DEVCARE SOLUTIONS,CHENNAI V. ITO NON CORP CIR 22(1), TAMBARAM

ITA 2854/CHNY/2024

AI Insights

The case involves Devcare Solutions, the appellant, contesting an order from the CIT(A), NFAC, Delhi, for the assessment year 2021-22. The primary issues in the appeal were the addition of Rs. 83,86,539 as technical services fees and Rs. 66,61,467 as cash payments exceeding the prescribed limit under section 40A(3) of the Income Tax Act. The Tribunal noted that the assessee did not provide adequate evidence such as agreements, qualifications of the service providers, or details of payments made through banking channels. The Tribunal emphasized that mere tax deduction at source and the submission of Form 16A were insufficient to prove the genuineness of the expenses claimed.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312853 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2021-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAMANTHA MULLAMUDI
• Assessee Lawyers: Y. SRIDHAR; F.C.A
• Keywords: Commercial expediency; Principle of natural justice; TDS
• Section: 133(6); 40A(3)

Judgement Text

" आयकर अपीलीय अधिकरण, ‘ए’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI माननीय श्री मनु क ुमार धिरर ,न्याधयक सदस्य एवं माननीय श्री अमिताभ शुक्ला, लेखा सदस्य क े सिक्ष BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND HON’BLE SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2854/Chny/2024 Assessment Years: 2021-22 Devcare Solutions No.4, Ram Complex, Padasalai Street, Urapakkam, Chennai-603 210. [PAN: AAHFD6945Q] Income Tax Officer, Non-Corp Circle-22(1), Chennai (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Shri.Y.Sridhar, F.C.A प्रत्यर्थी की ओर से /Revenue by : Smt.Samantha Mullamudi, Addl.CIT सुनवाई की तारीख/Date of Hearing : 26.03.2025 घोषणा की तारीख /Date of Pronouncement : 30.04.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M : This appeal is filed by the assessee against the order bearing DIN & Order No.ITBA / NFAC / S / 250 / 2024-25 / 1068689335(1) dated 13.09.2024 of the Learned Commissioner of Income Tax [herein after “CIT(A), National Faceless Appeal Center[NFAC], Delhi, for the assessment years 2021-22. Through the aforesaid appeal the assessee has challenged order u/s 250 dated 13.09.2024 passed by NFAC, Delhi. 2.0 The assessee has contested the impugned order of Ld.First Appellate Authority by raising altogether 10 grounds. The ground of ITA No.2854/Chny/2025 Page - 2 - of 6 appeal nos 1 & 10 have been found to be general in nature and hence dismissed. 3.0 The first issue arising from the ground of appeal nos.2 to 5 are regarding addition made by the Ld.AO of Rs. 83,86,539/- in respect of technical services fees paid by the assessee to various persons. Before us the Ld.AR reiterated the arguments taken before the lower authorities placing reliance upon same set of documents. The Ld. AO in para 4 of his order had noted that the assessee had paid technical fees to about 10 persons. The Ld. AO had issued notices u/s 133(6) to parties to whom technical services fees were paid by the assessee and such parties had not filed their returns of income. There was no response to the Ld.AO’s notices. In response to the show cause assesee had merely submitted copy of form 16A showing TDS made qua the parties with a bald statement that these persons had done design, development, testing etc works. Perusal of assesess bank statement did not indicate any payments having been made to these parties. The assessee also failed to provide copy of any agreements or qualification details of persons to whom technical fees were paid. Before the Ld. First Appellate Authority, the assessee repeated the same arguments and relied upon the same set of documents. The Ld. CIT(A) proceeded to wholly concur with the findings of the Ld.AO as per observations made in para ITA No.2854/Chny/2025 Page - 3 - of 6 5.4 of his order. Before us also the Ld.Counsel reiterated the same set of arguments relying on the same documents. 4.0 The Ld.DR vehemently argued in favour of the order of lower authorities. It was stated that in the absence of any cogent demonstrative evidence forthcoming from the assessee, a presumption qua genuineness of impugned expenses cannot be drawn. 