Mohan Lal Chowdhury, Murshidabad v. ITO, Ward - 41(2), Kolkata

ITA 1964/KOL/2009 | 2005-2006
Pronouncement Date: 30-04-2010

Appeal Details

RSA Number 196423514 RSA 2009
Bench Kolkata
Appeal Number ITA 1964/KOL/2009
Duration Of Justice 5 month(s) 10 day(s)
Appellant Mohan Lal Chowdhury, Murshidabad
Respondent ITO, Ward - 41(2), Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Assessee
Bench Allotted SMC
Tribunal Order Date 30-04-2010
Assessment Year 2005-2006
Appeal Filed On 19-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SRI D. K. TYAGI JM & HONBLE SRI C . D. RAO AM] I.T.A. NO.1964 /KOL/2009 ASSESSMENT YEAR: 2005-06 MOHAN LAL CHOWDHURY -VS- INCOME-TAX OFFICER WD -41(2) KOLKATA (PA NO.ACOPC 9834 C) (APPELLANT) (RESPONDENT) APPELLANT BY : SRI P. K. SEN RESPONDENT BY : SRI P. KOLHE O R D E R PER D. K. TYAGI JM: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF THE LD. CIT(A) KOLKATA DATED 24.08.2009 FOR ASSESSMENT YEA R 2005-06 ON THE FOLLOWING SOLE GROUND : THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2 04 639/- U/S. 40A(3) OF I. T. ACT 61 HOLDING THE APPELLANT BEING UNABLE TO PROVE BUSINESS EXPEDIENCY AND UNAVO IDABLE CIRCUMSTANCES TO MAKE SUCH PAYMENTS. THEREFORE THIS SHOULD BE DELETED. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A RESELLER OF LIME STONECHIPS DOLOMITE CHIPS BLACK STONE AND KOTA ST ONE. THE ASSESSEE HAS FILED RETURN OF INCOME SHOWING TOTAL INCOME OF RS.1 30 832/-. DURI NG THE ASSESSMENT YEAR THE ASSESSEE HAD PAID FREIGHT CHARGES TO M/S. CONTAINER CORPORAT ION OF INDIA OF RS.12 36 164/-. THE AO NOTED THAT OUT OF SUCH PAYMENTS RS.10 23 196/- W AS PAID IN CASH IN VIOLATION OF PROVISION OF SECTION 40A(3). THE AO CALLED FOR ASS ESSEES EXPLANATION AS TO WHY 20% OF THESE PAYMENTS SHOULD NOT BE DISALLOWED U/S. 40A (3) OF THE ACT. THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS STATED THAT TH E PAYMENTS WERE MADE TO CONTAINER CORPORATION OF INDIA WHICH IS PART OF INDIAN RAILWA YS AND IS EXEMPT UNDER RULE 6DD. THE AO HOWEVER OBSERVED THAT CONTAINER CORPORATIO N OF INDIA WAS A SEPARATE ENTITY AND NOT INCLUDED IN THE EXEMPTED CATEGORY OF PAYEE S UNDER RULE 6DD AND THEREFORE DISALLOWED RS.2 04 639/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THIS ORDER NOW THE ASSESSEE IS IN APP EAL BEFORE US. 3. AT THE TIME OF HEARING BEFORE US THE LD. COUNSE L FOR THE ASSESSEE FILED A WRITTEN SUBMISSION IN WHICH THE ASSESSEE STATED THAT THE AS SESSEE A RESELLER OF