Standard Consultants Limited, Hyderabad V. Asst. Commissioner of Income Tax, Hyderabad

ITA 1207/HYD/2013

• Counselvise Citation: 120722514 RSA 2013
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 13-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEEVAN LAL LAVADIYA
• Assessee Lawyers: D V ANJANEYULU
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1207/HYD/2013 ASSESSMENT YEAR 2010-2011 STANDARD CONSULTANTS LTD. HYDERABAD PANAACCS8414P VS. ACIT, CIRCLE 3(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. D.V. ANJANEYULU FOR REVENUE : MR. JEEVAN LAL LAVADIYA DATE OF HEARING : 28.11.2013 DATE OF PRONOUNCEMENT : 24.01.2014 ORDER PER SAKTIJIT DEY, J.M. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)IV, HYDERABAD DATED 26.07.2013 FOR T HE A.Y. 2010-2011. 2. THE ONLY ISSUE IN DISPUTE IN THE PRESENT APPEAL IS DISALLOWANCE OF AN AMOUNT OF RS.25,14,125/- UNDER SECTIO N 40A(3) OF THE ACT. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF TRADING AND MARKETING OF CN G/LPG CONVERSION KITS, LPG TANKS AND ACCESSORIES AND LAYING OF ELECTRICAL LINES. FOR THE ASSESSMENT YEAR IN DISPUTE TH E ASSESSEE FILED ITS RETURN OF INCOME ON 24.09.2010 DECLA RING AN INCOME OF RS.76,04,991/-. IN COURSE OF SCRUTINY ASSESS MENT PROCEEDINGS, THE A.O. WHILE EXAMINING THE P & L ACCOUNT NOTICED THAT THE ASSESSEE HAS DEBITED AN EXPENDITURE OF 2 ITA.NO.1207/HYD/2013 STANDARD CONSULTANTS LTD. HYDERABAD RS.58,43,851/- AS PAYMENT TO LABOUR SUB-CONTRACTOR SHRI N. C. RAJASEKHAR. ON FURTHER EXAMINATION OF CASH BOOK AND LEDGER ACCOUNT, THE A.O. FOUND THAT OUT OF RS.58,43,851/- AN AMOUNT OF RS.27,02,239/- WAS PAID IN CASH AND EACH PAYMENT IS IN EXCESS OF RS.20,000/- PER DAY. THE A.O. THEREFORE INVOKI NG THE PROVISIONS OF SECTION 40A(3) DISALLOWED THE EXPENDITURE OF RS.27,02,239/-. 4. BEING AGGRIEVED OF THE ADDITION MADE IN THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE CIT(A). IN COURSE OF HEARING OF APPEAL BEFORE THE CIT(A) , THE ASSESSEE SUBMITTED A BREAK-UP OF THE PAYMENTS MADE TO THE SUB CONTRACTOR SRI NC RAJSHEKAR WHICH IS AS UNDER : SL.NO. PARTICULARS AMOUNT RS. 1. CHEQUES DEPOSITED IN HIS ACCOUNT 22,94,370 2. ONLINE DEPOSITS IN HIS BANK ACCOUNTS A) UNION BANK, VELLUER, TAMILNADU A/C.NO.333802010426479 B) INDIAN BANK, VELLUER, TAMILNADU A/C. NO.817593504 11,40,655 3. CASH PAID ON EMERGENCY BASIS (ADVANCES) 13,73,470 4. RECOVERIES TOWARDS HIRE JCB 5,71,946 5. TDS DEDUCTED AT THEREON 1,31,746 TOTAL 55,12,187 5. IT WAS CONTENDED BY THE ASSESSEE REFERRING TO THE BREAK-UP THAT CASH PAYMENTS MADE TO THE CONTRACTOR WAS RS.25,14,125/- AND NOT RS.27,02,239/- AS HELD BY THE A.O. IT WAS CONTENDED THAT CASH WAS DIRECTLY DEPOSITED INTO THE BANK ACCOUNT OF THE SUB-CONTRACTOR AS ADVANCE AS ONLINE TRA NSFER FACILITIES LIKE