Case Law Details

Case Name : K.K. Construction Co. Vs. ACIT (ITAT Jaipur)
Appeal Number : ITA. No. 990/JP/2017
Date of Judgement/Order : 05/12/2019
Related Assessment Year : 2012-2013
Courts : All ITAT (7336) ITAT Jaipur (228)

K.K. Construction Co. Vs. ACIT (ITAT Jaipur)

Conclusion: Dis allowance under section 40A(3) could not be made as identity of persons from whom purchases had been made was established; source of cash payments was clearly identifiable in form of withdrawals from assessee’s bank accounts and the said details were submitted before AO, thus, the genuineness of the transaction had been established as purchase of construction material for road construction and the test of business expediency had been met.

Held: Assessee was engaged in the business of civil construction. During the course of assessment proceedings, AO observed that assessee had made payment of Rs. 2,38,67,250/- in cash exceeding prescribed threshold in contravention of Section 40A(3) towards purchase of grit and other items for construction to various persons. In responseJ, assessee submitted that the contract work was executed in rural area and the payments were made in cash for purchase of raw material due to non-availability of banking facility in the village area.  It was further submitted 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 from the State of Rajasthan and the business of assessee’s firm is mainly in the state of Haryana and the suppliers do not accept payment through cheque hence the assessee firm was under business compulsion to complete the work in a time bound manner and therefore, had to make the purchases in cash. AO made addition on the ground that since certain payments had been made through RTGS, the argument of banking facility not available did not arise because recipient had got the bank account for receiving payment.  In the instant case, it was found that the identity of the persons from whom the purchases had been made has been established and the source of cash payments was clearly identifiable in form of the withdrawals from the assessee’s bank accounts and the said details were submitted before the lower authorities and had not been disputed by them. The genuineness of the transaction had been established as purchase of construction material for road construction and lastly, the test of business expediency had been met as it was the admitted position that the mining activities had been banned in the State of Haryana and assessee had no other option but to buy construction material from State of Rajasthan where the suppliers and stone crushing units had insisted on cash payments at the time of delivery of material.  Therefore the genuineness of the transactions and it being free from vice of any device of evasion of tax was relevant consideration for which section 40A(3) had been brought on the statute books and which had been satisfied in the instant case.

FULL TEXT OF THE ITAT JUDGEMENT

This is an appeal filed by the assessee against the order of ld. CIT(A)-3, Jaipur dated 10.11.2017 for Assessment Year 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 addition of Rs. 2,38,67,250/- by making disallowances u/s 40A(3) of the income tax act 1961.

2. On the facts and circumstances of the case Ld Lower 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 construction. During the course of assessment proceedings, the Assessing Officer observed that the assessee has made payment of Rs. 2,38,67,250/- in cash exceeding prescribed threshold in contravention of Section 40A(3) of the Act towards purchase of grit and other items for construction 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 the cash payment made in contravention of Section 40A(3) of the IT Act may not be added to the total income of the assessee. In response, the assessee submitted that the contract work was executed in rural area and the payments were made in cash for purchase of raw material due to non-availability of banking facility in the village area. It was further submitted that the stone crushers are located in the remote hilly areas where there is no banking facility and the suppliers do not accept the cheque payments and the assessee has to make payment in cash due to compelling circumstances. It was further submitted 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 from the State of Rajasthan and the business of assessee’s firm is mainly in the state of Haryana and the suppliers do not accept payment through cheque hence the assessee firm was under business compulsion 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 considered however, not found acceptable to the Assessing Officer. Firstly, the Assessing Officer observed that on various dates, the assessee has made payment through RTGS therefore, the payment so made by the assessee in cash could have been made through RTGS. Further, the Assessing Officer observed that on perusal of the photocopies of the cheques issued by the assessee firm, 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 and 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 operating widely in their areas and therefore, the assessee’s contention that the parties to whom such payment were made in cash were operating in the rural and remote areas was wrong and baseless. It was accordingly held by the Assessing officer that the assessee’s case is not covered under clause (a) to (I) of Rule 6DD of the IT Rules hence, the amount of Rs. 2,38,67,250/- was disallowed as per provisions of Section 40A(3) of the IT Act.

3. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) and during the course of appellate proceedings, the assessee filed additional evidence in the form of certificates from ‘Sarpanch’ of the Gram Panchayats stating therein that no bank branches are available in the area of business of the assessee where the assessee has purchase grits for the requirement of the civil construction. The said additional evidences were forwarded to the Assessing Officer for examination and seeking the remand report.

4. In the remand report dated 15.09.2017, the Assessing Officer has stated in para 3 as under:-

“However, clause (g) of Rule 6DD of Income Tax Rules, 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 on 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 to submit such evidences during the course of assessment proceedings and it was not prevented by any cause or reason. In this regard, vide show cause notice dated 27/02/2015 & 11/03/2015, the assessee firm was asked as to why the cash payment made in the areas falling under the Gram Panchyats as submitted by the assessee during the appellate proceedings may not be added u/s 40A(3) o f the Act. In response to that showcause, the assessee filed written submission stating therein that the contract work has been executed in Rural Area 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 opportunity was accorded to it.

Without prejudice to the above, additional evidences in the form of certificates from the Sarpanch of Gram Panchayats have been verified by the Inspector of this office. The Inspector of this office has submitted his report stating that the Gram Panchyats under consideration does not have any bank branch within the geographical territory of the Panchayats. Therefore, the additional evidences submitted by the assessee during the appellate proceedings may be entertained on merits. ”

Further, the Assessing officer has issued another remand report on 28.09.2017 and in the said remand report has stated in para 3 as under:–

“3. However, clause (g) of Rule 6DD of Income Tax Rules, 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 on 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 to submit such evidences during the course of assessment proceedings and it was not prevented by any cause or reason. In this regard, vide show cause notice dated 27/02/2015 & 11/03/2015, the assessee firm was asked as to why the cash payment made in the areas hilling under the Gram Panchyats as submitted by the assessee during the appellate proceedings may not be added u/s 40A(3) of the Act. In response to that showcause, the assessee filed written submission stating therein that the contract work has been executed in Rural Area and the payment have to be made in cash for purchase of raw materia l due to non banking facility nearby but the assessee did not submit the certificates despite adequate opportunity was accorded to it.

Without prejudice to the above, additional evidences in the form of certificates from the Sarpanch of Gram Panchayats have been verified by the Inspector of this office. The Inspector of this office has submitted his report stating that the Gram Panchyats 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 consideration have banking facility in nearby area as described below:

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. Gad rata,       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.
0.              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 the assessee during the appellate proceedings may be entertained on merits. ”

5. The ld. CIT(A), after considering the submissions of the assessee and the remand reports of the Assessing Officer, has 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 facility is available nearby 2-3 KMs from the gram panchayat and in the modern, 2-3 Kms distances doesn’t mean anything. Further, he held that since certain payments have been made through RTGS, the argument of banking facility not available doesn’t arise because the recipient have got the bank account for receiving the payment. Accordingly, he upheld the finding of the Assessing Officer. Against the said findings of the ld. CIT(A), the assessee is now in appeal before us.

6. During the course of hearing, the ld. AR referring to the provisions of Section 40A(3) of the Act submitted that 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 legislature behind introduction of Section 40A(3) of the Act was to curb the chances and opportunities to use or create black money and to ascertain whether the payment was genuine or whether it was out of the income from disclosed sources or not. He was relied on the decision of the Hon’ble Supreme Court in the case of Attar Singh Gurmukh Singh 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 where this section must be read along with the Rule 6DD and if read together, it is clear that the provisions of Section 40A(3) are not intended to restrict the business activities. It was submitted that in the instant case the cash payments were made either at the construction site of the assessee or where the supplier’s stone crushing unit is situated. It was submitted that the assessee is in the business of construction of roads and was mostly working in remote areas and there is no banking facility 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 the work progress. It was further submitted that even the stone crushing units are situated in remote and hilly areas near the mines, where also there is no banking facility available. The location of some crushers as 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 Ramkumarpura
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 assessee is squarely covered U/s 6DD(g) of the Income Tax Rules. Regarding 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 language and cannot be given any other interpretation as there is no ambiguity and therefore, does not matter if there is a banking facility situated 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 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 suppliers in respect of goods purchased by the assessee or the identity of the suppliers as the Assessing Officer as himself stated in the assessment order that the payment are made to the renowned suppliers.

