M/s Shibpur Pachai Shop, Burdwan v. ITO, Wd-1(4), Asansol, Asansol

ITA 340/KOL/2014 | 2008-2009
Pronouncement Date: 19-10-2016

Appeal Details

RSA Number 34023514 RSA 2014
Assessee PAN AAMFS4463P
Bench Kolkata
Appeal Number ITA 340/KOL/2014
Duration Of Justice 2 year(s) 7 month(s) 24 day(s)
Appellant M/s Shibpur Pachai Shop, Burdwan
Respondent ITO, Wd-1(4), Asansol, Asansol
Appeal Type Income Tax Appeal
Pronouncement Date 19-10-2016
Appeal Filed By Assessee
Bench Allotted SMC
Tribunal Order Date 19-10-2016
Date Of Final Hearing 01-09-2016
Next Hearing Date 01-09-2016
Assessment Year 2008-2009
Appeal Filed On 25-02-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN JM] I.T.A NO. 340/KOL/201 4 ASSESSMENT YEAR : 2008-0 9 M/S. SHIBPUR PACHAI SHOP -VS.- I.T.O. WARD- 1(4) BURDWAN. ASANSOL [PAN: AAMFS 4463 P] (APPELLANT) (RESPONDENT) FOR THE APPELLANT SHRI U.DASGUPTA ADVOCATE FOR THE RESPONDENT : SHRI.DIVAKAR CHAKRABORTH Y JCIT DATE OF HEARING : 1.9.2016 DATE OF PRONOUNCEMENT : 19.10.2016. ORDER PER N.V.VASUDEVAN JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 9.12.2013 OF CIT(A)- ASANSOL RELATING TO AY 2008-09. 2. THE ASSESSEE IS AN INDIVIDUAL. HE IS A DEALE R IN COUNTRY SPIRITS. PURCHASES ARE MADE FROM A SINGLE PARTY NAMELY ASANSOL BOTTLING & PACKI NG CO. PVT.LTD. THE ASSESSEE IN RESPECT OF PURCHASES FROM ASANSOL BOTTLING & PACKIN G CO. PVT.LTD. MADE A PAYMENT OF RS.36 64 440/- IN CASH. ACCORDING TO THE AO THE ABO VE PAYMENT MADE CANNOT BE ALLOWED AS DEDUCTION IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE BECAUSE OF THE VIOLATION OF THE PROVISION OF SECTION 40A(3) OF THE INCOME TAX ACT 1961 (ACT). THE ACTION OF THE AO WAS CONFIRMED BY CIT(A). 3. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSE E HAS PREFERRED AN APPEAL BEFORE THIS TRIBUNAL. 2 ITA NO.340/KOL/2014 M/S. SHIBPUR PACHAI SHOP. A.YR.2008-09 2 4. I HAVE HEARD THE SUBMISSIONS OF THE LD. COUN SEL FOR THE ASSESSEE AND THE LD. DR. IDENTICAL ISSUE WITH REGARD TO THE DISALLOWANCE U/S 40A(3) OF THE ACT IN THE CASE OF ASSESSEE S CASE WHO ARE ENGAGED IN THE BUSINESS OF COUNTRY SPIRITS WHICH HAD COME UP FOR CONSIDERATION BEFORE THIS BENCH IN THE CASE OF RAMNAGAR PACHWAI AND C.S. (SHOP) VS ITO VIDE ITA NO.148/KOL/2015 AND 185&186/KOL/201 4 FOR A.Y.2007-08 AND 2008- 09 AND 2010-11 RESPECTIVELY. THIS TRIBUNAL VIDE ITS ORDER DATED ON IDENTICAL ISSUE HAS HELD AS FOLLOWS :- 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESS EE COMPRISING OF VARIOUS ORDERS OF LOWER AUTHORITIES VIDE PAGES 1 TO 42 OF THE PAPER B OOK COPY OF NOTIFICATION NO. 1208-EX DATED 29.08.2005 ISSUED BY THE EXCISE DEPARTMENT G OVERNMENT OF WEST BENGAL VIDE PAGES 43 TO 49 OF PB AND COPIES OF VARIOUS DECISION S OF HIGH COURTS AND TRIBUNALS VIDE PAGES 50 TO 102 OF PB. WE HAVE ALSO GONE THROUGH T HE PROVISIONS OF THE WEST BENGAL EXCISE RULES 2005 AND THE BENGAL EXCISE ACT 1909. THE FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITERATED FO R THE SAKE OF BREVITY. AT THE OUTSET WE DEEM IT NECESSARY TO INCORPORATE THE FOLLOWING C LAUSES FROM THE NOTIFICATION ISSUED BY THE EXCISE DEPARTMENT GOVERNMENT OF WEST BENGAL DATED 29.8.2005 FOR THE SAKE OF BETTER UNDERSTANDING OF THE FACTS :- IN EXERCISE OF THE POWER CONFERRED BY SECTION 85 A ND SECTION 86 OF THE BENGAL EXCISE ACT 1909 (BEN. ACT V OF 1909) AND IN SUPERSESSION OF THE RULES PUBLISHED WITH THIS DEPARTMENT NOTIFICATION NO. 122-EX/O/1R-1/2000 DATE D 23.2.2000 AS SUBSEQUENTLY AMENDED THE GOVERNOR IS PLEASED HEREBY TO MAKE THE FOLLOWING RULES REGULATING THE ISSUE AND REMOVAL OF COUNTRY SPIRIT ON PAYMENT OF DUTY IN LABELLED AND CAPSULED BOTTLES FROM COUNTRY SPIRIT BOTTLING PLANTS AND IN BULK FROM WAR EHOUSES BY THE LICENSED WHOLESALE VENDORS OF THE SAME FOR THE PURPOSE OF SELLING COUN TRY SPIRIT BY WHOLESALE: RULES 1. SHORT TITLE AND COMMENCEMENT.(1) THESE RULES MAY B E CALLED THE WEST BENGAL EXCISE (SUPPLY OF COUNTRY SPIRIT ON PAYMENT OF DUTY ) RULES 2005. (2) THESE RULES SHALL COME INTO FORCE FROM 19TH OCTOBER 2005. 2. D EFINITIONS.