LIME STONE CHIPS 2 DOLOMITE CHIPS BLACK STONE AND KOTA STONE THAT AR E BEING IMPORTED FROM OUTSIDE WEST BENGAL IN CONTAINERS ON RAIL HAD FILED HIS INCOME TAX RETURN FOR THE ASSESSMENT YEAR 2005-06 SHOWING TOTAL INCOME OF RS.1 30 832/-. DURI NG THE YEAR THE ASSESSEE HAD PAID FREIGHT CHARGES TO M/S. CONTAINER CORPORATION OF IN DIA FOR RS.12 35 164/- OUT OF WHICH RS.10 23 196/- WAS PAID IN CASH. THE ASSESSING OFFI CER CALLED FOR THE ASSESSEES EXPLANATION AS TO WHY 20% OF RS.10 23 196/- PAID IN VIOLATION OF PROVISIONS OF SEC. 40A(3) SHOULD NOT BE DISALLOWED. THE ASSESSEE CONTE NDED INTER ALIA THAT THE PAYMENTS WERE MADE TO THE CONCERN WHICH IS A PART OF INDIA R AILWAYS AND EXEMPT UNDER RULE 6DD(B). THE ASSESSING OFFICE REJECTED THE EXPLANATI ON AND DISALLOWED RS.2 04 639/-. ON APPEAL THE APPLICATION OF CIRCULAR NO. 34 DATED 05- 03-1973 FOR EXEMPTING INDIAN RAILWAYS WAS UNSUCCESSFULLY URGED BEFORE THE LD. CI T(A) AND HE CONFIRMED THE DISALLOWANCE APPLYING THE RATIO OF JUDGEMENT IN THE CASE OF BAGMAN TEA CO. LTD. V. CIT (2001) 251 ITR 640 (CAL). HOWEVER NEITHER THE ASSE SSING OFFICER NOR THE LD. CIT(A) CONTROVERTED THE GENUINENESS OF TRANSACTIONS AND ID ENTITY OF THE PAYEE. 3.1. HE ALSO CONTENDED THAT THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF BAGMAN TEA CO. LTD. THAT THE LD. CIT(A) AP PLIED AGAINST THE ASSESSEE IT IS MOST HUMBLY SUBMITTED THAT THEIR LORDSHIP INDUCTED AN EX TRA ORDINARY INTERPRETATION TO SEC. 40A(3) OF I. T. ACT BY OPINING WITH RESPECT WE ARE OF THE VIEW THAT WHEN THE PAYM ENT IS MADE IN CONTRAVENTION OF SEC. 40A(3) THOUGH THE PAYMENT IS GENUINE THAT CAN NOT BE ALLOWED BECAUSE THE GENUINENESS OF PAYMENT IS REQUI RED IN ALL CASES BUT PAYMENT BY ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT IS ADDITIONAL REQUIREMENT UNDER SEC. 40A(3). IF WE FOLLOW THE VIEW THAT THE PAYMENT IS GENUINE THE N THAT SHOULD NOT BE DISALLOWED. IN THAT CASE THE PROVISION OF SEC. 40A(3) WILL BECOME REDUNDANT. THEREFORE UNLESS THERE ARE UNAVOIDABLE CIRCUMSTANCES FOR PAYMENT IN CASH T HAT PAYMENT WILL BE HIT BY THE PROVISION OF SEC. 40A(3}. IT APPEARS EXTRA ORDINARY BECAUSE GENUINENESS OF T HE TRANSACTION ALONE WILL NOT SUFFICE AS THE COURT OBS ERVED THOUGH THAT WAS THE VERY ESSENCE BEHIND SUCH LEGISLATION. PAYMENT BY CHEQUE OR DRAFT SHOULD NOT BE CONSTRUED AN ADDITIONAL CONDITION TO OVERRIDE GENUINENESS AS OB SERVED BY THE HONBLE CALCUTTA HIGH COURT. IT CAN BE CONVERSELY STATED THAT GENUINENESS IS THE