RTGS AND NEFT WERE NOT AVAILABLE AND S INCE WORK WAS GOING ON IN A VILLAGE WHERE LABOUR PAYMENTS WERE REQUIRED TO BE MADE PUNCTUALLY TO ENSURE SMOOTH CONTIN UATION 3 ITA.NO.1207/HYD/2013 STANDARD CONSULTANTS LTD. HYDERABAD OF WORK, CASH HAD BEEN DEPOSITED INTO HIS BANK ACCOUNT SO THAT FUNDS WERE CREDITED IMMEDIATELY. IT WAS FURTHER C ONTENDED THAT CASH HAD BEEN PAID TO THE SUB-CONTRACTOR AS ADVANCE IN EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES AT WORK SITE A ND AFTER OFFICE HOURS AT A PLACE CALLED JURLA WHICH IS MORE THAN 30 KMS FROM GADVEL AND 60 KMS FROM VANAPARTHY WHERE NO BANKING FACILITIES ARE AVAILABLE. THE ASSESSEE THEREF ORE, PLEADED THAT THE CASH PAYMENTS THEREFORE, WOULD COME WITHIN THE EXCEPTIONS PROVIDED UNDER RULE (G) AND (K) OF RULE 6DD, HENCE, NO DISALLOWANCE CAN BE MADE UNDER SECTION 40A(3). 6. THE CIT(A) THOUGH ACCEPTED THE ASSESSEES CONTENTION THAT CASH PAYMENTS WERE ONLY RS.25,14,125/- BUT HE REJECTED ALL OTHER CONTENTIONS OF THE ASSESSEE AND SUSTAINED THE ADDITION OF THE AFORESAID AMOUNT BY HOLDING AS UNDE R : 7. AS FAR AS THE ONLINE DEPOSITS ARE CONCERNED THE AR HAS SUBMITTED THAT ISSUE OF CHEQUE WOULD HAVE TAKEN A LONG TIME TO BE CREDITED INTO THE SUB-CONTRACTORS BANK ACCOUNT AND CASH WAS IMMEDIATELY REQUIRED FOR SMOOTH FLOW OF WORK. THE AR HAS ALSO CLAIMED THAT THE WORK WAS BEING CARRIED OUT AT JURALA WHICH DID NOT HAVE ANY BANKING FACILITY. I FIND THE TWO CLAIMS OF THE AR TO BE CONTRADICTORY. IF AS CLAIMED, THERE WAS NO BANKING FACILITY AT JURALA, THE ONLINE CASH DEPOSITS INTO THE BANK ACCOUNT OSTENSIBLY FOR IMMEDIATE USE WOULD NOT HAVE BEEN AVAILABLE AT THE WORK SITE, IN WHICH CASE THE WHOLE ARGUMENT OF IMMEDIATE AVAILABILITY OF CASH IS DEFEATED. 8. THE AR HAS ALSO CLAIMED THAT THERE WAS NO BANK BRANCH OR ATM WITHIN A RADIUS OF 15 TO 20 KMS FROM JURALA WHERE THE WORK SITE WAS LOCATED. ON THE OTHER HAND, THIS ABSENCE OF BANK BRANCH OR ATM DID NOT CAUSE ANY HINDRANCE TO THE APPELLANT IN 4 ITA.NO.1207/HYD/2013 STANDARD CONSULTANTS LTD. HYDERABAD PAYMENT OF A SUBSTANTIAL AND ALMOST EQUIVALENT AMOUNT OF RS.22,94,370/- TO THE SAME SUB CONTRACTOR FOR THE SAME WORK SITE AT JURALA BY CHEQUE. THE REASON ADVANCED BY THE APPELLANT IS THEREFORE MERELY AN EXCUSE FOR INCURRING THE EXPENSES IN CASH. THE DISALLOWANCE U/S. 40A(3) IS THEREFORE UPHELD. 7. WE HAVE HEARD THE CONTENTIONS OF THE PARTIES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS OT HER MATERIALS ON RECORD. THE ONLY ISSUE TO BE DECIDED IN THE PRESENT APPEAL IS, WHETHER DISALLOWANCE COULD BE MADE UN DER SECTION 40A(3) CONSIDERING THE FACTS OF THE PRESENT C ASE. AS CAN BE SEEN FROM THE BREAK-UP OF PAYMENTS REPRODUCED HEREINBEFORE EVEN OUT OF THE AMOUNT OF RS.25,14,125/- P AID IN CASH, AN AMOUNT OF RS.11,40,655/- WAS DIRECTLY