(1) IN THESE RULES UNLESS THERE IS ANYTHING REPUGNANT IN THE SUBJECT O R CONTEXT (I) COMMISSIONER MEANS THE EXCISE COMMISSIONER; (II) REQUISITION MEANS THE REQUISITION SUBMITTED BY TH E AUTHORIZED REPRESENTATIVE OF LICENSED WHOLESALE VENDOR OF COUN TRY SPIRIT IN FORM II APPENDED TO THESE RULES; (III) RETAIL VENDOR MEANS THE PERSON HOLDING LICENSE IN THE PRESCRIBED FORM FOR RETAIL VENDING OF COUNTRY SPIRIT GRANTED BY TH E COLLECTOR; 189; (IV) STATE GOVERNMENT MEANS THE GOVERNMENT OF WEST BEN GAL; (V) THE ACT MEANS THE BENGAL EXCISE ACT 1909 (BEN. A CT V OF 1909); (VI) TRANSPORT PASS MEANS THE TRANSPORT PASS ISSUED IN FORM III APPENDED TO THESE RULES; 3 ITA NO.340/KOL/2014 M/S. SHIBPUR PACHAI SHOP. A.YR.2008-09 3 (VII) WAREHOUSE MEANS THE WAREHOUSE FOR SUPPLY OF COUNT RY SPIRIT TO RETAIL VENDORS ESTABLISHED AT CONVENIENT PLACES BY THE CO MMISSIONER AT THE EXPENSE OF THE STATE GOVERNMENT OR AT THE EXPENSE OF A PERSON TO WHOM THE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLING COU NTRY SPIRIT BY WHOLESALE HAS BEEN GRANTED UNDER SECTION 22 OF THE ACT OR OF A LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT; (VIII) WHOLESALE LICENSEE MEANS THE WHOLESALE VENDOR OF COUNTRY SPIRIT TO WHOM LICENSE HAS BEEN GRANTED IN WEST BENGAL EXCISE FORM NO. 26. (2) WORDS AND EXPRESSIONS USED IN THESE RULES AND N OT DEFINED BUT DEFINED IN THE ACT SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN THE ACT. 3. ISSUE ONLY ON PAYMENT OF DUTY.NO COUNTRY SPIRIT IN LABELLED AND CAPSULED BOTTLES SHALL BE ISSUED WITHOUT PAYMENT OF DUTY FRO M A COUNTRY SPIRIT BOTTLING PLANT. NO COUNTRY SPIRIT IN BULK SHALL BE ISSUED WI THOUT PAYMENT OF DUTY FROM A COUNTRY SPIRIT WAREHOUSE. 4. PERSONAL LEDGER ACCOUNT TO BE MAINTAINED BY THE WHOLESALE LICENSEE.THE WHOLESALE LICENSEE SHALL MAINTAIN A PERSONAL LEDGER ACCOUNT IN ACCORDANCE WITH THE DIRECTION ISSUED BY THE COMMISSIONER FROM TIME TO TIME FOR THE PURPOSE OF MAINTAINING AN ACCOUNTCURRENT OF THE DUTIES PAYABL E BY THE WHOLESALE LICENSEE FOR THE ISSUES OF COUNTRY SPIRIT TO THE RETAIL VEND ORS OR TRANSPORT ON PAYMENT OF DUTY FROM THE CONCERNED COUNTRY SPIRIT BOTTLING PLA NT OR WAREHOUSE. 5. MINIMUM BALANCE IN PERSONAL LEDGER ACCOUNT.THE COLLECTOR SHALL ISSUE DIRECTIONS FOR MAINTAINING THE MINIMUM AMOUNT OF B ALANCE IN THE AFORESAID PERSONAL LEDGER ACCOUNTS IN ORDER TO ENSURE THAT DU TY FOR DAILY ISSUES OF COUNTRY SPIRIT FROM THE COUNTRY SPIRIT BOTTLING PLANT OR WA REHOUSE MAY BE DEBITED FROM THE SAID ACCOUNT LEAVING SUFFICIENT BALANCE AS MAY BE DETERMINED BY HIM. 6. PROCEDURE OF ISSUE OF COUNTRY SPIRIT.(1) THE R ETAIL VENDOR OR HIS AUTHORIZED REPRESENTATIVE SHALL SUBMIT TO THE REPRESENTATIVE O F THE WHOLESALE LICENSEE THROUGH EXCISE OFFICER-IN-CHARGE OF THE WAREHOUSE A DEMAND FOR ISSUE OF COUNTRY SPIRIT IN FORM I APPENDED TO THESE RULES IN DUPLICATE. THE DUPLICATE COPY SHALL BE KEPT IN THE CUSTODY OF THE EXCISE OFFICER- IN-CHARGE FOR HIS OFFICIAL RECORD. (2) NO RETAIL VENDOR OF COUNTRY SPIRIT SHALL DEPOSI T DUTY DIRECT INTO THE LOCAL TREASURY FOR ISSUE OF COUNTRY SPIRIT TO BE TAKEN BY HIM FROM THE WAREHOUSE CONCERNED. DUTY COST PRICE BOTTLING CHARGE IF TH ERE BE ANY AT THE PRESCRIBED RATE AND OTHER IMPOSITION AS MAY BE PRESCRIBED BY LAW SHALL BE PAID BY THE RETAIL VENDOR TO THE CREDIT OF THE WHOLESALE LICENS EE CONCERNED. (3) THE AUTHORIZED REPRESENTATIVE OF THE WHOLESALE LICENSEE SHALL REALIZE THE NECESSARY AMOUNT OF DUTY COST PRICE AND BOTTLING C HARGE IF THERE BE ANY AT THE PRESCRIBED RATE AND SUCH OTHER IMPOSITION AS MAY B E PRESCRIBED BY LAW FROM THE RETAIL VENDOR TO WHOM COUNTRY SPIRIT IS TO BE ISSUE D FROM THE CONCERNED WAREHOUSE. THE AUTHORIZED REPRESENTATIVE AS ABOVE S HALL THEN SUBMIT REQUISITION IN DUPLICATE IN FORM II APPENDED TO THESE RULES TO THE EXCISE OFFICER-IN-CHARGE 4 ITA NO.340/KOL/2014 M/S. SHIBPUR PACHAI SHOP. A.YR.2008-09 4 OF THE WAREHOUSE SEPARATELY FOR EACH OF THE RETAIL VENDORS TO WHOM COUNTRY SPIRIT IS TO BE ISSUED ON THE DAY. (4) ON RECEIPT OF THE REQUISITION IN FORM II THE EXCISE OFFICER-IN-CHARGE OF THE WAREHOUSE SHALL ALLOW ISSUE OF COUNTRY SPIRIT FROM THE WAREHOUSE. DUPLICATE COPY OF THE REQUISITION SHALL BE RETURNED TO THE AUTHORI ZED REPRESENTATIVE OF THE WHOLESALE LICENSEE AFTER THE ISSUE HAS BEEN MADE. (5) THE EXCISE OFFICER-IN-CHARGE OF THE WAREHOUSE SHALL ISSUE TRANSPORT PASS TO THE RETAIL VENDOR IN FORM III APPENDED TO THESE RUL ES. (6) NOTWITHSTANDING ANYTHING CONTAINED IN ANY PROVI SIONS OF THE RULES ORDERS AND NOTIFICATIONS IN THIS CONTEXT THE WHOLESALE SUPPLI ERS OF COUNTRY SPIRIT IN LABELLED AND CAPSULED BOTTLES SHALL ALLOW A REBATE OF FIVE P AISE PER BOTTLE IRRESPECTIVE OF MEASURE FROM THE BOTTLING CHARGE TO THE RETAIL COUN TRY SPIRIT LICENSEES WHOSE LICENSED PREMISES ARE LOCATED