COROLLARY TO NON-COMPLIANCE OF THE PROVISIONS OF SEC. 40A(3) WHERE UNAVOIDABILITY IS IMPERATIVE OR OBVIOUS BE OF WHATEVER MAGNITUDE. PLETHORA OF PRECEDENTS ARE THER E TO SUPPORT THIS VIEW. 3 3.2. THE LAW REGARDING PROVISIONS OF SEC. 40A(3) I S WELL SETTLED NOW. THE SUPREME COURT IN THE CASE OF ATTAR SLNGH GURMUCK SING V. I. T.O. (1991) 191 ITR 667 SAID THAT THE PROVISIONS WERE NOT INTENDED TO RESTRICT BUSINE SS ACTIVITIES PAYMENT BY CROSSED CHEQUE OF CROSSED BANK DRAFT WAS INSISTED UPON TO E NABLE THE ASSESSING OFFICER TO ASCERTAIN WHETHER IT WAS GENUINE OR OUT OF INCOME F ROM UNDISCLOSED SOURCES. THE PROVISIONS WERE INTENDED TO REGULATE BUSINESS TRANS ACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES OF USING BL ACK MONEY FOR BUSINESS TRANSACTION. 3.3. GENUINENESS OF THE TRANSACTION CAN NOT BE A PO INT OF USUAL REQUIREMENT IN ADDITION TO THE PRIMARY REQUIREMENT OF PROVING THE EXCEPTIONAL CIRCUMSTANCES AS OBSERVED BY THE CALCUTTA HIGH COURT IN THE CASE OF BAGMAN TEA CO. LTD. THE PENAL ACTIONS IN THE SAID SECTION WERE INTRODUCED AS A DE TERRENT FROM OF JUSTICE. SPIRIT OF LAW WAS NOT TO PUNISH FOR PAYMENT TO IDENTIFIED PARTIES THAT CONCLUSIVELY ASSURES DESTINATION OF THE PAYMENT RECEIVED BY THE PAYEE. GENUINENESS I S NOT AN ORDINARY ISSUE THAT WAS ENVISAGED WHILE DRAFTING THE CODE. IT PREDICATES UN COMMONNESS/OR UNAVOIDABILITY THAT HAS BEEN SECURED BY THE LEGISLATURE IN THE SECOND P ROVISO TO SEC. 40A(3). THE CALCUTTA HIGH COURT IN DISPOSING A REFERENCE U/S 256(2) IN THE CASE OF GOENKA AGENCIES V. CIT (2003) 263 ITR 159 OPINED IN THE JUDGEMENT IF THE IDENTITY OF THE TRANSACTION IS FOUND TO BE NOT GENUINE THEN WHETHER A PAYMENT IS MADE UN DER UNAVOIDABLE CIRCUMSTANCES OR DUE TO EXCEPTIONAL CIRCUMSTANCES BECOMES SECONDARY ALTOGETHER AS THE TRANSACTION IN QUESTION IS FOUND TO BE NOT GENUINE AND IN THAT EVE NT THE WHOLE EXERCISE UNDER THESE PROVISIONS FALL THROUGH. THIS WOULD BE AN APPOSITE PRECEDENT FROM THE SAME JURISDICTIONAL HIGH COURT OF CALCUTTA AGAINST THE J UDGEMENT RELIED AND APPLIED BY THE LD. CIT(A) THAT WAS DECIDED LATER THAN THAT OF THE LD. CIT (A). IT MAY BE NOTED THAT NOT ONLY THE DECISION OF BAGMAN TEA CO. LTD. AS PER LD. CIT (A) DOES NOT APPEAR TO HAVE BEEN BROUGHT BEFORE THE NOTICE OF HONBLE ITAT ON 28-06- 2004 IN DECIDING THE CASE OF BRITANNIA INDUSTRIES LIMITED V. JCIT SPECIAL RANGE 14 KOLKATA IN ITA NO. 541 (KOL) OF 2001 AS ALLEGEDLY OBSERVED BY THE LD. CIT( A) BUT ALSO THE DECISION OF