M/s. Abhay Singhvi, HUF, MUMBAI V. DCIT, UDAIPUR

ITA 117/JODH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70170 (ITAT-JODHPUR)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DEEPAK SEHGALCIT
• Assessee Lawyers: DEVENDRA MEHTA
• Section: 40A(3); 194C

Judgement Text

1 IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 117/JODH/2013 (A.Y. 2009-10) M/S. ABHAY SINGHVI, HUF VS DCIT, CENTRAL CIRCLE-1 , C/O. M/S. RAVI & DEV., C.AS., UDAIPUR. 601, A WING, AURUS CHAMBERS, BEHIND MAHINDRA TOWERS, S.S. AMRUTWAR MARG, WORLI, MUMBAI. PAN NO. AAHHA5709D (APPELLANT) (RESPONDENT) ITA NO. 185/JODH/2013 (A.Y. 2009-10) DCIT, CENTRAL CIRCLE-1, VS M/S. ABHAY SINGHVI, H UF UDAIPUR. PROP. M/S. SUHANI TRANSPORT, BAIJI RAJ KA KUND, DELHI GATE, UDAIPUR. PAN NO. AAHHA5709D (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. DEVENDRA MEHTA. DEPARTMENT BY : DR. DEEPAK SEHGAL-CIT- DR. DATE OF HEARING : 05/07/2013. DATE OF PRONOUNCEMENT : 30/08/2013 O R D E R PER BENCH : THESE ARE CROSS APPEALS FOR A.Y. 2009-10 DIRECTED AGAINST THE ORDER OF LD. CIT(A), (CENTRAL), JAIPUR, DATED 07/01/2013. 2 2 BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE, AS A PROPRIETOR OF M/S. SUHANI TRANSPORT, IS ENGAGED IN THE TRANSPORT BUSINESS. HE FILED HIS RETURN OF INCOME (ROI) FOR A.Y. 2009-10 ON 29/09/2009 DECL ARING TOTAL INCOME OF RS. 3,87,980/-. THE ASSESSMENT HAS BEEN MADE U/S 143(3 ) OF THE I.T. ACT, 1961 (THE ACT FOR SHORT) AT A TOTAL INCOME OF RS. 78,69,611 /- VIDE ORDER DATED 15/12/2011. IN COMING AT THE ABOVE TOTAL INCOME, THE AO HAS MAD E THE FOLLOWING ADDITIONS:- SR. NO. PARTICULARS AMOUNT RS. 1. DISALLOWANCE OUT OF TRAVELLING EXPENSES 41,0 01 2. ADDITION ON ACCOUNT OF UNEXPLAINED TRANSPORT EXPENSES 64,52,632 3. DISALLOWANCE U/S. 40A(3) 8,20,000 4 ADDITION OF INTEREST ON ACCOUNT OF INTEREST FREE LOANS 1,68,000 5 ADDITION ON ACCOUNT OF SLOWER NET PROFIT MARGIN RS. 14,24,193/-. HOWEVER, NO SEPARATE ADDITION MADE BECAUSE OF ADDITION AT S.NO. 1 TO 4 2.1 IN THE FIRST APPEAL, THE LD. CIT(A) HAS DELETED AD DITIONS FIGURING AT SR. NO. (1), (4) AND FROM OUT OF ADDITIONS AT SR. NOS. 2 & 3, HAS DELETED A SUM OF RS. 43,32,885/- OUT OF TOTAL ADDITION OF RS. 64,52,632/ - AND BY RETAINING BALANCE ADDITION OF RS. 21,19,747/-. THE REVENUE IS IN APP EAL CHALLENGING THE IMPUGNED DELETIONS AND ASSESSEE IS AGGRIEVED BY SUSTAINED AD DITIONS. BOTH HAVE FILED THEIR RESPECTIVE APPEALS. 