Shri Ramchand Bhulchand Rajai, Ahmedabad V. The Jt.CIT, (OSD), Circl-1, Bhavnagar

ITA 1441/AHD/2014

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8594 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-09-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 12-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: B R POPAT
• Keywords: Additional evidence; Question of law; Wrong claim
• Section: 40A(3); 143(3); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I MAHAVIR PRASAD , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER RAMCHAND BHULCHAND RAJAI, PROP. RAMA ENTERPRISE, OPP; RAILWAY STATION, BHAVNAGAR, PAN: ABMPR4841D (APPELLANT) VS THE J CIT (OSD) , CIRCLE - 1, BHAVNAGAR (RESPONDENT) REVENUE BY : S H RI MUDIT NAGPAL , SR. D . R. ASSESSEE BY: SHRI B.R. POPAT, A.R. DATE OF HEARING : 12 - 10 - 2 018 DATE OF PRONOUNCEMENT : 12 - 12 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A. Y. 2009 - 10 , ARI SES FROM ORDER OF THE CIT(A) - XX, AHMEDABAD DATED 28 - 03 - 2 014 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - THE LEARNED CIT(A) - XX AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN - 1. PARTLY CONFIRMING THE ADDITION OF RS.1,77,20,947/ - WHICH WAS ORIGINALLY MADE BY THE AO UNDER SECTION 40A(3) OF THE ACT, AT RS.65,20,741/ - . CONSIDERING THE FACTS OF THE CASE IN ITS TOTALITY AND THE PROVISIONS OF LAW AS INTERPRETED BY VARIOUS COURTS AND TRIBUNALS, HE OUGHT TO HAVE DELETED THE ENTIRE ADDITION. I T A NO . 1441 / A HD/20 1 4 A SSESSMENT YEAR 200 9 - 10 I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 2 2. PARTLY CONFIRMING THE DISALLOWANCE OF RS. 12,12,400/ - IN RESPECT OF LOADING AND UNLOADING EXPENSES AT RS. 1,81,800/ - ON LUMP SUM BASIS. CONS IDERING THE FACTS OF THE CASE IN ITS TOTALITY, HE OUGHT TO HAVE DELETED THE ENTIRE ADDITION. 3. THE BRIEF FACT OF THE CASE IS THAT RETURN OF INCOME DECLARING INCOME OF RS. 24 , 84 ,044/ - WAS FILED. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SECURITY BY ISSU ING OF NOTICE U/S. 143(2) OF THE ACT ON 18 TH AUGUST, 2010. M/S. S.N.R. LOGISTICS IS A PROPRIETY CONC ERN OF THE AS SESSEE ENGAGED IN THE BUSINESS OF TRANSPORT OF GOODS BY ROAD TRUCK AND CONTRACTORS . THE MAIN ACTIVITY OF THE ASSESSEE IS TO HIRE THE TRUCK AN D CONTRACTOR S FROM THE TRANSPORTERS AND SUPPLY THEM TO THEIR CLIENTS COMPANY. ON VERIFICATION OF THE DETAILS FILED, THE ASSESSING OFFICER NOTICED THAT ASSESSEE MADE CASH PAYMENT IN EXCESS OF RS. 20,000/ - . THEREFORE, THE ASSESSEE WAS ISSUED A SHOW CAUSE N OTICE AS TO WHY THE AMOUNT PAID IN EXCESS OF RS. 20,000/ - TO A SINGLE PARTY IN A DAY SHOULD NOT BE DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. THE ASSESSEE HAS EXPLAINED THAT IT HAS MADE PAYMENT WHICH INCLUDES ALL PURPOSE S LIKE PAYMENT TO DRI VER, CLEANER, DIESEL EXP ENSES, OTHER SPARE PARTS PURCHASE , EXPENSES FOR PUNCTURE TUBE TIRE ETC. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION ON THE FOLLOWING REASONS: - 01. THE ASSESSE WORKS MERELY AS AN COMMISSION AGENT AND TRANSPORT CONTRACTOR S WHEREIN HE ARRANGES THE VEHICLES 02. ONCE THE RATE IS FIXED FOR THE VEHICLES, HE IS SUPPOSED TO PAY THE RENTALS FOR THE VEHICLES OWNERS 03. DRIVERS/ CLEANERS ETC. ARE NOT ASSOCIATED WITH THE ASSESSE AS EMPLOYEE BUT THEY WORK FOR VEHICLE OWNERS 04. DRIVER S SALARY/ CLEANERS SALARY, DIESEL EXPENSES SPARE PARTS AND OTHER INCIDENTAL EXPENSES ARE NOT THE RESPONSIBILITY OF THE ASSESSE BUT ARE OF THE VEHICLE OWNERS. 05. THUS CLAIM OF THE ASSESSE THAT HE HAS PAID FOR THESE EXPENSES ARE FAR FROM REALITY AND IN NO W AY IS SUPPORTED BY ANY APPROPRIATE EVIDENCE 06. LT APPEARS THAT THE NARRATION GIVEN BY THE ASSESSEE AS ADVANCE' IS AN AFTERTHOUGHT. 07. IT IS NOTICED THAT THE ADVANCE PAYMENTS ARE DIRECTLY TRANSFERRED TO EXPENSE ACCOUNT WHICH PROVES BEYOND DOUBT THAT PAYME NTS MADE BY ASSESSE ARE ACTUALLY IN THE NATURE OF EXPENSES BUT BY ASSESSE HAS USED THE COLORABLE DEVISE AND HAVE GIVEN THE NAME AS 'ADVANCE' AND HAVE TRIED TO TAKE SHELTER THE TECHNICALITIES OF SECTION 40A(3) AND RULE 6D. 08. ASSESSEE HAS ACTUALLY MADE PAY MENTS IN EXCESS OF RS. 20,000/ - IN ALL THE ABOVE CASES. 09. UNDER THE FACTS AND CIRCUMSTANCES, ASSESSE CASE SQUARELY FALLS UNDER THE PROVISIONS OF SEC. 40A(3). I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 3 THE ASSESSING OFFICER HAS STATED THAT AS PER SECTION 40A(3) PAYMENT IN CASH IN EXCESS OF RS. 2 0,000/ - IS DISALLOWABLE. HE FURTHER STATED THAT ASSESSEE DOES NOT OWN ANY TRUCK AND ONLY TAKE S TRUCK ON RENT AND IN TURN GIVE IT TO RENT TO OTHER PARTIES. THE ASSESSING OFFICER HAS OBSERVED THAT THE PAYMENT GIVEN BY THE ASSESSEE TO THE TRUCK DRIVERS FOR MS A PART OF RENT ONLY TO THE PARTY FROM WHOM THE ASSESSEE HAS TAKEN THE TRUCKS ON RENT. HE HAS FURTHER STATED THAT SUCH PAYMENT IS THE PAYMENT MADE TO DRIVERS ON BEHALF OF THE VEHICLE OWNERS, PARTIES FROM WHOM TRUCKS WERE TAKEN ON RENT. HE STATED THAT T RUCK DRIVERS WERE EMPLOYERS OF THE PARTIES WHO HIRE OUT THE TRUCK ON RENT ON WHICH THEY HAVE RECEIVED PAYMENT ONLY AS A G E NT TO THE TRUCK OWNERS. THEREFORE, THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS. 1,77,20,947/ - . 