9. It was further submitted that as the mining activities had been banned in the State of Haryana, assessee had no other option but to buy construction material from State of Rajasthan as the transport of grit is very expensive and to buy raw material from any other state would have increased the cost substantially. Increase 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 cost of construction is selected. It was submitted that the stone crushing units situated in the State of Rajasthan insisted on the payment to be made in the form of cash and not cheque. It was submitted that the assessee was left with no choice but to buy the construction material in cash, as the assessee company was working on a strict timeline. It was further submitted that if the payments were not made, the suppliers would have stopped the further supply which would have caused unnecessary delay in finishing the work contracts. It was submitted that if the assessee company did not finish the contract in time, they would be held liable to substantial fines for delay in completing the work. Moreover, a delay would also hamper the reputation of the company. Reliance was placed on the Hon’ble Punjab and Haryana High Court decision in the case of Gurdas Garg v. CIT 63 taxmann.com 289 as well as Hon’ble Madras High Court in the case of CIT vs. Chrome Leather 235 ITR 708 regarding the business expediency of making the cash payment.

10. It was further submitted that it can be established from the bank statements of the assessee that every single cash payment made to the supplier has been from the sale proceeds received by the assessee in its bank account either by withdrawing the said amount from bank or by issuing bearer cheques. It was further submitted that the source of cash payment is clearly identifiable in form of withdrawals from the assessee’s bank and details have been submitted before 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 claiming relying in terms of Rule 6DD(g). Reliance was placed on the Coordinate 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 Hon’ble 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 it was held that no disallowance should be made where the industries are situated in backward areas and is not having banking facility. It was submitted that the said decision has subsequently been affirmed by the Hon’ble Rajasthan High Court (in DB ITA No. 38/2017 dated 20.11.2017) and the SLP filed by the Department has been dismissed by the Hon’ble Supreme Court.

13. Further, reliance was placed on the Hon’ble Rajasthan High Court decision in case of Harshila Chordia vs. ITO 208 CTR 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 established, the addition so made by the Assessing officer should be deleted.

14. It was also submitted that the AO has wrongly considered following three payments which have been made through cheques amounting to Rs. 21 lakhs and account transfer which is clearly not a subject matter of disallowance U/s 40A(3) of the Act:-

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

15. Per contra, the ld. DR submitted that the provisions of Section 40A(3) of the Act are clearly attracted in the instant case as the payment have been made either in cash exceeding the prescribed threshold or through cash withdrawal by issue of self cheque from the bank. It was submitted that unless and until the cheque is issued in the name of the party and is an account payee cheque, the payment so made does not satisfy the requirement of Section 40A(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 three cheque payments amounting to Rs 21 lacs out of total disallowance of Rs 2.38 crores are clearly outside the scope of section 40A(3) as the same have been transferred to respective payee’s account as reflected in the bank statements and the addition so made is directed to be deleted.

17. In respect of other payments, the case of the assessee 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, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town. ”

In support of its contention, the assessee has submitted certificates from ‘Sarpanch’ of the Gram Panchayats where the assessee has purchase grits for the requirement of the civil construction work. We find that the Assessing officer in her remand report dated 15.09.2017 has accepted the said factual position wherein she states that:

“… additional evidences in the form of certificates from the Sarpanch o f Gram Panchayats have been verified by the Inspector of this office. The Inspector of this office has submitted his report stating that the Gram Panchyats under consideration does not have any bank branch within the geographical territory of the Panchayats. ”

18. The ld CIT(A) has also returned a similar finding stating that the banking facility was not available in Gram Panchayat area. Therefore, where there is a clear finding of both the lower authorities, the Assessing officer as well as ld CIT(A), we donot see 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 such payment is not served by any bank” which, in the instant case, is clearly demonstrated and verified by the lower authorities through physical inspection that there is no banking facility in the Gram Panchyat areas where the payments have been made by the assessee to the payees and thus, on this ground itself, no disallowance should be made invoking provisions of section 40A(3) of the Act.