2.2 WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE RECORD. GROUND NO. (1) IN ASSESSEES APPEAL AND GR OUND NO. (1) IN REVENUES APPEAL ARE IN RESPECT OF A COMMON ISSUE PERTAINING TO TRANSPORTATION EXPENSES. THE FACTS APROPOS ON PERUSAL OF LEDGER OF TRANSPORT ATION EXPENSES (TE) IT WAS FOUND THAT THERE ARE PAYMENTS MADE TO THE INDIVIDUA L TRAVEL OWNERS FOR WHICH THE ASSESSEE HAS NOT FILED ANY DETAILS OTHER THAN T HE TRUCK NUMBERS ENTERED IN 3 THE NARRATION OF THE PARTICULAR ENTRY. THE ASSESSI NG OFFICER HAS EXTRACTED A LENGTHY TABLE OF SUCH PAYMENTS MADE BETWEEN 04/04/2 008 TO 05/10/2008 TOTALLING TO RS. 64,52,632/-. THE ASSESSING OFFICE R HAS NOTICED THAT TO THE INDIVIDUAL PAYMENTS TDS IS REQUIRED TO BE DEDUCTED U/S 194C OF THE ACT. HOWEVER, IN SOME CASE THE ASSESSEE HAS FILED COPIES OF FORM NOS. 15-I & 15-J. THE ASSESSING OFFICER HAS REJECTED FROM NO. 15-I ON THE PREMISE THAT THE ASSESSEE DID NOT FILE THEM IN THE OFFICE OF THE CON CERNED INCOME TAX AUTHORITY AND EVEN SOME OF THEM WERE DEFECTIVE AS THEY DID NO T CONTAIN PAN. THEREFORE, HE HAS DISALLOWED THE ENTIRE PAYMENT OF RS. 64,52,6 32/- U/S 40(A)(IA) OF THE ACT. 2.3. AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL AGA INST THE ABOVE ADDITION. THE LD. CIT(A) HAS REDUCED THIS ADDITION TO RS. 21, 19,747/- AND HAS DELETED A SUM OF RS. 43,32,885/- OUT OF THE TOTAL ADDITION OF RS. 64,52,632/-. NOW, BOTH THE PARTIES ARE AGGRIEVED AND HAVE PREFERRED THEIR RESPECTIVE APPEAL. THE ASSESSEE HAS FILED A COPY OF THE LEDGER ACCOUNTS OF TRANSPORTER AS WELL AS TRANSPORTATION EXPENSES. THESE DOCUMENTS WERE EVEN PRODUCED BEFORE THE LD. CIT(A) FOR VERIFICATION. HE ARGUED THAT THE ASSESSE E PRODUCED ALL THESE DOCUMENTS BEFORE THE AUTHORITIES BELOW. ON THE OTH ER HAND, LD. D.R. HAS ARGUED THAT THESE PAYMENTS ARE SUBJECT TO THE PROVISION OF RS. 194C AND SINCE THE ASSESSEE HAS NOT DEDUCTED TDS AND BECAUSE FORM NO. 15-I & 15-J ARE FOUND DEFECTIVE ON VARIOUS REASONS MENTIONED BY THE ASSES SING OFFICER, THE ENTIRE AMOUNT DESERVES TO BE ADDED U/S 40(A)(IA) OF THE AC T. WE HAVE FOUND THAT IN THE VOUCHERS OF TRANSPORTATION EXPENSES THE NAMES OF TH E TRUCK DRIVERS, TRUCK NUMBERS, DATES OF PAYMENT AND SIGNATURES OF SUCH TR UCK DRIVERS ARE MENTIONED. WE ARE AWARE THAT THE MANDATORY REQUIREMENT OF PROV IDING PAN IN FORM NO. 15-I AND IN FORM NO. 15-J HAS BEEN INTRODUCED W.E.F . 