5.0 We have heard rival submissions in the light of material available on records. It is an undisputed fact of the case that the assessee has not provided any evidence in the form of qualifications of the parties, agreements entered with them, details of amounts paid to them through banking channels etc thus far. It is trite law that it is the assessee which is required to lead evidence in its case in support of claims made. The assessee was therefore required to provide all the above evidence for examination of the lower authorities. Mere tax deduction by the assessee can be a factor to justify the claim, but cannot be the sole factor. The assessee was required to explain the commercial expediency of the impugned expenses including the genuineness of the transactions, identify of persons etc. Accordingly, we are of the opinion that there is no case of any interference to be made in the order of Ld.First Appellate Authority. The same is therefore confirmed and grounds of appeal nos. 2 to 5 raised by the assessee are dismissed. ITA No.2854/Chny/2025 Page - 4 - of 6 6.0 The next issues raised by the assessee through grounds of appeal nos. 6 to 8 are regarding addition of Rs.66,61,467/- made by the Ld. AO by invoking provisions of section 40A(3) of the act. The Ld. Counsel drew our attention to para 6 of the Ld. AO’s order. During the course of assessment proceedings the Ld.AO noted that the assessee had withdrawn huge amount of cash amounting to Rs. 80,14,000/- from its account with HDFC bank. In response to show cause notice of the Ld.AO, the assessee provided copy of its cash book. The Ld. AO noted from the perusal thereof that cash expenses of amounts aggregating to Rs.66,61,467/- was in respect of cases where expenditure exceeded the threshold limit u/s 40A(3) of Rs.10,000/-. As evident from para 7 of the order, in the absence of any effective rebuttal from the assessee, the Ld. AO made the impugned addition. Before the Ld.CIT(A) the assessee had argued that the Ld.AO has misunderstood the fact of the case. The assessee had argued before the Ld.CIT(A) that it had genuine and compelling circumstances for making cash payments in excess of threshold limit u/s 40A(3) of Rs.10,000/-. Thus, rent amount of Rs.3,60,000/- was paid in cash as per the request of the land lords who were also incidentally partners of the firm. Stipend of Rs. 21,84,147/- was paid to some students hired for US projects since they did not have any bank account. Similarly, salary / outsourcing charges of ITA No.2854/Chny/2025 Page - 5 - of 6 Rs.40,16,237/- were paid to temporary / contractual staff since they did not have any bank account. 7.0 The Ld.DR relied upon the order of lower authorities. 8.0 We have heard the rival submissions in the light of material available on records. Section 40A(3) of the act has been brought on the statute with the objective of curbing cash transactions so that a bona-fide identifiable trail of expenses is available on records. Rule 6DD of the Income Tax rules presumes situations where it may not be possible to comply with the said threshold limit of Rs.10,000/- and hence certain exceptions have been made to allow for cash expenses in exceptional circumstances, chiefly being non-availability of adequate banking facilities, low end laborers etc. We find sufficient force in the findings of the Ld.CIT(A) that the assessee does not have any justified grounds in support of its claim. The argument of land lord insisting for cash payments cannot be a justified ground. Similarly, stipend payments and salary etc to white collar workforce located in metropolis of Chennai could have been easily given by cheque as argument of non-availability of adequate banking facilities in Chennai cannot be accepted. Accordingly, we do not feel any need to interfere with the order of the Ld.CIT(A) as this stage. The addition made by the Ld.AO of Rs.66,61,461/- is therefore confirmed and all the grounds of appeal raised by the assessee are dismissed. ITA No.2854/Chny/2025 Page - 6 - of 6 9.0 The next issue raised by the assessee through its appeal no.9 is regarding violation of principles of natural justice to the extent of using information against it, which was gathered at its back. Upon consideration of the matter, we have noted that no specific detail or arguments were brought to our knowledge in support of the impugned ground. There is nothing in the order of lower authorities which alludes towards utilization of any information gathered at its back. Consequently, the ground of appeal no.9 has been found to be infructuous and is therefore dismissed. 10.0 In the result the appeal of the assessee is dismissed. Order pronounced on 30th , April-2025 at Chennai. Sd/- (मनु क ुमार धिरर) (MANU KUMAR GIRI) न्याधयक सदस्य / Judicial Member Sd/- (अधमताभ शुक्ला) (AMITABH SHUKLA) लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 30th , April-2025. KB/- आदेश की प्रतितिति अग्रेतिि/Copy to: 1. अिीिार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT - Chennai 4. तिभागीय प्रतितिति/DR 5. गार्ड फाईि/GF "