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M/s Maa Jagdambay Enterprises, Purkazi, Muzaffarnagar. Vs. Income Tax Officer, Ward-2(1), Ward- Muzaffarnagar.
October, 09th 2014
               IN THE INCOME TAX APPELLATE TRIBUNAL
                                 `E' : NEW DELHI
                     DELHI BENCH `E

           BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
                                GARG, JUDICIAL MEMBER
            SHRI CHANDRA MOHAN GARG,

                            No.2759/Del/2013
                        ITA No.
                                        2009-10
                      Assessment Year : 2009-


M/s Maa Jagdambay             Vs.    Income Tax Officer,
Enterprises,                         Ward-2(1),
                                     Ward-
Purkazi,                             Muzaffarnagar.
Muzaffarnagar.
Muzaffarnagar.
PAN : AAQFM2746K.
    (Appellant)                          (Respondent)

             Appellant by      :    Shri Rohitash Kumar and
                                    Shri Prem Prakash, Advocates.
             Respondent by     :    Shri J.P. Chandraker, Sr.DR.

                               ORDER

         AGRAWAL, VP :
PER G.D. AGRAWAL,
     This appeal by the assessee is directed against the order of
learned CIT(A), Muzaffarnagar dated 11th February, 2013 for the AY
2009-10.


2.   The assessee has raised the following grounds of appeal:-

      "1. That order is against law & facts on the record.

      2. That ld.CIT(A) was wrong in disallowing expenses
      with out rejection of a/c books.

      3. That ld.CIT(A) was wrong in disallowing payments of
      expenses u/s 40A(3) at Rs.25,29,895.00 in respect of
      purchase made on Sundays/Holidays/Bank Closed days.

      4. That ld.CIT(A) was wrong in disallowing payments of
      Rs.38,84,575.00 on Sundays/Holidays/Bank Closed days
      against purchases made previously on credit bases.
                                      2                          ITA-2759/D/2013



          5. That     ld.CIT(A), was  wrong  in   disallowing
          Rs.28,10,102.00 being cash payments not exceeding
          Rs.20,000.00.

          6. That ld.CIT(A) was wrong in not considering the
          written submissions dt. 19.12.2012.

          7. That ld.CIT(A) did not consider the written
          submissions and rejoinders and evidencing papers
          properly and confirmed the additions of Rs.91,45,944.00
          wrongly."

3.    At the time of hearing before us, it is submitted by the learned
counsel that ground Nos.1 to 6 and 7 are of general nature and only
ground Nos.3, 4 & 5 require adjudication by the ITAT which are against
the disallowance made u/s 40A(3) which is sustained by the learned
CIT(A).      He stated that the Assessing Officer made the total
disallowance of `95,96,883/-. It is the assessee's contention that the
sum of `64,12,470/- (25,29,895 + 38,84,575) are the payments made
on Sundays/bank holidays and, therefore, the same are squarely
covered by Rule 6DDJ. In support of this contention, he also referred to
the remand report by the Assessing Officer in which the Assessing
Officer    has   confirmed   that   the   payment   has   been   made       on
Sundays/bank holidays. He submitted that the learned CIT(A) did not
accept the assessee's contention on the ground that the payment is
not recorded on Sundays/bank holidays in the books of M/s Sir Shadi
Lal Distillery & Chemical Works, Mansurpur. It was explained by the
learned counsel that payment is made by the assessee to depot-in
charge Shri Prafful Bhatnagar who is maintaining the separate books of
account in respect of the depot.      That the said books of Shri Prafful
Bhatnagar were produced during remand proceedings and the
Assessing Officer has stated in the remand report that the payment
has been recorded in the books of Shri Prafful Bhatnagar on
Sundays/bank holidays. He further submitted that another ground on
which learned CIT(A) did not allow the relief under Rule 6DDJ was that
                                     3                          ITA-2759/D/2013