01/04/2010. THE CIT, UDAIPUR IS THE PRESCRIBED AUTHORITY AS PER THE RULE 29D AS ON 21/04/2009. COPIES OF THE ABOVE FORMS WERE IMMEDIATELY PRODUCED BEFORE HIM. THEREFORE, WHEN FORM NOS. 15-I AND 15-J WERE DULY FURNISHED BE FORE THE COMPETENT 4 AUTHORITY (CIT, UDAIPUR), THE ASSESSEE IS ABSOLVED FROM DEDUCTING TDS U/S 194C OF THE ACT. THEREFORE, THE PROVISIONS OF SECT ION 40(A)(IA) WILL NOT APPLY. THE FOLLOWING DECISIONS, RELIED ON BY LD. A.R. IN H IS SYNOPSIS, HELP THE CONTENTION OF THE ASSESSEE AND WE CAN RELY ON THEM: - 1. I.T.O. VS. GARLAPATI CHALAPATHI REDDY [2013] 33 TAX MANN.COM 402 (HYD)(TRIB.) 2. A.C.I.T. VS. SHREE PRAMUKH TRANSPORT CO. [I.T.A.NO. 1717/AHD/2010 DATED 31/08/2010] 3. C.I.T. VS. VALIBHAI KHANBHAI MANKAD [TAX APPEAL NO. 1182 OF 2011 (GUJ)(HC)] 4. PAREEK ELECTRICALS VS. A.C.I.T. (2013) 55 SOT 338 ( CUTTACK) (TRIB.) 5. GOVIND RAM GUPTA VS. J.C.I.T. [2013] 34 TAXMANN.COM 111 (CUTTACK-TRIB) ACCORDINGLY, WE ORDER THE DELETION OF THE ENTIRE AM OUNT OF RS. 64,52,632/- BY DELETING EVEN THE SUSTAINED AMOUNT OF RS. 21,19,747 /-. IN VIEW OF THE ABOVE THE COMPOSITE PAYMENT OF THE YEAR BEING MORE THAN RS. 5 0,000/-. THEREFORE, THE GROUND NO. (2) OF ASSESSEES APPEAL IS ALLOWED BY D ELETING THE DISALLOWANCE OF RS. 21,19,747/- AND DISMISS GROUND NO. (1) OF THE R EVENUES APPEAL. 3. THERE IS ONE MORE GROUND, BEARING NO. (3) IN ASSES SEES APPEAL WHICH IS IN RELATION TO DISALLOWANCE OF RS. 8,20,000/- MADE U/S 40A(3) AND ALSO CONFIRMED BY LD. CIT(A). THE FACTS OF THIS GROUND A RE THAT THE PAYMENTS TO TRUCK DRIVERS WERE MADE ON BEHALF OF THE TRANSPORTER TO W HICH SECTION 40A(3) IS ATTRACTED. THE REASONING GIVEN BY THE A.O. FOR MAKI NG THIS DISALLOWANCE ARE AS UNDER :- (A) THE ASSESSEE DENIED MAKING ANY PAYMENT IN CONT RAVENTION OF SEC.40A(3) ON SPECIFIC QUERY FROM A.O. (B) IN MANY INSTANCES, THE PAYMENTS MADE TO SHRI YA DAV TRANSPORT PVT. LTD. ON A SINGLE DAY WERE IN CONTRAVENTION OF SEC.4 0A(3) BUT THE ASSESSEE 5 SPLITTED THESE PAYMENTS TO LESS THAN RS.20,000/- TO AVOID DISALLOWANCE U/S.40A(3). SUCH INSTANCES WERE AS UNDER: NAME OF PARTY DATE OF PAYMENT AMOUNT AGGREGATE AMOUNT SHREE YADAV TRANSPORT PVT. LTD 11/05/2008 15000 15000 30000 SHREE YADAV TRANSPORT PVT. LTD 14/05/2008 15000 15000 30000 SHREE YADAV TRANSPORT PVT. LTD 15/05/2008 15000 15000 15000 15000 60000 SHREE YADAV TRANSPORT PVT. LTD 18/05/2008 15000 15000 30000 SHREE YADAV TRANSPORT PVT. LTD 19/05/2008 15000 15000 15000 45000 SHREE YADAV TRANSPORT PVT. LTD 20/05/2008 15000 15000 30000 SHREE YADAV TRANSPORT PVT. LTD 23/05/2008 15000 15000 15000 15000 60000 SHREE YADAV TRANSPORT PVT. LTD 24/05/2008 15000 15000 15000 15000 60000 SHREE YADAV TRANSPORT PVT. LTD 26/05/2008 15000 15000 30000 SHREE YADAV TRANSPORT PVT. LTD 27/05/2008 15000 15000 15000 15000 60000 SHREE YADAV TRANSPORT PVT. LTD 31/05/2008 15000 15000 15000 45000 SHREE YADAV TRANSPORT PVT. LTD 