Sri S.Sridharan, CHENNAI V. DCIT, Trichy

CO 134/CHNY/2010

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8446 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 5 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-04-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 17-04-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 12-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Non-deduction of tax
• Section: 40A(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 113/MDS/2010 (ASSESSMENT YEAR : 2005-06) THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE II, TIRUCHIRAPALLI. (APPELLANT) V. SHRI S. SRIDHARAN, 52, THANJORE MAIN ROAD, TIRUCHIRAPALLI. PAN : AAAFR 6713 M (RESPONDENT) C.O. NO. 134/MDS/2010 (IN I.T.A. NO. 113/MDS/2010) (ASSESSMENT YEAR : 2005-06) SHRI S. SRIDHARAN, 52, THANJORE MAIN ROAD, TIRUCHIRAPALLI. (CROSS-OBJECTOR) V. THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE II, TIRUCHIRAPALLI. (RESPONDENT) REVENUE BY : SMT. RUBY GEORGE, CIT-DR ASSESSEE BY : SHRI S. SRIDHAR, ADVOCATE DATE OF HEARING : 17.04.2013 DATE OF PRONOUNCEMENT : 30.04.2013 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEAL OF THE REVENUE AND CROSS-OBJECTI ON OF THE ASSESSEE, DIRECTED AGAINST AN ORDER DATED 19.11.200 9 OF COMMISSIONER OF INCOME TAX (APPEALS), TIRUCHIRAPPALLI. 2 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 2. CROSS-OBJECTION FILED BY THE ASSESSEE IS DELAYED BY 114 DAYS. CONDONATION PETITION HAS BEEN FILED. REASONABLE GR OUNDS HAVE BEEN SHOWN FOR THE DELAY. LEARNED D.R. DID NOT OBJECT. DELAY IS CONDONED AND CROSS-OBJECTION IS ADMITTED. 3. FACTS GIVING RAISE TO THIS APPEAL AND CROSS-OBJE CTION ARE THAT ASSESSEE, A TRANSPORT CONTRACTOR, HAD FILED HIS RET URN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING AN INCOME OF ` 11,36,450/-. WHEN CALLED UPON TO PRODUCE BOOKS OF ACCOUNTS AND SUPPORTING DO CUMENTS, ASSESSEE CLAIMED THAT THERE WAS A FIRE ACCIDENT IN HIS BUSINESS PREMISES AND BOOKS OF ACCOUNTS WERE LOST. ASSESSEE PRODUCED A FIRST INFORMATION REPORT IN SUPPORT. NEVERTHELESS, ASSES SING OFFICER HAS STATED THAT ASSESSEE DID PRODUCE LOAN CONFIRMATION LETTERS, TDS CERTIFICATES AND BANK STATEMENTS. BUSINESS OF THE ASSESSEE WAS PROVIDING TRANSPORTATION FOR M/S BHEL AND GOVERNMEN T DEPARTMENTS FOR WHICH HE HAD HIRED LORRIES FROM ONE M/S NAMAKKAL TI RUCHY TRAILER OWNERS ASSOCIATION AND CERTAIN OTHER LORRY BROKERS. AS PER THE A.O., AVERAGE PROFITS IN THE BUSINESS OF HIRING OUTSIDE L ORRIES AND USING IT FOR TRANSPORT CONTRACTS, CAME TO 10.6%. FURTHER, AS PE R THE A.O., ASSESSEE WAS COLLECTING HIGHER RATE OF TRANSPORTATION CHARGE S FROM BHEL, AGAINST LESSER AMOUNTS PAID TO THE LORRY OWNERS. THOUGH AS SESSING OFFICER 3 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 ACCEPTED THAT THERE COULD BE INCIDENTS WHERE THE PR OFIT WOULD BE LESSER, HE WAS OF THE OPINION THAT AVERAGE PROFIT COULD BE ESTIMATED AT 10% OF THE RECEIPTS. AN ADDITION OF ` 20 LAKHS WAS MADE BASED ON THIS CONCLUSION. 