Commissioner Of Income Tax,Kolkata-Ii, Kolkata v. Bhartiya Hotels Ltd

O-26 ITAT/170/2014 IA No.GA/1/2014 (Old No.GA/3405/2014) IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE COMMISSIONER OF INCOME TAX,KOLKATA-II, KOLKATA -Versus- BHARTIYA HOTELS LTD. Appearance:Mr. Aryak Dutta, Adv....for the appellant/revenue. Mr. Rishi Raju, Adv.Mr. Soumyajyoti Nandy, Adv.Mr. Deepankar Thakur, Adv.Mr. Ashutosh Singh, Adv....for the respondent/assessee. BEFORE: The Hon’ble JUSTICE T.S. SIVAGNANAM -And- The Hon’ble JUSTICE BIVAS PATTANAYAK Date : 5[th] July, 2022.The Court : This appeal filed by the revenue underSection 260A of the Income Tax Act, 1961 (the ‘Act’ for brevity)is directed against the order dated 16[th] June, 2014 passed by theIncome Tax Appellate Tribunal “Third Member” Case (A): Kolkata (inshort the ‘Tribunal’) in ITA No.941/Kol/2011 for the assessmentyear 2007-08. The revenue has raised the following substantial questions of law for consideration: i)Whether on the facts and circumstances of the casethe Tribunal was justified in law to uphold theviews of the Administrative Member holding, interalia, that the provision of Section 40A(3) of thesaid Act could not be invoked?the Tribunal was justified in law to uphold theviews of the Administrative Member holding, interalia, that the provision of Section 40A(3) of thesaid Act could not be invoked? ii)Whether on the facts and circumstances of the casethe Tribunal was justified in not appreciating theviews of the judicial member who rightly held thatsection 40A(3) is applicable in case where issueinvolved is ‘payments made otherwise then by an A/cPayee Cheque or bank draft’ and not ‘payment made ina sum’ in worth mentioning?the Tribunal was justified in not appreciating theviews of the judicial member who rightly held thatsection 40A(3) is applicable in case where issueinvolved is ‘payments made otherwise then by an A/cPayee Cheque or bank draft’ and not ‘payment made ina sum’ in worth mentioning? We have heard Mr. Aryak Dutta, learned counsel for theappellant and Mr. Rishi Raju, learned Counsel assisted by Mr.Soumyajyoti Nandy, Mr. Deepankar Thakur and Mr. Ashutosh SinghAdvocates for the respondent/assessee. The short question involved in the instant case iswhether the provisions of Section 40A(3) of the Act would standattracted to the transaction effected by the assessee. The factsas noted by the assessing officer were that the assessee hadpurchased stock in trade over them by account payee cheque drawnon a bank or account payee bank draft and, therefore, provision of Section 40A(3) of the Act is attracted. The assessee was onappeal before the Commissioner of Income Tax (Appeals)-VIII,Kolkata [CIT(A)]. By an order dated 24[th] March, 2011, the CIT(A)allowed the assessee’s appeal, after examining the nature oftransaction and held that the assessing officer was not justifiedin considering the property in question to be stock in trade forthe assessment year under consideration and, consequently, Section40A(3) could not be attracted. The revenue carried the matter onappeal to the tribunal. The learned administrative member of thetribunal agreed with the CIT(A) whereas the learned judicialmember took a different view. Consequently, the learned Presidentof the tribunal exercised power under Section 255(4) of the Actand referred the matter to the learned third member to decide thequestion as to whether in the facts and circumstances of the case,the provisions of Section 40A(3) could be invoked or not. Thelearned third member had elaborately discussed the facts and tooknote of the findings recorded by the learned administrative memberwhile affirming the findings of the CIT(A). After noting theobject behind introduction of Section 40A(3), it was held thatwhen an expenditure is incurred for which payment is not made incash or monetary terms, the provisions will have no application.The learned third member took note of the fact that the learnedjudicial member who opined that the word “payment” occurring inSection 40A(3) of the Act has to be given a very wide meaning. The learned third member pointed out that the word “payment” hasto be read in conjunction with the expression “in a sum exceeding20,000 rupees” as contained in Section 40A(3) of the Act. Thatapart, the nature of transaction done by the assessee was alsoexamined on facts and it has not been disputed by the revenue thatthere was cash transaction done by the assessee in excess ofRs.20,000/-. The learned administrative member had taken note ofthe decision of the High Court of Kerala in the case ofCommissioner of Income Tax (Appeals) vs. Muthoot Brothers reportedin 247 ITR 27 (Ker.). With regard to the decision in the case ofAttar Singh Gurmukh singh vs. ITO reported in 191 ITR 667 (SC)which was referred to by the learned judicial member, as rightlypointed out by the learned Advocate appearing for therespondent/assessee, in the said case, admittedly payments weremade in cash exceeding a sum of Rs.2500/-. In the background ofthose facts, the Court had rendered a decision holding that cashpayment exceeding prescribed limit would attract Section 40A(3) ofthe Act. Therefore, the said decision is distinguishable onfacts. Learned Advocate appearing for the respondent/assesseeplaced reliance on the decision of the High Court of Gujarat inthe case of CIT-III vs. Dinesh Kumar Chandmal Jain reported in[2014] 42 taxmann.com 155 (Guj.) In the said case, the assessingofficer found that the assessee had paid an amount of Rs.18.22crores in cash to six parties and disallowed 20% of such payment under Section 40A(3). However, the assessing officer was not in aposition to actually prove that payment was made in cash, and,therefore, the said disallowance was set aside by the tribunal andthe order passed by the tribunal was confirmed by the Hon’bleDivision Bench in the case of Dinesh Kumar Chandmal Jain (supra).In fact, on facts, the case on hand is in a better footing as therevenue does not state that any cash transaction took place. Considering the facts and circumstances, we find thatthere is no perversity in the order passed the learned thirdmember of the tribunal agreeing with the learned administrativemember of the tribunal.For the above reasons, the appeal (ITAT/170/2014) failsand the same stands dismissed. The substantial questions of laware answered against the revenue. Consequently, the connected application for stay (IANo.GA/1/2014) also stands closed. (BIVAS PATTANAYAK, J.)