05/06/2008 15000 15000 30000 SHREE YADAV TRANSPORT PVT. LTD 23/06/2008 15000 15000 30000 SHREE YADAV TRANSPORT PVT. LTD 30/06/2008 15000 15000 15000 15000 150000 6 15000 15000 15000 15000 15000 15000 SHREE YADAV TANSPORT PVT. LTD. 05/07/2008 15000 15000 30000 SHREE YADAV TANSPORT PVT. LTD. 31/07/2008 20000 10000 10000 40000 SHREE YADAV TANSPORT PVT. LTD. 06/08/2008 20000 20000 20000 60000 TOTAL 820000 (C) THE PROVISIONS OF SECTION 40A(3) ARE MANDATORY IN NATURE. THE LANGUAGE OF THIS SECTION IS UNAMBIGUOUS AND LEAVES NO SCOPE FOR FURTHER INTERPRETATION. THE PAYMENTS MADE BY THE ASSESSEE ARE NOT COVERED BY TH E CIRCUMSTANCES REFERRED UNDER RULE 6DD. (D) THEREFORE, DISALLOWANCE OF RS.8,20,000/- IS MAD E U/S.40A(3) OF THE INCOME-TAX ACT, 1961 3.1 AS AGAINST THE ABOVE THE LD. CIT(A) HAS GIVEN THE FOLLOWING REASONS FOR SUSTAINING THE ADDITIONS :- (A) ALL THE PAYMENTS MENTIONED IN THE ASSESSMENT ORDER WERE MADE TO SHREE YADAV TRANSPORT PVT. LTD. THROUGH INDIVIDUAL DRIVERS. (B) THE PAYMENTS TO INDIVIDUAL DRIVERS WERE MADE ON BEH ALF OF SHREE YADAV TRANSPORTER PVT. LTD. (C) THE TRUCK DRIVERS ACCEPTED PAYMENT ON BEHALF OF SHR EE YADAV TRANSPORT PVT. LTD. AND NOT ON THEIR OWN RIGHT. TH EREFORE, IT AMOUNTED TO PAYMENT TO SHREE YADAV TRANSPORTATION P VT. LTD. (D) THE PAYMENT MADE TO SHREE YADAV TRANSPORTER PVT. LT D. ATTRACTED DISALLOWANCE U/S. 40A(3) OF THE INCOME-TAX ACT, 196 1. ACCORDINGLY, HE CONFIRMED DISALLOWANCE OF RS. 8,20, 000/-. 7 3.2 BEFORE US BOTH PARTIES HAVE REITERATED THEIR RESPEC TIVE ARGUMENTS. IT WAS STATED BY LD. A.R. THAT THE DISALLOWANCE U/S 40A(3) OF THE ACT IS AVAILABLE IN SUCH CASE WHERE CASH PAYMENT EXCEEDING RS. 20,000/- IS MADE TO ANY PERSON ON A SINGLE DAY ON ACCOUNT OF PURCHASES / EXPENSES AND THAT WHEN PAYMENTS IS (ARE) LESS THAN RS. 20,000/- ON A SINGLE DAY, SECTION 40A (3) WILL NOT APPLY. THE LD. A.R. HAS FURTHER SUBMITTED WRITTEN SUBMISSION AS UN DER :- 4.4 THE UNDISPUTED FACTS IN THE ASSESSEE'S CASE ARE THAT (A) IT MADE PAYMENT IN CASH TO DIFFERENT DRIVERS ON A SINGLE DA Y, (B) THE PAYMENT TO INDIVIDUAL DRIVERS WAS LESS THAN RS.20,000/-, (C) HOWEVER, THE PAYMENTS TO INDIVIDUAL DRIVERS WERE MADE ON ACCOUNT OF SHRI YADAV TRANSPORT PVT. LTD. AND (D) THE GENUINENESS OF THE PAYMENT TO DRIV ERS IS UNDISPUTED. 