19. Further, regarding the contention of the ld AR as to the intention of the legislature behind introduction of section 40A(3) and various authorities quoted in support thereof, this Bench had an occasion to examine the same in case of M/s A Royal Daga Arts vs ITO (supra) in light of decision of the Hon’ble Supreme Court in case of Attar Singh Gurmukh Singh vs. ITO and the decisions of various High Courts including the decision of the jurisdictional High Court and the relevant findings reads as under:

“18. We have heard the rival contentions and perused the material available on record. It would be relevant to refer to the provisions of section 40A(3) of the Act which reads as under:

‘(3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise 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 respect of such expenditure.

(3A) Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for 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 payee 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 the subsequent year if the payment or aggregate of payments made to a person in 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 payments made to a person in a day, otherwise than by an account payee cheque drawn 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 to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors :

Provided further that in the case of payment made for plying, hiring 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.

(4) Notwithstanding anything contained in any other law for the time being in force or in any contract, where any payment in respect 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 disallowed as a deduction under sub-section (3), then the payment may be made by such 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 ground 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 relied 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 of Rs. 2,500/- for purchase of certain stock-in-trade. Payments were not allowed as deductions in the computation of income under the head “profits and gains of business 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 regarding 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 Supreme Court.

21. The Hon’ble Supreme Court referring to the provisions of section 40A(3) and Rule 6DD and in particular, Rule 6DD(j), as existed at relevant point in time, has held as under:—

“6. As to the validity of section 40A(3), it was urged that if the price of the purchased material is not allowed to be adjusted against the sale price of the material sold for want of proof of payment by a crossed cheque or crossed bank draft, then the income-tax levied will not be on the income but it will be on an assumed income. It is said that the provision authorizing 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 contention. Section 40A(3) must not be read in isolation or to the exclusion of rule 6DD. The section must be read along with the rule. If read together, it will be clear 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 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 bank draft is insisted on to enable the assessing authority to ascertain whether the payment was genuine or whether it was out 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 the Assessing Officer the circumstances under which the payment in the manner prescribed in section 40A(3) was 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 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 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. – Mudiam Oil Co. v. ITO [1973] 92  ITR 519 (AP). If the payment is made by a crossed cheque on a bank or a crossed bank draft, then it will be easier to ascertain, when deduction is claimed, whether the payment was genuine and whether it was out of the income from disclosed sources. In interpreting a taxing statute the Court cannot be oblivious of the proliferation of black-money which is under circulation in our country. Any restraint intended to curb the chances and opportunities to use or create black-money should not be regarded as curtailing the freedom of trade or business.”

22. Further, the Hon’ble Supreme Court upheld the applicability of section 40A(3) to payment made for acquiring stock-in-trade and raw materials 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 purchasing stock-in-trade or raw material should also be regarded 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 provisions are not intended to restrict the business activities and restraint so provided are 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 introduction of these provisions and it would therefore be relevant to examine whether in the present case, there is any violation of such intention and if ultimately, it is determined that such intention has been violated, then certainly, the assessee deserves the disallowance of the expenditure so claimed.

24. The Hon’ble Supreme Court referring to the provisions 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 fact that the payment in the manner aforesaid was not practical or would have caused genuine difficulty to the payee and furnishing the necessary evidence to the satisfaction 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. 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 the Assessing Officer the circumstances under which the payment in the manner prescribed in section 40A(3) was 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 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 circumstances specified under the rule.”

