M/S. K.K. CONSTRUCTION CO., JHUNJHUNU V. ASSISTANT COMMISSIONER OF INCOME TAX, JHUNJHUNU

ITA 990/JPR/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2302 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 15-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Additional evidence
• Section: 40A(3); 208; 28; 68

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 990/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 M/S K.K. CONSTRUCTION CO., VILLAGE KANWARPURA, POST- BAKHTAWARPURA, DIST- JHUNJHUNE. CUKE VS. THE ACIT, CIRCLE, JHUNJHUNE. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAJFK 9114 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI VEDANT AGARWAL (C.A.)& SHRI SATISH GUPTA (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SMT. RUNI PAL (DCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 04/11/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 05/12/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-3, JAIPUR DATED 10.11.2017 FOR ASSESSMENT YE AR 2012-13 WHEREIN THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW ALSO LD LOWER AUTHORITIES GROSSLY ERRED IN MAKING THE ADDIT ION OF RS. 2,38,67,250/- BY MAKING DISALLOWANCES U/S 40A(3) OF THE INCOME TAX ACT 1961. ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD LO WER AUTHORITIES GROSSLY ERRED IN MAKING THE ADDITION OF RS. 18,00,000/- U/S 68 OF THE INCOME TAX ACT. 2. REGARDING GROUND NO. 1, BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTR UCTION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER OBSERVED THAT THE ASSESSEE HAS MADE PAYMENT OF RS. 2,38,67,250/- IN CASH EXCEEDING PRESCRIBED THRESHOLD IN CONTRAVENTION OF SECTION 40 A(3) OF THE ACT TOWARDS PURCHASE OF GRIT AND OTHER ITEMS FOR CONSTR UCTION TO VARIOUS PERSONS AS DETAILED AT PAGES 5-7 OF THE ASSESSMENT ORDER. A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AS TO WHY T HE CASH PAYMENT MADE IN CONTRAVENTION OF SECTION 40A(3) OF THE IT A CT MAY NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IN RESPO NSE, THE ASSESSEE SUBMITTED THAT THE CONTRACT WORK WAS EXECUTED IN RU RAL AREA AND THE PAYMENTS WERE MADE IN CASH FOR PURCHASE OF RAW MATE RIAL DUE TO NON- AVAILABILITY OF BANKING FACILITY IN THE VILLAGE ARE A. IT WAS FURTHER SUBMITTED THAT THE STONE CRUSHERS ARE LOCATED IN TH E REMOTE HILLY AREAS WHERE THERE IS NO BANKING FACILITY AND THE SUPPLIER S DO NOT ACCEPT THE CHEQUE PAYMENTS AND THE ASSESSEE HAS TO MAKE PAYMEN T IN CASH DUE TO COMPELLING CIRCUMSTANCES. IT WAS FURTHER SUBMITT ED THAT THERE WAS COMPLETE BAN ON THE MINING IN THE STATE OF HARYANA SINCE 2010 AND THE ASSESSEE HAD TO PURCHASE THE GRIT, STONE & DUST FRO M THE STATE OF RAJASTHAN AND THE BUSINESS OF ASSESSEES FIRM IS MA INLY IN THE STATE OF HARYANA AND THE SUPPLIERS DO NOT ACCEPT PAYMENT THR OUGH CHEQUE HENCE THE ASSESSEE FIRM WAS UNDER BUSINESS COMPULSI ON TO COMPLETE THE WORK IN A TIME BOUND MANNER AND THEREFORE, HAD TO MAKE THE PURCHASES IN CASH. THE SUBMISSIONS SO FILED BY THE ASSESSEE WERE ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 3 CONSIDERED HOWEVER, NOT FOUND ACCEPTABLE TO THE ASS ESSING OFFICER. FIRSTLY, THE ASSESSING OFFICER OBSERVED THAT ON VAR IOUS DATES, THE ASSESSEE HAS MADE PAYMENT THROUGH RTGS THEREFORE, T HE PAYMENT SO MADE BY THE ASSESSEE IN CASH COULD HAVE BEEN MADE T HROUGH RTGS. FURTHER, THE ASSESSING OFFICER OBSERVED THAT ON PER USAL OF THE PHOTOCOPIES OF THE CHEQUES ISSUED BY THE ASSESSEE F IRM, IT REVEALS THAT THE CHEQUES SO ISSUED WERE SELF CHEQUE WITHOUT ANY MENTION OF NAME OF THE PARTY AND THE ACCOUNT NUMBER OF THE PARTY AN D THEREFORE, THESE ARE SELF CHEQUES AND NOT ACCOUNT PAYEE CHEQUE DRAWN BY THE ASSESSEE FIRM. FURTHER, ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS MADE PAYMENT TO RENOWNED PARTIES AND THEY WERE OPERATIN G WIDELY IN THEIR AREAS AND THEREFORE, THE ASSESSEES CONTENTION THAT THE PARTIES TO WHOM SUCH PAYMENT WERE MADE IN CASH WERE OPERATING IN TH E RURAL AND REMOTE AREAS WAS WRONG AND BASELESS. IT WAS ACCORDI NGLY HELD BY THE ASSESSING OFFICER THAT THE ASSESSEES CASE IS NOT C OVERED UNDER CLAUSE (A) TO (I) OF RULE 6DD OF THE IT RULES HENCE, THE A MOUNT OF RS. 2,38,67,250/- WAS DISALLOWED AS PER PROVISIONS OF S ECTION 40A(3) OF THE IT ACT. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LD. CIT(A) AND DURING THE COURSE OF APPE LLATE PROCEEDINGS, THE ASSESSEE FILED ADDITIONAL EVIDENCE IN THE FORM OF CERTIFICATES FROM SARPANCH OF THE GRAM PANCHAYATS STATING THEREIN T HAT NO BANK BRANCHES ARE AVAILABLE IN THE AREA OF BUSINESS OF T HE ASSESSEE WHERE THE ASSESSEE HAS PURCHASE GRITS FOR THE REQUIREMENT OF THE CIVIL CONSTRUCTION. THE SAID ADDITIONAL EVIDENCES WERE F ORWARDED TO THE ASSESSING OFFICER FOR EXAMINATION AND SEEKING THE R EMAND REPORT. ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 4 4. IN THE REMAND REPORT DATED 15.09.2017, THE ASSES SING OFFICER HAS STATED IN PARA 3 AS UNDER:- HOWEVER, CLAUSE (G) OF RULE 6DD OF INCOME TAX RULE S, 1962 STATES THAT'WHERE THE PAYMENT IS MADE IN A VILLAGE OR TOWN, WHICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK, TO ANY PERSON WHO ORDINARILY RESIDES, OR IS CARRYING O N ANY BUSINESS, PROFESSION OR VOCATION, IN ANY SUCH VILLAGE OR TOWN '. THE PROVISIONS OF THE INCOME TAX ACT WERE AVAILABLE TO THE ASSESSEE AB-INITIO. THE ASSESSEE WAS GIVEN SUFFICIENT TIME T O SUBMIT SUCH EVIDENCES DURING THE COURSE OF ASSESSMENT PROCEEDIN GS AND IT WAS NOT PREVENTED BY ANY CAUSE OR REASON. IN THIS R EGARD, VIDE SHOW CAUSE NOTICE DATED 27/02/2015 & 11/03/2015, TH E ASSESSEE FIRM WAS ASKED AS TO WHY THE CASH PAYMENT MADE IN T HE AREAS FALLING UNDER THE GRAM PANCHYATS AS SUBMITTED BY TH E ASSESSEE DURING THE APPELLATE PROCEEDINGS MAY NOT BE ADDED U /S 40A(3) OF THE ACT. IN RESPONSE TO THAT SHOWCAUSE, THE ASSESSE E FILED WRITTEN SUBMISSION STATING THEREIN THAT THE CONTRACT WORK H AS BEEN EXECUTED IN RURAL AREA AND THE PAYMENT HAVE TO BE M ADE IN CASH FOR PURCHASE OF RAW MATERIAL DUE TO NON BANKING FAC ILITY NEARBY BUT THE ASSESSEE DID NOT SUBMIT THE CERTIFICATES DE SPITE ADEQUATE OPPORTUNITY WAS ACCORDED TO IT. WITHOUT PREJUDICE TO THE ABOVE, ADDITIONAL EVIDENCE S IN THE FORM OF CERTIFICATES FROM THE SARPANCH OF GRAM PANCHAYAT S HAVE BEEN VERIFIED BY THE INSPECTOR OF THIS OFFICE. THE INSPE CTOR OF THIS OFFICE HAS SUBMITTED HIS REPORT STATING THAT THE GR AM PANCHYATS UNDER CONSIDERATION DOES NOT HAVE ANY BANK BRANCH W ITHIN THE GEOGRAPHICAL TERRITORY OF THE PANCHAYATS. THEREFORE , THE ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE DURI NG THE APPELLATE PROCEEDINGS MAY BE ENTERTAINED ON MERITS. FURTHER, THE ASSESSING OFFICER HAS ISSUED ANOTHER R EMAND REPORT ON 28.09.2017 AND IN THE SAID REMAND REPORT HAS STATED IN PARA 3 AS UNDER: ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 5 3. HOWEVER, CLAUSE (G) OF RULE 6DD OF INCOME TAX R ULES, 1962 STATES THAT 'WHERE THE PAYMENT IS MADE IN A VILLA GE OR TOWN, WHICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK, TO ANY PERSON WHO ORDINARILY RESIDES, OR IS CARRYIN G ON ANY BUSINESS, PROFESSION OR VOCATION, IN ANY SUCH VILLA GE OR TOWN'. THE PROVISIONS OF THE INCOME TAX ACT WERE AVAILABLE TO THE ASSESSEE AB-INITIO. THE ASSESSEE WAS GIVEN SUFFICIE NT TIME TO SUBMIT SUCH EVIDENCES DURING THE COURSE OF ASSESSME NT PROCEEDINGS AND IT WAS NOT PREVENTED BY ANY CAUSE O R REASON. IN THIS REGARD, VIDE SHOW CAUSE NOTICE DATED 27/02/ 2015 & 11/03/2015, THE ASSESSEE FIRM WAS ASKED AS TO WHY T HE CASH PAYMENT MADE IN THE AREAS HILLING UNDER THE GRAM PANCHYATS AS SUBMITTED BY THE ASSESSEE DURING THE APPELLATE PROC EEDINGS MAY NOT BE ADDED U/S 40A(3) OF THE ACT. IN RESPONSE TO THAT SHOWCAUSE, THE ASSESSEE FILED WRITTEN SUBMISSION ST ATING THEREIN THAT THE