AT A DISTANCE OF 50 K ILOMETRES OR MORE BY THE SHORTEST ROUTE FROM THE ISSUING WAREHOUSE ON THE BA SIS OF A CERTIFICATE TO BE ISSUED BY THE COLLECTOR IN RESPECT OF DISTANCE. AT THE END OF THE MONTH THE WHOLESALER SHALL SUBMI T A BILL IN DUPLICATE TO THE OFFICER-IN-CHARGE OF THE WAREHOUSE CLAIMING REFUND OF THE AMOUNT GRANTED AS REBATE. THE OFFICER-IN-CHARGE SHALL ON RECEIPT OF THE BILL REFUND THE AMOUNT CLAIMED AFTER VERIFYING HIS RECORDS THROUGH ADJUSTMENT IN T HE PERSONAL LEDGER ACCOUNT MAINTAINED FOR THE PURPOSE OF PRIVILEGE FEE. IN CAS E THERE IS NO PERSONAL LEDGER ACCOUNT FOR PRIVILEGE FEE AT THE WAREHOUSE THE OFF ICER-IN-CHARGE SHALL SEND A COPY OF THE CLAIM WITH HIS COMMENTS TO THE OFFICER- IN-CHARGE OF THE SUPPLIER BOTTLING PLANT WHO SHALL REFUND THE AMOUNT RECOMME NDED TO THE WHOLESALER THROUGH ADJUSTMENT IN THE PERSONAL LEDGER ACCOUNT M AINTAINED FOR PRIVILEGE FEE. 14. WE FIND THAT THE RELIANCE PLACED ON THE DECIS ION OF CO-ORDINATE BENCH OF BANGALORE TRIBUNAL IN THE CASE OF SRI RENUKESWARA R ICE MILLS VS ITO REPORTED IN 93 ITD 263 (BANG TRIB.) IS WELL FOUNDED WHEREIN IT WAS HELD THAT THE C ASH PAYMENT IN THE BANK ACCOUNT OF THE PAYEE IS SUFFICIENT TO GET EXEMPTIO N IN TERMS OF RULE 6DD IN AS MUCH IT IS ENSURED THAT THE PAYEE AND PAYEE ALONE RECEIVES TH E PAYMENT AND THE ORIGIN AND CONCLUSION OF THE TRANSACTION IS TRACEABLE THEREBY FULFILLING THE CRITERION FOR ENSURING THE OBJECT OF INTRODUCTION OF SECTION 40A(3) OF THE ACT . 15. WE FIND THAT THE FOLLOWING FACTS ARE UNDISPUT ED AND INDISPUTABLE:- (A) THE TRANSACTIONS MADE BY THE ASSESSEE IS GENUI NE. (B) THE IDENTITY OF THE RECEIVER (WHOLESALE LICENSE E) IS ESTABLISHED BEYOND DOUBT. ( C) THE PAYMENT IS MADE IN THE BANK ACCOUNT OF THE SELLER (WHOLESALE LICENSEE). 5 ITA NO.340/KOL/2014 M/S. SHIBPUR PACHAI SHOP. A.YR.2008-09 5 WE HOLD THAT SINCE THE GENUINITY OF THE PAYMENTS MA DE TO THE M/S ASANSOL BOTTLING & PACKAGING CO. PVT. LTD (WHOLESALE LICENSEE) IS NOT DOUBTED BY THE REVENUE THE PROVISIONS OF SECTION 40A(3) COULD NOT BE MADE APPLICABLE TO THE FACTS OF THE INSTANT CASE. IT IS OBSERVED THAT THE ASSESSEE HAD TAKEN ENOUGH PRECAUT IONS FROM ITS SIDE TO ENSURE THAT THE PAYEE ALSO DONT ESCAPE FROM THE AMBIT OF TAXATION ON THESE RECEIPTS BY DIRECTLY DEPOSITING THE CASH IN THE BANK ACCOUNT OF THE PAYEE. MOREOVE R THE REGULATIONS OF THE WEST BENGAL GOVERNMENT PURSUANT TO NOTIFICATION FROM ITS EXCISE DEPARTMENT DATED 29.8.2005 ALSO MANDATES THE PAYMENT TO BE MADE BY WAY OF DIRECT DE POSIT INTO THE BANK ACCOUNT OF THE WHOLESALE LICENSEE. THIS FACT IS ALSO NOT DISPUTED BY THE REVENUE. 16. IT WILL BE PERTINENT TO GO INTO THE INTENTION BEHIND INTRODUCTION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AT THIS JUNCTURE. WE FIN D THAT THE SAID PROVISION WAS INSERTED BY FINANCE ACT 1968 WITH THE OBJECT OF CURBING EXPENDI TURE IN CASH AND TO COUNTER TAX EVASION. THE CBDT CIRCULAR NO. 6P DATED 6.7.1968 R EITERATES THIS VIEW THAT THIS PROVISION IS DESIGNED TO COUNTER EVASION OF A TAX T HROUGH CLAIMS FOR EXPENDITURE SHOWN TO HAVE BEEN INCURRED IN CASH WITH A VIEW TO FRUSTRATI NG PROPER INVESTIGATION BY THE DEPARTMENT AS TO THE IDENTITY OF THE PAYEE AND REAS ONABLENESS OF THE PAYMENT. 17. IN THIS REGARD IT IS PERTINENT TO GET INTO T HE FOLLOWING DECISIONS ON THE IMPUGNED SUBJECT:- ATTAR SINGH GURMUKH SINGH VS ITO REPORTED IN (1991) 191 ITR 667 (SC) ' 3.3.4. SECTION 40A(3) OF THE INCOME-TAX ACT 1961 WHICH PROVIDES THAT EXPENDITURE IN EXCESS OF RS. 2 500 (RS. 10 000 AFTER THE 1987 AMEN DMENT) WOULD BE ALLOWED TO BE DEDUCTED ONLY IF MADE BY A CROSSED CHEQUE OR CROSSE D BANK DRAFT (EXCEPT IN SPECIFIED CASES) IS NOT ARBITRARY AND DOES NOT AMOUNT TO A RE STRICTION ON THE FUNDAMENTAL RIGHT TO CARRY ON BUSINESS. IF READ TOGETHER WITH RULE 6DD O F THE INCOME-TAX RULES 1962 IT WILL BE CLEAR THAT THE PROVISIONS ARE NOT INTENDED TO RE STRICT BUSINESS ACTIVITIES. THERE IS NO RESTRICTION ON THE ASSESSEE IN HIS TRADING ACTIVITI ES. 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-BA NK DRAFT. THE PAYMENT BY CROSSED- CHEQUE OR CROSSED BANK-DRAFT IS INSISTED UPON TO EN ABLE THE ASSESSING AUTHORITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHE R IT WAS OUT OF INCOME FROM UNDISCLOSED SOURCES. THE TERMS OF SECTION 40A(3) AR E NOT ABSOLUTE. CONSIDERATION 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 ASSESSING OFFICE R 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 CROSS ED-CHEQUE OR CROSSED-BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT W ILL BE CLEAR FROM THE PROVISIONS OF SECTION 40A(3) AND RULE 6DD THAT THEY ARE INTENDED TO REGULATE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDU CE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTIONS.' 