25. Here, it is relevant to note that there has been no change in the provisions of section 40A(3) in so far as considerations of business 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 2013-14. However, Rule 6DD(j) has been amended and by notification dated 10.10.2008, 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 holiday or strike. A question which arises for consideration is whether the legal proposition so laid down by the Hon’ble Supreme Court regarding consideration of business expediency and other relevant factors has been diluted by way of delegated legislation 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 circumstances in Rule 6DD as amended are exhaustive enough and which visualizes all kinds and nature of business expediency in all possible situations.

26. If we look at the legislative history of section 40A(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 Rule 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 virtue of another amendment, disallowance under section 40A(3) was increased from 20% to 100%, however, Rule 6DD(j) was not reintroduced in original form to provide for exceptional and unavoidable circumstances rather it was restricted to payment by way of salary to employees and thereafter, by virtue of lastest amendment in year 2008 to payments made on a day on which the banks were closed on account of holiday or strike.

27. We do not believe that by virtue of these amendments, the legal proposition so laid down by the Hon’ble Supreme court regarding consideration 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 possible situations and it is for the appropriate authority to examine and provide for a mechanism as originally envisaged which provides for exceptional or unavoidable circumstances to the satisfaction of the Assessing officer whereby genuine business expenditure should not suffer disallowance.

28. Further, the Courts have held from time to time that the Rules must be interpreted in a manner so as to advance and not to frustrate the object of the legislature. The intention of the legislature is manifestly clear and which is to curb the chances and opportunities to use or create black money and to ascertain whether the payment was genuine or whether it was out of the income from disclosed sources. And Section 40A(3) continues to provide that no disallowance shall be made in such cases and under such circumstances as may be prescribed having regard to the nature and extent of the banking facilities available, consideration of business expediency and other relevant factors. In our view, given that there has been no change in the provisions of section 40A(3) in so far as consideration of business expediency and other relevant factors are concerned, the same continues 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) of the Act so long as the intention of the legislature is not violated. We find that our said view find resonance in decisions of various authorities, which we have discussed 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 were that the assessee had made certain cash payments towards purchase of scooter/mopeds which exceeded Rs. 10,000/- in each case to the principal agent instead 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 circumstances 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 did exist. However, the findings of the ld. CIT (A) were reversed by the Tribunal and the 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 furnished 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 clause (j) was to operate as it was existing at the relevant time and enumerated circumstances in the circular was exhaustive of exceptional circumstances. The Hon’ble High Court observed that the Tribunal has erroneously assumed that enumeration of instances in the circular in which the provisions of clause (j) under rule 6DD would operate to be exhaustive of such circumstances and had not been properly understood its implication. It was further observed by the Hon’ble High Court that primary object of enacting section 40A(3) in its original incarnation was two-fold, firstly, 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 to 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 by 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 evasion of tax is relevant consideration which has been overlooked by the Tribunal.”

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 consequence. 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 provision 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 in the context of what shall constitute exceptional and unavoidable circumstances within the meaning of section Clause (j). The Hon’ble High Court observed that the circular in paragraph 5 gives a clear indication that rule 6DD(j) has to be liberally 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 section 40A(3) was intended to penalize the tax evader and not the honest transactions 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 with the principle enunciated by the Supreme Court in CTO v. Swastik Roadways [2004] 3 SCC 640.

32. The legal proposition that arises from the above decision 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 transactions and it being free from vice of any device of evasion of tax is relevant consideration and which should be examined before invoking the rigours of section 40A(3) of the Act.

33. In case of Anupam Tele Services the matter which came 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 mobile 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 issued by Tata Tele Services Ltd., requiring the appellant to deposit cash at the company’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 situations 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 profession under the said section. Amongst the various clauses, cl. (j) which is relevant, 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 particular sub-cl. (3) thereof aims at curbing the possibility of on-money transactions by insisting that all payments where expenditure in excess of a certain sum (in the present case twenty thousand rupees) must be made by way of account payee cheque drawn on a bank or account payee bank draft.