4.5 THE ONLY DISPUTE IN THIS CASE IS WHETHER PAYME NT MADE TO VARIOUS INDIVIDUAL DRIVERS AT DIFFERENT TIME AND PLACES BUT ON THE SAME DAY, WHO RECEIVED IT ON BEHALF OF SHREE YADAV TRANSPORT PVT. LTD., AMOUNTED TO PAYMENT MADE TO SHREE YADAV TRANSPORT PVT. LTD. 4.6 IT IS SUBMITTED THAT THE ASSESSEE IS IN THE BUS INESS OF TRANSPORTATION. SHREE YADAV TRANSPORT PVT. LTD. WAS ARRANGING TRANS PORT VEHICLES I.E. TRUCKS FOR THE ASSESSEE. THE RELATION BETWEEN THE A SSESSEE AND SHREE YADAV TRANSPORT PVT. LTD. WAS OF PRINCIPAL AND AGEN T. THE TRUCK DRIVERS CARRYING THE ASSESSEE'S GOODS BELONGED TO DIFFERENT PLACES AND THEY WERE NOT AGREEABLE TO ACCEPT PAYMENT BY CHEQUE. UNDER TH ESE PECULIAR CIRCUMSTANCES, THE ASSESSEE WAS COMPELLED TO MAKE P AYMENT TO VARIOUS DRIVERS IN CASH, WHICH, AS PER THE A.O., AMOUNTED T O PAYMENT TO SHREE YADAV TRANSPORT PVT. LTD. 4.7 RULE 6DD(K) OF THE INCOME-TAX RULES, 1962 READS AS UNDER : 6DD. NO DISALLOWANCE UNDER SUB-SECTION (3) OF SECTI ON 40A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFI TS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB-SECTION (3A) OF SE CTION 40A 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 THE CASES AND CIRCUMSTANCES SPECIFIED HEREUNDER, NAMELY :- 8 (K) WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BE HALF OF SUCH PERSON; 4.8 ON A PLAIN READING OF THE ABOVE RULE, IT EMERGE S THAT WHERE THE PRINCIPAL HAS TO MAKE PAYMENT TO HIS AGENT IN CASH BECAUSE THE AGENT IN TURN IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES SUPPLIED TO THE PRINCIPAL, SUCH INSTANCES OF CASH PAYMENT SH ALL BE COVERED BY EXCEPTIONAL CIRCUMSTANCES ENVISAGED UNDER RULE (K) OF RULE 6DD OF THE INCOME-TAX RULES, 1962 AND THEREFORE, DISALLOWANCE U/S,40A (3) WILL NOT BE ATTRACTED. 4.9 IN THE ASSESSEE'S CASE, ON THE BASIS OF EMERGI NG FACTS, SHREE YADAV TRANSPORT PVT. LTD. IS THE AGENT OF THE ASSESSEE WH O IS ENGAGED IN ARRANGING TRANSPORT VEHICLES FOR HIM. THE DRIVERS O F THE TRANSPORT VEHICLES, WHO ARE FROM DISTANT PLACES, INSIST UPON CASH PAYMENT AND BECAUSE OF IT, THE ASSESSEE IS COMPELLED TO MAKE PA YMENT TO THEM IN CASH, THESE PAYMENTS ARE ON BEHALF OF SHREE YADAV TRANSPO RT PVT. LTD. THE MODUS OPERANDI OF THE ASSESSEE IS ITS BUSINESS REQU IREMENT AND IS IN ACCORDANCE WITH THE PREVAILING CUSTOMS IN ITS LINE OF BUSINESS. IF THE ASSESSEE INSISTED UPON MAKING PAYMENT ONLY BY WAY O F ACCOUNT PAYEE CHEQUES OR DRAFTS, IT WOULD HAVE ADVERSELY AND GRAV ELY AFFECTED ITS BUSINESS. UNDER THESE FACTS AND CIRCUMSTANCES, THE FACTS OF THE ASSESSEE'S CASE AND PAYMENT MADE BY IT WERE COVERED BY THE EXC EPTIONAL CIRCUMSTANCES PROVIDED UNDER CLAUSE (K) OF RULE 6DD . 