Assessee purchased country liquor from dealers from their bonded warehouse appointed under the notification of Govt. of West Bengal and made cash payment in excess of prescribed limit. AO invoked section 40A(3) and made disallowance.Held: Dealers were agents of Govt. of West Bengal and, therefore, impugned cash payment was covered under rule 6DD(b) and, therefore, section 40A(3) was not applicable.
IN THE ITAT KOTKATA BENCH
A.T. VARKEY, J.M. & A.L. SAINI, A.M.
ITO v. English Bazar Foreign Liquor
I.T.A. No. 1805/Kol/2017
3 June, 2019
Against Revenue
Appellant by: Robin Choudhury, Addl. CIT, Sr. DR
Respondent by: S.M. Surana, Advocate
A.T. Varkey, J.M.
This appeal filed by revenue is against the order of learned Commissioner (Appeals), Jalpaiguri dated 7-6-2017 for assessment year 2014-15 on the following grounds :--
'1. That on the facts and in the circumstance of the case, the learned Commissioner (Appeals) has erred in allowing the cash payments in excess of the prescribed limit under section 40A(3) on the ground that there is no element of tax evasion in the transactions, despite the fact that such exception or allowance on the ground of genuineness of business transactions has not been provided either in section 40A(3) or Rule 6DD.
2. That on the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in relying relied upon the decisions of the Jurisdictional ITAT in the cases of Motor Ch. Mondal v. Income Tax Officer (2016) 48 CCH 8 (Kol-Trib) and Ashok Kumar Mondal v. Income Tax Officer, Ward-2(2), Asansol (2016) 161 ITD 521 (Kolkata Trib) : 2016 TaxPub(DT) 4739 (Kol-Trib), despite the fact that the cited cases pertain to retailers of country spirit in which the business is regulated by the 'West Bengal Excise(Supply of Country Spirit on Payment of Duty) Rules, 2005', and that the instant case relates to an assessee who is a retailer of foreign liquor and none of the payees in default of section 40A(3) are covered by the Rules formulated for country spirit suppliers.'
2. Briefly stated facts as observed by the assessing officer are that the assessee firm is deriving income from business of foreign liquor under the name and style of M/s. English Bazar Foreign Liquor Shop No. 1. During the course of scrutiny proceedings the assessing officer found that the assessee made cash purchase exceeding Rs. 20,000 or more from different parties in a single day to the tune of Rs. 1,29,11,500 during the assessment year under consideration. It was submitted on behalf of the assessee that cash payments were received by the bonders/distributors through their sales representatives for an amount of less than Rs. 20,000 in a single day, who generally hold the money for five to six days in their custody and then send the bonders/distributors. The bonders/distributors had recorded the payments on the date on which the same was received by them and hence the payments recorded in their books were more than Rs. 20,000. The assessee also cited various exceptions given in Rule 6DD of the Income Tax Rules, 1962 (hereinafter referred to as the 'Rules') and circumstances under which payment made in excess of Rs. 20,000 in a single day to a single party would not attract the provisions of section 40A(3) of the Act. Considering the submissions of the assessee, the assessing officer disallowed Rs. 1,29,11,500 as per the provision of section 40A(3) of the Act and added the same to the total income of the assessee. Aggrieved, assessee preferred an appeal before the learned Commissioner (Appeals), who allowed the assessee's appeal holding that the payments would be covered by Rule 6DD(b) and Rule 6DD(k) of the Rules.