GOENKA AGENCIES WAS NOT BROUGHT BEFORE THE NOTICE OF THE I TAT IN THE SAME CASE. 3.4. THE ASSESSEE HAD SUBMITTED BEFORE THE ID. CIT (A) THAT IT HAD PAID FREIGHT CHARGES TO M/S. CONTAINER CORPORATION OF INDIA FOR RS.10 36 196 IN CASH DUE TO EASY UNLOAD AND 4 RELEASE OF THE GOODS FROM THE STOCKYARD OF RAILWAYS . AND IN DOING SO IT ACTED UNDER THE BONAFIDE BELIEF BESIDES THAT OF BUSINESS EXPEDIENC Y THAT SUCH FREIGHT PAYMENT HOWEVER WOULD BE PROTECTED UNDER RULE 6DD(B) AS M/ S. CONTAINER CORPORATION OF INDIA WAS A GOVT. OF INDIA UNDERTAKING AND A PART OF INDI AN RAILWAYS. THEREFORE THE ASSESSEE HAD INSISTED UPON CIRCULAR NO. 34 DATED 05-03-1970 BEFORE THE LD. CIT(A). AS THE PAYEE WAS M/S. CONTAINER CORPORATION OF INDIA A GOVT. OF INDIA UNDERTAKING ITS IDENTITY AND GENUINENESS OF TRANSACTION WAS NOT DISPUTED BY THE ASSESSING OFFICER. ALL THE RELATED VOUCHERS WERE VERIFIED BY THE ASSESSING OFFICER DUR ING ASSESSMENT PROCEEDINGS. 3.5. IN WALFORD TRANSPORT (EASTERN INDIA) LTD. V. CIT (1990) 240 ITR 902 (GAUHATI) IN EXPLAINING THE PURPOSE OF SEC. 40A(3) THE GAUHA TI HIGH COURT SAID THAT THE SAID SECTION WAS NOT TO PENALISE THE ASSESSEE FOR MAKING CASH PAYMENTS BUT THE WHOLE OBJECT OF THE SAID SECTION WAS TO CHECK EVASION OF TAX AND FLOW OF UNACCOUNTED MONEY OR TO CHECK TRANSACTIONS WHICH WERE NOT GENUINE. THE PROV ISIONS OF SEC. 40A(3) WERE TO BE READ WITH RULE 6DD. THE ASSESSING OFFICER ACCORDING TO THE SAID DECISION HAS TO TAKE INTO ACCOUNT THE SURROUNDING CIRCUMSTANCES CONSIDE RATIONS OF BUSINESS EXPEDIENCY AND THE FACTS OF EACH PARTICULAR CASE. EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES COULD VARY ON THE FACTS OF EACH CASE. IF HOWEVER THE TRANSACT IONS ARE FOUND TO BE GENUINE AND THE IDENTITY OF THE PAYEE IS ESTABLISHED A LIBERAL VIE W OF COMPELLING AND MITIGATING CIRCUMSTANCES SHOULD BE TAKEN*. THEIR LORDSHIP JUST ICE V. N. KHARE (AS HIS LORDSHIP THEN WAS) AND JUSTICE M. KATJU SAID THAT AS HAS A LREADY BEEN OBSERVED ABOVE IN THE PRESENT CASE THE TOTALITY OF CIRCUMSTANCES SHOWS TH AT THE TRANSACTIONS WERE GENUINE FOR THE REASONS ALREADY MENTIONED ABOVE. IN FACT THE A MOUNT SAID TO HAVE BEEN PAID IN CASH BY THE ASSESSEE TO CERTAIN PARTIES HAVE BEEN VERIFI ED BY THE CERTIFICATES OF THOSE PARTIES. HENCE THE INTEREST OF THE DEPARTMENT IS PROTECTED BECAUSE THE DEPARTMENT CAN ASSESS THOSE AMOUNTS IN THE HAND OF THE PAYEE AND IT IS NO T THAT THESE AMOUNTS WILL NOT BE ASSESSED AT ALL. THUS THE DEPARTMENT