CONTRACT WORK HAS BEEN EXECUTED IN RURAL A REA AND THE PAYMENT HAVE TO BE MADE IN CASH FOR PURCHASE OF RAW MATERIAL DUE TO NON BANKING FACILITY NEARBY BUT THE ASSESSEE DID NOT SUBMIT THE CERTIFICATES DESPITE ADEQUATE OPPORTUNIT Y WAS ACCORDED TO IT. WITHOUT PREJUDICE TO THE ABOVE, ADDITIONAL EVIDENCE S IN THE FORM OF CERTIFICATES FROM THE SARPANCH OF GRAM PANCHAYAT S HAVE BEEN VERIFIED BY THE INSPECTOR OF THIS OFFICE. THE INSPE CTOR OF THIS OFFICE HAS SUBMITTED HIS REPORT STATING THAT THE GRAM PANC HYATS UNDER CONSIDERATION DOES NOT HAVE ANY BANK BRANCH WITHIN THE GEOGRAPHICAL TERRITORY OF THE PANCHAYATS. HOWEVER, IT IS FURTHER SUBMITTED THAT THE GRAM PANCHAYATS UNDER CONSIDERAT ION HAVE BANKING FACILITY IN NEARBY AREA AS DESCRIBED BELOW: ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 6 S.NO. NAME OF GRAM PANCHAYAT UNDER CONSIDERATION NAME OF NEARBY GRAM PANCHAYAT/TOWN HAVING BANKING FACILITY APPROX DISTANCE FROM THE GRAM PANCHAYAT UNDER CONSIDERATION 1. G A DRATA , TEHSIL KHETRI 1. PAPURNA (BARODA RAJASTHAN KSHATRIYA GRAMIN BANK) 2. BABAI (BARODA RAJASTHAN KSHATRIYA GRAMIN BANK & SBI) PAPURNA - TWO KILOMETER BABAI-FOUR KILOMETER. 2. SANJAY NAGAR, TEHSIL-KHETRI 1. PAPURNA (BARODA RAJASTHAN KSHATRIYA GRAMIN BANK) 2. BABAI (BARODA RAJASTHAN KSHATRIYA GRAMIN BANK & SBI) PAPURNA - THREE KILOMETER BABAI-FIVE KILOMETER. 3. ZERPUR, TEHSIL - MAHINDRAGARH 1. MAHENDRA GARH (SBI, PNB, CANARA BANK, CBI, INDIAN BANK, HDFC, ICICI, KOTAK MAHINDRA ETC.) 2. PALI ( HARYAN GRAMIN BANK) MAHENDRA GARH - SEVEN KILOMETER. PALI-EIGHT KILOMETER. THEREFORE, THE ADDITIONAL EVIDENCES SUBMITTED BY TH E ASSESSEE DURING THE APPELLATE PROCEEDINGS MAY BE ENTERTAINED ON MERITS. 5. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE AND THE REMAND REPORTS OF THE ASSESSING OFFICER, HA S GIVEN A FINDING THAT THE BANKING FACILITY WAS NOT AVAILABLE IN THE GRAM PANCHAYAT AREA WHEREIN THE PAYMENT MADE SHOWN BY THE ASSESSEE BUT THE ASSESSING OFFICER HAS CATEGORICALLY MENTIONED IN THE REMAND REPORT THAT BANKING ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 7 FACILITY IS AVAILABLE NEARBY 2-3 KMS FROM THE GRAM PANCHAYAT AND IN THE MODERN, 2-3 KMS DISTANCES DOESNT MEAN ANYTHING. FU RTHER, HE HELD THAT SINCE CERTAIN PAYMENTS HAVE BEEN MADE THROUGH RTGS, THE ARGUMENT OF BANKING FACILITY NOT AVAILABLE DOESNT ARISE BECAUSE THE RECIPIENT HAVE GOT THE BANK ACCOUNT FOR RECEIVING T HE PAYMENT. ACCORDINGLY, HE UPHELD THE FINDING OF THE ASSESSING OFFICER. AGAINST THE SAID FINDINGS OF THE LD. CIT(A), THE ASSESSEE IS NO W IN APPEAL BEFORE US. 6. DURING THE COURSE OF HEARING, THE LD. AR REFERRI NG TO THE PROVISIONS OF SECTION 40A(3) OF THE ACT SUBMITTED T HAT THE INTENT OF BRINGING THE SAID PROVISIONS WAS TO CURB THE BLACK MONEY BUT GENUINENESS OF TRANSACTION, BUSINESS EXPEDIENCY AND GENUINE HARDSHIP HAS ALSO BEEN KEPT AS RELEVANT CONSIDERATION BY WAY OF ABOVE PROVISION. IT WAS SUBMITTED THAT THE INTENTION OF THE LEGISLA TURE BEHIND INTRODUCTION OF SECTION 40A(3) OF THE ACT WAS TO CU RB THE CHANCES AND OPPORTUNITIES TO USE OR CREATE BLACK MONEY AND TO A SCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF THE I NCOME FROM DISCLOSED SOURCES OR NOT. HE WAS RELIED ON THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF ATTAR SINGH GURMUKH SI NGH V. ITO 4 SCC 385 WHEREIN IT WAS HELD THAT SECTION 40A(3) OF THE ACT MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSION OF RULE 6DD AND WH ERE THIS SECTION MUST BE READ ALONG WITH THE RULE 6DD AND IF READ TOGETHE R, IT IS CLEAR THAT THE PROVISIONS OF SECTION 40A(3) ARE NOT INTENDED TO RE STRICT THE BUSINESS ACTIVITIES. IT WAS SUBMITTED THAT IN THE INSTANT CA SE THE CASH PAYMENTS WERE MADE EITHER AT THE CONSTRUCTION SITE OF THE AS SESSEE OR WHERE THE SUPPLIERS STONE CRUSHING UNIT IS SITUATED. IT WAS SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTION OF ROAD S AND WAS MOSTLY ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 8 WORKING IN REMOTE AREAS AND THERE IS NO BANKING FAC ILITY AVAILABLE NEAR ITS WORKING SITES AND MOREOVER, GIVEN THE NATURE OF WORK, THE ASSESSEE HAS TO MOVE ITS PLACEMENT IN EVERY 10-15 DAYS OF TH E WORK PROGRESS. IT WAS FURTHER SUBMITTED THAT EVEN THE STONE CRUSHING UNITS ARE SITUATED IN REMOTE AND HILLY AREAS NEAR THE MINES, WHERE ALSO T HERE IS NO BANKING FACILITY AVAILABLE. THE LOCATION OF SOME CRUSHERS A S MENTIONED IN THE ASSESSMENT ORDER IS SUBMITTED HEREWITH:- S.NO. NAME LOCATION 1. BKN STONE CRUSHING COMPANY VILLAGE JERPUR 2. GANESH STONE CRUSHER VILLAGE MODI 3. QUALITY EARTH MINERS PVV. LTD. VILLAGE RAMKUMAR PURA 4. BAJRANG STONE VILLAGE PAPDA 5. BHAGWATI STONE CRUSHER VILLAGE SULTANPUR 6. SHREE SHYAM ASSOCIATES DHANI SUIWALI 7. IT WAS FURTHER SUBMITTED THAT EVEN THE ASSESSING OFFICER HAS ACCEPTED THE POSITION THAT BANKING FACILITY IS NOT AVAILABLE AT PLACE OF WORK ACCORDINGLY SUBMITTED THAT THE CASE OF THE ASS ESSEE IS SQUARELY COVERED U/S 6DD(G) OF THE INCOME TAX RULES. REGARDI NG THE SECOND REMAND REPORT BY THE AO AS WELL THE FINDINGS OF THE LD. CIT(A), IT WAS SUBMITTED THAT THE RULES ARE VERY CLEAR IN ITS LANG UAGE AND CANNOT BE GIVEN ANY OTHER INTERPRETATION AS THERE IS NO AMBIG UITY AND THEREFORE, DOES NOT MATTER IF THERE IS A BANKING FACILITY SITU ATED 2-3 KMS OUTSIDE THE VILLAGE AS THERE IS NO BANKING FACILITY IN THE VILLAGE WHERE THE PAYMENT IS MADE, THE CONDITION SO SPECIFIED IN RULE 6DD ARE FULFILLED ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 9 AND BOTH THE LOWER AUTHORITIES THEREFORE, ERRED IN WRONGLY INTERPRETING THE SAID PROVISION. 8. IT WAS FURTHER SUBMITTED THAT NEITHER THE AO NOR LD. CIT(A) HAS DOUBTED THE GENUINENESS OF PAYMENT MADE TO SUPPLIER S IN RESPECT OF GOODS PURCHASED BY THE ASSESSEE OR THE IDENTITY OF THE SUPPLIERS AS THE ASSESSING OFFICER AS HIMSELF STATED IN THE ASSESSM ENT ORDER THAT THE PAYMENT ARE MADE TO THE RENOWNED SUPPLIERS. 9. IT WAS FURTHER SUBMITTED THAT AS THE MINING ACTI VITIES HAD BEEN BANNED IN THE STATE OF HARYANA, ASSESSEE HAD NO OTH ER OPTION BUT TO BUY CONSTRUCTION MATERIAL FROM STATE OF RAJASTHAN A S THE TRANSPORT OF GRIT IS VERY EXPENSIVE AND TO BUY RAW MATERIAL FROM ANY OTHER STATE WOULD HAVE INCREASED THE COST SUBSTANTIALLY. INCREA SE IN COST IS A MAJOR FACTOR BECAUSE IN THIS COMPETITIVE WORLD, A LOT OF TENDERS ARE FILED AND THE ONE WITH THE BEST POSSIBLE TENDER WITH LEAST CO ST OF CONSTRUCTION IS SELECTED. IT WAS SUBMITTED THAT THE STONE CRUSHING UNITS SITUATED IN THE STATE OF RAJASTHAN INSISTED ON THE PAYMENT TO BE MA DE IN THE FORM OF CASH AND NOT CHEQUE. IT WAS SUBMITTED THAT THE ASSE SSEE WAS LEFT WITH NO CHOICE BUT TO BUY THE CONSTRUCTION MATERIAL IN C ASH, AS THE ASSESSEE COMPANY WAS WORKING ON A STRICT TIMELINE. IT WAS FURTHER SUBMITTED THAT IF THE PAYMENTS WERE NOT MADE, THE S UPPLIERS WOULD HAVE STOPPED THE FURTHER SUPPLY WHICH WOULD HAVE CA USED UNNECESSARY DELAY IN FINISHING THE WORK CONTRACTS. IT WAS SUBMI TTED THAT IF THE ASSESSEE COMPANY DID NOT FINISH THE CONTRACT IN TIM E, THEY WOULD BE HELD LIABLE TO SUBSTANTIAL FINES FOR DELAY IN COMPL ETING THE WORK. MOREOVER, A DELAY WOULD ALSO HAMPER THE REPUTATION OF THE COMPANY. ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 10 RELIANCE WAS PLACED ON THE HONBLE PUNJAB AND HARYA NA HIGH COURT DECISION IN THE CASE OF GURDAS GARG V. CIT 63 TAXMA NN.COM 289 AS WELL AS HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CHROME LEATHER 235 ITR 708 REGARDING THE BUSINESS EXPEDIENCY OF MA KING THE CASH PAYMENT. 