4. ASSESSING OFFICER ALSO NOTED THAT ASSESSEE WAS O WNING 9 VEHICLES AND APPLYING SECTION 44AE OF INCOME-TAX ACT, 1961 ( IN SHORT 'THE ACT') MADE AN ADDITION OF ` 3,78,000/-, REJECTING THE ASSESSEES CONTENTION THAT BOOKS OF ACCOUNTS WERE MAINTAINED AND AUDIT RE PORTS WERE FILED. 5. ASSESSING OFFICER FURTHER NOTED THAT ASSESSEE HA D NOT DEDUCTED TAX AT SOURCE ON INTEREST PAYMENTS TO THE EXTENT OF ` 3,61,000/-. HE APPLIED SECTION 40(A)(IA) AND MADE A DISALLOWANCE O F ` 3,61,000/-. 6. AGAIN AS PER THE ASSESSING OFFICER, HIRE CHARGES PAID BY THE ASSESSEE TO THE LORRY OWNERS WERE IN EXCESS OF ` 20,000/- TILL SEPTEMBER, 2004 AND IN EXCESS OF ` 50,000/- FROM OCTOBER, 2004. BASED ON A MONTH-WISE WORK-OUT, ASSESSING OFFICER APPLIED SECT ION 40(A)(IA) OF THE ACT, FOR WANT OF DEDUCTION OF TAX AT SOURCE. THE D ISALLOWANCE CAME TO ` 89,80,510/-. 7. THERE WAS A SURVEY CONDUCTED AT THE ASSESSEES B USINESS PREMISES ON 28.2.2006, WHEREIN, IT WAS FOUND THAT A SSESSEE HAD MADE 4 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 PAYMENTS TO LORRY OWNERS IN CASH IN EXCESS OF ` 20,000/- TOTALLING TO ` 65,53,980/-. ASSESSING OFFICER APPLIED SECTION 40A (3) OF THE ACT AND MADE A DISALLOWANCE OF 20% ON SUCH PAYMENTS. ADDIT ION CAME TO ` 13,10,796/-. 8. THE TOTAL ADDITIONS AND DISALLOWANCES MENTIONED ABOVE CAME TO ` 1,30,30,306/- AND ALONG WITH THE RETURNED INCOME OF ` 11,36,450/-, THE TOTAL INCOME ASSESSED CAME TO ` 1,41,66,756/-. 9. ASSESSEE MOVED IN APPEAL BEFORE CIT(APPEALS). A RGUMENT OF THE ASSESSEE WAS THAT IT WAS CONSISTENTLY PAYING ADVANC E TO THE LORRY DRIVERS ON THE LORRIES HIRED FOR TRANSPORTATION, TO MEET TH E RUNNING EXPENSES, SINCE LORRIES WERE COMING FROM NORTH INDIA. AS PER THE ASSESSEE, NAMAKKAL TRICHY TRAILER ASSOCIATION WAS ALLOCATING THE LORRIES COMING FROM NORTH, WHICH WERE RETURNING EMPTY. RELYING ON RULE 6DD OF INCOME-TAX RULES, 1962, ASSESSEE ARGUED THAT SUCH P AYMENTS WERE EXEMPT FROM THE RIGORS OF SECTION 40A(3) OF THE ACT . VIS--VIS ESTIMATION OF 10% OF THE CONTRACT RECEIPTS, ARGUMENT OF THE AS SESSEE WAS THAT THE RATE ADOPTED WAS VERY HIGH WHEN COMPARED TO THE RES ULTS OF THE PRECEDING THREE YEARS. AS PER THE ASSESSEE, IF AUD ITED ACCOUNTS FOR PRECEDING THREE YEARS WERE CONSIDERED, AVERAGE RATE OF GROSS RECEIPTS CAME 10.3% ONLY. VIS--VIS THE ADDITION MADE UNDER SECTION 44AE, 5 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 ASSESSEE SUBMITTED THAT IT WAS MAINTAINING BOOKS OF ACCOUNTS, WHICH WERE AUDITED AND 44AE COULD NOT BE APPLIED UNLESS S UCH BOOKS WERE