the assessee has not proved business exigency for making the
payment on Sundays/bank holidays. He stated that as per Rule 6DDJ,
there is no such requirement. That the assessee had further claimed
that the sum of `28,10,102/- was cash payment not exceeding
`20,000/- and the Assessing Officer has wrongly considered the same
to be in violation of Section 40A(3).          In the remand report, the
Assessing Officer accepted these facts also.            The learned CIT(A)
sustained the disallowance in respect of payments below `20,000/- on
the ground that the device has been adopted by the assessee so as to
circumvent the provisions of law.        He stated that Section 40A(3) is
applicable only when the payment made by the assessee exceeded
`20,000/-. If the payment made by the assessee at a time does not
exceed `20,000/-, Section 40A(3) is not applicable at all. He, therefore,
submitted that the addition sustained by the learned CIT(A) under
Section 40A(3) may be deleted.


4.    Learned DR, on the other hand, relied upon the orders of
authorities below and he stated that from the order of CIT(A), it is
evident that in the books of account of M/s Sir Shadi Lal Distillery &
Chemical Works, the receipt of payment from the assessee is not
recorded on Sundays or bank holidays and therefore, Rule 6DDJ would
not be applicable.     Similarly, with regard to the payment below
`20,000/-, he stated that the assessee has only adopted a device to
make the payment not exceeding `20,000/- at a time so as to
circumvent   the   provisions   of   Section   40A(3)    which cannot      be
permitted. He, therefore, submitted that the order of learned CIT(A)
should be sustained.


5.    We have carefully considered the submissions of both the sides
and perused relevant material placed before us.           That in the first
remand report dated 26.10.2012, the Assessing Officer stated as
under:-
                                   4                       ITA-2759/D/2013




       "(ii) Cash payments made on bank closed days
       Rs.64,02,470/-
       On examination, it has been found that the payments
       have been made in cash on days when there were
       Sundays or other bank holidays. All the payments have
       duly been accounted for in the books of accounts of the
       assessee. Since the transactions are covered by rule
       6DD(j) of Income Tax Rules therefore, no adverse
       comment is made regarding the same."

6.   Thus, the Assessing Officer, after examining the necessary
details including the assessee's books of account, arrived at the
conclusion that the payments have been made in cash on Sundays or
other bank holidays and, therefore, such transactions are covered by
Rule 6DDJ of the Income-tax Rules. Again, in the remand report dated
29.11.2012, the Assessing Officer stated as under:-


       "(ii) Cash payments made on bank closed days
       Rs.64,02,470/-
       On examination, it has been found that the payments
       have been made in cash on days when there were
       Sundays or other bank holidays. All the payments have
       duly been accounted for in the books of accounts of Sh.
       Prafful Bhatnagar.

       However it is noticed that on 13.11.2008 cash payment of
       Rs.3,13,384/- has been entered in the books of accounts
       of Sh. Prafful Bhatnagar and also in the copy of account
       submitted by the assessee before your ld. self but in the
       written submission dated 04.10.2012 at Sl.No.17
       regarding date 13.11.2008 (G. Nanak Jayanti) the amount
       is shown at Rs.3,03,384/-."

7.   From the above, it is evident that the Assessing Officer examined
the books of account of Shri Prafful Bhatnagar and found that the
payments to the extent of `64,02,470/- have been recorded in the
books maintained by him on Sundays or bank holidays.       It is not in
dispute that Shri Prafful Bhatnagar was the depot-in charge of M/s Sir
Shadi Lal Distillery & Chemical Works.    In one more remand report
                                     5                      ITA-2759/D/2013



