M/s Birgiri C. S. Shop, Purulia V. ITO, WD-3(2), PURULIA, Purulia

ITA 972/KOL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1805 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 09-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA CIT LD
• Assessee Lawyers: R N RAM LD
• Keywords: Income from undisclosed sources; Corroborative evidences
• Section: 40A(3)

Judgement Text

1 IT A NO . 9 72 /KOL/2016 MS. BIRGIRI C.S SHOP IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA BEFORE: SHRI J. SUDHAKAR REDDY , ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A NO. 9 72 /KOL/201 6 A.Y: 20 11 - 12 M/S. BIRGIRI C.S SHO P VS. I.T.O, WARD 3 ( 2 ), KOLKATA PAN: AA FFB 8532P [APPELLANT] [RESPONDENT] FOR THE APPELLANT : S/ SHRI RAVI TULSIYAN, FCA & R.N RAM, LD.A R S FOR THE RESPONDENT : SHRI S. DASGUPTA, ADDL.CIT, LD.SR.DR DATE OF HEARING : 13 - 06 - 2018 DATE OF PRONOUNCEMENT : 05 - 0 9 - 201 8 ORDER SHRI S.S. VISWANETHRA RAVI TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), ASANSOL DT. 2 4 - 02 - 2016 FOR THE A.Y 20 11 - 12 . 2. GROUND NO.S 1 TO 4 ARE COMMON RELATING TO CONFIRMATION OF ADDITION MADE U/S. 40A(3) OF THE ACT . 3. T HE LD.AR SUBMITS THAT THE ISSUE (S) RAISED IN THIS APPEAL OF ASSESSE IS COVERE D BY THE ORDER DT. 5 - 8 - 2016 IN ITA NOS. 145/KOL/2015, 185& 186/KOL/2014 FOR THE A.YS 2007 - 08, 08 - 09 & 10 - 11 IN THE CASE OF RAMNAGAR PACHWAI & C.S (S) SHOP ON SIMILAR SET OF FACTS , COPY OF THE SAID ORDER IS ON RECORD AT PAGE 33 OF THE PAPER BOOK AND REFER RED TO PARA 24 OF THE SAID ORDER AND ARGUED THAT ASSESSEES CASE FALLS UNDER THE EXCEPTIONS PROVIDED IN RULE 6DD(B) & 6DD ( K) OF THE RULES AND DISALLOWANCE COULD NOT BE MADE U/S.40A(3) OF THE ACT. 2 IT A NO . 9 72 /KOL/2016 MS. BIRGIRI C.S SHOP 4. ON THE OTHER HAND, THE LD. DR DID NOT CONTROVERT THE ABOV E SUBMISSIONS OF THE LD.AR. 5 . AFTER HEARING BOTH THE PARTIES AND PERUSED THE RECORD INCLUDING THE ORDER DT. 05 - 08 - 2016, WE FIND THAT THE ISSUE RAISED IN THIS APPEAL OF ASSESSE IS IN FAVOUR OF ASSESSE, WHICH HAS RIGHTLY BEEN POINTED OUT BY THE LD.AR OF ASS ESSE. ON PERUSAL OF ORDER DT. 05 - 08 - 2016, WE FIND THAT THIS TRIBUNAL DISCUSSED THE ISSUE IN DETAIL ANALYZING WITH VARIOUS CASE LAWS AVAILABLE IN THE SAID ORDER AND HELD THAT CASH PAYMENTS MADE BY THE ASSESSE, WHO IS RETAIL VENDOR TO THE PRINCIPAL, GOVT. OF WEST BENGAL THROUGH ITS WHOLESALE AGENT. THE ASSESSE I.E RETAIL VENDOR HAD MADE PAYMENT TO THE SAID AGENT (WHOLESALE LICENSEE) WOULD FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD(K) OF THE IT RULES. RELEVANT PORTION OF SUCH ORDER IS REPRODUCED HEREIN BELO W : - 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESSEE COMPRISING OF VARIOUS ORDERS OF LOWER AUTHORITIES VIDE PAGES 1 TO 42 OF THE PAPER BOOK, COPY OF NOTIFICATION NO. 1208 - EX DATED 29.08.2005 ISSUED BY THE EXCISE DEPARTMENT, GOVERNMENT OF WEST BENGAL VIDE PAGES 43 TO 49 OF PB AND COPIES OF VARIOUS DECISIONS OF HIGH COURTS AND TRIBUNALS VIDE PAGES 50 TO 102 OF PB. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF THE WEST BENGAL EX CISE RULES 2005 AND THE BENGAL EXCISE ACT, 1909. THE FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITERATED FOR THE SAKE OF BREVITY. AT THE OUTSET, WE DEEM IT NECESSARY TO INCORPORATE THE FOLLOWING CLAUSES FROM THE NOTIFICATION IS SUED BY THE EXCISE DEPARTMENT, GOVERNMENT OF WEST BENGAL , DATED 29.8.2005 FOR THE SAKE OF BETTER UNDERSTANDING OF THE FACTS : - IN EXERCISE OF THE POWER CONFERRED BY SECTION 85 AND SECTION 86 OF THE BENGAL EXCISE ACT, 1909 (BEN. ACT V OF 1909) AND IN SUPE RSESSION OF THE RULES PUBLISHED WITH THIS DEPARTMENT NOTIFICATION NO. 122 - EX/O/1R - 1/2000 DATED 23.2.2000, AS SUBSEQUENTLY AMENDED, THE GOVERNOR IS PLEASED HEREBY TO MAKE THE FOLLOWING RULES REGULATING THE ISSUE AND REMOVAL OF COUNTRY SPIRIT ON PAYMENT OF D UTY IN LABELLED AND CAPSULED BOTTLES FROM COUNTRY SPIRIT BOTTLING PLANTS AND IN BULK FROM WAREHOUSES BY THE LICENSED WHOLESALE VENDORS OF THE SAME FOR THE PURPOSE OF SELLING COUNTRY SPIRIT BY WHOLESALE: RULES 1. SHORT TITLE AND COMMENCEMENT. (1) THESE RUL ES MAY BE CALLED THE WEST BENGAL EXCISE (SUPPLY OF COUNTRY SPIRIT ON PAYMENT OF DUTY) RULES, 2005. (2) THESE RULES SHALL COME INTO FORCE FROM 19TH OCTOBER, 2005. 2. DEFINITIONS. (1) IN THESE RULES, UNLESS THERE IS ANYTHING REPUGNANT IN THE SUBJECT OR CONTE XT (I) COMMISSIONER MEANS THE EXCISE COMMISSIONER; (II) REQUISITION MEANS THE REQUISITION SUBMITTED BY THE AUTHORIZED REPRESENTATIVE OF LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT IN FORM II APPENDED TO THESE RULES; (III) RETAIL VENDOR MEANS THE PERSON HOLDING LICENSE IN THE PRESCRIBED FORM FOR RETAIL VENDING OF COUNTRY SPIRIT, GRANTED BY THE COLLECTOR; 189; (IV) STATE GOVERNMENT MEANS THE GOVERNMENT OF WEST BENGAL; (V) THE ACT MEANS THE BENGAL EXCISE ACT, 1909 (BEN. ACT V OF 1909); (VI) T RANSPORT PASS MEANS THE TRANSPORT PASS ISSUED IN FORM III APPENDED TO THESE RULES; 3 IT A NO . 