REJECTED. VIS--VIS THE DISALLOWANCE MADE FOR INTE REST PAYMENTS, FOR WANT OF DEDUCTION OF TAX AT SOURCE, ARGUMENT OF THE ASSESSEE WAS THAT LOANS RELATABLE TO THE INTEREST OF ` 1,09,500/-, OUT OF THE TOTAL DISALLOWANCE OF ` 3,61,000/-, STOOD ALREADY OFFERED AS INCOME IN THE EARLIER YEAR AND THEREFORE, THERE WAS NO REASON FOR MAKING A DISALLOWANCE OF THE WHOLE OUTGO. VIS--VIS THE DIS ALLOWANCE OF ` 89,80,510/- MADE FOR PAYMENTS TO TRANSPORT CONTRACT ORS, AGAIN FOR WANT OF DEDUCTION OF TAX AT SOURCE, ARGUMENT OF THE ASSE SSEE WAS THAT SUCH PAYMENTS WERE NOT BASED ON ANY CONTRACT AND THEREFO RE, SECTION 194C COULD NOT BE APPLIED TO SUCH PAYMENTS. 10. CIT(APPEALS), AFTER CONSIDERING THE ABOVE SUBMI SSIONS, CAME TO A CONCLUSION THAT ESTIMATION OF INCOME ON CONTRACT RE CEIPTS COULD BE MADE AT 4%, WHICH ACCORDING TO HIM, WAS REASONABLE WHEN COMPARED TO 10% ADOPTED BY THE ASSESSING OFFICER. AS FOR THE ADDIT ION MADE UNDER SECTION 44AE, CIT(APPEALS) WAS OF THE OPINION THAT ASSESSEE HAVING MAINTAINED BOOKS OF ACCOUNTS, SUCH SECTION HAD NO A PPLICABILITY. VIS-- VIS DISALLOWANCE MADE UNDER SECTION 40A(3) ON PAYME NTS IN CASH EXCEEDING ` 20,000/-, CIT(APPEALS) WAS OF THE OPINION THAT SUC H PAYMENTS HAVING BEEN MADE TO THE DRIVERS, CLAUSE (K ) OF RULE 6DD 6 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 SAVED THE ASSESSEE. VIS--VIS DISALLOWANCE OF INTE REST ` 3,61,000/- FOR WANT OF DEDUCTION OF TAX AT SOURCE, CIT(APPEALS) WA S OF THE OPINION THAT SUCH DISALLOWANCE TO THE EXTENT OF ` 1,09,500/- WAS NOT NECESSARY SINCE CORRESPONDING LOAN WAS ALREADY OFFERED AS INCOME. VIS--VIS DISALLOWANCE OF ` 89,80,510/- FOR WANT OF DEDUCTION OF TAX AT SOURCE , CIT(APPEALS) CONFIRMED THE ORDER OF THE ASSESSING O FFICER. 11. NOW BEFORE US, REVENUE IS AGGRIEVED ON VARIOUS ALLOWANCES GIVEN TO ASSESSEE, WHEREAS, ASSESSEE IN HIS CROSS-OBJECTI ON, IS AGGRIEVED FOR THE ADDITIONS/DISALLOWANCES TO THE EXTENT SUSTAINED . 12. LEARNED D.R. SUBMITTED THAT ASSESSEE HIMSELF HA D SHOWN 10% PROFIT IN THE EARLIER YEARS. FOR THE YEAR ENDING 3 1.3.2004, ASSESSEES INCOME CAME TO 10.26%. AS PER LEARNED D.R., SINCE ASSESSEE WAS UNABLE TO PRODUCE BOOKS OF ACCOUNTS, ESTIMATION OF PROFITS AT 10% MADE BY THE ASSESSING OFFICER WAS JUSTIFIED. CIT(APPEAL S) HAD NO REASON TO REDUCE IT TO 4%. 13. VIS--VIS DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT, LEARNED D.R. SUBMITTED THAT THE PAYMENTS WERE NOT EFFECTED BY THE ASSESSEE TO HIS AGENTS. ACCORDING TO HER, CLAUSE (K) OF RULE 6 DD COVERED ONLY PAYMENTS WHICH WERE EFFECTED BY A PERSON TO HIS OWN AGENTS AND NOT TO THE AGENTS OF THE PAYEE. 7 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 14. VIS--VIS THE CURTAILMENT OF DISALLOWANCE OF IN TEREST, LEARNED D.R. SUBMITTED THAT IF LOAN ITSELF WAS OFFERED AS INCOME BY THE ASSESSEE, IT COULD NOT CLAIM INTEREST PAYMENT AS A REVENUE OUTGO . 