6 ITA NO.340/KOL/2014 M/S. SHIBPUR PACHAI SHOP. A.YR.2008-09 6 CIT VS CPL TANNERY REPORTED IN (2009) 318 ITR 179 ( CAL ) THE CONTENTION OF THE ASSESSEE THAT HE PURCHASED GO ODS FROM SUPPLIERS WHO ARE PRODUCERS OF HIDES AND SKINS HAS NOT BEEN REFUTED EITHER BY THE AO OR BY THE CITA. THE SECOND CONTENTION OF THE ASSESSEE THAT OWING TO BUS INESS EXPEDIENCY OBLIGATION AND EXIGENCY THE ASSESSEE HAD TO MAKE CASH PAYMENT FOR PURCHASE OF GOODS SO ESSENTIAL FOR CARRYING ON OF HIS BUSINESS WAS ALSO NOT DISPUTED BY THE AO. THE GENUINITY OF TRANSACTIONS RATE OF GROSS PROFIT OR THE FACT THAT THE BONAFIDE OF THE ASSESSEE THAT PAYMENTS ARE MADE TO M/S IFB AGRO INDUSTRIES LTD FO R PURCHASE OF COUNTRY SPIRIT ARE ALSO NEITHER DOUBTED NOR DISPUTED BY THE AO. ON TH E BASIS OF THESE FACTS IT IS NOT JUSTIFIED ON THE PART OF THE AO TO DISALLOW 20% OF THE PAYMENTS MADE U/S 40A(3) IN THE PROCESS OF ASSESSMENT. WE THEREFORE DELETE THE A DDITION OF RS. 17 90 571/- AND GROUND NO.1 IS DECIDED IN FAVOUR OF THE ASSESSEE. CIT VS CRESCENT EXPORT SYNDICATE IN ITA NO. 202 OF 2008 DATED 30.7.2008 JURISDICTIONAL HIGH COURT DECISION IT ALSO APPEARS THAT THE PURCHASES HAVE BEEN HELD TO BE GENUINE BY THE LEARNED CIT(APPEAL) BUT THE LEARNED CIT(APPEAL) HAS INVOKED SECTION 40A(3) FOR PAYMENT EXCEEDING RS.20 000/- SINCE IT IS NOT MADE BY CROSSED-CHEQUE OR BANK DRAFT BUT BY BEARER CHEQUES AND HAS COMPUTED THE PA YMENTS FALLING UNDER PROVISIONS TO SECTION 40A(3) FOR RS.78 45 580/- AND DISALLOWED @ 20% THEREON RS.15 69 116/-. IT IS ALSO MADE CLEAR THAT WITHOUT THE PAYMENT BEING MADE BY BEARER CHEQUE THESE GOODS COULD NOT HAVE BEEN PROCU RED AND IT WOULD HAVE HAMPERED THE SUPPLY OF GOODS WITHIN THE STIPULATED TIME. THEREFORE THE GENUINENESS OF THE PURCHASE HAS BEEN ACCEPTED BY TH E ID. CIT (APPEAL) WHICH HAS ALSO NOT BEEN DISPUTED BY THE DEPARTMENT AS IT APPEARS FROM THE ORDER SO PASSED BY THE LEARNED TRIBUNAL. IT FURTHER APPEARS FROM THE ASSESSMENT ORDER THAT NEITHER THE ASSESSING OFFICER NOR THE CIT (APP EAL) HAS DISBELIEVED THE GENUINENESS OF THE TRANSACTION. THERE WAS NO DISPUT E THAT THE PURCHASES WERE GENUINE.' ANUPAM TELE SERVICES VS ITO IN (2014) 43 TAXMANN.CO M 199 (GUJ) SECTION 40A(3) OF THE INCOME-TAX ACT 1961 READ W ITH RULE 6DD OF THE INCOME- TAX RULES 1962 BUSINESS DISALLOWANCE - CASH PAYME NT EXCEEDING PRESCRIBED LIMITS RULE 6DD(J) ASSESSMENT YEAR 2006-07 - ASSESS EE WAS WORKING AS AN AGENT OF TATA TELE SERVICES LIMITED FOR DISTRIBUTING MOBI LE CARDS AND RECHARGE VOUCHERS - PRINCIPAL COMPANY TATA INSISTED THAT CHE QUE PAYMENT FROM ASSESSEE'S CO-OPERATIVE BANK WOULD NOT DO SINCE REALIZATION T OOK LONGER TIME AND SUCH PAYMENTS SHOULD BE MADE ONLY IN CASH IN THEIR BANK ACCOUNT - IF ASSESSEE WOULD NOT MAKE CASH PAYMENT AND MAKE CHEQUE PAYMENTS ALON E IT WOULD HAVE RECEIVED RECHARGE VOUCHERS DELAYED BY 4/5 DAYS WHIC H WOULD SEVERELY AFFECT ITS BUSINESS OPERATION - ASSESSEE THEREFORE MADE CASH PAYMENT - WHETHER IN VIEW OF ABOVE NO DISALLOWANCE UNDER SECTION 40A (3) WAS TO BE MADE IN RESPECT OF PAYMENT MADE TO PRINCIPAL - HELD YES [PARAS 21 TO 23] [IN FAVOUR OF THE ASSESSEE]' 7 ITA NO.340/KOL/2014 M/S. SHIBPUR PACHAI SHOP. A.YR.2008-09 7 SRI LAXMI SATYANARAYANA OIL MILL VS CIT REPORTED IN (2014) 49 TAXMANN.COM 363 (ANDHRAPRADESH HIGH COURT) 'SECTION 40A(3) OF THE INCOME-TAX ACT 1961 READ W ITH RULE 6DD OF THE INCOME- TAX RULES 1962- BUSINESS DISALLOWANCE - CASH PAYME NT EXCEEDING PRESCRIBED LIMIT (RULE 6DD) - ASSESSEE MADE CERTAIN PAYMENT OF PURCHASE OF GROUNDNUT IN CASH EXCEEDING PRESCRIBED LIMIT - ASSESSEE SUBMITTE D THAT HE MADE PAYMENT IN CASH BECAUSE SELLER INSISTED ON THAT AND ALSO GAVE INCENTIVES AND DISCOUNTS FURTHER SELLER ALSO ISSUED CERTIFICATE IN SUPPORT OF THIS - WHETHER SINCE ASSESSEE HAD PLACED PROOF OF PAYMENT OF CONSIDERATION FOR IT S TRANSACTION TO SELLER AND LATER ADMITTED PAYMENT AND THERE WAS NO DOUBT ABOUT GENUINENESS OF PAYMENT NO DISALLOWANCE COULD BE MADE UNDER SECTION 40A(3) - HELD YES [PARA 23] [IN FAVOUR OF THE ASSESSEE]' CIT VS SMT. SHELLY PASSI REPORTED IN (2013) 350 ITR 227 (P&H) IN THIS CASE THE COURT UPHELD THE VIEW OF THE TRIBU NAL IN NOT APPLYING SECTION 40A(3) OF THE ACT TO THE CASH PAYMENTS WHEN ULTIMAT ELY SUCH AMOUNTS WERE DEPOSITED IN THE BANK BY THE PAYEE. 