9 72 /KOL/2016 MS. BIRGIRI C.S SHOP (VII) WAREHOUSE MEANS THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VENDORS, ESTABLISHED AT CONVENIENT PLACES BY THE COMMISSIONER AT THE EXPENSE OF THE STATE GOVE RNMENT, OR AT THE EXPENSE OF A PERSON TO WHOM THE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLING COUNTRY SPIRIT BY WHOLESALE HAS BEEN GRANTED UNDER SECTION 22 OF THE ACT, OR OF A LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT; (VIII) WHOLESALE LICENSEE MEANS THE WHOLESALE VENDOR OF COUNTRY SPIRIT TO WHOM LICENSE HAS BEEN GRANTED IN WEST BENGAL EXCISE FORM NO. 26. (2) WORDS AND EXPRESSIONS USED IN THESE RULES AND NOT DEFINED, BUT DEFINED IN THE ACT, SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN THE ACT. 3. ISSUE ONLY ON PAYMENT OF DUTY. NO COUNTRY SPIRIT IN LABELLED AND CAPSULED BOTTLES SHALL BE ISSUED WITHOUT PAYMENT OF DUTY FROM A COUNTRY SPIRIT BOTTLING PLANT. NO COUNTRY SPIRIT IN BULK SHALL BE ISSUED WITHOUT PAYMENT OF DUTY FROM A COUNTRY SPIRIT WAREHOUSE. 4. PERSONAL LEDGER ACCOUNT TO BE MAINTAINED BY THE WHOLESALE LICENSEE. THE WHOLESALE LICENSEE SHALL MAINTAIN A PERSONAL LEDGER ACCOUNT IN ACCORDANCE WITH THE DIRECTION ISSUED BY THE COMMISSIONER FROM TIME TO TIME FOR THE PURPOSE OF MAINTAINING AN ACCOUNT CURRENT OF THE DUTIES PAYABLE BY THE WHOLESALE LICENSEE FOR THE ISSUES OF COUNTRY SPIRIT TO THE RETAIL VENDORS OR TRANSPORT ON PAYMENT OF DUTY FROM THE CONCERNED COUNTRY SPIRIT BOTTLING PLANT OR WAREHOUSE. 5. MINIMUM BALANCE IN PERSONAL LEDGER ACCOUNT. THE COLLECTOR SHALL ISSUE DIRECTIONS FOR MAINTAINING THE MINIMUM AMOUNT OF BALANCE IN THE AFORESAID PERSONAL LEDGER ACCOUNTS IN ORDER TO ENSURE THAT DUTY FOR DAILY ISSUES OF COUNTRY SPIRIT FROM THE COUNTRY SPIRIT BOTTLING PLANT OR WAREHOUSE MAY BE DEBITED FROM THE SAID ACCOUNT, LEAVING SUFFICIENT BALANCE AS MAY BE DETERMINED BY HIM. 6. PROCEDURE OF ISSUE OF COUNTRY SPIRIT. (1) THE RETAIL VENDOR OR HIS AUTHORIZED REPRESENTATIVE SHALL SUBMIT TO THE REPRESENTATIVE OF THE WHOLESALE LICENSEE, THROUGH EXCISE OFFICER - IN - CHARGE OF THE WAREHOUSE, A DEMAND FOR ISSUE OF COUNTRY SPIRIT IN FORM I APPENDED TO THESE RULES IN DUPLICATE. THE DUPLICATE COPY SHALL BE KEPT IN THE CUSTODY OF THE EXCISE OFFICER - IN - CHARGE FOR HIS OFFICIAL RECORD. (2) NO RETAIL VENDOR OF COUNTRY SPIRIT SHALL DEPOSIT DUTY DIRECT INTO THE LOCAL TREASURY FOR ISSUE OF COUNTRY SPIRIT TO BE TAKEN BY HIM FROM THE WAREHOUSE CONCERNED. DUTY, COST PRICE, BOTTLING CHARGE, IF THERE BE ANY, AT THE PRESCRIBED RATE AND OTHER IMPOSITION, AS MAY BE PRES CRIBED BY LAW, SHALL BE PAID BY THE RETAIL VENDOR TO THE CREDIT OF THE WHOLESALE LICENSEE CONCERNED. (3) THE AUTHORIZED REPRESENTATIVE OF THE WHOLESALE LICENSEE SHALL REALIZE THE NECESSARY AMOUNT OF DUTY, COST PRICE AND BOTTLING CHARGE, IF THERE BE ANY, AT THE PRESCRIBED RATE AND SUCH OTHER IMPOSITION, AS MAY BE PRESCRIBED BY LAW, FROM THE RETAIL VENDOR TO WHOM COUNTRY SPIRIT IS TO BE ISSUED FROM THE CONCERNED WAREHOUSE. THE AUTHORIZED REPRESENTATIVE AS ABOVE SHALL THEN SUBMIT REQUISITION IN DUPLICATE IN FORM II APPENDED TO THESE RULES TO THE EXCISE OFFICER - IN - CHARGE OF THE WAREHOUSE SEPARATELY FOR EACH OF THE RETAIL VENDORS TO WHOM COUNTRY SPIRIT IS TO BE ISSUED ON THE DAY. (4) ON RECEIPT OF THE REQUISITION IN FORM II, THE EXCISE OFFICER - IN - CHARGE OF THE WAREHOUSE SHALL ALLOW ISSUE OF COUNTRY SPIRIT FROM THE WAREHOUSE. DUPLICATE COPY OF THE REQUISITION SHALL BE RETURNED TO THE AUTHORIZED REPRESENTATIVE OF THE WHOLESALE LICENSEE AFTER THE ISSUE HAS BEEN MADE. (5) THE EXCISE OFFICER - IN - CHARGE OF THE WAREHO USE SHALL ISSUE TRANSPORT PASS TO THE RETAIL VENDOR IN FORM III APPENDED TO THESE RULES. (6) NOTWITHSTANDING ANYTHING CONTAINED IN ANY PROVISIONS OF THE RULES, ORDERS AND NOTIFICATIONS IN THIS CONTEXT, THE WHOLESALE SUPPLIERS OF COUNTRY SPIRIT IN LABELLED AND CAPSULED BOTTLES SHALL ALLOW A REBATE OF FIVE PAISE PER BOTTLE IRRESPECTIVE OF MEASURE FROM THE BOTTLING CHARGE TO THE RETAIL COUNTRY SPIRIT LICENSEES WHOSE LICENSED PREMISES ARE LOCATED AT A DISTANCE OF 50 KILOMETRES OR MORE BY THE SHORTEST ROUTE FRO M THE ISSUING WAREHOUSE ON THE BASIS OF A CERTIFICATE TO BE ISSUED BY THE COLLECTOR IN RESPECT OF DISTANCE. AT THE END OF THE MONTH, THE WHOLESALER SHALL SUBMIT A BILL IN DUPLICATE TO THE OFFICER - IN - CHARGE OF THE WAREHOUSE CLAIMING REFUND OF THE AMOUNT GR ANTED AS REBATE. THE OFFICER - IN - CHARGE SHALL, ON RECEIPT OF THE BILL, REFUND THE AMOUNT CLAIMED AFTER VERIFYING HIS RECORDS THROUGH ADJUSTMENT IN THE PERSONAL LEDGER ACCOUNT MAINTAINED FOR THE PURPOSE OF PRIVILEGE FEE. IN CASE THERE IS NO PERSONAL LEDGER ACCOUNT FOR PRIVILEGE FEE AT THE WAREHOUSE, THE OFFICER - IN - CHARGE SHALL SEND A COPY OF THE CLAIM WITH HIS COMMENTS TO THE OFFICER - IN - CHARGE 4 IT A NO . 9 72 /KOL/2016 MS. BIRGIRI C.S SHOP OF THE SUPPLIER BOTTLING PLANT, WHO SHALL REFUND THE AMOUNT RECOMMENDED TO THE WHOLESALER THROUGH ADJUSTMENT IN THE PERSONAL LEDGER ACCOUNT MAINTAINED FOR PRIVILEGE FEE. 14. WE FIND THAT THE RELIANCE PLACED ON THE DECISION OF CO - ORDINATE BENCH OF BANGALORE TRIBUNAL IN THE CASE OF SRI RENUKESWARA RICE MILLS VS ITO REPORTED IN 93 ITD 263 (BANG TRIB.) IS WELL FOUNDED , WH EREIN, IT WAS HELD THAT THE CASH PAYMENT IN THE BANK ACCOUNT OF THE PAYEE IS SUFFICIENT TO GET EXEMPTION IN TERMS OF RULE 6DD IN AS MUCH IT IS ENSURED THAT THE PAYEE AND PAYEE ALONE RECEIVES THE PAYMENT AND THE ORIGIN AND CONCLUSION OF THE TRANSACTION IS T RACEABLE THEREBY FULFILLING THE CRITERION FOR ENSURING THE OBJECT OF INTRODUCTION OF SECTION 40A(3) OF THE ACT. 15. WE FIND THAT THE FOLLOWING FACTS ARE UNDISPUTED AND INDISPUTABLE: - (A) THE TRANSACTIONS MADE BY THE ASSESSEE IS GENUINE. (B) THE IDENTITY OF THE RECEIVER (WHOLESALE LICENSEE) IS ESTABLISHED BEYOND DOUBT. (C) THE