dated 17.12.2012, the Assessing Officer examined the books of M/s Sir
Shadi   Lal   Distillery &    Chemical   Works and reported that      the
transactions are not found recorded in the books of M/s Sir Shadi Lal
Distillery & Chemical Works. On the basis of the third remand report,
i.e., 17.12.2012, learned CIT(A) sustained the disallowance. However,
after considering the arguments of both the sides and the facts of the
case, we are unable to agree with the learned CIT(A).       When the
assessee made the payment to the depot-in charge i.e., Shri Prafful
Bhatnagar and he has maintained separate books for that depot and
has recorded the payment in the books maintained at the depot, then,
so far as assessee is concerned, it has been able to prove that the
payments have been made on bank holidays. When the depot informs
the head office and when and how the head office records the
payments, it is the matter between the depot and the head office.
Therefore, in our opinion, when in two remand reports i.e., the remand
report dated 26.10.2012 and the remand report dated 29.11.2012, the
Assessing Officer, after examining the books of the assessee as well as
the books of the depot which is maintained by Shri Prafful Bhatnagar,
has arrived at the conclusion that the payments have been made on
bank holidays, it cannot be denied the benefit of Rule 6DDJ merely
because the payment is not recorded in the head office on the said
dates. We, therefore, allow ground Nos.2 & 3 of the assessee's appeal.
Insofar as ground No.4 is concerned, i.e., payment not exceeding
`20,000/-, in the remand report dated 26.10.2012, the Assessing
Officer reported as under:-





        "(iv) Cash payments made not exceeding Rs.20,000/-
        Rs.28,10,102/-
        On examination, these payments have also been found
        duly accounted for in the books of accounts of the
        assessee."
                                   6                         ITA-2759/D/2013



8.    Again, in the remand report dated 29.11.2012, the Assessing
Officer reported as under:-


       "(iv) Cash payments made not exceeding Rs.20,000/-
       Rs.28,10,102/-
       On examination, these payments have also been found
       duly accounted for in the books of accounts of Sh. Prafful
       Bhatnagar."

9.    Thus, in these two remand reports, the Assessing Officer has not
disputed the assessee's claim that the cash payment to the extent of
`28,10,102/- was not exceeding `20,000/-.     Section 40A(3) reads as
under:-


       "40A. (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.

10.   Thus, Section 40A(3) is applicable where the payment for any
expenditure or the aggregate payment to a person in a day otherwise
than account payee cheque or bank draft exceeded `20,000/-.
Therefore, for applicability of Section 40A(3), it is essential that the
aggregate payment made to a person on any day should exceed
`20,000/-. Now, in the contention of the assessee as well as remand
report, there is no discussion about the aggregate payment in a day.
There is only discussion with regard to the payment not exceeding
`20,000/-.   We, therefore, set aside this aspect to the file of the
Assessing Officer and direct him to verify the aggregate payment made
by the assessee on each day and if the payment in a day does not
exceed `20,000/-, then no disallowance under Section 40A(3) would be
made. That if assessee makes the payment not exceeding `20,000/-
every day, it cannot be said that the payment has been made to
                                       7                            ITA-2759/D/2013



circumvent the provisions of Section 40A(3). Section 40A(3) would be
applicable when the assessee makes payment exceeding `20,000/- in a
day. If there is no payment exceeding `20,000/- in a day, there is no
violation   of   Section    40A(3),   so   there   is   no   question   of   any
circumvention of the provisions.       With this remark, we set aside the
issue raised by the assessee vide ground No.4 of its appeal.                 The
Assessing Officer is directed to readjudicate the issue after allowing
adequate opportunity of being heard to the assessee.


11.    In the result, the appeal of the assessee is deemed to be allowed
for statistical purposes.
       Decision pronounced in the open Court on 30th September, 2014.


                    Sd/-                                     Sd/-
                      GARG)
      (CHANDRA MOHAN GARG)                                AGRAWAL)
                                                    (G.D. AGRAWAL)
         JUDICIAL MEMBER                            VICE PRESIDENT

Dated : 30.09.2014
VK.

Copy forwarded to: -

1.     Appellant     : M/s Maa Jagdambay Enterprises,
                    Purkazi, Muzaffarnagar.

2.     Respondent : Income Tax Officer,
                 Ward-2(1), Muzaffarnagar.
                 Ward-
3.     CIT
4.     CIT(A)
5.     DR, ITAT

                                 Assistant Registrar

 
 
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