19. As held by the Apex Court in case of Attar Singh Gurmukh Singh (supra). “..In our opinion, there is little merit in this contention. Sec. 40A(3) must not be read in isolation or to the exclusion of r. 6DD. The section must be read along with the rule. If read together, it will be clear that the provisions are not intended to restrict the business activities. There is no restriction 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 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 out of the income from undisclosed sources, The terms of s. 40A(3) are not absolute. Considerations of business expediency and other relevant factors are not excluded. 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) was 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 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 circumstances specified under the rule. It will be clear from the provisions of s. 40A(3) and r. 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:”

20. It was because of these considerations that this Court in case of Hynoup Foods (P.) Ltd. (supra) observed that the genuineness of the payment and the identify of the payee are the first and foremost requirements 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 such 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 following reasons:

(a) The paramount consideration of section 40A(3) is to curb and 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 considerations of business expediencies.

(b) In the present case, the appellant assessee was compelled to make cash payments on account of peculiar situation. Such situation was as 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 such amount shall be deposited in their bank account on behalf of the assessee;

(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 relied 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 assessee 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 turn assured and deposited the amount in a bank account. In the facts of the present case, rigors of s. 40A(3) of the Act must be lifted.

23. We notice that the Division Bench of the Rajasthan 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 and 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 case 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 came 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 said decision clearly applies in the instant case. In that case, the facts of the case were that the assessee was engaged in trading in properties and during the course of assessment proceedings, the AO observed that there are transactions where the payments 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 the 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 Rajasthan High Court in case of Smt. Harshila Chordia (supra) and the decision of Hon’ble 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 paid in respect of each of these agreement was satisfied before the Stamp Registration Authority and the transactions were held to be genuine and the bar against the grant of deductions u/s 40A(3) of the Act was not attracted. The Hon’ble High Court further observed that the Tribunal did not upset these findings including as to the genuineness 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 the real estate market and therefore it was necessary, therefore, to conclude the transactions 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 thereof, payments had to be made immediately to settle the deals. The Tribunal did not 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 furnished by the appellant for having made the cash payments, which we have already 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 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 unambiguous to the effect that even if the case of the assessee does not fall in any of the 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 expediency because of which it has to make the cash payments, the genuineness of the transactions have also to be verified.

37. The Co-ordinate Bench in case of Rakesh Kumar v. Asstt. CIT [IT Appeal No. 102 (Asr.) of 2014, dated 09-03-2016] relying on the decision of Hon’ble Punjab and Haryana High Court in case of Gurdas Garg (supra) has held that the genuineness of the payment has not been doubted as the Assessing Officer himself has held that sale deeds of properties were registered with the Revenue department of the Government. Therefore, following the decision of Hon’ble Punjab and Haryana High Court, the payment for purchase of land was allowed.

38. We further note that in case of ACE India Abodes limited [DB Appeal No. 45/2012, dated 11-09-2017], a similar issue has come up before the Hon’ble Rajasthan High Court regarding payment for purchase of land from various agriculturist for which the assessee has paid consideration in cash and shown the land as its stock-in-trade. The Hon’ble Rajasthan High 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 favour 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 which emerges from the above referred decisions. The facts of the case are that during the year under consideration, the assessee firm has purchased 26 pieces of plot of land 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 cheque 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 proceedings, the assessee submitted copies of the sale deed, the particulars of which find mention on page 7 and 8 of the assessment order. On perusal of the said details, it 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 made and genuineness of the transactions of purchase of various plots of land and 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 assessment 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 further 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 regularly and no specific circumstances have been brought to his knowledge that 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 city and in single family, repeated cash payments were made which itself shows that there 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 determining 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 submitted 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 had selected the mode of payment. For the sellers, who had insisted the payments in cash, assessee had withdrawn the cash from bank on the same date of registry and made 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
Cumu-lative balance Utilization Net
Balance
ICICI
Bank
Yes Bank Date Amount 18,00,0-00
5- Apr- 12 14,50,00-0 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 30,0-0,000 30,0-0,000 59,0-0,000 23- Apr- 12 21,3-6,900 11,5-7,000
24- Apr- 12 30,0-0,000 25,0-0,000 55,0-0,000 1,14,0-0,000 24- Apr- 12 55,4-0,100 11,5-7,000
25- Apr- 1,14,00,000 11,57,00-0
12
30- Apr- 12 1,14,0-0,000 11,57,0-00
4- May- 12 1,14,0-0,000 11,57,0-00
7- May- 12 1,14,00,000 11,57,0-00
8- May- 12 19,00,0-00 23,00,0-00 42,00,0-00 1,56,00,0-00 8- May- 12 38,55,000 15,02,0-00
12- May- 12 1,56,0-0,000 15,02,0-00
14- May- 12 1,56,00,000 15,02,0-00
15- May- 12 1,56,0-0,000 15,02,00-0
16- May- 12 15,00,000 15,00,000 1,71,0-0,000 30,02,0-00
17- May- 12 15,00,0-00 15,00,0-00 1,86,0-0,000 17- May-