18. WE ARE NOT INCLINED TO IGNORE THE INTENTION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT BY GIVING A PLAIN READING OF THE SAME AS A RGUED BY THE LD DR. WE FIND THAT THE DISALLOWANCE OF THE ENTIRE CASH PURCHASES RESULTS I N ABNORMAL TRADING PROFIT FOR THE ASSESSEE WHICH IT COULD NEVER EARN. WE FIND A PUR POSIVE CONSTRUCTION SHOULD BE RESORTED TO WHILE APPLYING THE PROVISIONS OF THE ACT. HENCE IT WOULD BE MORE RELEVANT TO GET INTO THE INTENTION OF THE LEGISLATURE. IN OUR OPINION THE PRIMARY OBJECT OF ENACTING SECTION 40A(3) WAS TWO-FOLD FIRSTLY PUTTING A CHECK ON T RADING TRANSACTIONS WITH A MIND TO EVADE THE LIABILITY TO TAX ON INCOME EARNED OUT OF SUCH T RANSACTION AND SECONDLY TO INCULCATE THE BANKING HABITS AMONGST THE BUSINESS COMMUNITY. APPARENTLY THIS PROVISION WAS DIRECTLY RELATED TO CURB THE EVASION OF TAX AND INC ULCATING THE BANKING HABITS. THEREFORE THE CONSEQUENCE WHICH WERE TO BEFALL ON ACCOUNT OF NON-OBSERVATION OF SECTION 40A(3) MUST HAVE NEXUS TO THE FAILURE OF SUCH OBJECT. THE REFORE THE GENUINENESS OF THE TRANSACTIONS IT BEING FREE FROM VICE OF ANY DEVICE OF EVASION OF TAX IS RELEVANT CONSIDERATION. IN THE INSTANT CASE THE CASH HAS B EEN DEPOSITED DIRECTLY IN THE BANK ACCOUNT OF THE SUPPLIER I.E M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD BY THE ASSESSEE. 19. WE FIND THAT THE HONBLE APEX COURT IN THE CASE OF CTO VS SWASTIK RO ADWAYS REPORTED IN (2004) 3 SCC 640 HAD HELD THAT THE CONSEQUENCES OF NON-COMPLIANCE O F MADHYAPRADESH SALES TAX ACT WHICH WERE INTENDED T O CHECK THE EVASION AND AVOIDANCE OF SALES TAX WERE SIGNIFICANTLY HARSH. THE COURT W HILE UPHOLDING THE CONSTITUTIONAL VALIDITY NEGATED THE EXISTENCE OF A MENS REA AS A CONDITION NECESSARY FOR LEVY OF PENALTY FOR NON- COMPLIANCE WITH SUCH TECHNICAL PROVISIONS REQUIRED HELD THAT IN THE CONSEQUENCE TO FOLLOW THERE MUST BE NEXUS BETWEEN THE CONSEQUENCE THAT BEFALL FOR NON-COMPLIANCE WITH SUCH PROVISIONS INTENDED FOR PREVENTING THE TAX EVA SION WITH THE OBJECT OF PROVISION BEFORE 8 ITA NO.340/KOL/2014 M/S. SHIBPUR PACHAI SHOP. A.YR.2008-09 8 THE CONSEQUENCE CAN BE INFLICTED UPON THE DEFAULTER . THE SUPREME COURT HAS OPINED THAT THE EXISTENCE OF NEXUS BETWEEN THE TAX EVASION BY T HE OWNER OF THE GOODS AND THE FAILURE OF C & F AGENT TO FURNISH INFORMATION REQUIRED BY THE COMMISSIONER IS IMPLICIT IN SECTION 57(2) AND THE ASSESSING AUTHORITY CONCERNED HAS TO NECESSARILY RECORD A FINDING TO THIS EFFECT BEFORE LEVYING PENALTY U/S 57(2). THOUGH IN THE INSTANT CASE THE ISSUE INVOLVED IS N OT WITH REGARD TO THE LEVY OF PENALTY BUT THE REQUIREMENT OF LAW TO BE FOLLOWED BY THE ASSESS EE WAS OF AS TECHNICAL NATURE AS WAS IN THE CASE OF SWASTIK ROADWAYS (3 SCC 640) AND THE CO NSEQUENCE TO FALL FOR FAILURE TO OBSERVE SUCH NORMS IN THE PRESENT CASE ARE MUCH HIG HER THAN WHICH WERE PRESCRIBED UNDER THE MADHYA PRADESH SALES TAX ACT. APPARENTLY IT IS A RELEVANT CONSIDERATION FOR THE ASSESSING AUTHORITY UNDER THE INCOME TAX ACT TH AT BEFORE INVOKING THE PROVISIONS OF SECTION 40A(3) IN THE LIGHT OF RULE 6DD AS CLARIFIE D BY THE 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. WE HOLD THAT THE PURPOSE OF SECTION 40A(3) IS ONLY PREVENTIVE AND TO CHECK EVASION OF TAX AND FLOW OF UNACCOUNTED MON EY OR TO CHECK TRANSACTIONS WHICH ARE NOT GENUINE AND MAY BE PUT AS CAMOUFLAGE TO EVADE T AX BY SHOWING FICTITIOUS OR FALSE TRANSACTIONS. ADMITTEDLY THIS IS NOT THE CASE IN THE FACTS OF THE ASSESSEE HEREIN. THE ASSESSEE HAD DIRECTLY DEPOSITED CASH IN THE BANK AC COUNT OF THE SUPPLIER M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD WHICH FACT IS ALSO ACCEPTED BY THE LD AO AND MANDATED BY THE NOTIFICATION DATED 29.8.2005 ISSUED BY THE E XCISE DEPARTMENT GOVERNMENT OF WEST BENGAL. IT IS ALSO PERTINENT TO NOTE THAT TH E HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SMT.HARSHILA CHORDIA VS ITO REPORTED IN (20 08) 298 ITR 349 (RAJ) HAD HELD THAT THE EXCEPTIONS CONTAINED IN RULE 6DD OF INCOME TAX RULES ARE NOT EXHAUSTIVE AND THAT THE SAID RULE MUST BE INTERPRETED LIBERALLY. 