PAYMENT IS MADE IN THE BANK ACCOUNT OF THE SELLER (WHOLESALE LICENSEE). WE HOLD THAT SINCE THE GENUINITY OF THE PAYMENTS MADE TO THE M/S ASANSOL BOTTLING & PACKAGING CO. PVT. LTD (WHOLESALE LICENSEE) IS NOT DOUBTED BY THE REVENUE, THE PROVISIONS OF SECTION 40A(3) COULD NOT BE MADE APPLICABLE TO THE FACTS OF THE INSTANT CASE. IT IS OBSERVED THAT THE ASSESSEE HAD TAKEN ENOUGH PRECAUTIONS FROM ITS SIDE TO ENSURE THAT THE PAYEE ALSO DO NT ESCAPE FROM THE AMBIT OF TAXATION ON THESE RECEIPTS BY DIRECTLY DEPOSITING THE CASH IN THE BANK ACCOUNT OF THE PAYEE. MOREOVER, THE REGULATIONS OF THE WEST BENGAL GOVERNMENT PURSUANT TO NOTIFICATION FROM ITS EXCISE DEPARTMENT DATED 29.8.2005 ALSO MANDA TES THE PAYMENT TO BE MADE BY WAY OF DIRECT DEPOSIT INTO THE BANK ACCOUNT OF THE WHOLESALE LICENSEE. THIS FACT IS ALSO NOT DISPUTED BY THE REVENUE. 16. IT WILL BE PERTINENT TO GO INTO THE INTENTION BEHIND INTRODUCTION OF PROVISIONS OF SECTION 40A(3) OF T HE ACT AT THIS JUNCTURE. WE FIND THAT THE SAID PROVISION WAS INSERTED BY FINANCE ACT 1968 WITH THE OBJECT OF CURBING EXPENDITURE IN CASH AND TO COUNTER TAX EVASION. THE CBDT CIRCULAR NO. 6P DATED 6.7.1968 REITERATES THIS VIEW THAT THIS PROVISION IS DESIGN ED TO COUNTER EVASION OF A TAX THROUGH CLAIMS FOR EXPENDITURE SHOWN TO HAVE BEEN INCURRED IN CASH WITH A VIEW TO FRUSTRATING PROPER INVESTIGATION BY THE DEPARTMENT AS TO THE IDENTITY OF THE PAYEE AND REASONABLENESS OF THE PAYMENT. 17. IN THIS REGARD, IT IS PERTINENT TO GET INTO THE FOLLOWING DECISIONS ON THE IMPUGNED SUBJECT: - ATTAR SINGH GURMUKH SINGH VS ITO REPORTED IN (1991) 191 ITR 667 (SC) ' 3.3.4. SECTION 40A(3) OF THE INCOME - TAX ACT, 1961, WHICH PROVIDES THAT EXPENDITURE IN EXCESS OF RS. 2,500 ( RS. 10,000 AFTER THE 1987 AMENDMENT) WOULD BE ALLOWED TO BE DEDUCTED ONLY IF MADE BY A CROSSED CHEQUE OR CROSSED BANK DRAFT (EXCEPT IN SPECIFIED CASES) IS NOT ARBITRARY AND DOES NOT AMOUNT TO A RESTRICTION ON THE FUNDAMENTAL RIGHT TO CARRY ON BUSINESS. IF READ TOGETHER WITH RULE 6DD OF THE INCOME - TAX RULES, 1962, IT WILL BE CLEAR THAT THE PROVISIONS ARE NOT INTENDED TO RESTRICT BUSINESS ACTIVITIES. THERE IS NO RESTRICTION ON THE ASSESSEE IN HIS TRADING ACTIVITIES. SECTION 40A(3) ONLY EMPOWERS THE ASSESSING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RESPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED - CHEQUE OR CROSSED - BANK DRAFT. THE PAYMENT BY CROSSED - CHEQUE OR CROSSED BANKDRAFT IS INSISTED UPON TO ENABLE THE ASSESSING AUTHORITY TO ASCERTAIN WHE THER THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF INCOME FROM UNDISCLOSED SOURCES. THE TERMS OF SECTION 40A(3) ARE NOT ABSOLUTE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. GENUINE AND BONA FIDE TRANSACTIONS ARE NO T TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE ASSESSING OFFICER THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUIN E DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECEIVED 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 CIRCUMS TANCES SPECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF SECTION 40A(3) AND RULE 6DD THAT THEY ARE INTENDED TO REGULATE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTIONS.' CIT VS CPL TANNERY REPORTED IN (2009) 318 ITR 179 (CAL) THE CONTENTION OF THE ASSESSEE THAT HE PURCHASED GOODS FROM SUPPLIERS WHO ARE PRODUCERS OF HIDES AND SKINS, HAS NOT BEEN REFUTED EITHER BY THE AO OR BY THE CITA. THE SECOND CONTENTI ON OF THE ASSESSEE THAT OWING TO BUSINESS EXPEDIENCY, OBLIGATION 5 IT A NO . 9 72 /KOL/2016 MS. BIRGIRI C.S SHOP AND EXIGENCY, THE ASSESSEE HAD TO MAKE CASH PAYMENT FOR PURCHASE OF GOODS SO ESSENTIAL FOR CARRYING ON OF HIS BUSINESS, WAS ALSO NOT DISPUTED BY THE AO. THE GENUINITY OF TRANSACTIONS, RATE OF GROSS PROFIT OR THE FACT THAT THE BONAFIDE OF THE ASSESSEE THAT PAYMENTS ARE MADE TO M/S IFB AGRO INDUSTRIES LTD FOR PURCHASE OF COUNTRY SPIRIT ARE ALSO NEITHER DOUBTED NOR DISPUTED BY THE AO. ON THE BASIS OF THESE FACTS IT IS NOT JUSTIFIED ON THE PART OF THE AO TO DISALLOW 20% OF THE PAYMENTS MADE U/S 40A(3) IN THE PROCESS OF ASSESSMENT. WE, THEREFORE, DELETE THE ADDITION OF RS. 17,90,571/ - AND GROUND NO.1 IS DECIDED IN FAVOUR OF THE ASSESSEE. CIT VS CRESCENT EXPORT SYNDICATE IN ITA NO. 202 OF 2008 DATED 30.7.2008 JURISDICTIONAL HIGH COURT DECISION IT ALSO APPEARS THAT THE PURCHASES HAVE BEEN HELD TO BE GENUINE BY THE LEARNED CIT(APPEAL) BUT THE LEARNED CIT(APPEAL) HAS INVOKED SECTION 40A(3) FOR PAYMENT EXCEEDING RS.20,000/ - SINCE IT IS NOT MADE BY CRO SSED - CHEQUE OR BANK DRAFT BUT BY BEARER CHEQUES AND HAS COMPUTED THE PAYMENTS FALLING UNDER PROVISIONS TO SECTION 40A(3) FOR RS.78,45,580/ - AND DISALLOWED @ 20% THEREON RS.15,69,116/ - . IT IS ALSO MADE CLEAR THAT WITHOUT THE PAYMENT BEING MADE BY BEARER CHE QUE THESE GOODS COULD NOT HAVE BEEN PROCURED AND IT WOULD HAVE HAMPERED THE SUPPLY OF GOODS WITHIN THE STIPULATED TIME. THEREFORE, THE GENUINENESS OF THE PURCHASE HAS BEEN ACCEPTED BY THE ID. CIT (APPEAL) WHICH HAS ALSO NOT BEEN DISPUTED BY THE DEPARTMENT AS IT APPEARS FROM THE ORDER SO PASSED BY THE LEARNED TRIBUNAL. IT FURTHER APPEARS FROM THE ASSESSMENT ORDER THAT NEITHER THE ASSESSING OFFICER NOR THE CIT (APPEAL) HAS DISBELIEVED THE GENUINENESS OF THE TRANSACTION. THERE WAS NO DISPUTE THAT THE PURCHASES WERE GENUINE.' ANUPAM TELE SERVICES VS ITO IN (2014) 43 TAXMANN.COM 199 (GUJ) SECTION 40A(3) OF THE INCOME - TAX ACT, 1961, READ WITH RULE 6DD OF THE INCOME - TAX RULES, 1962 - BUSINESS DISALLOWANCE - CASH PAYMENT EXCEEDING PRESCRIBED LIMITS RULE 6DD(J) AS SESSMENT YEAR 2006 - 07 - ASSESSEE WAS WORKING AS AN AGENT OF TATA TELE SERVICES LIMITED FOR DISTRIBUTING MOBILE CARDS AND RECHARGE VOUCHERS - PRINCIPAL COMPANY TATA INSISTED THAT CHEQUE PAYMENT FROM ASSESSEE'S CO - OPERATIVE BANK WOULD NOT DO, SINCE REALIZATI ON TOOK LONGER TIME AND SUCH PAYMENTS SHOULD BE MADE ONLY IN CASH IN THEIR BANK ACCOUNT - IF ASSESSEE WOULD NOT MAKE CASH PAYMENT AND MAKE CHEQUE PAYMENTS ALONE, IT WOULD HAVE RECEIVED RECHARGE VOUCHERS DELAYED BY 4/5 DAYS WHICH WOULD SEVERELY AFFECT ITS B USINESS OPERATION - ASSESSEE, THEREFORE, MADE CASH PAYMENT - WHETHER IN VIEW OF ABOVE, NO DISALLOWANCE UNDER SECTION 40A (3) WAS TO BE MADE IN RESPECT OF PAYMENT MADE TO PRINCIPAL - HELD, YES [PARAS 21 TO 23] [IN FAVOUR OF THE ASSESSEE]' SRI LAXMI SATYANAR AYANA OIL MILL VS CIT REPORTED IN (2014) 49 TAXMANN.COM 363 (ANDHRAPRADESH HIGH COURT) 'SECTION 40A(3) OF THE INCOME - TAX ACT, 1961, READ WITH RULE 6DD OF THE INCOME - TAX RULES, 1962 - BUSINESS DISALLOWANCE - CASH PAYMENT EXCEEDING PRESCRIBED LIMIT (RULE 6DD ) - ASSESSEE MADE CERTAIN PAYMENT OF PURCHASE OF GROUNDNUT IN CASH EXCEEDING PRESCRIBED LIMIT - ASSESSEE SUBMITTED THAT HE MADE PAYMENT IN CASH BECAUSE SELLER INSISTED ON THAT AND ALSO GAVE INCENTIVES AND DISCOUNTS - FURTHER, SELLER ALSO ISSUED CERTIFICATE IN SUPPORT OF THIS - WHETHER SINCE ASSESSEE HAD PLACED PROOF OF PAYMENT OF CONSIDERATION FOR ITS TRANSACTION TO SELLER, AND LATER ADMITTED PAYMENT AND THERE WAS NO DOUBT ABOUT GENUINENESS OF PAYMENT, NO DISALLOWANCE COULD BE MADE UNDER SECTION 40A(3) - HE LD, YES [PARA 23] [IN FAVOUR OF THE ASSESSEE]' CIT VS SMT. SHELLY PASSI REPORTED IN (2013) 350 ITR 227 (P&H) IN THIS CASE THE COURT UPHELD THE VIEW OF THE TRIBUNAL IN NOT APPLYING SECTION 40A(3) OF THE ACT TO THE CASH PAYMENTS WHEN ULTIMATELY, SUCH AMOUNT S WERE DEPOSITED IN THE BANK BY THE PAYEE. 18. WE ARE NOT INCLINED TO IGNORE THE INTENTION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT BY GIVING A PLAIN READING OF THE SAME AS ARGUED BY THE LD DR. WE FIND THAT THE DISALLOWANCE OF THE ENTIRE CASH PURCHA SES RESULTS IN ABNORMAL TRADING PROFIT FOR THE ASSESSEE WHICH IT COULD NEVER EARN. WE FIND A PURPOSIVE CONSTRUCTION SHOULD BE RESORTED TO WHILE APPLYING THE PROVISIONS OF THE ACT. HENCE IT WOULD BE MORE RELEVANT TO GET INTO THE INTENTION OF THE LEGISLATURE . IN OUR OPINION, THE PRIMARY OBJECT OF ENACTING SECTION 40A(3) WAS TWOFOLD, FIRSTLY, PUTTING A CHECK ON TRADING TRANSACTIONS WITH A MIND TO EVADE THE LIABILITY TO TAX ON INCOME EARNED OUT OF SUCH TRANSACTION AND, SECONDLY, TO INCULCATE THE BANKING HABITS AMONGST THE BUSINESS COMMUNITY. APPARENTLY, THIS PROVISION WAS DIRECTLY RELATED TO CURB THE EVASION OF TAX AND INCULCATING THE BANKING HABITS. THEREFORE, THE CONSEQUENCE, WHICH WERE TO BEFALL ON 6 IT A NO . 9 72 /KOL/2016 MS. BIRGIRI C.S SHOP ACCOUNT OF NON - OBSERVATION OF SECTION 40A(3) MUST HAVE NEXUS TO THE FAILURE OF SUCH OBJECT. THEREFORE, THE GENUINENESS OF THE TRANSACTIONS IT BEING FREE FROM VICE OF ANY DEVICE OF EVASION OF TAX IS RELEVANT CONSIDERATION. IN THE INSTANT CASE, THE CASH HAS BEEN DEPOSITED DIRECTLY IN THE BANK ACCOUNT OF THE SUPPLIER I .E M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD BY THE ASSESSEE. 19. WE FIND THAT THE HONBLE APEX COURT IN THE CASE OF CTO VS SWASTIK ROADWAYS REPORTED IN (2004) 3 SCC 640 HAD HELD THAT THE CONSEQUENCES OF NON - COMPLIANCE OF MADHYAPRADESH SALES TAX ACT , W HICH WERE INTENDED TO CHECK THE EVASION AND AVOIDANCE OF SALES TAX WERE SIGNIFICANTLY HARSH. THE COURT WHILE UPHOLDING THE CONSTITUTIONAL VALIDITY NEGATED THE EXISTENCE OF A MENS REA AS A CONDITION NECESSARY FOR LEVY OF PENALTY FOR NONCOMPLIANCE WITH SUCH TECHNICAL PROVISIONS REQUIRED HELD THAT IN THE CONSEQUENCE TO FOLLOW THERE MUST BE NEXUS BETWEEN THE CONSEQUENCE THAT BEFALL FOR NON - COMPLIANCE WITH SUCH PROVISIONS INTENDED FOR PREVENTING THE TAX EVASION WITH THE OBJECT OF PROVISION BEFORE THE CONSEQUENC E CAN BE INFLICTED UPON THE DEFAULTER. THE SUPREME COURT HAS OPINED THAT THE EXISTENCE OF NEXUS BETWEEN THE TAX EVASION BY THE OWNER OF THE GOODS AND THE FAILURE OF C & F AGENT TO FURNISH INFORMATION REQUIRED BY THE COMMISSIONER IS IMPLICIT IN SECTION 57( 2) AND THE ASSESSING AUTHORITY CONCERNED HAS TO NECESSARILY RECORD A FINDING TO THIS EFFECT BEFORE LEVYING PENALTY U/S 57(2). THOUGH IN THE INSTANT CASE, THE ISSUE INVOLVED IS NOT WITH REGARD TO THE LEVY OF PENALTY, BUT THE REQUIREMENT OF LAW TO BE FOLLOW ED BY THE ASSESSEE WAS OF AS TECHNICAL NATURE AS WAS IN THE CASE OF SWASTIK ROADWAYS (3 SCC 640) AND THE CONSEQUENCE TO FALL FOR FAILURE TO OBSERVE SUCH NORMS IN THE PRESENT CASE ARE MUCH HIGHER THAN WHICH WERE PRESCRIBED UNDER THE MADHYA PRADESH SALES TAX ACT. APPARENTLY, IT IS A RELEVANT CONSIDERATION FOR THE ASSESSING AUTHORITY UNDER THE INCOME TAX ACT THAT BEFORE INVOKING THE PROVISIONS OF SECTION 40A(3) IN THE LIGHT OF RULE 6DD AS CLARIFIED BY THE CIRCULAR OF THE CBDT THAT WHETHER THE FAILURE ON THE PA RT OF THE ASSESSEE IN ADHERING TO REQUIREMENT OF PROVISIONS OF SECTION 40A(3) HAS ANY SUCH NEXUS WHICH DEFEATS THE OBJECT OF PROVISION SO AS TO INVITE SUCH A CONSEQUENCE. WE HOLD THAT THE PURPOSE OF SECTION 