4.10. MOREOVER, THE FOLLOWING PAYMENTS WHICH WERE M ADE ON A BANK HOLIDAY, WERE COVERED UNDER EXCEPTION PROVIDED UNDE R CLAUSE (J) OF RULE 6DD: NAME OF PARTY DATE OF PAYMENT AMOUNT RS. AGGREGATE AMOUNT REMARK SHREE YADAV TRANSPORT PVT. LTD. 11/05/20 08 15000 15000 30000 SUNDAY SHREE YADAV TRANSPORT PVT. LTD. 18/05/2008 15000 15000 30000 SUNDAY SHREE YADAV TRANSPORT PVT. LTD. 19/05/2008 15000 15000 15000 45000 BUDDHA PURNMA TOTAL 105000 9 4.L1 MOREOVER, THE PRIMARY OBJECT OF ENACTING SEC,4 0A(3) WAS TO COUNTER EVASIONS OF TAX THROUGH CLAIMS FOR EXPENDITURE SHOW N TO HAVE BEEN INCURRED IN CASH WITH A VIEW TO FRUSTRATING PROPER INVESTIGATION BY THE DEPARTMENT AS TO THE IDENTITY OF THE PAYEE AND REAS ONABLENESS OF THE PAYMENT AND INCULCATING BANKING HABITS. THE PROVISI ON IS INTENDED TO REGULATE THE BUSINESS TRANSACTIONS AND TO PREVENT T HE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK-MONEY FOR BUSINESS TRANSACTIONS. IT IS INTENDED TO BE MADE APPLICABLE FOR THE TRANSACTIONS WHICH ARE NOT GENUINE. THE TERMS OF SEC.40A(3) ARE NOT ABSOLUTE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELE VANT FACTORS ARE NOT EXCLUDED. THE GENUINE AND BONA FIDE TRANSACTIONS AR E NOT TAKEN OUT OF THE SWEEP OF THE SECTION. THE CENTRAL BOARD OF DIRECT T AXES HAS PRESCRIBED RULE 6DD WHICH PROVIDES CIRCUMSTANCES IN WHICH DISA LLOWANCE U/S.40A(3) WILL NOT BE ATTRACTED. THESE CIRCUMSTANC ES ARE ILLUSTRATIVE AND NOT EXHAUSTIVE. THE UNDERLYING IDEA OF THE RULE IS THAT IF THE IDENTITY OF THE PAYEE IS KNOWN, IT WOULD BE POSSIBLE FOR THE INCOME -TAX DEPARTMENT TO CROSS-CHECK, WHETHER THE TRANSACTION HAD IN FACT TA KEN PLACE. IN SUPPORT OF THE ABOVE CONTENTION, WE RELY UPON THE JUDGMENT OF HONOURABLE MADRAS HIGH COURT IN THE CASE OF C.I.T. VS. K.K.S.K . LEATHER PROCESSOR (P.) LTD. [2008] (169 TAXMANN 251) WHEREIN IT WAS H ELD AS UNDER : .........THIS COURT, IN THE DECISION IN CHROME LEAT HER CO (P ) LTD.'S CASE (SUPRA), HELD THAT RULE 6DD PROVIDES THAT AN ASSESS EE CAN BE EXEMPTED FROM THE PAYMENT BY A CROSSED CHEQUE OR CROSSED BAN K DRAFT IN THE CIRCUMSTANCES SPECIFIED IN THE RULE. THE CENTRAL BO ARD OF DIRECT TAXES HAS ISSUED CERTAIN GUIDELINES GIVING CERTAIN CIRCUM STANCES, AND THOSE CIRCUMSTANCES ARE ILLUSTRATIVE AND NOT EXHAUSTIVE A ND THE UNDERLYING IDEA OF THE CIRCULAR IS THAT IF THE IDENTITY OF THE PAYE E IS KNOWN, IT WOULD BE POSSIBLE FOR THE INCOME-TAX OFFICER TO CROSS-CHECK, WHETHER THE TRANSACTION HAD IN FACT TAKEN PLACE. TAKING NOTE OF THE FACT THAT UNDER SIMILAR CIRCUMSTANCES THIS COURT HAD ACCEPTED THE P LEA OF THE ASSESSEE, HAVING REGARD TO THE NATURE OF TRADE, WE DO NOT FIN D ANY JUSTIFICATION TO TAKE IT A REASON TO INTERFERE. 