WILL NOT SUFF ER IN ANY WAY. 3.6. IT HAS BEEN SUBMITTED EARLIER THAT SUCH FREIGH T WAS PAID IN CASH TO M/S. CONTAINERS CORPORATION OF INDIA A GOVT. OF INDIA UNDERTAKING TO EXPEDITE DELIVERY AND RELEASE OF THE GOODS FROM THE RAILWAY YARDS TO MAKE PROMPT SAL E BY BOOKING IT TO TRANSPORT FOR RESPECTIVE DESTINATION OF BUYERS. THE ASSESSEE HAS PAID NO GODOWN RENT TO STORE THE GOODS BESIDES THE FACT OF PAYING CASH TO AVOID DEL AY IN BANKING CHANNEL THAT MAY INFLICT 5 DEMURRAGE. THE MOMENT INFORMATION FOR GOODS ARRIVA L IS RECEIVED THE ASSESSEE TRIED TO PROMPTLY CLEAR THE GOODS FOR ITS SUBSEQUENT DESPATC H. THIS WAS THE PRACTICE BY MOST OF THE CONSIGNEES TO PAY CASH IN CLEARING THE GOODS. H OWEVER BESIDES BEING THE PRACTICE OF THIS TRADE QUICK RELEASE AND UNLOAD WAS THE BUSINE SS EXPEDIENCY OF THE ASSESSEE THAT WAS STATED BEFORE THE LD. CIT(A) VIDE WRITTEN SUBMI SSION DATED 19-08-2009. THIS MISSED THE NOTICE OF THE LD. CIT(A) AND HE ONLY COUCHED UP ON THE OTHER POINTS TO HOLD THAT THE EXCEPTIONAL CIRCUMSTANCE WAS NOT MADE OUT. 3.7. IN VIEW OF ABOVE THE OBSERVATION OF LEARNED J USTICE IN SMT. HARSHILA CHORDIA V. ITO (2008) 298 ITR 349 WOULD BE RELEVANT. THE COURT OBSERVED IT MAY BE PERTINENT TO NOTICE THAT PRIMARY OBJECT OF ENACTING SECTION 40A( 3) IN ITS ORIGINAL INCARNATION WAS TWO-FOLD FIRSTLY PUTTING A CHECK ON TRADING TRANS ACTIONS WITH A MIND TO EVADE THE LIABILITY TO TAX ON INCOME EARNED OUT OF SUCH TRANS ACTION AND SECONDLY TO INCULCATE THE BANKING HABITS AMONGST THE BUSINESS COMMUNITY. THE CONSEQUENCE WHICH WAS PROVIDED WAS TO DISALLOW OF DEDUCTION OF SUCH PAYMENTS/EXPEN SES WHICH WERE NOT THROUGH BANK EITHER BY CROSSED CHEQUE OR BY DEMAND DRAFT OR BY P AY ORDER. THIS PROVISION HAS BEEN SUBSEQUENTLY AMENDED. APPAR ENTLY THIS PROVISION WAS DIRECTLY RELATED TO CURB THE EVASION OF TAX AND INC ULCATING THE BANKING HABITS. THEREFORE 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 OF SU CH 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 TRIB UNAL. 3.8. IN THIS CONNECTION THE JUDGMENT OF THE HONBL E SUPREME COURT WHICH NEEDS TO BE NOTICED IS IN THE CASE OF CTO V. SWASTIK ROADWAYS R EPORTED IN [2004] 2 RC 539; [2004] 3 SCC 640. THE CONSEQUENCE OF NONCOMPLIANCE WITH CE RTAIN PROVISIONS OF THE MADHYA PRADESH SALES TAX ACT WHICH WERE INTENDED TO CHECK THE EVASION AND AVOIDANCE OF SALES TAX WERE SIGNIFICANTLY HARSH. THE COURT WHILE UPHOLDING ITS CONSTITUTIONAL VALIDITY NEGATED THE EXISTENCE OF A MENS REA