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF THE LD. CIT (A) IS REPRODUCED AS UNDER 3.5. I HAVE CAREFULLY GONE THROUGH THE FACTS OF THE CASE, VARIOUS WRITTEN SUBMISSIONS , REMAND REPORT OF THE A.O AND REJOINDER TO THE REMAND REPORT. IT IS NOTICED THAT THE APPELLANT COULD NOT SUBMIT THE DETAILED REPLY ALONG WITH THE ANALYSIS AND SUPPORTING BILLS/VOUCHERS TO JUSTIFY THE PAYMENTS MADE EXCEEDING RS. 20,000/ - IN CASH AS THE VOL UMINOUS TRANSACTIONS WERE INVOLVED IN THE GIVEN SHORT TIME TO COMPLY THE REQUISITIONS OF THE A.O. SO THE NECESSARY DETAILS AND EVIDENCES WERE FURNISHED IN THE APPELLATE PROCEEDINGS AND REPORT OF THE A.O. WAS ALSO CALLED FOR. THUS, IT IS A FIT CASE FOR ADMI TTING THE EVIDENCES UNDER RULE - 46A OF THE I.T. RULES AS THE ORDER HAS BEEN PASSED BY THE A.O. WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO ADDUCE THE EVIDENCES RELEVANT TO THE GROUNDS OF APPEAL. EVEN THE A.O. HAS NOT MADE ANY OBJECTIONS TO THE ADMISSION OF SUCH ADDITIONAL EVIDENCES AND SHE GAVE THE REMAND REPORT ON MERITS OF THE ISSUE. THEREFORE, THE ADDITIONAL EVIDENCES ARE ADMITTED UNDER 46A OF THE I.T. RULES IN VIEW OF THE DECISION OF VARIOUS COURTS IN ELUDING IN THE CASE OF SMT. PRABHAVATI S. SHAH V. COMMISSIONER OF INCOME TAX. 231 ITR 1 (BOM). THE ISSUE IS DECIDED ON MERITS AS UNDER: - ON GOING THROUGH THE WRITTEN SUBMISSIONS OF THE APPELLANT, IT WAS FOUND THAT AS PER THEIR SUBMISSION THE CASH PAYMENTS TO VARIOUS TRANSPORTERS HAVE BEEN CATEG ORIZED UNDER DIFFERENT HEADS SUCH AS; (1)DETAILS OF PAYMENTS BELOW RS.20,000/ - EACH TO VARIOUS PARTIES TOTALING TO RS.20,73,420/ - . SINCE EACH PAYMENT WAS LESS THAN RS.20,000/ - EVEN ON A SINGLE DAY FOR A SINGLE TRANSACTION AND HENCE THE PROVISIONS OF SECTIO N 40A(3) DOES NOT APPLY AS PER THE APPELLANT. (DETAILS ON PAGE NO.21 TO 44 OF PAPER BOOK). - ALSO CLAIMED THAT TO A SINGLE PARTY TOTAL PAYMENT EXCEEDING RS.20,000/ - WAS MADE IN A SINGLE DAY FOR DIFFERENT TRIPS BUT THE PAYMENT RELATING TO EACH TRIP WAS LESS THAN RS!20,000/ - . (2) DETAILS OF THE AMOUNTS SEGREGATING THE ROAD/RTO EXPENSES OUT OF THE EACH PAYMENTS AND THE BALANCE PAYMENT TOWARDS TRANSPORT BEING LESS THAN RS. I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 4 20,000/ - AND HENCE THE PROVISIONS OF SECTION 40A(3) DOES NOT APPLY AS PER THE APPELLANT. TOTAL AMOUNT ON SUCH PAYMENTS STATED TO BE AT RS.5,23,790/ - . ( DETAILS ON PAGE NO.45 TO 53 OF PAPER BOOK) (3)EACH OF THE PAYMENTS IN CASH MADE ON SATURDAYS, SUNDAYS AND HOLIDAYS WHEN THE BANKING FACILITIES WERE NOT AVAILABLE AND HENCE SAME WAS FALLING UN DER RULE - 6DD(J) TO SECTION 40A(3) OF THE I.T. ACT AND HENCE NO DISALLOWANCE TO BE MADE AS PER APPELLANT. THE TOTAL AMOUNT ON THIS ACCOUNT STATED TO BE AT RS.49,26,891/ - . ( DETAILS ON PAGE NO.54 TO 98 OF PAPER BOOK) (4) THE DETAILS OF PAYMENTS WHERE THE TRA NSPORTERS DID NOT HAVE ANY OFFICE NEAR TO LOADING POINTS