DEPOSITE D INTO TWO BANK ACCOUNTS OF THE SUB-CONTRACTOR THROUGH ONLINE DEPOSITS. THOUGH THE AFORESAID AMOUNT MAY NOT HAVE BEEN PAID THROUGH THE MODE PRESCRIBED UNDER SECTION 40A(3) BUT CERTAINLY THE PAYMENT IS THROUGH A PROPER BANKING CHANNE L. IN REAL TERMS, IT IS NOT A DIRECT CASH PAYMENT TO THE SUB - CONTRACTOR. FURTHERMORE, IT WAS THE SPECIFIC CONTENTION OF THE ASSESSEE BEFORE THE CIT(A) THAT SINCE THERE WAS NO BANK ING FACILITY AVAILABLE AT THE WORK SITE AT JURALA, FOR ENSU RING SMOOTH CONTINUATION OF WORK PAYMENT WAS MADE IN CASH. THI S CONTENTION OF THE ASSESSEE REMAINS UNCONTROVERTED. THERE I S ABSOLUTELY NO SPECIFIC FINDING BY THE CIT(A) AS TO WHET HER BANKING FACILITY WAS AVAILABLE AT THE WORK SITE OR NOT. WITHOUT PROVING THE CLAIM OF THE ASSESSEE WITH REGARD TO NON- AVAILABILITY OF BANKING FACILITY AT THE PLACE WHERE PA YMENT IS MADE TO BE WRONG BY BRINGING COGENT MATERIAL ON RECORD, THE REJECTION OF ASSESSEES CLAIM IS BASED MORE ON PRESUMPTI ONS AND SURMISES THAN ON FACTS. THOUGH SECTION 40A(3) EMPO WERS 5 ITA.NO.1207/HYD/2013 STANDARD CONSULTANTS LTD. HYDERABAD THE A.O. TO DISALLOW EXPENDITURE MADE OTHER THAN BY WAY OF CHEQUE OR DRAFT, BUT THE PROVISO TO SECTION 40A(3) PROVI DES THAT NO DISALLOWANCE UNDER SECTION 40A(3) WOULD BE MADE IN SU CH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIB ED HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACIL ITIES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OT HER RELEVANT FACTORS. THE EXCEPTIONS FOR NON-APPLICABILITY OF SECTION 40A(3) ARE PROVIDED UNDER RULE 6DD OF THE RULES. SUB- RULE (G) OF RULE 6DD READS AS UNDER : (G) WHERE THE PAYMENT IS MADE IN A VILLAGE OR TOWN, WHICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK, TO ANY PERSON WHO ORDINARILY RESIDES, OR IS CARRYING ON ANY BUSINESS, PROFESSION OR VOCATION, IN ANY SUCH VILLAGE OR TOWN; 8. IT IS THE SPECIFIC PLEA OF THE ASSESSEE THAT CAS H PAYMENTS HAD TO BE MADE IN THE INTEREST OF BUSINESS, SINCE BANKING FACILITIES ARE NOT AVAILABLE AT THE WORK SITE AT JURALA. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO DISPROVE THE AFORESAID CLAIM OF THE ASSESSEE. THEREFORE, CONSIDERED IN THE CONTEXT OF RULE 6DD(G) NO DISALLOWANCE OF THE EXPENDITU RE CLAIMED CAN BE MADE UNDER SECTION 40A(3) OF THE ACT. I N AFORESAID VIEW OF THE MATTER, WE DELETE THE ADDITION OF RS.25,14,125/-. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.01.2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATE 24 TH JANUARY, 2014 VBP/- 6 ITA.NO.1207/HYD/2013 STANDARD CONSULTANTS LTD. HYDERABAD COPY TO : 1. STANDARD CONSULTANTS LTD. 30, BHAGYALAXMI NAGAR, G ANDHI NAGAR, HYDERABAD PANAACCS8414P 2. ACIT, CIRCLE 3 (2), HYDERABAD 3. CIT(A)-IV, HYDERABAD 4. CIT-III, HYDERABAD 5. D.R. ITAT B BENCH, HYDERABAD.