40A(3) IS ONLY PREVENTIVE AND TO CHECK EVASION OF TAX AND FLOW OF UNACCOUNTED MONEY OR TO CHECK TRANSACTIONS WHICH ARE NOT GENUINE AND MAY BE PUT AS CAMOUFLAGE TO EVADE TAX BY SHOWING FICTITIOUS OR FALSE TRANSACTIONS. ADMITTEDLY, THIS IS NOT THE CASE IN THE FACTS OF THE ASSESSEE HEREIN. THE ASSESSEE HAD DIRECTLY DEPOSITED CASH IN THE BANK ACCOUNT OF THE SUPPLIER M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD WHICH FACT IS ALSO ACCEPTED BY THE LD AO AND MANDATED BY THE NOTIFICATION DATED 29.8.2005 ISSUED BY THE EXCISE DEPARTMENT , GOVERNMENT OF WEST BENGAL. IT IS ALSO PERTINENT TO NOTE THAT THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SMT.HARSHILA CHORDIA VS ITO REPORTED IN (2008) 298 ITR 349 (RAJ) HAD HELD THAT THE EXCEPTIONS CONTAINED IN RULE 6DD OF INCOME TAX RULES ARE NOT EXHAUSTIVE AND THAT THE SAID R ULE MUST BE INTERPRETED LIBERALLY. 20. WE ALSO FIND THAT THE IMPUGNED ISSUE IS ALSO COVERED BY THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ASHOK MONDAL VS ITO IN ITA NO. 873/KOL/2012 FOR ASST YEAR 2009 - 10 DATED 6.2.2014, WHEREIN I T WAS HELD THAT : - 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT THE OUTSET A PERUSAL OF THE DECISION IN THE CASE OF SMT.PUSHPALATA MONDAL SHOWS THAT THE TRIBUNAL HAD DECIDED THE CASE BY FOLLOWING THE DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE O F K.ABDU & CO. REFERRED TO SUPRA WHEREIN THE ISSUE WAS IN RELATION TO RULE 6DD(A) OF IT RULES. THE ISSUE IN THE ASESSEC'S CASE IS IN RESPECT OF THE PAYMENTS MADE UNDER THE RULES FRAMED BY THE GOVERNMENT AND SUCH PAYMENT WAS REQUIRED TO BE MADE IN LEGAL TEN DER. A PERUSAL OF THE GOVERNMENT NOTIFICATION ISSUED BY THE GOVT. OF WEST BENGAL CLEARLY SHOWS THAT THE DEALERS ARE AGENTS OF THE GOVERNMENT AND THE PAYMENTS MADE ARE TO THE GOVERNMENT. IT ALSO MAKES IT CATEGORICALLY REQUIRED THAT THE PAYMENT IS TO BE MADE BEFORE LIFTING OF THE COUNTRY SPIRIT. CONSEQUENTLY WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.AMRAI PACHWAI & C.S.SHOP REFERRED TO SUPRA WHEREIN IT HAS BEEN HELD AS FOL LOWS : - '6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT THE OUTSET A PERUSAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE AO HAS RECOGNIZED THE ASSESSEE'S BUSINESS IN TRADING OF COUNTRY SPIRIT AND COUNTRY LIQUOR. COPY OF FORM OF LICENCE ISSUED BY DURGA PUR MUNICIPAL CORPORATION AND COPY OF FORM III ISSUED BY DEPARTMENT OF EXCISE, GOVT. OF W.B. WERE ALSO FOUND AT PAGES 177 AND 179 OF THE ASSESSEE'S PAPER BOOK. IN ANY CASE THE VALIDITY OF LICENCE OF THE ASSESSEE TO TRADE IN COUNTRY SPIRIT AND COUNTRY LIQUO R IS NOT THE ISSUE BEFORE US. THE ISSUE IS WHETHER THE PAYMENTS MADE BY THE ASSESSEE FOR THE PURCHASE OF COUNTRY SPIRIT FROM THE TERRITORIAL LICENSEE BOTTLING PLANT, IFB AGRO INDUSTRIES LTD., CITY CENTRE, DURGAPUR FALLS WITHIN THE EXEMPTION PROVIDED UNDER RULE 6DD(B) OF THE I.T.RULES, 1962. ADMITTEDLY, THE AO HAS RECOGNIZED THAT THE PROVISION OF RULE 6DD(B) OF THE I.T RULES, 1962 IS APPLICABLE IN CASE OF PAYMENTS MADE TO GOVERNMENT DIRECTLY. THIS IS FOUND IN PAGE 2 OF THE ASSESSMENT ORDER. A PERUSAL OF THE KOLKATA GAZETTE TUESDAY 20TH SEPT 2005 SHOWS THAT THE GOVERNMENT OF WEST 7 IT A NO . 9 72 /KOL/2016 MS. BIRGIRI C.S SHOP BENGAL, DEPARTMENT OF EXCISE HAS ISSUED A NOTIFICATION, WHEREIN THE WAREHOUSE HAS BEEN IDENTIFIED TO MEAN THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO THE RETAIL VENDORS, ESTABLISHED AT CONVENIENT PLACES BY THE COMMISSIONER AT THE EXPENSE OF THE STATE GOVERNMENT, OR AT THE EXPENSE OF A PERSON TO WHOM THE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLING COUNTRY SPIRIT BY WHOLESALE HAS BEEN GRANTED U/S 22 OF THE ACT OF A LICENSED WHOLESALE V ENDOR OF COUNTRY SPIRIT. FURTHER, IT HAS BEEN SPECIFICALLY IDENTIFIED THAT THE AUTHORISED REPRESENTATIVE OF THE WHOLESALE LICENSEE SHALL REALIZE THE NECESSARY AMOUNT OF DUTY, COST PRICE AND BOTTLING CHARGE, IF THERE BE ANY, AT THE PRESCRIBED RATE AND SUCH OTHER IMPOSITION, AS MAY BE PRESCRIBED BY LAW, FROM THE RETAIL VENDOR TO WHOM THE COUNTRY SPIRIT IS TO BE ISSUED FROM THE CONCERNED WAREHOUSE. IT IS ALSO SPECIFICALLY MENTIONED IN SECTION (2) OF THE SAID NOTIFICATION THAT NO RETAIL VENDOR OF COUNTRY SPIRIT SHALL DEPOSIT DUTY DIRECT INTO THE LOCAL TREASURY FOR ISSUE OF COUNTRY SPIRIT TO BE TAKEN BY HIM FROM THE WAREHOUSE CONCERNED WHICH CLEARLY SHOWS THAT THE WAREHOUSE IS FOR THE SUPPLY OF THE COUNTRY LIQUOR, SPECIFICALLY, THE WAREHOUSE IS UNDER THE DIRECT C ONTROL AND CUSTODY OF THE STATE GOVT. THE STATE GOVERNMENT HAS CLOSED ITS DOORS IN SO FAR AS THE LOCAL TREASURY IS CONCERNED AND THE PAYMENT FOR THE PURCHASE OF COUNTRY SPIRIT OR COUNTRY LIQUOR HAS TO BE MADE TO THE WAREHOUSE, RUN BY THE GOVERNMENT. THIS S HOWS THAT ANY PAYMENT MADE TO THE WAREHOUSE, WHICH IS UNDER THE DIRECT CONTROL OF THE STATE GOVERNMENT, IS A PAYMENT MADE DIRECTLY TO THE GOVERNMENT. ONCE, THIS IS ACCEPTED THEN THE PROVISIONS OF RULE 6DD(B) OF THE I.T RULES, 1962 WHICH CLEARLY SPELLS OUT THAT THE PAYMENT MADE TO THE GOVERNMENT IN LEGAL TENDER UNDER THE RULES FRAMED BY THE GOVERNMENT, IS EXEMPTED FROM THE RIGOURS OF SECTION 40A(3) OF THE ACT. HERE, IT IS NOTICED THAT THE PAYMENTS MADE BY THE ASSESSEE FOR PURCHASE OF COUNTRY SPIRIT AND COUNT RY LIQUOR IS TO THE GOVERNMENT AS PER THE NOTIFICATION ISSUED BY THE GOVERNMENT AND IS IN LEGAL TENDER SPECIFIED BY THE NOTIFICATION. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE PAYMENT MADE BY THE ASSESSEE FOR THE PURCHASE OF COUNTRY LIQUOR AND COUN TRY SPIRIT FROM THE TERRITORIAL LICENSEE BOTTLING PLANT, IFB AGRO INDUSTRIES LTD., CITY CENTRE, DURGAPUR IS PROTECTED BY THE EXEMPTION IN TERMS OF RULE 6DD(B) OF THE 1.T.RULES 1962. IN THE CIRCUMSTANCES, THE ADDITION AS MADE BY THE AO AND AS CONFIRMED BY T HE ID. CIT(A) BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE I. T.ACT 1961 STANDS DELETED. 8. IN THE RESULT THE ADDITION AS CONFIRMED BY THE ID. CIT(A) STANDS DELETED. WE FIND THAT THIS DECISION WAS RENDERED BY PLACING RELIANCE ON ITS EARLIER DECISI ON IN THE CASE OF M/S AMRAI PACHWAI & C.S.SHOP IN ITA NO. 1251/KOL/2011 DATED 15.1.2014 AND AFTER CONSIDERING THE CONTRARY DECISIONS RENDERED IN THE CASE OF PUSHPALATA MONDAL IN ITA NO. 965/KOL/2010 DATED 28.7.2011 AND HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS K ABDU & CO (170 TAXMAN 297). WE FIND THAT THE CO - ORDINATE BENCH DECISION IN THE CASE OF M/S AMRAI PACHWAI & C.S.SHOP IN ITA NO. 1251/KOL/2011 DATED 15.1.2014 AND THE HELD PORTION IS REPRODUCED HEREINABOVE. 21. WE FIND THAT M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD IS A BOTTLING PLANT CUM WAREHOUSE UNDER RULE 2(VII) OF THE WEST BENGAL EXCISE RULES 2005 WITH PRIVILEGE GRANTED U/S 22 OF THE BENGAL EXCISE ACT, 1909. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO GO INTO THE DEFINITION OF WAREHOUSE AS PROVIDED UNDER THE STATE EXCISE RULES 2005 AS BELOW: - WAREHOUSE , UNDER RULE 2(VII) OF THE W.B.EXCISE RULES 2005 , MEANS THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VENDORS, ESTABLISHED AT CONVENIENT PLACES BY THE COMMISSIONER AT THE EXPENSE O F THE STATE GOVERNMENT, OR AT THE EXPENSE OF A PERSON TO WHOM THE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLING COUNTRY SPIRIT BY WHOLESALE HAS BEEN GRANTED UNDER SECTION 22 OF THE ACT, OR OF A LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT. THE ABOVE DEFINITIO N MAKES IT CLEAR THAT THE WAREHOUSE REFERRED TO UNDER THE STATE EXCISE RULES IS UNDER THE DIRECT CONTROL AND AUTHORITY OF THE COMMISSIONER OF STATE EXCISE BECAUSE IT IS ESTABLISHED BY THE COMMISSIONER OF STATE EXCISE AND AS SUCH IS A STATE GOVERNMENT EST ABLISHMENT. IT IS ALSO PERTINENT TO NOTE THAT THE EXPENDITURE IN RELATION TO SUCH WAREHOUSE IS BORNE BY THE STATE GOVERNMENT OR BY THE LICENSEE TO WHOM THE EXCLUSIVE PRIVILEGE IS GRANTED U/S 22 OF THE BENGAL EXCISE ACT, 1909. HENCE THERE COULD BE NO DOUBT THAT THE WAREHOUSE IS ESTABLISHED BY THE STATE EXCISE COMMISSIONER. HENCE IT COULD BE SAFELY CONCLUDED THAT THE WAREHOUSE SO ESTABLISHED BY THE STATE EXCISE COMMISSIONER IS A STATE GOVERNMENT ESTABLISHMENT. IT WOULD ALSO BE PERTINENT TO NOTE THAT THE SAID WAREHOUSE HAS BEEN SPECIFICALLY ESTABLISHED FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VENDORS (ASSESSEE HEREIN) ONLY AND NOT TO ANYBODY ELSE. IT WOULD BE PERTINENT TO LOOK INTO THE DEFINITION OF WHOLESALE LICENSEE AS PER RULE 2(VIII) OF THE EXCISE RULES 20 05 AS BELOW: - 8 IT A NO . 9 72 /KOL/2016 MS. BIRGIRI C.S SHOP RULE 2(VIII) WHOLESALE LICENSEE MEANS THE WHOLESALE VENDOR OF COUNTRY SPIRIT TO WHOM LICENCE HAS BEEN GRANTED IN WEST BENGAL EXCISE FORM NO. 26. IT WOULD BE PERTINENT TO LOOK INTO SECTION 22 OF THE BENGAL EXCISE ACT, 1909 AT THIS JUNCTU RE AS BELOW: - SECTION 22 GRANT OF EXCLUSIVE PRIVILEGE OF MANUFACTURE AND SALE OF COUNTRY LIQUOR OR INTOXICATING DRUGS (1) THE STATE GOVERNMENT MAY GRANT TO ANY PERSON, ON SUCH CONDITIONS AND FOR SUCH PERIOD AS IT MAY THINK FIT, THE EXCLUSIVE PRIVILEGE (A) OF MANUFACTURING, OR SUPPLYING BY WHOLESALE, OR (B) OF MANUFACTURING, AND SUPPLYING BY WHOLESALE, OR (C) OF SELLING, BY WHOLESALE OR RETAIL, OR (D) OF MANUFACTURING OR SUPPLYING BY WHOLESALE AND SELLING RETAIL, OR (E) OF MANUFACTURING AND SUPPLYIN G BY WHOLESALE AND SELLING RETAIL, ANY COUNTRY LIQUOR OR INTOXICATING DRUG WITHIN ANY SPECIFIED LOCAL AREA: PROVIDED THAT PUBLIC NOTICE SHALL BE GIVEN TO THE INTENTION TO GRANT ANY SUCH EXCLUSIVE PRIVILEGE, AND THAT ANY OBJECTIONS MADE BY ANY PERSON RES IDING WITHIN THE AREA AFFECTED SHALL BE CONSIDERED BEFORE AN EXCLUSIVE PRIVILEGE IS GRANTED. (2) NO GRANTEE OF ANY PRIVILEGE UNDER SUB - SECTION (1) SHALL EXERCISE THE SAME UNLESS OR UNTIL HE HAS RECEIVED A LICENSE IN THAT BEHALF FROM THE COLLECTOR OR THE E XCISE COMMISSIONER. HENCE IT COULD BE SAFELY CONCLUDED THAT M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD (BOTTLING PLANT) IS A WAREHOUSE WITHIN THE MEANING OF RULE 2(VII) OF THE EXCISE RULES 2005 AND SAID WAREHOUSE IS A STATE GOVERNMENT ESTABLISHMENT, EST ABLISHED AND CONTROLLED BY THE EXCISE COMMISSIONER . IT WOULD BE RELEVANT TO REPRODUCE RULE 6DD(B) OF THE IT RULES AT THIS JUNCTURE : - (B) WHERE THE PAYMENT IS MADE TO THE GOVERNMENT AND, UNDER THE RULES FRAMED BY IT, SUCH PAYMENT IS REQUIRED TO BE MADE I N LEGAL TENDER. IN THE INSTANT CASE, THE ASSESSEE (RETAIL VENDOR) HAD MADE CASH PAYMENTS FOR PURCHASE OF COUNTRY SPIRIT BY DEPOSITING CASH DIRECTLY INTO THE BANK ACCOUNT OF M/S ABPL AS PER RULE 6(2) OF THE EXCISE RULES 2005 , IT HAS TO BE CONSTRUED AS PAYM ENT MADE TO THE STATE GOVERNMENT AUTHORITY AND ACCORDINGLY FALLS UNDER THE EXCEPTION PROVIDED IN RULE 6DD(B) OF THE IT RULES. 