15. PER CONTRA, LEARNED A.R., IN SUPPORT OF THE ORD ER OF LD. CIT(APPEALS) SO FAR AS IT RELATED TO ISSUES HELD IN FAVOUR OF ASSESSEE, AND ASSAILING IT ON THE ASPECTS WHICH WENT AGAINST IT, SUBMITTED THAT ESTIMATION OF INCOME AT 4% WAS EXCESSIVE. ACCORDIN G TO HIM, JUST BECAUSE ASSESSEES BOOKS WERE DESTROYED IN FIRE, AU DITED STATEMENTS FILED BY THE ASSESSEE COULD NOT BE IGNORED. ASSESS EE NEVER HAD INCOME IN EXCESS OF 3% IN ANY OF THE EARLIER YEARS. INSOF AR AS DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3) WAS CONSIDERED, LEARNED A.R. SUBMITTED THAT EVEN IF RULE 6DD WAS NO T APPLICABLE, PAYMENTS HAVING BEEN MADE ON BUSINESS EXIGENCY, FIR ST PROVISO TO SECTION 40A(3A) SAVED THE ASSESSEE. ACCORDING TO H IM, ASSESSEE HAD PAID ADVANCES TO THE DRIVERS, WHO HAD COME FROM NOR TH INDIA, AND THE LORRIES USED WERE HIRED THROUGH NAMAKKAL TRICHY TRA ILER OWNERS ASSOCIATION. THE PAYMENTS WERE MADE IN CASH TO SUC H DRIVERS FOR MEETING DAILY RUNNING EXPENSES WITHOUT WHICH THE BU SINESS OF THE ASSESSEE COULD NOT BE CARRIED ON. ACCORDING TO HIM , ASSESSEE WAS, THEREFORE, COVERED UNDER FIRST PROVISO TO SECTION 4 0A(3A) OF THE ACT. 8 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 16. AS FOR THE DISALLOWANCE MADE UNDER SECTION 40(A )(IA) OF THE ACT ON INTEREST PAYMENT, LEARNED A.R. SUBMITTED THAT ASSES SEE HAD DEDUCTED TAX AT SOURCE IN THREE CASES, BUT, THESE WERE IGNOR ED BY THE LOWER AUTHORITIES. ACCORDING TO HIM, WITHOUT VERIFYING T HE FACTS, DISALLOWANCES WERE MADE. 17. AS FOR THE DISALLOWANCE AGAIN MADE UNDER SECTIO N 40(A)(IA) FOR THE PAYMENTS EFFECTED TO LORRY OWNERS, LEARNED A.R. SUB MITTED THAT THERE WAS NO CONTRACT EITHER WRITTEN OR ORAL WITH SUCH PA RTIES. WHEN THERE WAS NO CONTRACT, THERE WAS NO QUESTION OF ANY DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE ACT. DISALLOWANCE WAS MA DE WITHOUT PROPERLY APPRECIATING THE NATURE OF ASSESSEES BUSI NESS. RELIANCE WAS PLACED ON THE DECISION OF CIT V. BHAGWATI STEELS (3 26 ITR 108) OF HONBLE PUNJAB & HARYANA HIGH COURT, CIT V. UNITED RICE LAND LIMITED (322 ITR 594) OF HONBLE PUNJAB & HARYANA HIGH COUR T AND CIT V. KOTHARI SANITATION AND TILES P. LTD. (282 ITR 117) OF HON'BLE JURISDICTIONAL HIGH COURT. ACCORDING TO HIM, NONE OF THE TRANSACTIONS WITH THE TRANSPORT CONTRACTORS EXCEEDED ` 20,000/- IN A GIVEN INSTANCE AND THE ADDITION WAS MADE WITHOUT MAKING AN ANALYSIS OF THE ACTUAL PAYMENTS EFFECTED. 9 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 18. IN REPLY TO THE ARGUMENT OF THE ASSESSEE, LEARN ED D.R. SUBMITTED THAT DISALLOWANCE UNDER SECTION 40(A)(IA) WAS MADE BASED ON A SURVEY CONDUCTED ON 28.2.2006 AND THE SUMS WERE CORRECTLY COMPUTED BY THE ASSESSING OFFICER. 19. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IN THE FIRST PLACE WHAT WE NOTICE IS THAT THE ADDITION MADE BY THE ASSESSING OFFICER, RELYING ON SECTION 44AE OF THE ACT, AT ` 3,78,000/- WAS DELETED IN TOTO BY CIT(APPEALS) ON ASSESSEES APPEAL AND RE VENUE IS NOT AGGRIEVED BY SUCH DELETION. REVENUE IS AGGRIEVED O N THE SCALING DOWN OF THE ESTIMATE OF INCOME FROM 10% TO 4% OF THE GRO SS RECEIPTS, RELIEF GIVEN FOR THE DISALLOWANCE OF INTEREST FOR WANT OF DEDUCTION OF TAX AT SOURCE AND RELIEF GIVEN ON THE PAYMENTS EFFECTED BY THE ASSESSEE IN EXCESS OF ` 20,000/- IN CASH, CONSIDERING IT TO BE FALLING UND ER RULE 6DD. AS AGAINST THIS, ASSESSEE IS AGGRIEVED THAT ESTIMAT ION TO THE EXTENT OF 4% OF CONTRACT INCOME WAS SUSTAINED BY THE CIT(APPE ALS) DESPITE AUDIT REPORT IN FORM 3CEB HAVING BEEN FILED AND ALSO ON T HE DISALLOWANCE UNDER SECTION 40(A)(IA) TO THE EXTENT SUSTAINED BY THE CIT(APPEALS). 20. IT HAS NOT BEEN DISPUTED THAT ASSESSEE IS A LOR RY CONTRACTOR. IT HAS ALSO NOT BEEN DISPUTED THAT ASSESSEE WAS HIRING LOR RIES FROM NAMAKKAL TRICHY TRAILER OWNERS ASSOCIATION. ASSESSING OFFIC ER HIMSELF MENTIONS 10 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 THAT NAMAKKAL TRICHY TRAILER OWNERS ASSOCIATION WAS USING LORRIES COMING FROM OTHER STATES, WHICH HAD OFF LOADED GOOD S IN TAMIL NADU, AND WERE GIVEN ON HIRE TO PERSONS LIKE ASSESSEE, FO R TRANSPORT OF GOODS ON THEIR RETURN JOURNEY. ASSESSING OFFICER HAD EST IMATED INCOME OF THE ASSESSEE BASED ON THE RECEIPTS FOR THE REASON THAT ASSESSEE COULD NOT PRODUCE BOOKS OF ACCOUNTS. AS PER ASSESSEE, HIS IN COME WAS ONLY 3% FOR THE PRECEDING THREE YEARS. AS PER ASSESSING OF FICER, IT COULD BE ESTIMATED AT 10% CONSIDERING THE CIRCUMSTANCES OF T HE CASE AND ALSO DUE TO THE FACT THAT ASSESSEE COULD NOT PRODUCE ANY RECORDS OR BOOKS OF ACCOUNTS IN SUPPORT OF HIS CLAIM. WE ARE OF THE OP INION THAT ENDS OF JUSTICE WILL BE MET IF INCOME OF THE ASSESSEE IS ES TIMATED AT 8% OF TRANSPORT CONTRACT RECEIPTS. NEVERTHELESS, THE ADD ITION AFTER SUCH ESTIMATION SHOULD BE RESTRICTED TO THE EXCESS OVER THE RETURNED INCOME OF ` 11,36,450/-. 21. COMING TO THE GROUND REGARDING NON-DEDUCTION OF TAX AT SOURCE ON INTEREST PAYMENTS, ASSESSEE HAD NOT DISPUTED THE FA CT THAT INTEREST WAS, IN FACT, PAID TO THE EXTENT OF ` 3,61,000/- TO THE FOLLOWING PARTIES:- ANTHONI ` 48,000 VICTOR ` 18,000 S. RENGANAYAKI ` 1,01,000 SULOCHANA ` 64,500 SUBHA ` 1,09,500 S. VENKATESAN ` 20,000 ` 3,61,000 11 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 ACCORDING TO ASSESSEE, THE LOAN TAKEN FROM SUBHA WA S ALREADY OFFERED AS INCOME AND THEREFORE, THERE WAS NO QUESTION OF D ISALLOWANCE OF INTEREST RELYING ON SECTION 40(A)(IA) OF THE ACT. WE ARE UNABLE TO APPRECIATE THIS LINE OF