10. IT WAS FURTHER SUBMITTED THAT IT CAN BE ESTABLI SHED FROM THE BANK STATEMENTS OF THE ASSESSEE THAT EVERY SINGLE CASH P AYMENT MADE TO THE SUPPLIER HAS BEEN FROM THE SALE PROCEEDS RECEIVED B Y THE ASSESSEE IN ITS BANK ACCOUNT EITHER BY WITHDRAWING THE SAID AMOUNT FROM BANK OR BY ISSUING BEARER CHEQUES. IT WAS FURTHER SUBMITTED TH AT THE SOURCE OF CASH PAYMENT IS CLEARLY IDENTIFIABLE IN FORM OF WITHDRAW ALS FROM THE ASSESSEES BANK AND DETAILS HAVE BEEN SUBMITTED BEF ORE THE LOWER AUTHORITIES AND THEY HAVE NOT BEEN DISPUTED BY THEM . RELIANCE WAS PLACED ON THE COORDINATE BENCH DECISION IN THE CASE OF M/S A DAGA ROYAL ARTS V. ITO (IN ITA NO. 1065/JP/2016 DATED 15.05.2018). 11. IT WAS FURTHER SUBMITTED THAT THE FEW PAYMENTS MADE BY RTGS TO THE PAYESS DOES NOT DISENTITLE THE ASSESSEE FROM CL AIMING RELYING IN TERMS OF RULE 6DD(G). RELIANCE WAS PLACED ON THE CO ORDINATE BENCH DECISION IN CASE OF SHREE GOVIND KRIPA BUILDMART V . ACIT (IN ITA NO. 472/JP/2011 DATED 26.08.2011) WHICH HAS SUBSEQUENTLY BEEN AFFIRMED BY THE HONBLE RAJASTHAN HIGH COURT (IN DB ITA NO. 47/2012 DATED 20.09.2017. 12. FURTHER, RELIANCE WAS PLACED ON THE COORDINATE BENCHE DECISION IN THE CASE OF M/S LORD CHLORO ALKALI V. ACIT WHERE I T WAS HELD THAT NO ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 11 DISALLOWANCE SHOULD BE MADE WHERE THE INDUSTRIES AR E SITUATED IN BACKWARD AREAS AND IS NOT HAVING BANKING FACILITY. IT WAS SUBMITTED THAT THE SAID DECISION HAS SUBSEQUENTLY BEEN AFFIRMED BY THE HONBLE RAJASTHAN HIGH COURT (IN DB ITA NO. 38/2017 DATED 2 0.11.2017) AND THE SLP FILED BY THE DEPARTMENT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT. 13. FURTHER, RELIANCE WAS PLACED ON THE HONBLE RAJ ASTHAN HIGH COURT DECISION IN CASE OF HARSHILA CHORDIA VS. ITO 208 CT R 208 WHEREIN IT WAS HELD THAT EXCEPTIONS CONTAINED IN RULE 6DD ARE NOT EXHAUSTIVE AND THAT THE SAID RULE MUST BE INTERPRETED LIBERALLY. IT WAS ACCORDINGLY SUBMITTED THAT GENUINENESS OF THE TRANSACTION AND IDENTITY OF THE PAYEE HAS NOT BEEN DOUBTED AND THE BUSINESS EXPEDIENCY HAS BEEN E STABLISHED, THE ADDITION SO MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. 14. IT WAS ALSO SUBMITTED THAT THE AO HAS WRONGLY C ONSIDERED FOLLOWING THREE PAYMENTS WHICH HAVE BEEN MADE THROU GH CHEQUES AMOUNTING TO RS. 21 LAKHS AND ACCOUNT TRANSFER WHIC H IS CLEARLY NOT A SUBJECT MATTER OF DISALLOWANCE U/S 40A(3) OF THE AC T:- S.NO DATE OF PAYMENT PARTY NAME AMOUNT CHEQUE NO. 1. 8.07.2011 BIRLA CORPORATION LTD. 300000 232791 2. 10.02.2012 DS FILLING STATION 600000 454718 3. 1.12.2011 RAMESH KR CONTRACTOR 1200000 454701 ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 12 15. PER CONTRA, THE LD. DR SUBMITTED THAT THE PROVI SIONS OF SECTION 40A(3) OF THE ACT ARE CLEARLY ATTRACTED IN THE INST ANT CASE AS THE PAYMENT HAVE BEEN MADE EITHER IN CASH EXCEEDING THE PRESCRIBED THRESHOLD OR THROUGH CASH WITHDRAWAL BY ISSUE OF SE LF CHEQUE FROM THE BANK. IT WAS SUBMITTED THAT UNLESS AND UNTIL THE CH EQUE IS ISSUED IN THE NAME OF THE PARTY AND IS AN ACCOUNT PAYEE CHEQUE, T HE PAYMENT SO MADE DOES NOT SATISFY THE REQUIREMENT OF SECTION 40 A(3) OF THE ACT. FURTHER, HE HAS RELIED ON THE FINDING OF THE LOWER AUTHORITIES. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FIRSTLY, WE FIND THAT THE THRE E CHEQUE PAYMENTS AMOUNTING TO RS 21 LACS OUT OF TOTAL DISALLOWANCE O F RS 2.38 CRORES ARE CLEARLY OUTSIDE THE SCOPE OF SECTION 40A(3) AS THE SAME HAVE BEEN TRANSFERRED TO RESPECTIVE PAYEES ACCOUNT AS REFLEC TED IN THE BANK STATEMENTS AND THE ADDITION SO MADE IS DIRECTED TO BE DELETED. 17. IN RESPECT OF OTHER PAYMENTS, THE CASE OF THE A SSESSEE IS THAT GIVEN ITS NATURE OF ROAD CONSTRUCTION WORK, BANKING FACILITY IS NOT AVAILABLE NEAR ITS WORKING SITES AND EVEN THE STONE CRUSHING UNITS ARE SITUATED IN REMOTE AND HILLY AREAS NEAR THE MINES, WHERE THERE IS NO BANKING FACILITY AVAILABLE AND ITS CASE THUS FALLS IN EXCEPTION AS CONTAINED IN RULE 6DD(G) WHICH READS AS UNDER: WHERE THE PAYMENT IS MADE IN A VILLAGE OR TOWN, WH ICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK, TO ANY PERSON WHO ORDINARILY RESIDES, OR IS CARRYING ON ANY BUSIN ESS, PROFESSION OR VOCATION, IN ANY SUCH VILLAGE OR TOWN. ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 13 IN SUPPORT OF ITS CONTENTION, THE ASSESSEE HAS SUBM ITTED CERTIFICATES FROM SARPANCH OF THE GRAM PANCHAYATS WHERE THE AS SESSEE HAS PURCHASE GRITS FOR THE REQUIREMENT OF THE CIVIL CON STRUCTION WORK. WE FIND THAT THE ASSESSING OFFICER IN HER REMAND REPOR T DATED 15.09.2017 HAS ACCEPTED THE SAID FACTUAL POSITION WHEREIN SHE STATES THAT: ADDITIONAL EVIDENCES IN THE FORM OF CERTIFICATES FR OM THE SARPANCH OF GRAM PANCHAYATS HAVE BEEN VERIFIED BY THE INSPECTOR OF THIS OFFICE. THE INSPECTOR OF THIS OFFICE HAS SUBMITTED HIS REPORT S TATING THAT THE GRAM PANCHYATS UNDER CONSIDERATION DOES NOT HAVE ANY BAN K BRANCH WITHIN THE GEOGRAPHICAL TERRITORY OF THE PANCHAYATS. 18. THE LD CIT(A) HAS ALSO RETURNED A SIMILAR FINDI NG STATING THAT THE BANKING FACILITY WAS NOT AVAILABLE IN GRAM PANCHAYA T AREA. THEREFORE, WHERE THERE IS A CLEAR FINDING OF BOTH THE LOWER AU THORITIES, THE ASSESSING OFFICER AS WELL AS LD CIT(A), WE DONOT SE E ANY JUSTIFIABLE BASIS TO DENY THE CLAIM OF THE ASSESSEE THAT THE PAYMENTS SO MADE FALLS UNDER EXCEPTION SO CARVED OUT IN RULE 6DD(G) AS THE LANGUAGE OF RULE 6DD(G) IS CLEAR AND UNAMBIGUOUS TO THE EFFECT THAT THE PAYMENT IS MADE IN A VILLAGE OR TOWN, WHICH ON THE DATE OF SUC H PAYMENT IS NOT SERVED BY ANY BANK WHICH, IN THE INSTANT CASE, IS CLEARLY DEMONSTRATE D AND VERIFIED BY THE LOWER AUTHORITIES THROUGH PHYSI CAL INSPECTION THAT THERE IS NO BANKING FACILITY IN THE GRAM PANCHYAT A REAS WHERE THE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE TO THE PAYE ES AND THUS, ON THIS GROUND ITSELF, NO DISALLOWANCE SHOULD BE MADE INVOKING PROVISIONS OF SECTION 40A(3) OF THE ACT. ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 14 19. FURTHER, REGARDING THE CONTENTION OF THE LD AR AS TO THE INTENTION OF THE LEGISLATURE BEHIND INTRODUCTION OF SECTION 4 0A(3) AND VARIOUS AUTHORITIES QUOTED IN SUPPORT THEREOF, THIS BENCH H AD AN OCCASION TO EXAMINE THE SAME IN CASE OF M/S A ROYAL DAGA ARTS V S ITO (SUPRA) IN LIGHT OF DECISION OF THE HONBLE SUPREME COURT IN C ASE OF ATTAR SINGH GURMUKH SINGH VS. ITO AND THE DECISIONS OF VARIOUS HIGH COURTS INCLUDING THE DECISION OF THE JURISDICTIONAL HIGH C OURT AND THE RELEVANT FINDINGS READS AS UNDER: 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. IT WOULD BE RELEVANT TO REFER TO THE PROVIS IONS OF SECTION 40A(3) OF THE ACT WHICH READS AS UNDER: '(3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN R ESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OT HERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT EXCEEDS TWENTY THOUSAND RUPEES, NO DEDUCTION SHALL BE ALLOWED IN R ESPECT OF SUCH EXPENDITURE. (3A) WHERE AN ALLOWANCE HAS BEEN MADE IN THE ASSESS MENT FOR ANY YEAR IN RESPECT OF ANY LIABILITY INCURRED BY THE ASSESSEE F OR ANY EXPENDITURE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR (HEREINAFTER REFERRED TO AS SUBSEQUENT YEAR) THE ASSESSEE MAKES PAYMENT IN RESPECT THEREOF , OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAY EE BANK DRAFT, THE PAYMENT SO MADE SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS INCOME OF T HE SUBSEQUENT YEAR IF THE PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON I N A DAY, EXCEEDS TWENTY THOUSAND RUPEES: PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB-SECTION (3) AND THIS SUB-SECTION WHERE A PAYMENT OR AGGREGATE OF PAYMENT S MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAW N ON A BANK OR ACCOUNT PAYEE BANK DRAFT EXCEEDS TWENTY THOUSAND RUPEES, IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED, HAVING REGARD T O THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUS INESS EXPEDIENCY AND OTHER RELEVANT FACTORS : PROVIDED FURTHER THAT IN THE CASE OF PAYMENT MADE FOR PLYING, HIRIN G OR LEASING GOODS CARRIAGES, THE PROVISIONS OF SUB-SECTIONS (3) AND (3A) SHALL HAVE EFFECT AS IF FOR THE WORDS 'TWENTY THOUSAND RUPEES', THE WORDS ' THIRTY-FIVE THOUSAND RUPEES' HAD BEEN SUBSTITUTED. ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 15 (4) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FORCE OR IN ANY CONTRACT, WHERE ANY PAYMENT IN RESP ECT OF ANY EXPENDITURE HAS TO BE MADE BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT IN ORDER THAT SUCH EXPENDITURE MAY NOT BE DIS ALLOWED AS A DEDUCTION UNDER SUB-SECTION (3), THEN THE PAYMENT MAY BE MADE BY SU CH CHEQUE OR DRAFT; AND WHERE THE PAYMENT IS SO MADE OR TENDERED, NO PERSON SHALL BE ALLOWED TO RAISE, IN ANY SUIT OR OTHER PROCEEDING, A PLEA BASED ON THE G ROUND THAT THE PAYMENT WAS NOT MADE OR TENDERED IN CASH OR IN ANY OTHER MANNER .' 19. THE AFORESAID PROVISIONS HAVE TO BE CONSIDERED AND INTERPRETED IN LIGHT OF VARIOUS AUTHORITIES WHICH HAVE BEEN QUOTED AT THE BAR AND R ELIED UPON BY THE LD AR AND LD DR IN SUPPORT OF THEIR RESPECTIVE CONTENTIONS. 20. IN CASE OF ATTAR SINGH GURMUKH SINGH (SUPRA), THE MATTER WHICH CAME UP FOR CONSIDERATION BEFORE THE HON'BLE SUPREME COURT, THE FACTS OF THE CASE WERE THAT ASSESSEE HAD MADE PAYMENT IN CASH EXCEEDING A SUM O F RS. 2,500/- FOR PURCHASE OF CERTAIN STOCK-IN-TRADE. PAYMENTS WERE NOT ALLOWED A S DEDUCTIONS IN THE COMPUTATION OF INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSI NESS OR PROFESSIONS' AS THE SAME WERE HELD TO BE IN CONTRAVENTION OF SECTION 40A(3) READ WITH THAT 6DD OF THE INCOME RULES. IN THAT FACTUAL BACKGROUND, THE QUESTION REG ARDING VALIDITY OF SECTION 40A(3) AND APPLICABILITY OF THE SAID PROVISIONS TO PAYMENT MADE FOR ACQUIRING STOCK-IN-TRADE CAME UP FOR CONSIDERATION BEFORE THE HON'BLE SUPREM E COURT. 21. THE HON'BLE SUPREME COURT REFERRING TO THE PROVISI ONS OF SECTION 40A(3) AND RULE 6DD AND IN PARTICULAR, RULE 6DD(J), AS EXISTED AT R ELEVANT POINT IN TIME, HAS HELD AS UNDER: '6. AS TO THE VALIDITY OF SECTION 40A(3), IT WAS UR GED THAT IF THE PRICE OF THE PURCHASED MATERIAL IS NOT ALLOWED TO BE ADJUSTED AG AINST THE SALE PRICE OF THE MATERIAL SOLD FOR WANT OF PROOF OF PAYMENT BY A CRO SSED CHEQUE OR CROSSED BANK DRAFT, THEN THE INCOME-TAX LEVIED WILL NOT BE ON TH E INCOME BUT IT WILL BE ON AN ASSUMED INCOME. IT IS SAID THAT THE PROVISION AUTHO RIZING LEVY TAX ON AN ASSUMED INCOME WOULD BE A RESTRICTION ON THE RIGHT TO CARRY ON THE BUSINESS, BESIDES BEING ARBITRARY. 7. IN OUR OPINION, THERE IS LITTLE MERIT IN THIS CO NTENTION. SECTION 40A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSION OF RULE 6D D. THE SECTION MUST BE READ ALONG WITH THE RULE. IF READ TOGETHER, IT WILL BE C LEAR THAT THE PROVISIONS ARE NOT INTENDED TO RESTRICT THE BUSINESS ACTIVITIES. THERE IS NO RESTRICTION ON THE ASSESSEE IN HIS TRADING ACTIVITIES. SECTION 40A(3) ONLY EMPO WERS THE ASSESSING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RE SPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED CHEQUE OR CROSSED BANK DRAFT. THE P AYMENT 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 O UT OF THE INCOME FROM DISCLOSED SOURCES. THE TERMS OF SECTION 40A(3) ARE NOT ABSOLUTE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. THE GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF T HE ASSESSING OFFICER THE ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 16 CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GEN UINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PER SON 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 CROSS ED BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF SECTION 40A(3) AND RULE 6DD THAT THEY ARE INTENDED TO REGULATE THE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK-MONEY FOR BUSINESS TRANSACTIONS. - MUD IAM OIL CO. V. ITO [1973] 92 ITR 519 (AP) . IF THE PAYMENT IS MADE BY A CROSSED CHEQUE ON A B ANK OR A CROSSED BANK DRAFT, THEN IT WILL BE EASIER TO ASCERTAIN, WH EN DEDUCTION IS CLAIMED, WHETHER THE PAYMENT WAS GENUINE AND WHETHER IT WAS OUT OF T HE INCOME FROM DISCLOSED SOURCES. IN INTERPRETING A TAXING STATUTE THE COURT CANNOT BE OBLIVIOUS OF THE PROLIFERATION OF BLACK-MONEY WHICH IS UNDER CIRCULA TION IN OUR COUNTRY. ANY RESTRAINT INTENDED TO CURB THE CHANCES AND OPPORTUN ITIES TO USE OR CREATE BLACK- MONEY SHOULD NOT BE REGARDED AS CURTAILING THE FREE DOM OF TRADE OR BUSINESS.' 22. FURTHER, THE HON'BLE SUPREME COURT UPHELD THE APPL ICABILITY OF SECTION 40A(3) TO PAYMENT MADE FOR ACQUIRING STOCK-IN-TRADE AND RAW M ATERIALS AND ALSO AFFIRMED THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN CASE OF FAKRI AUTOMOBILES V. CIT [1986] 24 TAXMAN 578/160 ITR 504 (RAJ) TO THE EFFECT THAT THE PAYMENTS MADE FOR PURCHASIN G STOCK-IN-TRADE OR RAW MATERIAL SHOULD ALSO BE REGAR DED AS EXPENDITURE FOR THE PURPOSES OF SECTION 40A(3) OF THE ACT. 23. THE HON'BLE SUPREME COURT HAS THEREFORE UPHELD THE CONSTITUTIONAL VALIDITY OF SECTION 40A(3) OF THE ACT AND HAS HELD THAT THE PRO VISIONS ARE NOT INTENDED TO RESTRICT THE BUSINESS ACTIVITIES AND RESTRAINT SO PROVIDED A RE ONLY INTENDED TO CURB THE CHANCES AND OPPORTUNITIES TO USE OR CREATE BLACK MONEY AND THE SAME SHOULD NOT BE REGARDED AS CURTAILING THE FREEDOM OF TRADE OR BUSINESS. THE HON'BLE SUPREME COURT HAS THUS LAID GREAT EMPHASIS ON THE INTENTION BEHIND INTRODU CTION OF THESE PROVISIONS AND IT WOULD THEREFORE BE RELEVANT TO EXAMINE WHETHER IN T HE PRESENT CASE, THERE IS ANY VIOLATION OF SUCH INTENTION AND IF ULTIMATELY, IT I S DETERMINED THAT SUCH INTENTION HAS BEEN VIOLATED, THEN CERTAINLY, THE ASSESSEE DESERVE S THE DISALLOWANCE OF THE EXPENDITURE SO CLAIMED. 24. THE HON'BLE SUPREME COURT REFERRING TO THE PROVISI ONS OF SECTION 40A(3) AS EXISTED AT RELEVANT POINT IN TIME WHICH TALKS ABOUT CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS AND RULE 6DD( J) WHICH PROVIDES FOR THE EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES AND THE FA CT THAT THE PAYMENT IN THE MANNER AFORESAID WAS NOT PRACTICAL OR WOULD HAVE CAUSED GE NUINE DIFFICULTY TO THE PAYEE AND FURNISHING THE NECESSARY EVIDENCE TO THE SATISFACTI ON OF THE ASSESSING OFFICER AS TO THE GENUINENESS OF THE PAYMENTS AND THE IDENTITY OF THE PAYEE HAS HELD THAT: 'THE TERMS OF SECTION 40A(3) ARE NOT ABSOLUTE. CONS IDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLU DED. THE GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE ASSE SSING OFFICER THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A(3) WAS NOT ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 17 PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE. 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 CI RCUMSTANCES SPECIFIED UNDER THE RULE.' 25. HERE, IT IS RELEVANT TO NOTE THAT THERE HAS BEEN N O CHANGE IN THE PROVISIONS OF SECTION 40A(3) IN SO FAR AS CONSIDERATIONS OF BUSIN ESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE CONCERNED, AS EXISTED AT RELEVANT POINT IN TIME AND AS CONSIDERED BY THE HON'BLE SUPREME COURT AND THE PROVISIONS OF SECTION 40A(3) AS EXIST NOW AND RELEVANT FOR THE IMPUNGED ASSESSMENT YEAR I.E. AY 2 013-14. HOWEVER, RULE 6DD(J) HAS BEEN AMENDED AND BY NOTIFICATION DATED 10.10.20 08, IT NOW PROVIDES FOR AN EXCEPTION ONLY IN A SCENARIO WHERE THE PAYMENT WAS REQUIRED TO BE MADE ON A DAY ON WHICH BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDA Y OR STRIKE. A QUESTION WHICH ARISES FOR CONSIDERATION IS WHETHER THE LEGAL PROPO SITION SO LAID DOWN BY THE HON'BLE SUPREME COURT REGARDING CONSIDERATION OF BUSINESS E XPEDIENCY AND OTHER RELEVANT FACTORS HAS BEEN DILUTED BY WAY OF DELEGATED LEGISL ATION IN FORM OF INCOME TAX RULES WHEN THE PARENT LEGISLATION IN FORM OF SECTION 40A( 3) TO WHICH SUCH DELEGATED LEGISLATION IS SUBSERVIENT HAS BEEN RETAINED IN ITS ENTIRETY. ALTERNATIVELY, CAN IT BE SAID THAT WHAT HAS BEEN PRESCRIBED AS EXCEPTIONAL CIRCUM STANCES IN RULE 6DD AS AMENDED ARE EXHAUSTIVE ENOUGH AND WHICH VISUALIZES ALL KIND S AND NATURE OF BUSINESS EXPEDIENCY IN ALL POSSIBLE SITUATIONS. 