra t i o n fro m t he c l u t ch es of S e c t i on 4 0A ( 3 ) i n th e p e c u l i a r fa ct s o f t h e pr es e n t c as e . Th e a c tion o f t he C IT (A ) i s t hu s se t as i d e a nd t he a dd i t i o ns m a d e b y t he A ss es si n g O ff i c e r u n d e r S ec t i on 4 0A (3 ) a re t hu s r e v e rse d a n d c a nc e l l e d. 11 . G r ou n d N o. 1 o f t h e a ppe a l o f t he a sse s see i s all ow e d. 12 . G r ou n d N o . 2 c o n c e rn s a ddi t i on s o f Rs . 50 , 000 / - on a c co u nt o f c ap it a l i nt r o d uc e d b y pr o p ri e t or. I t i s co nt en de d by t h e CI T( A ) t h at t he c a p i t al a mo un t o f R s. 50 , 00 0 / - i s o ut o f w i t hd raw a l fr o m t h e b a n k a cc ou nt w i t h S t a t e Ba nk o f In di a w he r e t he p e n s i o n o f t h e a sse ss ee I.T.A No. 6115/Del/2018 & 4618/Del/2019 12 i s c r e d i te d. T he c o py o f b an k p a s sb o ok r e fl e c t i ng ca sh w i t hd ra w a l w er e s t a t e d t o be fi l ed be fo r e t he CI T( A ). T h e C I T (A ) h ow e v e r re j ec t e d t he e x pl an a t i on o f t h e a sse ss e e o n t h e g r ou n d t h a t w it h d ra w a l ma d e fr o m t h e b a n k c ou l d b e u t i l i z e d fo r h o u se h o l d e xp e n se s a n d t he o nu s t ow a rd s a va i l a b i l i t y o f c a sh i s n o t d i s c h a r g e d i n t h e pre se nt c as e . 13 . B e f or e u s, th e a s se ss e e h as fa i l e d t o l ea d a n y c o g e n t e v i d en ce t o r e b u t t h e o bse rv at i on s o f t he C I T ( A ) . We t h u s are i n n o p o si t i o n t o t r a v e r se t he fa ct s a nd d ec i d e i n de p e n d e nt ly . We t h u s se e n o re a so n t o i n t e r f er e w i t h t h e a p pr o a c h o f t h e C IT (A ). 14 . G r ou n d N o. 2 o f t h e a sse s s ee a p pe a l i s t hu s di s mi s se d. 15 . I n t he r e s u l t , t he a pp e a l o f t h e a ss e s s e e for Ass e s s me n t Y e a r 20 1 4- 15 i s pa r tl y a l l ow e d. ITA N o. 4 61 8 /D e l / 2 01 9 A sse s s me n t Y e ar 20 15 - 1 6 16 . T he g r o un ds o f a pp e a l r ai s e d b y t h e as se s se e rea d a s u nd e r : “ 1 T h a t t h e L d C I T ( A ) - R o h t a k h a s e r r e d i n l a w a n d o n f a c t s i n s u s t a i n i n g t h e a d d i t i o n m a d e b y t h e L d A O o f R s . 9 8, 4 1 ,0 0 0 . 0 0 o n u n t e n a b l e a n d i l l e g a l g r o u n d s . H e n c e , t h e a d d i t i o n a s su c h m a y b e d e l e t e d . 2 T h a t t h e L d C I T ( A ) - R o h t a k h a s e r r e d i n l a w a n d on f a c t s i n s u s t a i n i n g t h e a d d i t i o n m a d e b y t h e L d A O o f R s . 9 8, 4 1 ,0 0 0 .0 0 b y i n v o k i n g s e c t i o n 4 0 ( 3 ) o n u n t e n a b l e a n d i l l e g a l g rou n d s . H e n c e , t h e a d d i t i o n a s s u c h m a y b e d e l e t e d . ” 17. A s per t he g rounds of ap peal, the assessee has cha l le nge d addi ti ons of Rs. 98, 41, 00 0/ - unde r Sect io n 40A (3) of t he A ct i n the s imila r factual mat ri x. T he fact s and is sue a re i dentical t o G roun d N o. 1 of the appeal of t he assesse e i n A ssessment Y ear 2014-15. In consonance w ith th e vi ew express ed in Assess ment I.T.A No. 6115/Del/2018 & 4618/Del/2019 13 Y ear 2014- 15, the ad di ti ons ma de unde r the s hel te r of Secti on 40A (3 ) of the Act by t he Re ve nue A uthori ties is t hus reve rse d. 18. T he ap pea l of t he assesse e for A sses s ment Y ear 2015 -16 is thus al low ed. 19. In t he combi ned result, t he appeal of t he assess ee for the A ssess me nt Y ear 2014-15 in IT A N o. 611 5/D e l/2018 is partl y all ow ed w hereas a ppe al for t he A ssess me nt Y ear 2015- 16 in ITA N o. 4618 /D el/2019 is al lowe d. Order pronounced in the open Court on 15/06/2023. Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /06/2023 Prabhat