OF THE TRUCKS AND HENCE THE PROVISIONS OF SECTION 40A(3) COULD NOT BE APPLIED AS PER THE APPELLANT. THE TOTAL AMOUNT ON THIS ACCOUNT STATED TO BE AT RS.79,79,711/ - . (DETAILS ON PAGENO.99TO 101 OF PAP ER BOOK) (5) THE DETAILS OF AMOUNTS PAID TO THE PARTIES IN EXCESS OF RS.20,000/ - WHEREIN THE APPELLANT DOES NOT HAVE ANY PRESENCE NOR BANK ACCOUNT. THE TOTAL OF THIS AMOUNTS STATED TO BE AT RS.22,52,135/ - . (DETAILS AT PAGE NO. 102 TO 118 OF PAPER BOOK) (6) ENCLOSED CERTAIN COPIES OF THE LETTERS FROM FEW PARTIES STATING THAT THEY HAVE INSISTED FOR THE CASH PAYMENTS AT THE RELEVANT POINT OF TIME. THE APPELLANT HAS NOT QUANTIFIED SUCH AMOUNT. (PAGE NO.L 19 TO 127 OF PAPER BOOK) EACH OF THE ABOVE HEADS UNDER WHI CH THE PAYMENTS HAVE BEEN CLASSIFIED BY THE APPELLANT ARE DISCUSSED HEREUNDER: - (1) DETAILS OF PAYMENTS BELOW RS.20,000/ - EACH TO VARIOUS PARTIES TOTALING TO RS.20,73,420/ - . SINCE EACH PAYMENT WAS LESS THAN RS.20,000/ - EVEN ON A SINGLE DAY FOR A SINGLE T RANSACTION AND HENCE THE PROVISIONS OF SECTION 40A(3) DOES NOT APPLY AS PER THE APPELLANT. (PAGE NO.21 TO 44 OF PAPER BOOK) I HAVE CAREFULLY GONE THROUGH THE FACTS OF THE CASE, VARIOUS WRITTEN SUBMISSIONS, REMAND REPORT OF THE A.O AND REJOINDER TO THE REMAND REPORT. THE APPELLANT HAS CLAIMED THAT IN FACT THE A.O. HAS MADE THE DISALLOWANCE OF THE CASH PAYMENT OF RS.20,000/ - ON A SINGLE DAY TO THE SINGLE PARTY ON WHICH PROVISIONS OF SECTION 40A(3) DOES NOT APPLY AS FOR INVOKING THE PROVISIONS THE CAS H PAYMENTS SHOULD BE EXCEEDING RS.20,000/ - . THE APPELLANT'S CONTENTION IS FOUND CORRECT TO THIS EXTENT. IT IS NOTICED THAT IN THE FOLLOWING CASES, THE PAYMENTS TO THE PARTIES WERE MADE UPTO RS.20,000/ - ON A SINGLE DAY ON WHICH THERE IS NO VIOLATION AND NO DISALLOWANCE NEEDS TO BE MADE AS PER THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT. THEREFORE, AS PER THE DETAILS GIVEN BELOW, THE APPELLANT GETS THE RELIEF OF RS.5,66,270/ - . XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX THE AFORESAID DETAILS OF THE PAYMENTS UPTO RS.20,000/ - IN CASH ARE LISTED IN THE ASSESSMENT ORDER BY THE A.O AND HENCE RELIEF MAY BE GRANTED FOR THE PAYMENT ACCORDINGLY. IN CASE OF ANY OTHER CASH PAYMENTS UPTO RS.20,0 00/ - TO A SINGLE PARTY IN A SINGLE DAY COMES INTO THE NOTICE OF THE A.O. .WHICH ARE NOT LISTED ABOVE BUT DISALLOWANCE HAS BEEN MADE IN ASSESSMENT ORDER THEN THOSE MAY ALSO BE NOT CONSIDERED FOR ANY DISALLOWANCE U/S.40A(3) OF THE I.T. ACT. HERE THE APPELLAN T'S SECOND ARGUMENT IS THAT IF TWO OR MORE PAYMENTS CONSIDERING EACH PAYMENT BELOW RS.20,000/ - TO A SINGLE PARTY ON A SINGLE DAY DOES NOT ATTRACT THE PROVISIONS OF SECTION 40A(3) OF THE ACT AS EACH PAYMENT WAS MADE WITH REGARD TO A DIFFERENT SET OF TRANSAC TIONS/DIFFERENT TRIP. THE APPELLANT'S CONTENTION IN THIS REGARD IS NOT ACCEPTABLE FOR THE REASON THAT UNDER THE PROVISIONS OF SECTION 40A(3) IT IS CLEARLY MENTIONED THAT IF THE ASSESSEE INCURRES ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT O R AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE EXCEEDS RS.20,000/ - NO SUCH DEDUCTION SHALL BE ALLOWED. SO, THE PAYMENT/PAYMENTS SHOULD NOT BE EXCEEDING RS.20,000/ - TO A SINGLE PERSON TO AVOID THE DISALLOWANCES. MEANING THEREB Y THAT THE PROVISIONS DOESN'T GIVE ANY IMMUNITY FOR EVERY SET OF TRIPS/SEPARATE TRIP THE PAYMENT EXCEEDING RS.20,000 / - EVEN IF PAID ON A SINGLE DAY I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 5 TO A SAME PERSON]) SO THE APPELLANT'S ARGUMENT IN THIS REGARD IS NOT CORRECT AND HENCE THE SAME IS NOT ACCEP TED. NO RELIEF ON THIS ACCOUNT IS ALLOWED TO THE APPELLANT. (2)DETAILS OF THE AMOUNTS SEGREGATING THE ROAD/RTO EXPENSES OUT OFR THE EACH PAYMENTS AND THE BALANCE PAYMENT TOWARDS TRANSPORT WAS LESS THAN RS.20,000/ - AND HENCE THE PROVISIONS OF SECTION 40A(3) DOES NOT APPLY AS PER THE APPELLANT. TOTAL AMOUNT ON SUCH PAYMENTS WERE RS.5,23,790/ - . (PAGE NO.45 TO 53 OF PAPER BOOK) I HAVE CAREFULLY GONE THROUGH THE FACTS OF THE CASE, VARIOUS - , WRITTEN SUBMISSIONS, REMAND REPORT OF THE A.O AND REJOINDER TO THE REMA ND REPORT. IT HAS BEEN SUBMITTED BY THE APPELLANT THAT HE HAS PAID AND INCURRED CERTAIN EXPENSES ON ACCOUNT OF VARIOUS RTO FEES AT CHECK POSTS, REIMBURSEMENT OF THE TOLL AT VARIOUS TOLL NAKAS AND OTHER EXPENSES BESIDES THE FOOD AND BEVERAGE EXPENSES OF THE DRIVERS AND HELPERS. SO THE TOTAL PAYMENT MADE FOR A SINGLE TRIPS INCLUDES VARIOUS EXPENSES UNDER AFORESAID HEADS BESIDES DIESEL/REPAIRING, MAINTAINING EXPENSES FOR THE TRUCK/TRAILERS ETC. SINCE THESE EXPENSES WERE PAID TO DIFFERENT PAYEES AND DO NOT I NDIVIDUALLY EXCEED THE LIMIT OF RS.20,000/ - SO NO DISALLOWANCE SHOULD BE MADE ON THIS ACCOUNT. 2.1. ON GOING THROUGH THE VARIOUS DETAILS AND SUBMISSIONS AND THE COPIES OF VOUCHERS AND THE RECORDS IT IS UNDISPUTED THAT THE APPELLANT HAS TO MAKE THE PAYMENT IN CASH FOR THE VARIOUS RTO FEES LEVIED IN THE TRIPS AT RTO CHECK POSTS ON VARIOUS ACCOUNTS BESIDES TOLL PAYMENTS AT VARIOUS TOLL NAKAS. ALL THESE 3 PAYMENTS ARE MANDATORILY TO BE MADE BY WAY OF CASH AND NO CHEQUE/DD COULD BE GIVEN FOR SUCH PAYMENTS. HENCE , THE PAYMENTS TOWARDS RTO FEES AND THE TOLL PAYMENTS MADE IN CASH DOES NOT QUALIFY FOR THE DISALLOWANCE IN VIEW OF THE RULE - 6DD(B) BECAUSE THESE PAYMENTS ARE MADE TO THE GOVERNMENT AUTHORITIES OR THE COLLECTING AGENTS ON BEHALF OF THE GOVERNMENT TO