26. IF WE LOOK AT THE LEGISLATIVE HISTORY OF SECTION 4 0A(3) AND RULE 6DD, WE FIND THAT INITIALLY, SECTION 40A(3) PROVIDES FOR DISALLOWANCE OF 100% OF THE EXPENDITURE UNLESS THE MATTER FALLS UNDER EXCEPTION AS PROVIDED IN RUL E 6DD(J) LATER ON, SECTION 40A(3) HAS BEEN AMENDED TO PROVIDE FOR DISALLOWANCE OF 20% OF THE EXPENDITURE INCURRED IN CASH AND RULE 6DD(J) WAS OMITTED. THEREAFTER, BY VI RTUE OF ANOTHER AMENDMENT, DISALLOWANCE UNDER SECTION 40A(3) WAS INCREASED FRO M 20% TO 100%, HOWEVER, RULE 6DD(J) WAS NOT REINTRODUCED IN ORIGINAL FORM TO PRO VIDE FOR EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES RATHER IT WAS RESTRICTED TO PAYMENT BY WAY OF SALARY TO EMPLOYEES AND THEREAFTER, BY VIRTUE OF LASTEST AMEN DMENT IN YEAR 2008 TO PAYMENTS MADE ON A DAY ON WHICH THE BANKS WERE CLOSED ON ACC OUNT OF HOLIDAY OR STRIKE. 27. WE DO NOT BELIEVE THAT BY VIRTUE OF THESE AMENDMEN TS, THE LEGAL PROPOSITION SO LAID DOWN BY THE HON'BLE SUPREME COURT REGARDING CONSIDE RATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS HAS BEEN DILUTED IN ANY WAY. AT THE SAME TIME, WE ALSO BELIEVE THAT RULE 6DD AS AMENDED ARE NOT EXHAUSTIVE ENOUGH AND WHICH VISUALIZES ALL KINDS AND NATURE OF BUSINESS EXPEDIENCY IN ALL POSS IBLE SITUATIONS AND IT IS FOR THE APPROPRIATE AUTHORITY TO EXAMINE AND PROVIDE FOR A MECHANISM AS ORIGINALLY ENVISAGED WHICH PROVIDES FOR EXCEPTIONAL OR UNAVOID ABLE CIRCUMSTANCES TO THE SATISFACTION OF THE ASSESSING OFFICER WHEREBY GENUI NE BUSINESS EXPENDITURE SHOULD NOT SUFFER DISALLOWANCE. 28. FURTHER, THE COURTS HAVE HELD FROM TIME TO TIME TH AT THE RULES MUST BE INTERPRETED IN A MANNER SO AS TO ADVANCE AND NOT TO FRUSTRATE T HE OBJECT OF THE LEGISLATURE. THE INTENTION OF THE LEGISLATURE IS MANIFESTLY CLEAR AN D WHICH IS TO CURB THE CHANCES AND OPPORTUNITIES TO USE OR CREATE BLACK MONEY AND TO A SCERTAIN WHETHER THE PAYMENT WAS ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 18 GENUINE OR WHETHER IT WAS OUT OF THE INCOME FROM DI SCLOSED SOURCES. AND SECTION 40A(3) CONTINUES TO PROVIDE THAT NO DISALLOWANCE SH ALL BE MADE IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED HAVIN G REGARD TO THE NATURE AND EXTENT OF THE BANKING FACILITIES AVAILABLE, CONSIDE RATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. IN OUR VIEW, GIVEN THAT THE RE HAS BEEN NO CHANGE IN THE PROVISIONS OF SECTION 40A(3) IN SO FAR AS CONSIDERA TION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE CONCERNED, THE SAME CONT INUES TO BE RELEVANT FACTORS WHICH NEEDS TO BE CONSIDERED AND TAKEN INTO ACCOUNT WHILE DETERMINING THE EXCEPTIONS TO THE DISALLOWANCE AS CONTEMPLATED UNDER SECTION 40A(3) O F THE ACT SO LONG AS THE INTENTION OF THE LEGISLATURE IS NOT VIOLATED. WE FIND THAT OU R SAID VIEW FIND RESONANCE IN DECISIONS OF VARIOUS AUTHORITIES, WHICH WE HAVE DIS CUSSED BELOW AND THUS SEEMS FORTIFIED BY THE SAID DECISIONS. 29. WE REFER TO THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN CASE OF SMT. HARSHILA CHORDIA (SUPRA), WHERE THE FACTS OF CASE W ERE THAT THE ASSESSEE HAD MADE CERTAIN CASH PAYMENTS TOWARDS PURCHASE OF SCOOTER/M OPEDS WHICH EXCEEDED RS. 10,000/- IN EACH CASE TO THE PRINCIPAL AGENT INSTEA D OF MAKING PAYMENT THROUGH THE CROSS CHEQUES OR BANK DRAFT. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 40A(3) AND HELD THAT THEY WERE NO EXCEPTIONAL CIRCU MSTANCES FALLING UNDER RULE 6DD WHICH COULD AVOID CONSEQUENCES OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE LD. CIT (A) HELD THAT SUCH EXCEPTIONAL CIRCUMSTANCES DI D EXIST. HOWEVER, THE FINDINGS OF THE LD. CIT (A) WERE REVERSED BY THE TRIBUNAL AND T HE MATTER CAME UP FOR CONSIDERATION BEFORE THE HON'BLE HIGH COURT. 30. THE HON'BLE HIGH COURT OBSERVED THAT THE PRINCIPAL REASON WHICH WEIGHED WITH THE TRIBUNAL IN DISCARDING THE EXPLANATION FURNISHE D BY THE ASSESSEE WAS THAT THE CASE OF THE ASSESSEE DID NOT FALL IN ANY OF THE CLAUSES ENUMERATED IN THE CIRCULAR ISSUED BY THE CBDT ABOUT THE EXPLANATORY NOTE APPENDED TO CLA USE (J) WAS TO OPERATE AS IT WAS EXISTING AT THE RELEVANT TIME AND ENUMERATED CIRCUM STANCES IN THE CIRCULAR WAS EXHAUSTIVE OF EXCEPTIONAL CIRCUMSTANCES. THE HON'BL E HIGH COURT OBSERVED THAT THE TRIBUNAL HAS ERRONEOUSLY ASSUMED THAT ENUMERATION O F INSTANCES IN THE CIRCULAR IN WHICH THE PROVISIONS OF CLAUSE (J) UNDER RULE 6DD W OULD OPERATE TO BE EXHAUSTIVE OF SUCH CIRCUMSTANCES AND HAD NOT BEEN PROPERLY UNDERS TOOD ITS IMPLICATION. IT WAS FURTHER OBSERVED BY THE HON'BLE HIGH COURT THAT PRI MARY OBJECT OF ENACTING SECTION 40A(3) IN ITS ORIGINAL INCARNATION WAS TWO-FOLD, FI RSTLY, PUTTING A CHECK ON TRADING TRANSACTIONS WITH A MIND TO EVADE THE LIABILITY TO TAX ON INCOME EARNED OUT SUCH TRANSACTION AND, SECONDLY, TO INCULCATE THE BANKING HABITS AMONGST THE BUSINESS COMMUNITY. THE CONSEQUENCE WHICH WAS PROVIDED WAS T O DISALLOW OF DEDUCTION OF SUCH PAYMENTS/EXPENSES WHICH WERE NOT THROUGH BANK EITHER BY CROSSED CHEQUES OR BY DEMAND DRAFT OR BY PAY ORDER. IT WAS FURTHER HELD B Y THE HON'BLE HIGH COURT THAT: 'APPARENTLY, THIS PROVISION WAS DIRECTLY RELATED TO CURB THE EVASION OF TAX AND INCULCATING THE BANKING HABITS. THEREFORE, THE CONSEQUENCES, WHICH WERE TO BEFALL ON ACCOUNT OF NON-OBSERVATION OF SUB-SECTION (3) OF SECTION 40A MUST HAVE NEXUS TO THE FAILURE OF SUCH OBJECT. THEREFORE THE GENUINENESS OF THE TRANSACTIONS AND IT BEING FREE FROM VICE OF ANY DEVICE OF EVASIO N OF TAX IS RELEVANT CONSIDERATION WHICH HAS BEEN OVERLOOKED BY THE TRIB UNAL.' ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 19 31. IT WAS ACCORDINGLY HELD BY THE HON'BLE HIGH COURT THAT IT IS THE RELEVANT CONSIDERATION FOR THE ASSESSING AUTHORITY UNDER THE INCOME TAX ACT THAT BEFORE INVOKING THE PROVISIONS OF SECTION 40A(3) IN LIGHT OF RULE 6DD AS CLARIFIED BY CIRCULAR OF THE CBDT THAT WHETHER THE FAILURE ON THE PART 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 CONSEQUE NCE. THIS IS PARTICULARLY SO, BECAUSE THE CONSEQUENCE PROVIDED U/S 40A(3) FOR FAILURE TO MAKE PAYMENTS THROUGH BANK IS NOT ABSOLUTE IN TERMS NOR AUTOMATIC BUT EXCEPTIONS HAVE BEEN PROVIDED AND LEVERAGE HAS BEEN LEFT FOR LITTLE FLEXING BY MAKING A GENERAL PR OVISION IN THE FORM OF CLAUSE (J) IN RULE 6DD. THEREAFTER, THE HON'BLE HIGH COURT REFERS TO THE CLAUSE 6DD(J) AND THE CIRCULAR DATED 31ST MAY, 1977 ISSUED BY THE BOARD I N THE CONTEXT OF WHAT SHALL CONSTITUTE EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCE S WITHIN THE MEANING OF SECTION CLAUSE (J). THE HON'BLE HIGH COURT OBSERVED THAT TH E CIRCULAR IN PARAGRAPH 5 GIVES A CLEAR INDICATION THAT RULE 6DD(J) HAS TO BE LIBERAL LY CONSTRUED AND ORDINARILY WHERE THE GENUINENESS OF THE TRANSACTION AND THE PAYMENT AND THE IDENTITY OF THE RECEIVER IS ESTABLISHED, THE REQUIREMENT OF RULE 6DD(J) MUST BE DEEMED TO HAVE BEEN SATISFIED. THE HON'BLE HIGH COURT OBSERVED THAT APPARENTLY SEC TION 40A(3) WAS INTENDED TO PENALIZE THE TAX EVADER AND NOT THE HONEST TRANSACT IONS AND THAT IS WHY AFTER FRAMING OF RULE 6DD(J), THE BOARD STEPPED IN BY ISSUING THE AFORESAID CIRCULAR AND THIS CLARIFICATION, IN OUR OPINION, IS IN CONFORMITY WIT H THE PRINCIPLE ENUNCIATED BY THE SUPREME COURT IN CTO V. SWASTIK ROADWAYS [2004] 3 S CC 640. 