AS A CONDITION NECESSARY FOR LEVY OF PENALTY FOR NONCOMPLIANCE WITH SUCH TECHNICAL PROVISIONS REQUIR ED HELD THAT IN THE CONSEQUENCE TO FOLLOW THERE MUST BE NEXUS BETWEEN THE CONSEQUENCE THAT BEFALL FOR NON-COMPLIANCE WITH SUCH PROVISIONS INTENDED FOR PREVENTING THE TA X EVASION WITH THE OBJECT OF PROVISION BEFORE THE CONSEQUENCE CAN BE INFLICTED U PON THE DEFAULTER. THE SUPREME 6 COURT HAS OPINED THAT THE EXISTENCE OF NEXUS BETWEE N THE TAX EVASION BY THE OWNER OF THE GOODS AND THE FAILURE OF C & F AGENT TO FURNISH INFORMATION REQUIRED BY THE COMMISSIONER IS IMPLICIT IN SECTION 57(2) AND THE A SSESSING AUTHORITY CONCERNED HAS TO NECESSARILY RECORD A FINDING TO THIS EFFECT BEFORE LEVYING PENALTY UNDER SECTION 57(2). 3.9. OF COURSE PRESENT IS NOT A CASE OF LEVY OF PE NALTY BUT THE REQUIREMENT OF LAW TO BE FOLLOWED BY THE ASSESSEE WAS OF AS TECHNICAL NAT URE AS WAS IN THE CASE OF SWASTIK ROADWAYS [2004) 2 RC 539 AND THE CONSEQUENCE TO FAL L FOR FAILURE TO OBSERVE SUCH NORMS IN THE PRESENT CASE ARE MUCH HIGHER THAN WHIC H WERE PRESCRIBED UNDER THE MADHYA PRADESH SALES TAX ACT. APPARENTLY IT IS A R ELEVANT CONSIDERATION FOR THE ASSESSING AUTHORITY UNDER THE INCOME-TAX ACT THAT B EFORE INVOKING THE PROVISIONS OF SECTION 40A(3) IN THE LIGHT OF RULE 6DD AS CLARIFIE D BY CIRCULAR OF THE CENTRAL BOARD OF DIRECT TAXES THAT WHETHER THE FAILURE ON THE PART O F 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 UNDER SECTION 40A(3) FOR F AILURE TO MAKE PAYMENTS THROUGH BANK IS NOT ABSOLUTE IN TERMS NOR AUTOMATIC BUT EXC EPTIONS 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. 3.10. THE ASSESSEE STRONGLY RELIES ON THE ABOVE JUD GEMENT OF THE HONBLE SUPREME COURT FOLLOWED IN SMT. HARSHILA CHORDIAS CASE (SUP RA) AS NOTHING HAS BEEN BROUGHT ON RECORD EITHER BY THE ASSESSING OFFICER OR BY THE LD . CIT(A) THAT DEFEATS THE OBJECT OF SEC. 40A(3) SO AS TO INVITE SUCH A CONSEQUENCE OF DISALL OWANCE WHERE THE ASSESSEE ACTED UNDER THE BONAFIDE BELIEF BESIDES THAT OF BUSINESS EXPEDIENCY THAT SUCH FREIGHT PAYMENT HOWEVER WOULD BE PROTECTED UNDER RULE 6DD(B) AS M/ S. CONTAINER CORPORATION OF INDIA WAS A GOVT. OF INDIA UNDERTAKING AND A PART OF INDI AN RAILWAYS. DISALLOWANCE IN SUCH A CASE FOR PAYMENT IN CASH TO A GOVERNMENT COMPANY WO ULD BE DUE TO ABSOLUTELY TECHNICAL VIOLATION AGAINST THE TRUE SPRIT OF LAW I N REGARD TO SEC. 40A(3) OF THE ACT. 3.11. THE ASSESSEE HAS ALSO SUBMITTED THAT THE CALC UTTA HIGH COURT (ITA NO. 202 