Full Text
HIGH COURT OF DELHI
Decision delivered on: 03.10.2023
RAJESH KUMAR ..... Appellant
Through: Mr Shantanu Kanungo and Mr Rajeev Bansal, Advs.
Through: Mr Vipul Agrawal, Sr. Standing Counsel with Mr Gibran Naushad and
Ms Sakshi Shairwal, Advs.
HON'BLE MR. JUSTICE GIRISH KATHPALIA [Physical Hearing/Hybrid Hearing (as per request)]
RAJIV SHAKDHER, J. (ORAL):
CM No.50702/2023
JUDGMENT
1. Allowed, subject to just exceptions.
2. This appeal concerns Assessment Year (AY) 2013-14.
3. Via the instant appeal, challenge is laid to the order dated 26.04.2023 passed by the Income Tax Appellate Tribunal [in short, “Tribunal”].
4. Via the order, the Tribunal sustained the order of the Commissioner of Income Tax [in short “CIT(A)”] and rejected the appeal of the assessee.
5. The record discloses that for the aforementioned assessment year, the appellant/assessee had filed a return of income (ROI), whereby, he declared his total income as Rs. 2,23,140/-.
6. During the assessment proceedings, the Assessing Officer (AO) found that in respect of certain purchases aggregating to Rs. 2,77,13,513/-, payments had been made otherwise than by account payee cheque.
7. On enquiry, it was found that payments to suppliers had been made via bearer cheques.
8. The aforementioned payments were paid to three concerns i.e., (i) Dolphine Sales Corporation, (ii) Salasar Enterprises, and (iii) Balaji Tradings. The breakup of the amounts is as follows:
┌──────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────┐ │ Sl. Name of the parties and address Total purchase (in Rs.) Mode of payment │ │ No. in cash during the │ │ year │ ├──────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────┤ │ 1. Dolphine Sales Corporation, 96,69,410/- 32,09,513/- │ │ 425/14, Street No.6, Bhola Nath │ │ Nagar, Shahdara, Delhi │ │ 2. Salasar Enterprises, Flat No.1, Pl 57,28,776.75 28,41,000/- │ │ No.11/3/2932, Sh. Ram Colony, │ │ Bhola Nath Nagar, Shahdara, │ │ Delhi │ │ 3. Balaji Trading co., 1658, III 2,30,94,494 2,16,63,000 │ │ Floor, Mangal Market, Bhagirath │ │ Pla [sic] Delhi │ │ Total 3,84,92,680.7 2,77,13,513 │ │ 9. It is not in dispute that the amounts were paid via bearer cheques to │ │ the above-mentioned concerns. │ │ 10. The appellant/assessee, in his defence, sought to rely on the erstwhile │ │ Rule 6DD(j) of the Income Tax Rules, 1962, read with Central Board of │ │ ITA 562/2023 Page 2 of 8 │ │ Signature Not Verified │ │ Digitally Signed │ │ By:VAISHALI CHAUHAN │ │ Direct Taxes [in short, “CBDT”] circular no. 220 dated 31.05.1977 [in short, │ │ “1977 circular”]. The relevant part of the said 1977 circular, which is │ │ founded on Rule 6DD(j) reads as follows: │ │ “383. Circumstances when Income-tax Officer can relax requirement of │ │ making payments in excess of Rs. 2,500 by crossed cheques under clause │ │ (j) of rule 6DD │ └──────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────┘
15. According to us, even if we were to accept that the reason given in the confirmation letters was correct, that is, the appellant/assessee was a new entrant in the business, we believe, to allay concerns of the suppliers i.e., the above-mentioned concerns, payments could have been made through bank drafts or other modes, whereby, banking channels were used for the subject payments.
16. Furthermore, we find that the Tribunal has returned with a finding of fact that these confirmations were produced for the first time before the CIT(A).
17. Counsel for the appellant/assessee says that this observation is not correct.
18. The grounds of appeal preferred before us show that there is nothing stated that would indicate that the appellant/assessee has averred that the said observation was perverse.
19. However, as indicated hereinabove, even if we were to assume that these confirmation letters were produced before the AO, it would still not help the cause of the assessee.
20. Clearly, payments made by the assessee to the concerns violated Section 40A(3) of the Income-tax Act, 1961 [in short, “Act”] as they were not made through an account payee cheque drawn on a bank, account payee bank draft or through the use of electronic clearing system through a bank account, and therefore, to fall within the ambit of the 1977 circular, the appellant/assessee was required to establish the genuineness of the transactions. The appellant/assessee having failed to do so, led to the deduction being rightly disallowed for the subject payments.
21. Significantly, with effect from A.Y. 2009-10, Rule 6DD was substituted via Notification No. 97/2008 dated 10.10.2008 issued by the CBDT. For convenience, the portions of this circular that pertain to the issue in question are extracted hereafter: “INCOME-TAX (SEVENTH AMENDMENT) RULES, 2008 - SUBSTITUTION OF RULE 6DD NOTIFICATION NO. 97/2008, DATED 10-10-2008 In exercise of the powers conferred by section 295 read with proviso to sub-section (3A) of section 40A of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:—
1. (1) These rules may be called the Income-tax (7th Amendment) Rules, 2008. (2) They shall come into force with effect from assessment year 2009-10.
2. In the Income-tax Rules, 1962, for rule 6DD, the following rule shall be substituted, namely:- ["Cases and circumstances in which a payment or aggregate of payments exceeding twenty thousand rupees may be made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft. 6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A 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 the cases and circumstances specified hereunder, namely:— xxx xxx xxx (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; [Emphasis is ours]
21.1. This aspect of the matter was not noticed by authorities below as they dealt with the 1977 circular placed before them without accounting for the substitution of Rule 6DD itself via the 2008 Notification.
21.2. To our minds, even if the petitioner’s/assessee’s case fell within the ambit of the 1977 circular, the petitioner/assessee could not have been allowed deductions on the subject payments made by the petitioner/assessee as the rule under which leeway was claimed did not exist for the AY in question.
22. We find no good reason to interfere with the impugned order passed by the Tribunal.
23. According to us, no substantial question of law arises for our consideration.
24. The appeal is, accordingly, dismissed.
(RAJIV SHAKDHER) JUDGE (GIRISH KATHPALIA)
JUDGE OCTOBER 3, 2023 Click here to check corrigendum, if any