CONTENTION OF THE ASSESSEE. IF THE LOAN ITSELF WAS OFFERED, THERE WAS NO QUESTION OF INTEREST BEING AL LOWED AS ALLOWANCE. WITH RESPECT TO OTHER PARTIES, ASSESSEE HAS NOT DI SPUTED THAT PAYMENTS WERE EFFECTED WITHOUT DEDUCTING TAX AT SOURCE. IN OUR OPINION, ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING INTEREST AMOUN T OF ` 3,61,000/- AND CIT(APPEALS) FELL IN ERROR IN GIVING RELIEF TO THE EXTENT OF ` 2,51,500/- TO THE ASSESSEE. 22. COMING TO THE DISALLOWANCE OF HIRE CHARGES, FOR WANT OF DEDUCTION OF TAX AT SOURCE, WE FIND THAT ASSESSING OFFICER HA D COME TO A CONCLUSION BASED ON THE FOLLOWING DATA:- APRIL 2004 ` 3,76,030 MAY 2004 69,100 JUNE 2004 4,72,358 JULY 2004 3,52,842 AUGUST 2004 4,12,228 SEPTEMBER 2004 10,50,345 OCTOBER 2004 7,41,916 NOVEMBER 2004 10,75,779 DECEMBER 2004 4,87,359 JANUARY 2005 7,62,363 FEBRUARY 2005 14,04,256 MARCH 2005 17,75,934 89,80,510 12 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 AS PER A.O., THE ABOVE MENTIONED AMOUNTS WERE HIRE CHARGES PAID BY THE ASSESSEE FOR THE RESPECTIVE MONTHS, WHICH WERE IN EXCESS OF ` 20,000 / ` 50,000/-. NEVERTHELESS, ASSESSING OFFICER HAD NOT EXAMINED WHETHER THERE WAS ANY CONTRACT BETWEEN ASSESSEE WIT H LORRY OWNERS EITHER ORAL OR WRITTEN. FOR APPLICATION OF SECTION 194C OF THE ACT, IT HAS TO BE SHOWN THAT THE AMOUNTS CREDITED OR PAID OR LIKEL Y TO BE CREDITED OR PAID TO AN ACCOUNT OF THE CONTRACTOR OF SUB-CONTRAC TOR, EXCEEDED ` 20,000/-, UNLESS AND UNTIL THE AGGREGATE AMOUNT IN EACH CASE, PER SUB- CONTRACTOR EXCEEDED ` 50,000/- DURING THE WHOLE OF THE YEAR. THIS IS LA ID DOWN IN SUB-SECTION (3) OF SECTION 194C OF THE ACT. THEREFORE, FOR APPLICATION OF SECTION 40(A)(IA), FIRST WE HAVE TO SEE WHETHER ASSESSEE IS IN FACT REQUIRED TO DEDUCT TAX AT SOURCE AS PER SEC TION 194C OF THE ACT AND THEN WHETHER ANY OF THE PAYMENTS ARE COVERED BY SUB-SECTION (3) OF SECTION 194C. SINCE THESE ASPECTS HAVE NOT BEEN GO NE INTO BY ANY OF THE LOWER AUTHORITIES, WE ARE OF THE OPINION THAT T HE ISSUE REQUIRES A FRESH LOOK BY THE ASSESSING OFFICER. WE, THEREFORE , SET ASIDE THE ORDERS OF AUTHORITIES BELOW INSOFAR AS IT RELATES TO DISAL LOWANCE OF ` 89,80,510/- FOR WANT OF DEDUCTION OF TAX AT SOURCE, AND REMIT I T BACK TO THE FILE OF THE A.O. FOR CONSIDERATION AFRESH, IN ACCORDANCE WITH L AW. 13 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 23. COMING TO THE LAST ISSUE, WHICH IS REGARDING DI SALLOWANCE MADE UNDER SECTION 40A(3) FOR HAVING EFFECTED THE PAYMEN TS IN EXCESS OF ` 20,000/- IN CASH, ARGUMENT OF THE ASSESSEE IS THAT SUCH PAYMENTS WERE COVERED BY FIRST PROVISO TO SECTION 40A(3A) OF THE ACT. THE SAID PROVISO IS REPRODUCED HEREUNDER:- 40A. (3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSI NESS OR PROFESSION UNDER SUB-SECTION (3) AND THIS SUB-SECTIO N WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON I N A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED, HAVING REGARD TO THE NATURE AND EXTENT O F BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUS INESS EXPEDIENCY AND OTHER RELEVANT FACTORS. ACCORDING TO ASSESSEE, THERE WERE BUSINESS EXIGENCI ES WHICH REQUIRED IT TO MAKE PAYMENTS IN CASH. HOWEVER, IN OUR OPINION, EXCEPT FOR MAKING A SUBMISSION IN THIS REGARD, NO EVIDENCE WAS PRODUC ED BY THE ASSESSEE FOR PROVING THE BUSINESS EXPEDIENCY WHICH FORCED TH E ASSESSEE TO EFFECT THE PAYMENTS IN CASH. LD. CIT(APPEALS) HAD APPLIED CLAUSE (K) OF RULE 6DD FOR GIVING RELIEF TO THE ASSESSEE. THE SAID RU LE 6DD RELIED ON BY THE CIT(APPEALS) IS REPRODUCED HEREUNDER:- 14 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 NO DISALLOWANCE UNDER CLAUSE (A) OF SUB-SECTION (3) OF SECTION 40A SHALL BE MADE AND NO PAYMENTS SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER C LAUSE (B) OF SUB-SECTION (3) OF SECTION 40A WHERE ANY PAYMENT IS A SUM EXCEEDING TWENTY THOUSAND RUPEE IS MADE OTHERWISE TH AN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAY EE BANK DRAFT IN THE CASES AND CIRCUMSTANCES SPECIFIED HERE UNDER, NAMELY:- (K) WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS O R SERVICES ON BEHALF OF SUCH PERSON. IT IS CLEAR THAT CLAUSE (K) WILL APPLY ONLY WHERE T HE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT, WHO IN TURN IS REQUIRED TO MAKE PAYMENT IN CASH. SO, BY NECESSARY IMPLICATION, THE PAYMENT HA S TO BE EFFECTED TO THE AGENT OF THE ASSESSEE AND NOT TO AGENT OF THE P AYEE. EVEN IF THE CONTENTION OF THE ASSESSEE THAT DRIVER IS THE AGENT OF THE OWNER OF THE LORRY, HE WILL STILL NOT BE COVERED UNDER THE ABOVE CLAUSE. THEREFORE, IN OUR OPINION, CIT(APPEALS) FELL IN ERROR IN GIVING R ELIEF TO THE ASSESSEE ON THE DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE A CT. HIS ORDER IS SET ASIDE ON THIS ASPECT AND THE ADDITION OF ` 13,10,796/- IS REINSTATED. 24. TO SUMMARISE THE RESULTS, GROUND NO.2 OF REVENU E IS PARTLY ALLOWED, WHEREAS ITS GROUNDS 3 AND 4 ARE ALLOWED, G ROUND 1 AND 5 OF THE REVENUE ARE GENERAL. VIS--VIS CROSS-OBJECTION S OF THE ASSESSEE, GROUND NO.2 TO 4 ARE ALLOWED FOR STATISTICAL PURPOS ES, WHEREAS, ITS 15 I.T.A. NO. 113/MDS/10 C.O. NO. 134/MDS/10 GROUNDS 5 TO 7 ARE DISMISSED. GROUND NO.1 IN THE C ROSS-OBJECTION IS GENERAL. 25. THUS, APPEAL OF THE REVENUE IS PARTLY ALLOWED, WHEREAS, CROSS- OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE COURT ON TUESDAY, THE 3 0 TH OF APRIL, 2013, AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 30 TH APRIL, 2013. KRI. COPY TO: (1) ASSESSEE (2) ASSESSING OFFICER (3) CIT(A), TIRUCHIRAPALLI (4) CIT-I, TRICHY (5) D.R. (6) GUARD FILE