Orient Builders, CHENNAI V. ACIT Non Corp. Circle 9(1), CHENNAI

ITA 1427/CHNY/2018

• Counselvise Citation: [NaN] 107 COUNSELVISE.COM (IT) 1776 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 27-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: TDS
• Section: 40A(3)

Judgement Text

आयकर अपील य अ धकरण, ‘ए’ यायपीठ, चे नई IN THE INCOME TAX APPELLATE TRIBUNAL , ‘A’ BENCH, CHENNAI ी वी.द ु गा राव, या यक सद य एवं ी जी.मंज ु नाथ, लेखास द य के सम$ BEFORE SHRI V.DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER आयकरअपीलसं./I .T. A. No. 1 4 2 7 / C hn y/ 2 0 1 8 ( नधा रणवष / As s es s m en t Ye ar : 20 10 - 1 1) M/s. Orient Builders 23, Police Commissioner’s Office Road, Egmore, Chennai-600 008. V s The Assistant Commissioner of Income Tax, Non-Corporate Circle-9(1) Chennai. P AN: A AA F O 0 6 7 0 Q (अपीलाथ /Appellant) ( यथ /Respondent) अपीलाथ क ओरसे/ Appellant by : None यथ क ओरसे/Respondent by : Mr. AR V Sreenivasan, Addl.CIT स ु नवाईक तार ख/D a t e o f h e a r i n g : 29.12.2021 घोषणाक तार ख /D a t e o f P r o n o u n c e m e n t : 03.01.2022 आदेश / O R D E R PER G.MANJUNATHA, AM: This appeal filed by the assessee is directed against order of the learned Commissioner of Income Tax (Appeals)-10, Chennai dated 12.01.2018 and pertains to assessment year 2010-11. 2. The assessee has raised following grounds of appeal:- “1. The order of the Commissioner of Income Tax Appeals is contrary to Law and Arbitrary and inconsistent with respect to the law and facts. 2. The learned Commissioner of Income Tax Appeals has not any reservation against any of the arguments advanced. The Appellant did not have fair and reasonable opportunity. 2 ITA No.1427/Chny/2018 3. The CIT Appeals have refused to recognize the meaning of ‘Agent’ where the supervision is been deemed to act as an agent due to circumstance which is supported by a case law in favor of the assesses. 4. The order was passed nearly 2 months of the hearing indicating non application of mind to the arguments presented which has not being adverted in the order.” 3. Brief facts of the case are that the assessee firm is engaged in the business of civil contractors/builders filed its return of income for assessment year 2010-11 on 31.03.2012 declaring total income of Rs.6,95,520/-. The case has been subsequently reopened u/s.147 of the Income Tax Act, 1961, for reasons recorded, as per which income chargeable to tax had been escaped assessment. In response to 148 notice and subsequent hearings, the Authorized Representative of the assessee appeared and furnished various details called for. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has made cash payment for various expenses, including payments for purchase of cement, sand, bricks and jelly in excess of prescribed limit provided u/s.40A(3) of the Income Tax Act, 1961, and hence, called upon the assessee to explain as to why cash payments in excess of 3 ITA No.1427/Chny/2018 Rs.20,000/- cannot be disallowed u/s.40A(3) of the Act. In response, the assessee vide letter dated 29.01.2016 submitted that in civil construction business cash payments for purchase of certain materials is unavoidable. Therefore, the assessee argued that payment made for purchase of raw materials on urgent requirements cannot be considered in light of provisions of section 40A(3) of the Act. The Assessing Officer, however, was not convinced with explanation furnished by the assessee and according to him, payments made in cash for purchase of materials does not come under any exceptions as provided under Rule 6DD of Income Tax Rules, 1962, and hence, total cash payments amounting to Rs.35,21,035/- has been disallowed u/s.40A(3) of the Act. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee submitted that it has purchased materials in cash through agents which is covered under Rule 6DD clause (k), as per which any payment made by a person to his agent, who is required to make payment in cash for goods and services on behalf of such person does not come under the 4 ITA No.1427/Chny/2018 purview of section 40A(3) of the I.T Act, 1961. The learned CIT(A), after considering relevant facts and also taken note of the provisions of section 40A(3) of the Act, observed that although the assessee claims to have made payment to his agent, who is required to make payment in cash for goods and services on behalf of such person, but on perusal of details filed by the assesse, it was noted that the assessee has made payment to his own employees and claimed that said employees are its agents. Therefore, he opined that exception as provided under clause (k) of Rule 6DD Income Tax Rules, 1962, has no application to the case of the assessee. The learned CIT(A) further observed that even otherwise assuming for a moment, the assessee has made payment to its agents, which is covered under exception as provided under Rule 6DD, but sum would be liable for disallowance, albeit u/s.40(a)(ia) of the Act, as no TDS has been deducted while making contractual payment to its aforesaid agents. Therefore, he opined that payment made by the assessee in cash for purchases is in violation of provisions of section 40A(3) of the Act and thus, cannot be allowed as deduction, accordingly, 5 ITA No.1427/Chny/2018 confirmed additions made by the Assessing Officer. Aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 5. None appeared on behalf of the assessee, despite various dates of hearings was provided. It is apparent from order sheet notings that on five occasions starting from 21.12.2020 to 07.09.2021, the assessee neither appeared nor sought adjournment of hearing by filing petition for adjournment. Therefore, when the appeal was called upon for hearing, once again, the assessee neither appeared nor filed any petition for adjournment. Therefore, left with no option, we proceed to dispose off appeal of the assessee ex-parte on the basis of materials available on record. As per facts borne out from records, the assessee has made cash payments in excess of prescribed limit covered u/s.40A(3) of the Act, for purchase and services. In fact, the assessee admitted fact that it has made cash payments in excess of prescribed limit, however, argued that said payment is made to his agent, who is required to make payments in cash for goods or services on behalf of the assessee. We find that the learned CIT(A) has recorded 6 ITA No.1427/Chny/2018 categorical finding that although, the assessee claims to have made payment to its agent, but on perusal of details filed by the assesse, so called agents are employees of the assessee firm. Therefore, he opined that exceptions covered under clause (k) of Rule 6DD of I.T. Rules, 1962, does not apply to facts of the present case. The facts remain unchanged. The assessee neither appeared nor filed any details to justify its case to argue that payments made in cash in excess of prescribed limit provided under section 40A(3) of the Act, comes under clause (k) of Rule 6DD of Income Tax Rules, 1962. Therefore, we are of the considered view that cash payments made in excess of prescribed limit for purchase of materials comes under provisions of section 40A(3) of the Act, and hence, there is no error in the reasons given by the Assessing Officer to make additions towards cash payment u/s.40A(3) of the Act. As regards various case laws relied upon by the assesse, we find that all those cases are rendered under different set of facts and hence, no application to the facts of the present case. 7 ITA No.1427/Chny/2018 6. In this view of the matter, and considering facts and circumstances of the case, we are of the considered view that there is no error in the reasoning given by the learned CIT(A) to sustain additions made by the Assessing Officer towards cash payments u/s.40A(3) of the Act and hence, we are inclined to uphold order of the learned CIT(A) and dismiss appeal filed by the assessee. 7. In the result, appeal filed by the assessee is dismissed. Order pronounced in the open court on 3 rd January, 2022 Sd/- Sd/- ( वी.द ु गा राव) ( जी. मंज ु नाथ) (V.Durga Rao) ( G.Manjunatha ) #या यक सद&य /Judicial Member लेखा सद&य / Accountant Member चे#नई/Chennai, )दनांक/Dated 3 rd January, 2022 DS आदेश क त+ल,प अ-े,षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आय ु .त (अपील)/CIT(A) 4. आयकर आय ु .त/CIT 5. ,वभागीय त न2ध/DR 6. गाड फाईल/GF.app