12

30,69,0-00 14,33,00-0
To-tal 63,50,0-00 1,42,5-0,000 1,86,0-0,000 1,71,67,0-00

41. It was submitted by the ld AR that in order to secure 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 bank. 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 interest and to complete the deal, the assessee had chosen to make the payments in cash fortified through registered sale deed. The payment has been made out of the explained 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 through cheque and there are transactions where the payment has been made through cash. The said contentions are supported by the fact that on the same day, there are cash and cheque payments as evidenced from the details of the transactions appearing at page 7 and 8 of the assessment order. It is therefore clear that the assessee 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 seller 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 completed. The second proviso to section 40A(3) refers to “the nature and extent of banking facility, consideration of business expediency and other relevant factors” which means that the object of the legislature is not to make disallowance of cash payments which have to be compulsory made by the assessee on account of business 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 the 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 Courts and Coordinate Benches referred supra, we are of the view that the identity of the persons from whom the various plots of land have been purchased and source of cash payments as withdrawals from the assessee’s bank account has been established. The genuineness of the transaction has been established as evidenced by the registered sale deeds and lastly, the test of business expediency has been met 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 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 evasion of tax is relevant consideration. The intent and the purpose 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 transaction, no disallowance is called for by invoking the provisions of section 40A(3) of the Act.

In the result, the appeal of the assessee is allowed.”

20. In the instant case, we find that the identity of the persons from whom the purchases have been made has been established and 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 the assessee has been utilised in making the cash payments. The genuineness of the transaction has been established as purchase of construction material for road construction 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 State of Haryana and the assessee had no other option but to buy construction material from State of Rajasthan where the suppliers and stone crushing units had insisted on cash payments at the time of delivery of material. 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 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 evasion of tax is relevant consideration for which section 40A(3) has been brought on the statute books and which has been satisfied in the instant case.

21. In the entirety of facts and circumstances of the case and respectfully following the legal proposition laid down by the various Courts and Coordinate Benches referred supra, no disallowance is called under section 40A(3) of the Act and the same is directed to be deleted. In the result, the ground no. 1 of the assessee’s appeal is allowed.

22. In ground no. 2, the assessee has challenged the 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 that the creditworthiness of creditors have not been established and hence, he has confirmed the additions so made by the Assessing 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 having 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 and copy of bank account statements of these persons were filed reflecting 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 persons 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 details have also been filed. The transactions have happened through the banking channel and in support of creditworthiness, agricultural land ownerships records and the bank accounts reflect regular transactions of deposits and withdrawals have been submitted, the assessee has thus discharged the initial onus cast on it and in absence of any contrary findings and any material on record by the Revenue, no addition is called for by invoking provisions of section 68 of the Act. In the result, the addition so made is directed to be deleted and ground of appeal is allowed.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open Court on05/12/2019.

Download Judgment/Order

Author Bio

More Under Income Tax

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

October 2020
M T W T F S S
 1234
567891011
12131415161718
19202122232425
262728293031