4.12 IN THE ASSESSEE'S CASE, DUE TO THE VERY NATURE OF ITS BUSINESS, IT WAS COMPELLED TO MAKE PAYMENT TO TRUCK DRIVERS IN CASH ON ACCOUNT OF SHREE YADAV TRANSPORT PVT. LTD., HOWEVER, THE IDENTITY OF THE PAYEE AND GENUINENESS OF PAYMENT WAS UNDISPUTED AND ALL EVIDE NCE IN SUPPORT THEREOF WERE PLACED BEFORE THE A.O. AS WELL AS BEFO RE THE C.I.T.(A). UNDER THESE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE LE GAL POSITION EXPLAINED ABOVE, THE DISALLOWANCE OF RS.8,20,000/- U/S. 40A(3 ) WAS NOT WARRANTED AND THE ASSESSEE PRAYS FOR ITS DELETION. 10 3.3 THE LD. D.R. HAS RELIED ON THE REASONS EXTRACTED A S ABOVE, GIVEN BY THE A.O. AND LD. CIT(A). AFTER CONSIDERING THE RIVAL SU BMISSIONS WE ARE IN AGREEMENT WITH LD. A.R FOR THE SIMPLE REASON THAT T HE PROVISION OF SECTION 40A(3) WOULD APPLY WHEN CASH PAYMENT EXCEEDED RS. 2 0,000/- TO ANY PERSON ON A SINGLE DAY ON ACCOUNT OF PURCHASES/EXPENSES. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE PAYMENTS WERE MADE IN CASH TO DIF FERENT DRIVERS ON A SINGLE DAY. THE PAYMENT TO A SINGLE INDIVIDUAL DRIVER IS LESS THAN RS. 20,000/-. THE PAYMENTS WERE MADE ON BEHALF OF SHRI YADAV TRANSPOR T PVT. LTD. AND THE GENUINENESS OF THESE PAYMENTS TO DRIVERS IN NOT DIS PUTED BY THE REVENUE. NOW, THE QUESTION ARISES WHETHER PAYMENT MADE TO VARIOUS INDIVIDUAL DRIVERS AT DIFFERENT TIMES AND PLACED ON A SINGLE DAY, ON BEHA LF OF SHRI YADAV TRANSPORT PVT. LTD. WOULD AMOUNT TO PAYMENT MADE TO SHREE YAD AV TRANSPORT PVT. LTD. (SYTPL). IT IS FOUND THAT SYTPL WAS ARRANGING TRAN SPORT VEHICLES (TRUCKS) FOR THE ASSESSEE. THE RELATION BETWEEN THE ASSESSEE AN D SYTPL IS OF A PRINCIPAL AND AGENT. WE HAVE ALSO FOUND THAT THE DRIVERS BELONG TO DIFFERENT DISTANT PLACE WHO INSISTED ON CASH PAYMENTS. AS PER RULE 6DD (K) OF THE INCOME TAX RULES 1962 (IN SHORT RULES) WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS FURTHER REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS ON SERVICES ON BEHALF OF SUCH PERSONS, NO DISALLOWANCE U/S 40 A(3) SHALL BE MADE. WE ARE IN AGREEMENT WITH LD. A.R. SHRI MEHTA THAT THE MODUS OPERANDI A DOPTED BY THE ASSESSEE IN ITS BUSINESS IS IN ACCORDANCE WITH THE PREVAILING CUSTO MS IN THIS LINE OF THE BUSINESS. SOME PAYMENTS WHICH WERE MADE ON BANK HO LIDAYS WHICH ARE COVERED UNDER RULE 6DD (J) OF THE I.T. RULES, 1962. 