32. THE LEGAL PROPOSITION THAT ARISES FROM THE ABOVE D ECISION OF THE HON'BLE RAJASTHAN HIGH COURT IS THAT THE CONSEQUENCES, WHICH WERE TO BEFALL ON ACCOUNT OF NON- OBSERVATION OF SUB-SECTION (3) OF SECTION 40A MUST HAVE NEXUS TO THE FAILURE OF SUCH OBJECT. THEREFORE THE GENUINENESS OF THE TRANSACTIO NS AND IT BEING FREE FROM VICE OF ANY DEVICE OF EVASION OF TAX IS RELEVANT CONSIDERAT ION AND WHICH SHOULD BE EXAMINED BEFORE INVOKING THE RIGOURS OF SECTION 40A(3) OF TH E ACT. 33. IN CASE OF ANUPAM TELE SERVICES THE MATTER WHICH C AME UP FOR CONSIDERATION BEFORE THE HON'BLE GUJARAT HIGH COURT, THE FACTS OF THE CASE WERE THAT THE ASSESSEE WHO IS INVOLVED IN THE BUSINESS OF DISTRIBUTION MOB ILE AND RECHARGE VOUCHERS OF TATA TELE SERVICES LTD HAD MADE PAYMENT OF RS. 33,10,194 /- TO TATA TELE SERVICES LTD., BY CASH ON DIFFERENT DATES. THE ASSESSEE HAD MADE SUCH PAYMENT THROUGH ACCOUNT PAYEE CHEQUES TILL 22ND AUG, 2005, WHEN A CIRCULAR WAS IS SUED BY TATA TELE SERVICES LTD., REQUIRING THE APPELLANT TO DEPOSIT CASH AT THE COMP ANY'S OFFICE AT SURAT. IN THAT FACTUAL BACKGROUND , THE HON'BLE HIGH COURT HELD AS UNDER: '17. RULE 6DD OF THE IT RULES, 1962 PROVIDES FOR SI TUATIONS UNDER WHICH DISALLOWANCE UNDER S. 40A(3) SHALL NOT BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSI ON UNDER THE SAID SECTION. AMONGST THE VARIOUS CLAUSES, CL. (J) WHICH IS RELEV ANT, READ AS UNDER: (J) WHERE THE PAYMENT WAS REQUIRED TO BE MADE ON A DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE; 18. IT COULD BE APPRECIATED THAT S. 40A AND IN PART ICULAR SUB-CL. (3) THEREOF AIMS AT CURBING THE POSSIBILITY OF ON-MONEY TRANSACTIONS BY INSISTING THAT ALL PAYMENTS ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 20 WHERE EXPENDITURE IN EXCESS OF A CERTAIN SUM (IN TH E PRESENT CASE TWENTY THOUSAND RUPEES) MUST BE MADE BY WAY OF ACCOUNT PAY EE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT. 19. AS HELD BY THE APEX COURT IN CASE OF ATTAR SING H GURMUKH SINGH (SUPRA). '..IN OUR OPINION, THERE IS LITTLE MERIT IN THIS CO NTENTION. SEC. 40A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSION OF R. 6DD. TH E SECTION MUST BE READ ALONG WITH THE RULE. IF READ TOGETHER, IT WILL BE CLEAR T HAT THE PROVISIONS ARE NOT INTENDED TO RESTRICT THE BUSINESS ACTIVITIES. THERE IS NO RE STRICTION ON THE ASSESSEE IN HIS TRADING ACTIVITIES. SEC. 40A(3) ONLY EMPOWERS THE A .O. 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 CROSSE D CHEQUE OR CROSSED BANK DRAFT IS INSISTED ON TO ENABLE THE ASSESSING AUTHOR ITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF THE IN COME FROM UNDISCLOSED SOURCES, THE TERMS OF S. 40A(3) ARE NOT ABSOLUTE. C ONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLU DED. GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE A.O. THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN S. 40A(3) W AS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECEIVED THE CASH PAYME NT. 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 S PECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF S. 40A(3) AND R. 6D D THAT THEY ARE INTENDED TO REGULATE BUSINESS TRANSACTIONS AND TO PREVENT THE U SE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTIONS:' 20. IT WAS BECAUSE OF THESE CONSIDERATIONS THAT THI S COURT IN CASE OF HYNOUP FOODS (P.) LTD. (SUPRA) OBSERVED THAT THE GENUINENE SS OF THE PAYMENT AND THE IDENTIFY OF THE PAYEE ARE THE FIRST AND FOREMOST RE QUIREMENTS TO INVOKE THE EXCEPTIONS CARVED OUT IN R. 6DD(J) OF THE IT RULES, 1962. 21. IN THE PRESENT CASE, NEITHER THE GENUINENESS OF THE PAYMENT NOR THE IDENTITY OF THE PAYEE WERE IN ANY CASE DOUBTED. THESE WERE THE CONCLUSIONS ON FACTS DRAWN BY THE CIT(A). THE TRIBUNAL ALSO DID NOT DISTURB SU CH FACTS BUT RELIED SOLELY ON R. 6DD(J) OF THE RULES TO HOLD THAT SINCE THE CASE OF THE ASSESSEE DID NOT FALL UNDER THE SAID EXCLUSION CLAUSE NOR WAS COVERED UNDER ANY OF THE CLAUSES OF R. 6DD, CONSEQUENCES ENVISAGED IN S. 40A(3) OF THE ACT MUST FOLLOW. 22. IN OUR OPINION, THE TRIBUNAL COMMITTED AN ERROR IN COMING TO SUCH A CONCLUSION. WE WOULD BASE OUR CONCLUSIONS ON THE FO LLOWING REASONS: (A) THE PARAMOUNT CONSIDERATION OF SECTION 40A(3) IS TO CURB A ND REDUCE THE POSSIBILITIES OF BLACK MONEY TRANSACTIONS. AS HELD BY THE SUPREME COURT IN ATTAR SINGH GURMUKH SINGH (SUPRA ), SECTION 40A(3) OF THE ACT DOES NOT ELIMINATE CON SIDERATIONS OF BUSINESS EXPEDIENCIES. ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 21 (B) IN THE PRESENT CASE, THE APPELLANT ASSE SSEE WAS COMPELLED TO MAKE CASH PAYMENTS ON ACCOUNT OF PECULIAR SITUATION. SUCH SITUATION WAS A S FOLLOW- (I) THE PRINCIPAL COMPANY, TO WHICH THE ASSESSEE WAS A DISTRIBUTOR, INSISTED THAT CHEQUE PAYMENT FROM A CO- OPERATIVE BANK WOULD NOT DO, SINCE THE REALIZATION TAKES A LONGER TIME; (II) THE ASSESSEE WAS, THEREFORE, REQUIRED TO MAKE CASH PAYMENTS ONLY; (III) TATA TELE SERVICES LTD. ASSURED THE ASSESSEE THAT S UCH AMOUNT SHALL BE DEPOSITED IN THEIR BANK ACCOUNT ON BEHALF OF THE AS SESSEE; (IV) IT IS NOT DISPUTED THAT THE TATA TELE SERVICES LTD. DID NOT ACT ON SUCH PROMISE; (V) IF THE ASSESSEE HAD NOT MADE CASH PAYMENT AND RELIE D ON CHEQUE PAYMENTS ALONE, IT WOULD HAVE RECEIVED THE RECHARGE VOUCHERS DELAYED BY 4/5 DAYS AND THEREBY SEVERELY AFFECTING ITS BUSINESS OPERATIONS. WE WOULD FIND THAT THE PAYMENTS BETWEEN THE ASSESSE E AND THE TATA TELE SERVICES LTD. WERE GENUINE. THE TATA TELE SERVICES LTD. HAD INSISTED THAT SUCH PAYMENTS BE MADE IN CASH, WHICH TATA TELE SERVICES LTD. IN T URN ASSURED AND DEPOSITED THE AMOUNT IN A BANK ACCOUNT. IN THE FACTS OF THE PRESE NT CASE, RIGORS OF S. 40A(3) OF THE ACT MUST BE LIFTED. 23. WE NOTICE THAT THE DIVISION BENCH OF THE RAJAST HAN HIGH COURT IN CASE OF SMT. HARSHILA CHORDIA V. ITO (2007) 208 CTR (RAJ ) HAD OBSERVED THAT THE EXCEPTIONS CONTAINED IN R. 6DD ARE NOT EXHAUSTIVE A ND THAT THE SAID RULE MUST BE INTERPRETED LIBERALLY.' 34. IN CASE OF AJMER FOOD PRODUCTS (P.) LTD. V. JCIT [ IT APPEAL NO. 625 (JP) OF 2014, DATED 28-9-2016] A SIMILAR ISSUE HAS COME UP BEFORE THE CO-ORDINATE BENCH AND SPEAKING THROUGH ONE OF US, IT WAS HELD AS UNDER: '4.5 THE GENUINENESS OF THE TRANSACTION AS WELL AS THE IDENTITY OF THE PAYEE ARE NOT DISPUTED. FURTHER, THE APPELLANT HAS EXPLAINED THE BUSINESS EXPEDIENCY OF MAKING THE CASH PAYMENTS TO BOTH THE PARTIES WHICH HAS NOT BEEN CONTROVERTED BY THE REVENUE. FOLLOWING THE DECISION OF GUJARAT HIGH COURT IN CASE OF ANUPAM TELE SERVICES (SUPRA) AND RAJASTHAN HIGH COURT IN C ASE OF HARSHILA CHORDIA (SUPRA), THE ADDITION OF RS. 45,738/- UNDER SECTION 40A(3) IS DELETED.' 35. IN CASE OF GURDAS GARG (SUPRA), THE MATTER WHICH C AME UP FOR CONSIDERATION BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT, THE FACTS OF THE CASE ARE PARI MATERIA TO THE INSTANT CASE AND THE RATIO OF THE SA ID DECISION CLEARLY APPLIES IN THE ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 22 INSTANT CASE. IN THAT CASE, THE FACTS OF THE CASE W ERE THAT THE ASSESSEE WAS ENGAGED IN TRADING IN PROPERTIES AND DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THE AO OBSERVED THAT THERE ARE TRANSACTIONS WHERE THE PAYM ENTS HAVE BEEN MADE IN EXCESS OF RS. 20,000/- IN CASH WHICH WERE DISALLOWED U/S 40A( 3) OF THE ACT. THE HON'BLE HIGH COURT HELD THAT RULE 6DD(J) IS NOT EXHAUSTIVE OF TH E CIRCUMSTANCES IN WHICH THE PROVISO TO SECTION 40A(3) IS APPLICABLE AND IT ONLY ILLUSTRATIVE. THE HON'BLE HIGH COURT REFERS TO THE DECISION OF THE HON'BLE RAJASTH AN HIGH COURT IN CASE OF SMT. HARSHILA CHORDIA (SUPRA) AND THE DECISION OF HON'BL E SUPREME COURT IN CASE OF ATTAR SINGH GURMUKH SINGH (SUPRA). THE HIGH COURT FURTHER OBSERVED THAT THE LD. CIT(A) HAS GIVEN A FINDING THAT THE IDENTITY OF THE PAYEE I.E. VENDORS IN RESPECT OF LAND PURCHASE BY THE APPELLANT WAS ESTABLISHED, THE SALE DEEDS WERE PRODUCED, THE GENUINENESS THEREOF WAS ACCEPTED AND THE AMOUNT PAI D IN RESPECT OF EACH OF THESE AGREEMENT WAS SATISFIED BEFORE THE STAMP REGISTRATI ON AUTHORITY AND THE TRANSACTIONS WERE