22. IT IS NOT IN DISPUTE THAT M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD HAVE BEEN GRANTED LICENCE TO ACT AS A WHOLESALER FOR S UPPLY OF COUNTRY LIQUOR TO THE RETAIL VENDOR AS PER THE REGULATIONS OF THE EXCISE DEPARTMENT , GOVERNMENT OF WEST BENGAL. AT THE COST OF REPETITION, WE WOULD LIKE TO STATE THAT THE SAID REGULATION MANDATED THE PAYMENTS TO BE MADE DIRECTLY INTO THE BANK ACC OUNT OF THE SAID WHOLESALE LICENSEE BY THE RETAIL VENDOR (I.E ASSESSEE HEREIN) FOR STRICT AND EFFECTIVE REGULATION OF THE COUNTRY LIQUOR AND FOR PREVENTION OF SPURIOUS STOCKS AND BLACK MARKETING TRANSACTIONS FROM THE SAME. HENCE IT COULD BE SAFELY CONCLUDE D THAT THE SAID WHOLESALE LICENSEE HAD ACTED AT THE INSTANCE OF THE STATE GOVERNMENT. ONCE THIS IS SO, THEN THE SAID WHOLESALE LICENSEE COULD BE CONSTRUED AS AN AGENT OF THE STATE GOVERNMENT. FOR THE SAKE OF CONVENIENCE, THE RELEVANT RULE IS REPRODUCED HER EUNDER: - RULE 6DD(K) WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON. THE PAYMENT MADE BY THE ASSESSEE RETAIL VENDOR TO THE PRINCIPAL, GOVERNMENT OF WEST BENGAL THROUGH ITS WHOLESALE AGENT. THE RELATIONSHIP BETWEEN THE ASSESSEE (AUTHORIZED RETAILER) AND GOVERNMENT OF WEST BENGAL (THE SUPPLIER) ACTING UNDER WEST BENGAL EXCISE RULES THROUGH ITS AUTHORISED WHOLESALER LICENSEE (AGENT), BOTH DE FACTO AND DEJURE , IS O NE OF PRINCIPAL AND AGENT. WE HOLD THAT THE ASSESSEE RETAIL VENDOR HAD MADE PAYMENT TO THE SAID AGENT (WHOLESALE LICENSEE) WOULD FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD(K) OF THE RULES. 23. THE LD AR HAD ADVANCED ANOTHER ARGUMENT THAT THE PAYMEN T IS MADE BY THE ASSESSEE TO STATE BANK OF INDIA AND ACCORDINGLY THE SAME WOULD FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD(A) OF THE RULES. WE FIND THAT THE ASSESSEE HAD MADE 9 IT A NO . 9 72 /KOL/2016 MS. BIRGIRI C.S SHOP PAYMENTS ONLY TO THE CUSTOMER OF STATE BANK OF INDIA AND NOT TO STATE BANK OF INDIA. HENCE THE ASSESSEES CASE DOES NOT FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD(A) OF THE RULES. 24. WE HOLD FROM THE AFORESAID FINDINGS THAT THE ASSESSEES CASE FALLS UNDER THE EXCEPTIONS PROVIDED IN RULE 6DD(B) AND RULE 6DD(K) OF THE RULES. IN V IEW OF THE AFORESAID FACTS AND CIRCUMSTANCES AND RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE HAVE NO HESITATION IN DELETING THE DISALLOWANCE MADE U/S 40A(3) OF THE ACT IN ALL THE YEARS UNDER APPEAL. ACCORDINGLY, THE GROUNDS R AISED BY THE ASSESSEE FOR ALL THE YEARS UNDER APPEAL ARE ALLOWED. 6. IN VIEW OF THE ABOVE, FINDING OF CO - ORDINATE BENCH IN THE CASE OF SUPRA ON SIMILAR SET OF FACTS AND IDENTICAL ISSUE AND DISCUSSION MADE HEREIN ABOVE IN PARA NO. 5.1, WE SET ASIDE THE ORDER OF CIT - A AND DELETE THE ADDITION MADE BY THE AO. G ROUND NOS. 1 TO 4 RAISED BY THE ASSESSE ARE ALLOWED. 7 . GROUND NO. 5 IS RELATING TO CONFIRMATION OF ADDITION OF RS.6,76,294/ - MADE ON ACCOUNT OF ALLEGED PURCHASE OUT OF BOOKS OF ASSESSE. 8. THE CONT ENTION OF LD.AR IS THAT THE ASSESSE MADE PURCHASES AND THE AO COULD NOT TRACE OUT THE PAYMENTS MADE FROM BANK STATEMENTS OF ASSESSE. THE CASH PAYMENT WAS MADE BY ONE OF THE PARTNERS, SHRI SUDIP KR . CHATTERJEE AND REFERRED TO BANK STATEMENTS PLACED AT PAGES 28 - 30 OF THE PAPER BO O K AND ARGUED THAT SAID PAYMENT CANNOT BE DOUBTED AND COULD NOT BE SAID TO BE OUT OF BOOKS AS VIEWED BY THE AO AND CONFIRMED BY THE CIT - A. 9. ON THE OTHER HAND, THE LD.DR RELIED ON THE ORDERS OF THE AO & CIT - A. 10. HEARD BOTH THE PA RTIES AND PERUSED MATERIAL ON RECORD. WE FIND THAT DURING THE COURSE OF SCRUTINY PROCEEDINGS THE AO OBSERVED THAT AN AMOUNT OF RS. 6,76,294/ - PAID TO M/S. BHATTACHARYA BOTTLING PLANT PVT. LTD BY ONE OF ASSESSEES PARTNER, SHRI SUDIP KR . CHATTERJEE. THE CON TENTION OF THE AO WAS THAT THE SAID PAYMENT WAS MADE OUT OF BOOKS AND FOR NOT SUBSTANTIATING THE FACT OF SAID AMOUNT BY PRODUCING BOOKS OF ACCOUNT AND SUPPORTING DOCUMENTS ADDED THE IMPUGNED AMOUNT TO THE TOTAL INCOME OF ASSESSE E . THE CIT - A CONFIRMED THE S AID 10 IT A NO . 9 72 /KOL/2016 MS. BIRGIRI C.S SHOP ADDITION FOR NOT SUBSTANTIATING THE CLAIM OF ASSESSE BY PRODUCING AND SUPPORTING THE SAME. ON PERUSAL OF PAGES 28 - 30 OF THE PAPER BOOK AS FILED BY ASSESSE BEFORE US , WE FIND THAT THE SAID PARTNER WITHDRAWING AMOUNT AND PAYING THE SAME TO SAID M/S. BHA TTACHARYA BOTTLING PLANT PVT. LTD ON BEHALF OF ASSESSE. IT IS ALSO NOTED FROM PAGES 31 - 32 OF THE PAPER BOOK THAT M/S. BHATTACHARYA BOTTLING PLANT PVT. LTD STATED THAT THEY SOLD LIQUOR TO ASSESSE E AND OUTSTANDING BALANCE AS PER LEDGER COPY OF TRANSACTION IS OF RS.1 , 65 , 890 / - . IT IS FURTHER STATED THAT ALL PAYMENTS MADE ON BEHALF OF ASSESSE BY CHEQUES AND TCS AMOUNT DEDUCTED THEREON. IT IS ALSO OBSERVED FROM PAGE - 32 OF THE PAPER BOOK, WHICH IS THE DETAILS OF PAYMENT MADE BY ASSESSE TO SAID M/S. BHATTACHARYA BO TTLING PLANT PVT. LTD. IT CLEARLY SHOWS THAT ALL THE PAYMENTS WERE MADE BY CHEQUE FROM THE ACCOUNT OF ONE PARTNER, SHRI SUD IP KR. CHATTERJEE. AT PAGE 29 SHOWS AN AMOUNT OF RS.2,09,070/ - WAS TRANSFERRED TO M/S. BHATTACHARYA BOTTLING PLANT PVT. LTD VIDE CHEQ UE NO. 927174 . LIKEWISE VIDE CHEQUE NOS. 927175, 927176 & 927177, WHICH ARE MATCHING WITH CHEQUE NOS. AS DISCUSSED ABOVE IN RESPECT OF PAGE - 32 OF THE PAPER BOOK. THEREFORE, WE FIND FORCE IN THE SUBMISSIONS OF THE LD. AR THAT ONE OF HIS PARTNER, SHRI SUD IP KR. CHATTERJEE MADE THE PAYMENTS THROUGH HIS INDIVIDUAL ACCOUNT. IN OUR OPINION, IT CANNOT BE DOUBTED AS OUT OF BOOKS AS VIEWED BY THE AO , WHICH CONFIRMED BY THE CIT - A. THUS, THE CIT - A WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO ON THIS IS SUE . THE ORDER OF CIT - A IS SET ASIDE AND DELETED THE ADDITION MADE BY AO. GROUND NO. 5 RAISED BY THE ASSESSE IS ALLOWED. 