20. WE ALSO FIND THAT THE IMPUGNED ISSUE IS ALSO COVERED BY THE DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ASHO K MONDAL VS ITO IN ITA NO. 873/KOL/2012 FOR ASST YEAR 2009-10 DATED 6.2.2014 WHEREIN IT WAS HELD THAT :- 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E OUTSET A PERUSAL OF THE DECISION IN THE CASE OF SMT.PUSHPALATA MONDAL SHOWS THAT THE TRIBUNAL HAD DECIDED THE CASE BY FOLLOWING THE DECISION OF HON'BLE KERALA HI GH COURT IN THE CASE OF K.ABDU & CO. REFERRED TO SUPRA WHEREIN THE ISSUE WAS IN RELATION TO RULE 6DD(A) OF IT RULES. THE ISSUE IN THE ASESSEC'S CASE IS IN RESPECT OF THE PAYMENTS MADE UNDER THE RULES FRAMED BY THE GOVERNMENT AND SUCH PAYMENT WAS REQUIRED TO BE MADE IN LEGAL TENDER. A PERUSAL OF THE GOVERNMENT NOTIFICATION ISSUED BY THE GOVT. OF WEST BENGAL CLEARLY SHOWS THAT THE DEALERS ARE AGENTS OF THE GOVERNMENT AND THE PAYMEN TS MADE ARE TO THE GOVERNMENT. IT ALSO MAKES IT CATEGORICALLY REQUIRED THAT THE PAYME NT IS TO BE MADE BEFORE LIFTING OF THE COUNTRY SPIRIT. CONSEQUENTLY WE ARE OF THE VIEW THA T THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF M/S.AMRAI PACHWAI & C.S.SHOP REFERRED TO SUPRA WHEREIN IT HAS BEEN HELD AS FOLLOWS :- '6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E OUTSET A PERUSAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE AO HAS RECO GNIZED THE ASSESSEE'S BUSINESS IN TRADING OF COUNTRY SPIRIT AND COUNTRY L IQUOR. COPY OF FORM OF LICENCE ISSUED BY DURGAPUR MUNICIPAL CORPORATION AND COPY O F FORM III ISSUED BY 9 ITA NO.340/KOL/2014 M/S. SHIBPUR PACHAI SHOP. A.YR.2008-09 9 DEPARTMENT OF EXCISE GOVT. OF W.B. WERE ALSO FOUND AT PAGES 177 AND 179 OF THE ASSESSEE'S PAPER BOOK. IN ANY CASE THE VALIDITY OF LICENCE OF THE ASSESSEE TO TRADE IN COUNTRY SPIRIT AND COUNTRY LIQUOR IS NOT THE ISS UE BEFORE US. THE ISSUE IS WHETHER THE PAYMENTS MADE BY THE ASSESSEE FOR THE PURCHASE OF COUNTRY SPIRIT FROM THE TERRITORIAL LICENSEE BOTTLING PLANT IFB AGRO INDUS TRIES LTD. CITY CENTRE DURGAPUR FALLS WITHIN THE EXEMPTION PROVIDED UNDER RULE 6DD(B) OF THE I.T.RULES 1962. ADMITTEDLY THE AO HAS RECOGNIZED THAT THE PR OVISION OF RULE 6DD(B) OF THE I.T RULES 1962 IS APPLICABLE IN CASE OF PAYMENTS M ADE TO GOVERNMENT DIRECTLY. THIS IS FOUND IN PAGE 2 OF THE ASSESSMENT ORDER. A PERUSAL OF THE KOLKATA GAZETTE TUESDAY 20 TH SEPT 2005 SHOWS THAT THE GOVERNMENT OF WEST BENGA L DEPARTMENT OF EXCISE HAS ISSUED A NOTIFICATION WHEREIN THE WA REHOUSE HAS BEEN IDENTIFIED TO MEAN THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO THE RETAIL VENDORS ESTABLISHED AT CONVENIENT PLACES BY THE COMMISSIONER AT THE EXP ENSE OF THE STATE GOVERNMENT OR AT THE EXPENSE OF A PERSON TO WHOM THE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLING COUNTRY SPIRIT BY WHOLESALE HAS BEEN GRANTE D U/S 22 OF THE ACT OF A LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT. FURTHER IT HAS BEEN SPECIFICALLY IDENTIFIED THAT THE AUTHORISED REPRESENTATIVE OF THE WHOLESALE LICE NSEE SHALL REALIZE THE NECESSARY AMOUNT OF DUTY COST PRICE AND BOTTLING CHARGE IF THERE BE ANY AT THE PRESCRIBED RATE AND SUCH OTHER IMPOSITION AS MAY BE PRESCRIBE D BY LAW FROM THE RETAIL VENDOR TO WHOM THE COUNTRY SPIRIT IS TO BE ISSUED F ROM THE CONCERNED WAREHOUSE. IT IS ALSO SPECIFICALLY MENTIONED IN SECTION (2) OF THE SAID NOTIFICATION THAT NO RETAIL VENDOR OF COUNTRY SPIRIT SHALL DEPOSIT DUTY DIRECT INTO THE LOCAL TREASURY FOR ISSUE OF COUNTRY SPIRIT TO BE TAKEN BY HIM FROM THE WAREH OUSE CONCERNED WHICH CLEARLY SHOWS THAT THE WAREHOUSE IS FOR THE SUPPLY OF THE C OUNTRY LIQUOR SPECIFICALLY THE WAREHOUSE IS UNDER THE DIRECT CONTROL AND CUSTODY O F THE STATE GOVT. THE STATE GOVERNMENT HAS CLOSED ITS DOORS IN SO FAR AS THE LO CAL TREASURY IS CONCERNED AND THE PAYMENT FOR THE PURCHASE OF COUNTRY SPIRIT OR C OUNTRY LIQUOR HAS TO BE MADE TO THE WAREHOUSE RUN BY THE GOVERNMENT. THIS SHOWS TH AT ANY PAYMENT MADE TO THE WAREHOUSE WHICH IS UNDER THE DIRECT CONTROL OF THE STATE GOVERNMENT IS A PAYMENT MADE DIRECTLY TO THE GOVERNMENT. ONCE THIS IS ACCEPTED THEN THE PROVISIONS OF RULE 6DD(B) OF THE I.T RULES 1962 WH ICH CLEARLY SPELLS OUT THAT THE PAYMENT MADE TO THE GOVERNMENT IN LEGAL TENDER UNDE R THE RULES FRAMED BY THE GOVERNMENT IS EXEMPTED FROM THE RIGOURS OF SECTION 40A(3) OF THE ACT. HERE IT IS NOTICED THAT THE PAYMENTS MADE BY THE ASSESEE FOR P URCHASE OF COUNTRY SPIRIT AND COUNTRY LIQUOR IS TO THE GOVERNMENT AS PER THE NOTI FICATION ISSUED BY THE GOVERNMENT AND IS IN LEGAL TENDER SPECIFIED BY THE NOTIFICATION. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE PAYMENT MADE BY THE ASSESSEE FOR THE PURCHASE OF COUNTRY LIQUOR AND COUNTRY SPIRIT FROM THE TERRITORIAL LICENSEE BOTTLING PLANT IFB AGRO INDUSTRIES LTD. CITY CENTRE DURGA PUR IS PROTECTED BY THE EXEMPTION IN TERMS OF RULE 6DD(B) OF THE 1.T.RULES 1962. IN THE CIRCUMSTANCES THE ADDITION AS MADE BY THE AO AND AS CONFIRMED BY THE ID. CIT(A) BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE I. T.ACT 19 61 STANDS DELETED. 8. IN THE RESULT THE ADDITION AS CONFIRMED BY THE I D. CIT(A) STANDS DELETED. 10 ITA NO.340/KOL/2014 M/S. SHIBPUR PACHAI SHOP. A.YR.2008-09 10 WE FIND THAT THIS DECISION WAS RENDERED BY PLACING RELIANCE ON ITS EARLIER DECISION IN THE CASE OF M/S AMRAI PACHWAI & C.S.SHOP IN ITA NO. 125 1/KOL/2011 DATED 15.1.2014 AND AFTER CONSIDERING THE CONTRARY DECISIONS RENDERED I N THE CASE OF PUSHPALATA MONDAL IN ITA NO. 965/KOL/2010 DATED 28.7.2011 AND HONBLE KE RALA HIGH COURT IN THE CASE OF CIT VS K ABDU & CO (170 TAXMAN 297). WE FIND THAT TH E CO-ORDINATE BENCH DECISION IN THE CASE OF M/S AMRAI PACHWAI & C.S.SHOP IN ITA NO. 125 1/KOL/2011 DATED 15.1.2014 AND THE HELD PORTION IS REPRODUCED HEREINABOVE. 21. WE FIND THAT M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD IS A BOTTLING PLANT CUM WAREHOUSE UNDER RULE 2(VII) OF THE WEST BENGAL EXCISE RULES 2005 WITH PRIVILEGE GRANTED U/S 22 OF THE BENGAL EXCISE ACT 1909. AT THIS JUNCTURE IT WOULD BE RELEVANT TO GO INTO THE DEFINITION OF WAREHOUSE AS PROVIDED UNDER THE STATE EXCISE RULES 2005 AS BELOW:- WAREHOUSE UNDER RULE 2(VII) OF THE W.B.EXCISE R ULES 2005 MEANS THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VE NDORS ESTABLISHED AT CONVENIENT PLACES BY THE COMMISSIONER AT THE EXPENS E OF THE STATE GOVERNMENT OR AT THE EXPENSE OF A PERSON TO WHOM THE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLING COUNTRY SPIRIT BY WHOLESALE HAS BEEN GRANTE D UNDER SECTION 22 OF THE ACT OR OF A LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT . THE ABOVE DEFINITION MAKES IT CLEAR THAT THE WAREH OUSE REFERRED TO UNDER THE STATE EXCISE RULES IS UNDER THE DIRECT CONTROL AND AUTHOR ITY OF THE COMMISSIONER OF STATE EXCISE BECAUSE IT IS ESTABLISHED BY THE COMMISSIONER OF ST ATE EXCISE AND AS SUCH IS A STATE GOVERNMENT ESTABLISHMENT. IT IS ALSO PERTINENT TO NOTE THAT THE EXPENDITURE IN RELATION TO SUCH WAREHOUSE IS BORNE BY THE STATE GOVERNMENT OR BY THE LICENSEE TO WHOM THE EXCLUSIVE PRIVILEGE IS GRANTED U/S 22 OF THE BENGAL EXCISE ACT 1909. HENCE THERE COULD BE NO DOUBT THAT THE WAREHOUSE IS ESTABLISHED BY THE S TATE EXCISE COMMISSIONER. HENCE IT COULD BE SAFELY CONCLUDED THAT THE WAREHOUSE SO EST ABLISHED BY THE STATE EXCISE COMMISSIONER IS A STATE GOVERNMENT ESTABLISHMENT. IT WOULD ALSO BE PERTINENT TO NOTE THAT THE SAID WAREHOUSE HAS BEEN SPECIFICALLY ESTAB LISHED FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VENDORS (ASSESSEE HEREIN) ONLY AND NOT TO AN YBODY ELSE. IT WOULD BE PERTINENT TO LOOK INTO THE DEFINITION O F WHOLESALE LICENSEE AS PER RULE 2(VIII) OF THE EXCISE RULES 2005 AS BELOW:- RULE 2(VIII) WHOLESALE LICENSEE MENAS THE WHOLE SALE VENDOR OF COUNTRY SPIRIT TO WHOM LICENCE HAS BEEN GRANTED IN WEST BENGAL EXCISE FORM NO. 26. IT WOULD BE PERTINENT TO LOOK INTO SECTION 22 OF TH E BENGAL EXCISE ACT 1909 AT THIS JUNCTURE AS BELOW:- SECTION 22 GRANT OF EXCLUSIVE PRIVILEGE OF MANUFA CTURE AND SALE OF COUNTRY LIQUOR OR INTOXICATING DRUGS (1) THE STATE GOVERNMENT MAY GRANT TO ANY PERSON ON SU CH CONDITIONS AND FOR SUCH PERIOD AS IT MAY THINK FIT THE EXCLUSIVE PRIV ILEGE 11 ITA NO.340/KOL/2014 M/S. SHIBPUR PACHAI SHOP. A.YR.2008-09 11 (A) OF MANUFACTURING OR SUPPLYING BY WHOLESALE OR (B) OF MANUFACTURING AND SUPPLYING BY WHOLESALE OR (C) OF SELLING BY WHOLESALE OR RETAIL OR (D) OF MANUFACTURING OR SUPPLYING BY WHOLESALE AND SELL ING RETAIL OR (E) OF MANUFACTURING AND SUPPLYING BY WHOLESALE AND SEL LING RETAIL ANY COUNTRY LIQUOR OR INTOXICATING DRUG WITHIN ANY SPECIFIED LOCAL AREA: PROVIDED THAT PUBLIC NOTICE SHALL BE GIVEN TO THE I NTENTION TO GRANT ANY SUCH EXCLUSIVE PRIVILEGE AND THAT ANY OBJECTIONS MADE B Y ANY PERSON RESIDING WITHIN THE AREA AFFECTED SHALL BE CONSIDERED BEFORE AN EXC LUSIVE PRIVILEGE IS GRANTED. (2) NO GRANTEE OF ANY PRIVILEGE UNDER SUB-SECTION ( 1) SHALL EXERCISE THE SAME UNLESS OR UNTIL HE HAS RECEIVED A LICENSE IN THAT B EHALF FROM