HELD TO BE GENUINE AND THE BAR AGAINST THE GRA NT OF DEDUCTIONS U/S 40A(3) OF THE ACT WAS NOT ATTRACTED. THE HON'BLE HIGH COURT FURTH ER OBSERVED THAT THE TRIBUNAL DID NOT UPSET THESE FINDINGS INCLUDING AS TO THE GENUIN ENESS AND THE CORRECTNESS OF THE TRANSACTIONS AND IT IS ALSO IMPORTANT TO NOTE THAT THE TRIBUNAL NOTED THE CONTENTION ON BEHALF OF THE APPELLANT THAT THERE WAS A BOOM IN TH E REAL ESTATE MARKET AND THEREFORE IT WAS NECESSARY, THEREFORE, TO CONCLUDE THE TRANSACTI ONS AT THE EARLIEST AND NOT TO POSTPONE THEM; THAT THE APPELLANT DID NOT KNOW THE VENDORS AND OBVIOUSLY THEREFORE, INSISTED FOR PAYMENT IN CASH AND THAT AS A RESULT T HEREOF, PAYMENTS HAD TO BE MADE IMMEDIATELY TO SETTLE THE DEALS. THE TRIBUNAL DID N OT DOUBT THIS CASE. THE TRIBUNAL, HOWEVER, HELD THAT THE CLAIM FOR DEDUCTION WAS NOT SUSTAINABLE. IN VIEW OF SECTION 40A(3) AS THE PAYMENTS WHICH WERE OVER RS. 20,000/- WERE MADE IN CASH. THE HON'BLE HIGH COURT ACCORDINGLY OBSERVED THAT 'THE TRIBUNAL HAS NOT DISBELIEVED THE TRANSACTIONS OR THE GENUINENESS THEREOF NOR HAS IT DISBELIEVED THE FACT THAT PAYMENTS HAVING BEEN MADE. MORE IMPORTANTLY, THE REASONS FUR NISHED BY THE APPELLANT FOR HAVING MADE THE CASH PAYMENTS, WHICH WE HAVE ALREAD Y ADVERTED TO, HAVE NOT BEEN DISBELIEVED. IN OUR VIEW, ASSUMING THESE REASONS TO BE CORRECT, THEY CLEARLY MAKE OUT A CASE OF BUSINESS EXPEDIENCY.' 36. THE CO-ORDINATE BENCH IN CASE OF DHURI WINE V. DY. CIT [2017] 83 TAXMANN.COM 20 (CHD. - TRIB.) HAS HELD THAT THE PROPOSITION SO LAID DOWN BY THE HON'BLE HIGH COURT IN CASE OF GURDAS GARG (SUPRA) IS QUITE UNAMB IGUOUS TO THE EFFECT THAT EVEN IF THE CASE OF THE ASSESSEE DOES NOT FALL IN ANY OF TH E CLAUSES OF RULE 6DD OF THE INCOME TAX RULES, INVOKING THE PROVISIONS OF SECTION 40A(3 ) OF THE ACT CAN BE DISPENSED WITH IF THE ASSESSEE IS ABLE TO PROVE THE BUSINESS EXPED IENCY BECAUSE OF WHICH IT HAS TO MAKE THE CASH PAYMENTS, THE GENUINENESS OF THE TRAN SACTIONS HAVE ALSO TO BE VERIFIED. 37. THE CO-ORDINATE BENCH IN CASE OF RAKESH KUMAR V. A SSTT. CIT [IT APPEAL NO. 102 (ASR.) OF 2014, DATED 09-03-2016] RELYING ON THE DE CISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN CASE OF GURDAS GARG (SUPRA) H AS HELD THAT THE GENUINENESS OF THE PAYMENT HAS NOT BEEN DOUBTED AS THE ASSESSING O FFICER HIMSELF HAS HELD THAT SALE DEEDS OF PROPERTIES WERE REGISTERED WITH THE REVENU E DEPARTMENT OF THE GOVERNMENT. THEREFORE, FOLLOWING THE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT, THE PAYMENT FOR PURCHASE OF LAND WAS ALLOWED. ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 23 38. WE FURTHER NOTE THAT IN CASE OF ACE INDIA ABODES L IMITED [DB APPEAL NO. 45/2012, DATED 11-09-2017], A SIMILAR ISSUE HAS COM E UP BEFORE THE HON'BLE RAJASTHAN HIGH COURT REGARDING PAYMENT FOR PURCHASE OF LAND FROM VARIOUS AGRICULTURIST FOR WHICH THE ASSESSEE HAS PAID CONSI DERATION IN CASH AND SHOWN THE LAND AS ITS STOCK-IN-TRADE. THE HON'BLE RAJASTHAN H IGH COURT REFERRING TO THE INTENT BEHIND INTRODUCTION OF SECTION 40A(3) AND CATENA OF DECISIONS RIGHT FROM ATTAR SINGH GURMUKH SINGH, SMT. HARSHILA CHORDIA, GURDAS GARG, ANUPAM TELE SERVICES REFERRED SUPRA HAS DECIDED THE ISSUE IN FA VOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 39. THE ISSUE WHICH IS BEING DISPUTED BEFORE US HAS TO BE CONSIDERED AND DECIDED IN LIGHT OF FACTS ON RECORD AND THE LEGAL POSITION WHI CH EMERGES FROM THE ABOVE REFERRED DECISIONS. THE FACTS OF THE CASE ARE THAT DURING TH E YEAR UNDER CONSIDERATION, THE ASSESSEE FIRM HAS PURCHASED 26 PIECES OF PLOT OF LA ND IN THE MONTH OF APRIL AND MAY, 2012 FROM VARIOUS PERSONS FOR A TOTAL CONSIDERATION OF RS. 2,46,28,425/-, OUT OF WHICH PAYMENT AMOUNTING TO RS. 1,71,67,000/- WERE MADE IN CASH TO VARIOUS PERSONS, PAYMENT AMOUNTING TO RS. 59,48,920/- WERE MADE IN C HEQUE TO VARIOUS PERSONS, AND RS. 8,15,700/- AND RS. 6,84,296/- WERE PAID IN CASH TOWARDS STAMP DUTY AND COURT FEE RESPECTIVELY. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSEE SUBMITTED COPIES OF THE SALE DEED, THE PARTICULARS OF WHICH F IND MENTION ON PAGE 7 AND 8 OF THE ASSESSMENT ORDER. ON PERUSAL OF THE SAID DETAILS, I T IS OBSERVED THAT THE SAID DETAILS CONTAINS THE NAME OF THE SELLER, DATE OF SALE DEED, PLOT NO., PURCHASE VALUE, STAMP DUTY, COURT FEE AND MODE OF PAYMENT - CASH/CHEQUE. THEREFORE, AS FAR AS THE IDENTITY OF THE PERSONS FROM WHOM THE PURCHASES HAVE BEEN MA DE AND GENUINENESS OF THE TRANSACTIONS OF PURCHASE OF VARIOUS PLOTS OF LAND A ND PAYMENT IN CASH IS CONCERNED, THE SAME IS EVIDENCED BY THE REGISTERED SALE DEEDS AND THERE IS NO DISPUTE WHICH HAS BEEN RAISED BY THE REVENUE EITHER DURING THE ASSESS MENT PROCEEDINGS OR BEFORE US. THE IDENTITY OF THE SELLERS AND GENUINENESS OF THE TRANSACTIONS IS THEREFORE FULLY ESTABLISHED IN THE INSTANT CASE. 40. FROM PERUSAL OF THE ASSESSMENT ORDER, IT IS FURTHE R NOTED THAT THE AO, ON PERUSAL OF THE DETAILS OF THE PROPERTIES PURCHASED, AS PER COPIES OF THE SALE DEED FURNISHED, HELD THAT THE ASSESSEE HAD MADE CASH PAYMENTS REGUL ARLY AND NO SPECIFIC CIRCUMSTANCES HAVE BEEN BROUGHT TO HIS KNOWLEDGE TH AT THE CASH PAYMENTS WERE MADE DUE TO SOME UNAVOIDABLE CIRCUMSTANCES. IT WAS HELD BY THE AO THAT MAXIMUM CASH PAYMENTS WERE MADE TO PERSONS RESIDING IN JAIPUR CI TY AND IN SINGLE FAMILY, REPEATED CASH PAYMENTS WERE MADE WHICH ITSELF SHOWS THAT THE RE WERE NO UNAVOIDABLE CIRCUMSTANCES TO MAKE CASH PAYMENTS TO THE SELLERS. WHAT IS THEREFORE RELEVANT TO NOTE THAT THE AO HAS APPRECIATED THE NECESSITY OF DETERM INING THE UNAVOIDABLE CIRCUMSTANCES WHICH COULD HAVE LED THE ASSESSEE TO MAKE CASH PAYMENTS. DURING THE COURSE OF ASSESSEMENT PROCEEDINGS, IT WAS SUBMITTED BY THE ASSESSEE THAT THE PAYMENT FOR PURCHASE OF LAND HAS BEEN MADE IN CASH BECAUSE THE SELLERS WERE NEW TO THE ASSESSEE AND REFUSED TO ACCEPT THE CASH. IT WAS SUB MITTED THAT THE DELAY IN MAKING THE CASH PAYMENT, IT COULD HAVE LOST THE LAND DEALS. IN THIS REGARD, THE LD AR SUBMITTED BEFORE US THAT THE ASSESSEE HAD PURCHASED THE LANDS BOTH THROUGH CASH AND CHEQUES. BASED ON THE REQUIREMENT OF THE SELLER, ASSESSEE HA D SELECTED THE MODE OF PAYMENT. FOR THE SELLERS, WHO HAD INSISTED THE PAYMENTS IN C ASH, ASSESSEE HAD WITHDRAWN THE ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 24 CASH FROM BANK ON THE SAME DATE OF REGISTRY AND MAD E THE PAYMENTS TO SELLER ACCORDINGLY. THE WITHDRAWALS FROM BANK AND PAYMENTS TO SELLER HAVE BEEN TABULATED BELOW AS PER DATES BELOW: DATE BANK GRAND TOTAL CUMULATIVE BALANCE UTILIZATION NET BALANCE ICICI BANK YES BANK DATE AMOUNT 18,00,000 5 - APR- 12 14,50,000 3,50,00 18,00,000 18,00,000 5,07,00 9 - APR- 12 - 9,00,000 9,00,000 27,00,000 9 - APR- 12 21,93,000 3,34,000 11 - APR- 12 - 2,00,000 2,00,000 29,00,000 11 - APR- 12 3,73,000 3,34,000 12 - APR- 12 - - - 29,00,000 - - 3,34,000 13 - APR- 12 - - - 29,00,000 - - 11,97,100 19 - APR- 12 - 30,00,000 30,00,000 59,00,000 23 - APR- 12 21,36,900 11,57,000 24 - APR- 12 30,00,000 25,00,000 55,00,000 1,14,00,000 24 - APR- 12 55,40,100 11,57,000 25 - APR- - - - 1,14,00,000 - - 11,57,000 ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 25 12 30 - APR- 12 - - - 1,14,00,000 - - 11,57,000 4 - MAY- 12 - - - 1,14,00,000 - - 11,57,000 7 - MAY- 12 - - - 1,14,00,000 - - 11,57,000 8 - MAY- 12 19,00,000 23,00,000 42,00,000 1,56,00,000 8 - MAY- 12 38,55,000 15,02,000 12 - MAY- 12 - - - 1,56,00,000 - - 15,02,000 14 - MAY- 12 - - - 1,56,00,000 - - 15,02,000 15 - MAY- 12 - - - 1,56,00,000 - - 15,02,000 16 - MAY- 12 - 15,00,000 15,00,000 1,71,00,000 - - 30,02,000 17 - MAY- 12 - 15,00,000 15,00,000 1,86,00,000 17 - MAY- 12 30,69,000 14,33,000 TOTAL 63,50,000 1,42,50,000 1,86,00,000 1,71,67,000 ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 26 41. IT WAS SUBMITTED BY THE LD AR THAT IN ORDER TO SEC URE THE DEAL, ASSESSEE HAD NO OTHER OPTION BUT TO MAKE THE PAYMENT IN CASH. CASH PAYMENTS WERE MADE FROM THE DISCLOSED SOURCES BEING THE AMOUNT WITHDRAWN FROM B ANK. IT WAS FOR SHEER INSISTENCE OF THE SELLER THAT THE PAYMENTS WERE MADE IN CASH. HAD THE ASSESSEE DENIED THE CASH PAYMENT LOOKING TO THE PROVISIONS OF SECTIONS 40A(3 ), THE DEAL COULD NOT HAVE BEEN FINALIZED. IN SUCH CIRCUMSTANCES, IN THE BUSINESS I NTEREST AND TO COMPLETE THE DEAL, THE ASSESSEE HAD CHOSEN TO MAKE THE PAYMENTS IN CASH FO RTIFIED THROUGH REGISTERED SALE DEED. THE PAYMENT HAS BEEN MADE OUT OF THE EXPLAINE D SOURCES, THROUGH THE REGISTERED DOCUMENT AND AS A DISCLOSED TRANSACTION. 