11. GROUND NO. 6 IS RELATING TO CONFIRMATION OF ADDITION OF RS.28,97,668/ - ON ACCOUNT OF UNDISCLOSED PURCHASE IN THE FACTS AND CIRCUMST ANCES OF THE CASE. 12. THE LD.AR SUBMITS THAT THE ASSESSE AND ITS PARTNER , SRI SUDIP KR. CHATTERJEE BOTH ARE ENGAGED IN THE SAME BUSINESS OF ALCOHOL AND REFERRED TO TRADING, P ROFIT & L OSS ACCOUNT FILED FOR THE A.Y UNDER 11 IT A NO . 9 72 /KOL/2016 MS. BIRGIRI C.S SHOP CONSIDERATION PLACED AT PAGES 21 - 27 OF THE PAPER BOOK. HE FURTHER REFERRED TO PAGES 19 - 20 OF PAPER BOOK AND ARGUED THAT TCS WAS COLLECTED DURING THE A.Y UNDER CONSIDERATION. THE ENTIRE PURCHASE AMOUNT OF RS.28,81,522/ - WAS REFLECTED IN SH. SUDIP KR. CHATTERJEE S P ROFIT & L OSS ACCOUNT AND RE FERRED TO RETURN OF INCOME AT PAGES 24 - 27 OF PAPER BOOK. THE LD. AR ARGUED THAT WITHOUT CONSIDERING ALL THESE SUBMISSION OF ASSESSEE, THE CIT - A CONFIRMED THE ADDITION MADE BY THE AO ON THIS ISSUE, WHICH IS NOT AT ALL JUSTIFIED . THE ADDITION MADE BY THE AO AND CONFIRMED BY THE CIT - A SHOULD BE DELETED. 13. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDERS OF AO & CIT - A 1 4 . HEARD BOTH THE PARTIES AND PERUSED THE RECORD INCLUDING THE DETAILS AVAILABLE IN THE PAPER BOOK. WE FIND DURING THE COURSE OF ASSESSM ENT PROCEEDINGS THE AO FOUND FROM AN INFORMATION RECEIVED FROM IFB AGRO INDUSTRIES THAT THE ASSESSE HAS SHOWN TWO DIFFERENT PAN NOS. SALES TO THE TUNE OF RS.25,14,595/ - WAS MADE AGAINST PAN: AAFFB8532P, WHICH BELONGS TO ASSESSE E AND SALES TO THE TUNE OF RS .28,81,522/ - AGAINST PAN: ADPPC9825R, WHICH BELONGS TO SAID PARTNER, SH. SUDIP KR. CHATTERJEE. THE AO DOUBTED THE TRANSACTION FOR USING OF SAID TWO DIFFERENT PANS AND SOUGHT EXPLANATION FOR THE REASONS BEHIND THE SAME. ACCORDING TO AO, THE ASSESSE FAILED T O EXPLAIN THE USE OF SAID TWO PAN NOS . AND TREATED THE SAME AS UNDISCLOSED PURCHASE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSE. THE CIT - A CONFIRMED THE IMPUGNED ADDITION MADE BY AO BY OBSERVING THAT NO SUBSTANTIAL EVIDENCE WAS PRODUCED BEFORE HI M. I T IS NOTED FROM THE ORDER OF AO , T HE PAYMENTS MADE UPTO 28 - 06 - 2010 ON ASSESSEES PAN AND THEREAFTER, FROM 3 - 7 - 2011 THE PURCHASES WERE MADE ON PAN OF PARTNER, SH. SUDIP CHATTERJEE. IT IS FURTHER NOTED FROM PAGES 18 - 20 OF THE PAPER BOOK THAT TCS OF RS.28 ,806/ - WAS COLLECTED ON AMOUNT OF RS.28,81,522/ - , WHICH WAS ADMITTEDLY PAID BY SH. SUDIP KR. CHATTERJEE UNDER HIS PAN FROM HIS INDIVIDUAL ACCOUNT. IT 12 IT A NO . 9 72 /KOL/2016 MS. BIRGIRI C.S SHOP WAS CONTENDED THAT SH. SUDIP KR. CHATTERJEE IS AN AUTHORIZED LICENCEE TO PURCHASE LIQUOR FROM IFB AGRO IND USTRIES, WHICH WAS NOT DISPUTED BY THE AO AT PAGE - 8 OF HIS ORDER. IN VIEW OF ABOVE DISCUSSION, TAKING INTO CONSIDERATION THE SUBMISSIONS OF ASSESSE ALONG WITH DOCUMENTARY EVIDENCES PLACED BEFORE US IN THE PAPER BOOK FROM PAGES 19 - 27 RELATING TO THIS ISSUE THE ADDITION MADE BY THE AO IN THE HANDS OF ASSESSE DOES NOT STAND AND IT IS LIABLE TO BE DELETED. THEREFORE, THE ORDER OF THE CIT - A ON THIS ISSUE IN CONFIRMING THE SAME IS NOT JUSTIFIED. THUS, THE ORDER OF CIT - A ON THIS ISSUE IS SET ASIDE BY DELETING THE SAID ADDITION MADE BY THE AO. GROUND NO. 6 RAISED BY THE ASSESSE IS ALLOWED. 15. GROUND NO. 7 IS RELATING TO CONFIRMATION OF DISALLOWANCE OF EXPENSES OF RS.13,704/ - , @ 20% OF EXPENDITURE OF RS. 68,522/ - CLAIMED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 16. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD INCLUDING PAPER BOOK DETAILS, IT IS NOTED FROM ASSESSMENT ORDER THAT THE ASSESSE CLAIMED EXPENDITURE TO THE TUNE OF RS.68,522/ - UNDER MANY HEADS AS DETAILED THEREIN AT PAGE - 10 OF THE AOS ORDER. ACCORDING TO AO, THE ASSESSE COULD NOT PRODUCE ANY SUPPORTING EVIDENCE AND AS SUCH DISALLOWED THE SAME AT 20% I.E RS.13,704/ - AND ADDED THE SAME TO THE TOTAL INCOME OF ASSESSE. BEFORE THE CIT - A ALSO NO SUBSTANTIAL EVIDENCE WAS FILED BY ASSESSE AND AS SUCH HE CONFIRMED THE SAME AS DISALLOWED BY THE AO. BEFORE US ALSO EXCEPT MAKING SUBMISSION THAT BILLS AND VOUCHERS WERE DESTROYED DURING THE AGITATION OF LOCAL FEMALES AND AS SUCH NO EVIDENCE OR WHATSOEVER PROVING THE SAME FILED BEFORE US . IN OUR VIEW THE REA SONS AS STATED BY ASSESSE E BEFORE US FOR NON SUBMISSION OF ANY SUBSTANTIAL EVIDENCE IN SUPPORT OF CLAIM OF EXPENDITURE IS NOT ACCEPTABLE , AS WE NOTED THAT NO BOOKS OF ACCOUNT WERE EVEN PRODUCED BEFORE THE AO. IN SUCH CIRCUMSTANCES, WE FIND NO INFIRMITY IN CONFIRMING THE ORDER OF AO . THEREFORE, GROUND NO. 7 OF ASSESSEES APPEAL IS DISMISSED. 13 IT A NO . 9 72 /KOL/2016 MS. BIRGIRI C.S SHOP 17. IN THE RESULT, THE APPEAL OF ASSESSE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 - 0 9 - 2018 SD/ - SD/ - J. SUDHAKAR REDDY S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 05 - 0 9 - 2018 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT /ASSESSEE: M/S. BIRGIRI C.S SHOP, BIRGIRI P.O GENGARA DIST: PURULIA, PIN 723103. 2 RESPONDENT /REVENUE : INCOME TAX OFFICER, WARD 3 ( 2 ), PURULIA 3. THE CIT(A), ASANSOL 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, S ENIOR PRIVATE SECRETARY HEAD OF OFFICE, ITAT KOLKATA