OF 2008) IN THE CASE OF CIT KOLKATA XI V. CRESCENT EX PORT SYNDICATE VIDE JUDGEMENT DATED 19-09-2008 (UNREPORTED) WHERE THE SAME JURISD ICTIONAL COURT DID NOT FOLLOW ITS OWN DECISION IN THE CASE OF BAGMAN TEA CO. LTD. RE LIED BY LD. CIT(A) IN CASE OF THE 7 ASSESSEE. HE LASTLY SUBMITTED THAT THE DISALLOWAN CE SO CONFIRMED BY THE LD. CIT(A) MAY BE DELETED IN FULL. 4. ON THE OTHER HAND THE LD. DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES AND URGED BEFORE THE BENCH TO CONFIRM THE SAME. 5. HEARD BOTH THE PARTIES PERUSED THE MATERIAL AV AILABLE ON RECORDS AND FIND THAT AFTER TAKING INTO CONSIDERATION THE RELEVANT CASE L AWS ON THE ISSUE THE HONBLE SPECIAL BENCH OF KOLKATA ITAT IN THE CASE OF ITO VS- M/S. KENARAM SAHA & SUBHASH SAHA & ORS. REPORTED IN 116 ITD 1 (2009) HAS HELD AS UNDE R : II. SECTION 40A(3) OF THE INCOME-TAX ACT 1961 RE AD WITH RULE 6DD OF THE INCOME-TAX RULES 1962 - BUSINESS DISALLOWANCE CASH PAYMENTS EXCEEDING PRESCRIBED LIMITS - ASSESSMENT YEA 2003-04 AND 2004-05 - ASSESSEE WAS A N INDIVIDUAL DERIVING INCOME FROM BUSINESS IN ELECTRONIC ITEMS ON WHOLESALE-CUM-RETAI L BASIS - DURING RELEVANT ASSESSMENT YEAR ASSESSEE MADE CASH PAYMENTS OF RS.1.09 CRORES - ASSESSING OFFICER APPLYING PROVISIONS OF SECTION 40A(3) DISALLOWED 20 PER CEN T OF CASH PAYMENTS - ON APPEAL COMMISSIONER (APPEALS) DELETED DISALLOWANCE - ON RE VENUES APPEAL IT WAS FOUND THAT COMMISSIONER (APPEALS) HAD DELETED DISALLOWANCE WIT HOUT GIVING ANY FINDING WITH REGARD TO ANY SPECIFIC CLAUSE OF RULE 6DD IN WHICH ASSESS EES CASE FELL - WHETHER ONCE THERE IS PAYMENT OF ANY EXPENDITURE IN VIOLATION OF SECTION 40A(3) ASSESSEE CAN ESCAPE DISALLOWANCE UNDER SAID SECTION ONLY IF HIS CASE FA LLS WITHIN AMBIT OF ANY OF CLAUSES OF RULE 6DD - HELD YES SINCE IN THIS CASE ADMITTEDLY THE ASSESSEES CASE DOES NOT FALL IN ANY OF THE EXEMPTION CLAUSE OF RULE 6DD WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THE APPEAL OF THE ASSESSEE IS THEREFORE DISMISSED. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DIS MISSED. 7. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30. 4.2010 SD/- SD/- (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30TH APRIL 2010 COPY TO : 1. SRI MOHAN LAL CHOWDHURY C/O BARUN KUMAR MUKHERJEE 5/3 R. N. TAGORE ROAD BERHAMPORE MURSHIDABAD WEST BENGAL-7342 101 2. ITO WARD-41(2) KOLKATA 3. CIT(A) KOLKATA. 4. CIT KOLKATA. 5. D.R. ITAT KOLKATA. TRUE COPY BY ORDER DEPUTY REGISTRAR JD.(SR.P.S.) I.T.AT. KOLKATA