42. WE FIND FORCE IN THE CONTENTIONS SO RAISED BY THE LD AR. THE TRANSACTIONS HAVE BEEN EXECUTED BY THE ASSESSEE WITHIN A SPAN OF ONE AND HALF MONTH AND THERE ARE TRANSACTIONS WHERE THE PAYMENT HAS BEEN MADE THROUG H CHEQUE AND THERE ARE TRANSACTIONS WHERE THE PAYMENT HAS BEEN MADE THROUG H CASH. THE SAID CONTENTIONS ARE SUPPORTED BY THE FACT THAT ON THE SAME DAY, THE RE ARE CASH AND CHEQUE PAYMENTS AS EVIDENCED FROM THE DETAILS OF THE TRANSACTIONS A PPEARING AT PAGE 7 AND 8 OF THE ASSESSMENT ORDER. IT IS THEREFORE CLEAR THAT THE AS SESSEE WAS HAVING SUFFICIENT BANK BALANCE AND ONLY AT THE INSISTENCE OF THE SPECIFIC SELLERS, THE ASSESSEE HAS WITHDRAWN CASH AND MADE PAYMENT TO THEM AND WHEREVER, THE SEL LER HAS INSISTED ON CHEQUE PAYMENTS, THE PAYMENT HAS BEEN MADE BY CHEQUE. THIS MAKES OUT A CASE THAT THE ASSESSEE HAS BUSINESS EXPEDIENCY UNDER WHICH IT HAS TO MAKE PAYMENT IN CASH AND IN ABSENCE OF WHICH, THE TRANSACTIONS COULD NOT BE COM PLETED. THE SECOND PROVISO TO SECTION 40A(3) REFERS TO 'THE NATURE AND EXTENT OF BANKING FACILITY, CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS' WHI CH MEANS THAT THE OBJECT OF THE LEGISLATURE IS NOT TO MAKE DISALLOWANCE OF CASH PAY MENTS WHICH HAVE TO BE COMPULSORY MADE BY THE ASSESSEE ON ACCOUNT OF BUSIN ESS EXPEDIENCY. FURTHER, THE SOURCE OF CASH PAYMENTS IS CLEARLY IDENTIFIABLE IN FORM OF THE WITHDRAWALS FROM THE ASSESSEE'S BANK ACCOUNTS AND THE SAID DETAILS WERE SUBMITTED BEFORE THE LOWER AUTHORITIES AND HAVE NOT BEEN DISPUTED BY THEM. IT IS NOT THE CASE OF THE REVENUE EITHER THAT UNACCOUNTED OR UNDISCLOSED INCOME OF TH E ASSESSEE HAS BEEN UTILISED IN MAKING THE CASH PAYMENTS. 43. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE LEGAL PROPOSITION LAID DOWN BY THE VARIOUS COUR TS AND COORDINATE BENCHES REFERRED SUPRA, WE ARE OF THE VIEW THAT THE IDENTIT Y OF THE PERSONS FROM WHOM THE VARIOUS PLOTS OF LAND HAVE BEEN PURCHASED AND SOURC E OF CASH PAYMENTS AS WITHDRAWALS FROM THE ASSESSEE'S BANK ACCOUNT HAS BE EN ESTABLISHED. THE GENUINENESS OF THE TRANSACTION HAS BEEN ESTABLISHED AS EVIDENCE D BY THE REGISTERED SALE DEEDS AND LASTLY, THE TEST OF BUSINESS EXPEDIENCY HAS BEEN ME T IN THE INSTANT CASE. FURTHER, AS HELD BY THE HON'BLE RAJASTHAN HIGH COURT IN CASE OF SMT. HARSHILA CHORDIA (SUPRA), THE CONSEQUENCES, WHICH WERE TO BEFALL ON ACCOUNT O F NON-OBSERVATION OF SUB-SECTION (3) OF SECTION 40A MUST HAVE NEXUS TO THE FAILURE O F SUCH OBJECT. THEREFORE THE GENUINENESS OF THE TRANSACTIONS AND IT BEING FREE F ROM VICE OF ANY DEVICE OF EVASION OF TAX IS RELEVANT CONSIDERATION. THE INTENT AND THE P URPOSE FOR WHICH SECTION 40A(3) HAS BEEN BROUGHT ON THE STATUTE BOOKS HAS BEEN CLEARLY SATISFIED IN THE INSTANT CASE. THEREFORE, BEING A CASE OF GENUINE BUSINESS TRANSAC TION, NO DISALLOWANCE IS CALLED FOR BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 27 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. 20. IN THE INSTANT CASE, WE FIND THAT THE IDENTITY OF THE PERSONS FROM WHOM THE PURCHASES HAVE BEEN MADE HAS BEEN ESTABLIS HED AND THE SOURCE OF CASH PAYMENTS IS CLEARLY IDENTIFIABLE IN FORM OF THE WITHDRAWALS FROM THE ASSESSEE'S BANK ACCOUNTS AND T HE SAID DETAILS WERE SUBMITTED BEFORE THE LOWER AUTHORITIES AND HAV E NOT BEEN DISPUTED BY THEM. IT IS NOT THE CASE OF THE REVENUE EITHER T HAT UNACCOUNTED OR UNDISCLOSED INCOME OF THE ASSESSEE HAS BEEN UTILISE D IN MAKING THE CASH PAYMENTS. THE GENUINENESS OF THE TRANSACTION HAS BE EN ESTABLISHED AS PURCHASE OF CONSTRUCTION MATERIAL FOR ROAD CONSTRUC TION AND LASTLY, THE TEST OF BUSINESS EXPEDIENCY HAS BEEN MET AS IT IS THE ADMITTED POSITION THAT THE MINING ACTIVITIES HAD BEEN BANNED IN THE S TATE OF HARYANA AND THE ASSESSEE HAD NO OTHER OPTION BUT TO BUY CONSTRU CTION MATERIAL FROM STATE OF RAJASTHAN WHERE THE SUPPLIERS AND STONE CR USHING UNITS HAD INSISTED ON CASH PAYMENTS AT THE TIME OF DELIVERY O F MATERIAL. FURTHER, AS HELD BY THE HON'BLE RAJASTHAN HIGH COURT IN CASE OF SMT. HARSHILA CHORDIA (SUPRA), THE CONSEQUENCES, WHICH WERE TO BE FALL ON ACCOUNT OF NON-OBSERVATION OF SUB-SECTION (3) OF SECTION 40A M UST HAVE NEXUS TO THE FAILURE OF SUCH OBJECT. THEREFORE THE GENUINENE SS OF THE TRANSACTIONS AND IT BEING FREE FROM VICE OF ANY DEVICE OF EVASIO N OF TAX IS RELEVANT CONSIDERATION FOR WHICH SECTION 40A(3) HAS BEEN BRO UGHT ON THE STATUTE BOOKS AND WHICH HAS BEEN SATISFIED IN THE INSTANT C ASE. 21. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF T HE CASE AND RESPECTFULLY FOLLOWING THE LEGAL PROPOSITION LAID D OWN BY THE VARIOUS COURTS AND COORDINATE BENCHES REFERRED SUPRA, NO DI SALLOWANCE IS CALLED ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 28 UNDER SECTION 40A(3) OF THE ACT AND THE SAME IS DIR ECTED TO BE DELETED. IN THE RESULT, THE GROUND NO. 1 OF THE ASSESSEES A PPEAL IS ALLOWED. 22. IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED T HE SUSTENANCE OF ADDITION OF RS 18 LACS UNDER SECTION 68 OF THE ACT. WE FIND THAT THE LD CIT(A) HAS SUSTAINED THE ADDITION FOR THE REASON TH AT THE CREDITWORTHINESS OF CREDITORS HAVE NOT BEEN ESTABLI SHED AND HENCE, HE HAS CONFIRMED THE ADDITIONS SO MADE BY THE ASSESSIN G OFFICER. THE LD DR HAS RELIED ON THE FINDINGS OF THE LOWER AUTHORITIES . IN ITS SUBMISSIONS, THE ASSESSEE HAS SUBMITTED THAT THESE THREE PERSONS HAVE APPEARED BEFORE THE ASSESSING OFFICER AND HAVE CONFIRMED HAV ING PROVIDED LOAN TO THE ASSESSEE FIRM THROUGH CHEQUE PAYMENTS. IT WAS FURTHER SUBMITTED THAT THE CREDITWORTHINESS OF THESE PERSONS ARE ALSO ESTABLISHED AND IN SUPPORT, PAPER OF OWNERSHIP OF AGRICULTURAL LAND AN D COPY OF BANK ACCOUNT STATEMENTS OF THESE PERSONS WERE FILED REFL ECTING REGULAR TRANSACTIONS OF DEPOSITS AND WITHDRAWALS. 23. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THESE THREE PERS ONS HAVE APPEARED BEFORE THE ASSESSING OFFICER AND HAVE CONFIRMED THE TRANSACTION OF ADVANCING THE MONEY TO THE ASSESSEE AND DURING THE APPELLATE PROCEEDINGS, THEIR CONFIRMATIONS ALONG WITH PAN DET AILS HAVE ALSO BEEN FILED. THE TRANSACTIONS HAVE HAPPENED THROUGH THE BANKING CHANNEL AND IN SUPPORT OF CREDITWORTHINESS, AGRICULTURAL LAND O WNERSHIPS RECORDS AND THE BANK ACCOUNTS REFLECT REGULAR TRANSACTIONS OF D EPOSITS AND WITHDRAWALS HAVE BEEN SUBMITTED, THE ASSESSEE HAS T HUS DISCHARGED THE INITIAL ONUS CAST ON IT AND IN ABSENCE OF ANY CONTR ARY FINDINGS AND ANY MATERIAL ON RECORD BY THE REVENUE, NO ADDITION IS C ALLED FOR BY INVOKING ITA NO. 990 /JP/2017 M/S K.K. CONSTRUCTION CO. VS. ACIT 29 PROVISIONS OF SECTION 68 OF THE ACT. IN THE RESULT , THE ADDITION SO MADE IS DIRECTED TO BE DELETED AND GROUND OF APPEAL IS A LLOWED. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON05/12/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 05/12/2019. * SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S K.K. CONSTRUCTION CO., JHUNJHUNE . 2. IZR;FKHZ@ THE RESPONDENT- ACIT, CRILE, JHUNJHUNE. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 990/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR