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Judgment
Heard Dr. R.K. Srivastava, learned Counsel for the appellant and Mr. D.D. Chopra, learned Counsel appearing for the respondent.
Dispute relates to the assessment year 1988-89. Feeling aggrieved with the addition of Rs. 2,36,939/- in pursuance to the provisions contained in Sub-section (2) of Section 145 Income Tax Act as well as addition of Rs. 15,030/- u/s 40-A(3) of the Income Tax Act, present appeal has been preferred u/s 260-A of the Act.
The Income Tax Appellate Tribunal while allowing the appeal in part maintained the order of the assessing authority with regard to the amount in question.
While admitting the appeal on 1.9.2004, this Court had not framed substantial question of law on its own keeping in view the mandate of Section 260-A of the Income Tax Act. However, substantial questions of law at Serial Nos. 1, 2, 3 and 4 have been taken into account while admitting the appeal. These questions are reproduced as under:
Whether the Income Tax authorities have jurisdiction or power u/s 145(2) of the Income Tax Act, 1961 to reject the duly maintained and correct accounts merely for not keeping the Talpattis (weighment) in some cases as other requirements i.e. name and address of the persons, who had kept the potatoes were maintained and also in number of cases entire details as received to work-out the income of the assessee was duly kept?
ii. Whether the appellate authority, after having not disputed the details of the entries in Talpatti regarding farmers, quantity of potatoes stored by them and freight etc. at the time of storage, could reject the case of the petitioner in the matter of weighment at the time of Nikasi of the bags/quantity of potatoes under storage and fasten the additional tax liability in respect of Rs. 2,36,939.00 by applying provisions of Section 145(2) of the Income Tax Act, 1961?
iii. Whether purchase of Ammonia, an essential ingredient to run the cold storage, having not been disputed or doubted, the same could have been rejected on the ground that payment in respect of only two transactions of purchase of Ammonia of Rs. 6530/- and Rs. 8500/- being above Rs. 2500/-, ought to have been made through cheque or bank draft?
iv. Whether purchase of certain item in the open market in transaction of business is necessary to be made through bank draft or cheque notwithstanding the fact that the same is either not feasible or beyond control of an assessee?
It has been stated by learned Counsel for the appellant Dr. R.K. Srivastava that there is no dispute that the ammonia was purchased and consumed. Accordingly, the cash payment made for purchase of ammonia should have been considered as expenses in normal course of purchase from the open market. The submission is that the addition of amount in the manner aforesaid in pursuance to the provisions contained in Section 145(2), read with Section 40-A(3) of the Income Tax Act was not called for. Only because the amount was paid in cash, the assessing officer should not have made addition in the account of assessment year in question.
On the other hand, Mr. D.D. Chopra, learned Counsel for the respondent submits that the book account submitted by the appellant was disbelieved and during the assessment year in question, the provision with regard to cash transaction was only Rs. 2,500/- and the case does not fall under the exemption clause under Rule 6-DD of the Income Tax Act. According to Direct Tax Law Amendment Act, 1977 with effect from 1.4.1989, the provisions with regard to cash transaction of Rs. 2,500/- have been substituted by Rs. 10,000/-, meaning thereby, up to 31.3.1989, the maximum limit of cash transaction was Rs. 2,500/-.
In view of the statutory provisions with regard to maximum limit of Rs. 2,500/-, the assessing officer does not seem to be incorrect in adding the liability. Accordingly, neither the assessing officer nor the appellate authority below may be faulted while recording the finding with regard to addition in question for the purpose of tax.
However, it has been submitted by the learned Counsel for the appellant that the authority below should have applied its mind by exercising discretion provided under Sub-section(3) of Section 40-A of the Income Tax Act. It has also been stated that the appellant''s case should have been considered keeping in view the provisions contained in Rule 6-DD.
So far as exercise of discretion by the assessing officer to permit for cash transaction during normal course of business is concerned, the provisions contained in Rule 6-DD provide specific instances, when such discretion should be applied. Attention of the Court has not been invited to any pleading on record or any material which may show the circumstances relying on which the assessing officer was expected to adjudicate the controversy with regard to addition in question keeping in view the provisions contained in Rule 6-DD of the Income Tax Rules, 1962. In case the assessee wants benefit of certain statutory provisions or expects that the assessing officer should exercise discretion in his or her favour, then, there should be some pleading on record for the purpose. In absence of any pleading on record or request made by the assessee before the assessing officer, the order impugned cannot be assailed under the garb of Rule 6-DD.
Out of four questions of law framed, the learned Counsel for the appellant has pressed for question No. 4.
So far as the question No. 4 is concerned with regard to inability to make payment through bank draft is concerned, we are of the view that the assessee may not be permitted to transact the business in violation of statutory provisions. Once the maximum limit was Rs. 2,500/-, then it is expected that the Rule should be adhered during the course of transaction of business. Undoubtedly, the assessee was having option to advance his claim in pursuance to the provisions contained in Rule 6-DD of the Rules but in the present case, it seems to be missing. In absence of any pleading as observed hereinabove, the assessing officer was not expected to give the benefit of Section 40-A(3) of the Income Tax Act. Since the transaction was of more than Rs. 2,500/-, the assessing officer has rightly not given the benefit of Section 40-A(3) read with Rule 6-DD.
In view of above, the appeal lacks merit. It is accordingly dismissed. No order as to costs.