THE COLLECTOR OR THE EXCISE COMMISSIONER. HENCE IT COULD BE SAFELY CONCLUDED THAT M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD (BOTTLING PLANT) IS A WAREHOUSE WITHIN THE MEANING OF RULE 2(VII) OF THE EXCISE RULES 2005 AND SAID WAREHOUSE IS A STATE GOVERNMENT ESTABLISHM ENT ESTABLISHED AND CONTROLLED BY THE EXCISE COMMISSIONER . IT WOULD BE RELEVANT TO R EPRODUCE RULE 6DD(B) OF THE IT RULES AT THIS JUNCTURE :- (B) WHERE THE PAYMENT IS MADE TO THE GOVERNMENT AND UNDER THE RULES FRAMED BY IT SUCH PAYMENT IS REQUIRED TO BE MADE IN LEGAL TE NDER. IN THE INSTANT CASE THE ASSESSEE (RETAIL VENDOR) H AD MADE CASH PAYMENTS FOR PURCHASE OF COUNTRY SPIRIT BY DEPOSITING CASH DIRECTLY INTO THE BANK ACCOUNT OF M/S ABPL AS PER RULE 6(2) OF THE EXCISE RULES 2005 IT HAS TO BE CONSTR UED AS PAYMENT MADE TO THE STATE GOVERNMENT AUTHORITY AND ACCORDINGLY FALLS UNDER TH E EXCEPTION PROVIDED IN RULE 6DD(B) OF THE IT RULES. 22. IT IS NOT IN DISPUTE THAT M/S ASANSOL BOTTLIN G & PACKAGING CO. PVT LTD HAVE BEEN GRANTED LICENCE TO ACT AS A WHOLESALER FOR SUPPLY O F COUNTRY LIQUOR TO THE RETAIL VENDOR AS PER THE REGULATIONS OF THE EXCISE DEPARTMENT GOVE RNMENT OF WEST BENGAL. AT THE COST OF REPETITION WE WOULD LIKE TO STATE THAT THE SAID RE GULATION MANDATED THE PAYMENTS TO BE MADE DIRECTLY INTO THE BANK ACCOUNT OF THE SAID WHO LESALE LICENSEE BY THE RETAIL VENDOR (I.E ASSESSEE HEREIN) FOR STRICT AND EFFECTIVE REGULATIO N OF THE COUNTRY LIQUOR AND FOR PREVENTION OF SPURIOUS STOCKS AND BLACK MARKETING TRANSACTIONS FROM THE SAME. HENCE IT COULD BE SAFELY CONCLUDED THAT THE SAID WHOLESALE LICENSEE H AD ACTED AT THE INSTANCE OF THE STATE GOVERNMENT. ONCE THIS IS SO THEN THE SAID WHOLES ALE LICENSEE COULD BE CONSTRUED AS AN AGENT OF THE STATE GOVERNMENT. FOR THE SAKE OF CO NVENIENCE THE RELEVANT RULE IS REPRODUCED HEREUNDER:- 12 ITA NO.340/KOL/2014 M/S. SHIBPUR PACHAI SHOP. A.YR.2008-09 12 RULE 6DD(K) WHERE THE PAYMENT IS MADE BY ANY PERS ON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVI CES ON BEHALF OF SUCH PERSON. THE PAYMENT MADE BY THE ASSESSEE RETAIL VENDOR TO T HE PRINCIPAL GOVERNMENT OF WEST BENGAL THROUGH ITS WHOLESALE AGENT. THE RELATIONSH IP BETWEEN THE ASSESSEE (AUTHORIZED RETAILER) AND GOVERNMENT OF WEST BENGAL (THE SUPPLI ER) ACTING UNDER WEST BENGAL EXCISE RULES THROUGH ITS AUTHORISED WHOLESALER LICENSEE (A GENT) BOTH DEFACTO AND DEJURE IS ONE OF PRINCIPAL AND AGENT. WE HOLD THAT THE ASSESSEE RETAIL VENDOR HAD MADE PAYMENT TO THE SAID AGENT (WHOLSESALE LICENSEE) WOU LD FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD(K) OF THE RULES. 23. THE LD AR HAD ADVANCED ANOTHER ARGUMENT THAT THE PAYMENT IS MADE BY THE ASSESSEE TO STATE BANK OF INDIA AND ACCORDINGLY THE SAME WOULD FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD(A) OF THE RULES. WE FIND THA T THE ASSESSEE HAD MADE PAYMENTS ONLY TO THE CUSTOMER OF STATE BANK OF INDIA AND NOT TO S TATE BANK OF INDIA. HENCE THE ASSESSEES CASE DOES NOT FALL UNDER THE EXCEPTION P ROVIDED IN RULE 6DD(A) OF THE RULES. 24. WE HOLD FROM THE AFORESAID FINDINGS THAT THE ASSESSEES CASE FALLS UNDER THE EXCEPTIONS PROVIDED IN RULE 6DD(B) AND RULE 6DD(K) OF THE RULES. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES AND RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE WE HAVE NO HESITATION IN DELETING THE DISALLOWANCE MADE U/S 40A(3) OF THE ACT IN ALL THE YEARS UNDER APPEAL. ACCORDINGLY THE GROUNDS RAISED BY THE ASSESSEE FOR ALL THE YEARS UNDER APPEAL ARE ALLOWED. 5. THE FACTS AND CIRCUMSTANCES AND RELEVANT PROV ISION OF THE ACT APPLICABLE IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS AND PROVISI ONS OF LAW REFERRED TO IN THE DECISION RENDERED IN THE AFORESAID CASE. RESPECTFULLY FOLLOW ING THE DECISION REFERRED TO ABOVE I HOLD THAT DISALLOWANCE U/S 40A(3) OF THE ACT CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE DELETED. 6. IN THE RESULT THE APPEAL BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 19.10.2016. SD/- [ N.V.VASUDEVAN ] JUDICIAL MEMBER DATED : 19.10.2016. [RG PS] 13 ITA NO.340/KOL/2014 M/S. SHIBPUR PACHAI SHOP. A.YR.2008-09 13 COPY OF THE ORDER FORWARDED TO: 1. M/S. SHIBPUR PACHAI SOP VILLAGE & P.O. SHIBPUR DIST. BURDWAN PIN-713330. 2. I.T.O. WARD-1(4) ASANSOL. 3. CIT(A)-ASANSOL. 4. CIT- ASANSOL. 5. CIT(DR) KOLKATA BENCHES KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR ITAT KOLKATA BENCHES