3.4 MOREOVER, THE PRIMARY OBJECT OF SECTION 40 A(3) IS TO CHECK TAX EVASION AND/OR STOP THE INFLOW/SPREAD OF THE BLACK MONEY/UN ACCOUNTED MONEY, CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELE VANT FACTS ARE NOT TO BE EXCLUDED AND CANNOT BE EXCLUDED. IN THIS REGARD TH E DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. K.K.S.K. LEATHER PROCESSOR (P) LTD. (2008) 11 169 TAXMANN 251 IS RELEVANT. UNDER, THESE FACTS AND THE CIRCUMSTA NCES OF THE CASE WE ARE OF THE CONSIDERED OPINION THAT THE IMPU GNED DISALLOWANCE OF RS. 8,20,000/- MADE U/S 40A(3) OF THE ACT IS NOT WARRAN TED AND DESERVES TO BE DELETED. WE DELETE THIS ADDITION AND ALLOW GROUND NO. (3) OF ASSESSEES APPEAL. 4. GROUNDS NO. (1) (4) & (5) OF ASSESSEES APPEAL ARE OF GENERAL IN NATURE AND DOES NOT REQUIRED SPECIFICALLY TO BE DEALT WITH . THEREFORE, WE DISMISS GROUNDS NO. (1) (4) & (5) OF ASSESSEES APPEAL. 5. IN REVENUES APPEAL THERE ARE TWO MORE GROUNDS. G ROUND NO. (3) IS GENERAL IN NATURE. GROUND NO. (2) IS REGARDING DEL ETION OF RS. 14,24,149/- ADDED ON ACCOUNT OF TRADING DISCREPANCIES. THE FAC TS OF THIS GROUND ARE THAT THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEC LARED A NET PROFIT RATE OF 2.60% ON A TOTAL TURNOVER OF RS. 1.76 CRORES. THE ASSESSING OFFICER HAS NOTICED VARIOUS DISCREPANCIES IN THE BOOKS OF ACCOUNTS ETC MAINTAINED BY THE ASSESSEE, THE ASSESSING OFFICER HAS FOUND VARIOUS DISCREPANCI ES THEREIN. THEREFORE, HE HAS REJECTED THE BOOKS AND HAS ESTIMATED THE NET PR OFIT OF THE ASSESSEE BY ADOPTING NP RATE OF 10% AND HAS THUS MADE AN ADDITI ON OF RS. 14,24,193/- BEFORE LD. CIT(A) SIMILAR ARGUMENTS WERE REITERATED AND HE HAS AGREED WITH LD. A.R. SINCE THE N.P. RATE SHOWN IN THIS YEAR IS BETT ER THAN THE LAST YEAR, FURTHER ADDITION CANNOT BE MADE OUT. 6. BEFORE US BOTH THE PARTIES HAVE REITERATED THEIR E ARLIER STAND. IT IS FOUND THAT THE PROPORTION OF N.P. RATES (S) SHOWN AS ON 3 1/03/2007, 31/03/2008 AND 31/03/2009 HAS BEEN SHOWN AT 1.23%, 2.32% AND 2.60% RESPECTIVELY AS MENTIONED IN PARA 5.8 OF WRITTEN SUBMISSION FURNISH ED BY THE LEARNED A.R. THUS, EVEN AFTER REJECTION OF THE BOOKS OF ACCOUNT S THE PAST HISTORY OF THE ASSESSEE IF AVAILABLE, IS THE BETTER THAN THE LAST YEAR. THEREFORE, FURTHER ADDITION IS NOT WARRANTED AND DEEMED TO BE DELETED BECAUSE T HE NP RATE SHOWN BY THE 12 ASSESSEE AT 2.60% IS BETTER THAN EARLIER YEARS. TH E LD. CIT(A) HAS CORRECTLY DELETED THIS ADDITION. WE UPHELD THE SAME AND DISM ISS GROUND NO. (2) OF REVENUES APPEAL. 7. GROUND NO. (3) IS GENERAL IN NATURE. 8. ACCORDINGLY, WE ALLOW THE APPEAL OF THE ASSESSEE AN D DISMISS THE APPEAL OF THE REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON 30/08/2013. [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30/8/2013 VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.