WHOM C ONTRACTS FOR COLLECTION HAS BEEN AWARDED BY THE GOVERNMENT AND FALLS UNDER THE EXCLUSION CLAUSE UNDER THE RULES - 6DD OF 40A(3) OF THE I.T ACT. THE DETAILS OF SUC H , PAYMENTS ARE LISTED AS UNDER: - XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 2.2. THE VARIOUS COURTS AFTER INTERPRETING THE AFORESAID RULE HAVE TAKEN THIS VIEWS THAT SUCH PAYMENTS DOES NOT FALL UNDER THE DISALLOWANCE U/S.40A(3) OF THE I.T. ACT. THE SAME ARE DISCUSSE D HEREUNDER: - (1) CIT VS. DEVENDRAPPA M. KALAL (2013) 39 TAXMANN.COM 16 (KARNATAKA) DATE OF DECISION: 18.09.2013 (2) CIT VS. KISHOR PROJECT (P) LTD. (2013) 36 TAXMANN.COM 94 (GUJARAT) DATE OF DECISION 19.03.2013 TRIBUNAL UPHELD ORDER OF COMMISSIONE R (APPEALS) - WHETHER SINCE T HAD BEEN MADE AT A PLACE WHERE IT - WAS NOT FEASIBLE TO MAKE PAYMENT BY WAY OF CHEQUE OR DEMAND DR AFT, IMPUGNED ORDER PASSED BY APPELLATE AUTHORITIES WAS TO BE CONFIRMED - HELD, YES. (3) SARASWATI HOUSING & DEVELOPERS VS . ADDL.CIT, RANGE - 2 142 ITD 98 (DELHI) DATE OF DECISION : 01.03.2013 IT WAS NOTED FROM RECORDS THAT ASSES SEE MADE CASH PAYMENTS TO SELLERS BEFORE SUB - REGISTRAR AT PLACES, WHERE BANKING FACILITIES WERE NOT AVAILABLE - MOREOVER, THERE WAS NO DISPUTE REGARDI NG IDENTITY OF PAYEES AND GENUINENESS OF LAND TRANSACTIONS IN RESPECT OF WHICH PAYMENTS HAD BEEN MADE - WLTETHER ON FACTS, PAYMENTS IN QUESTION WERE COVERED UNDER SECOND PROVISO TO SECTION 40A(3) AND RULE 6DD(H) AND, THEREFORE, IMPUGNED DISALLOWANCE WAS TO BE DELETED - HELD, YES [PARAS 12 & 14] (4) BASU DISTRIBUTOR (P) LTD. VS. ACIT (2012) 19 TAXMANN.COM 11 (DELHI) DATE OF DECISION: 09.02.2012 SECTION 40A(3) OF THE INCOME - TAX ACT, 1961 READ WITH RULE 6DD(J) OF THE INCOME - TAX RULES, 1962 - BUSINESS DISAL LOWANCE - CASH PAYMENT EXCEEDING PRESCRIBED LIMITS - ASSESSMENT YEARS 1992 - 93 TO 1994 - 95 - ASSESSEE, A FILM DISTRIBUTOR, MADE PAYMENTS ABOVE RS. 10,000 IN CASH TO THIRD PARTIES - LOWER AUTHORITIES HELD THAT ASSESSEE BY MAKING PAYMENTS ABOVE RS. 10,000 IN CA SH TO THIRD PARTIES HAD VIOLATED PROVISIONS OF I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 6 SECTION 40A(3), READ WITH RULE 6DD(J) - WHETHER SINCE (I) PROVISIONS OF SECTION 40A(3) AND RULE 6DD(J) HAVE BEEN INCORPORATED IN ACT IN ORDER TO CHECK INCURRING OF BOGUS AND FICTITIOUS EXPENSES TO NON - EXISTING PARTIES, AND (II) LOWER AUTHORITIES DID NOT DOUBT IDENTITY OF THIRD PARTIES AND GENUINENESS OF PAYMENTS, THEY WERE WRONG IN CONCLUDING THAT ASSESSEE HAD VIOLATED PROVISIONS OF SECTION 40A(3), READ WITH RULE 6DD(J) - HELD, YES \ (5) CIT VS. KALYAN PRAS AD GUPTA (2012) 20 TAXMANN.COM 533 (RAJ.) DATE OF ORDER: 20.11.2010 ' SECTION 40A(3) OF THE INCOME - TAX ACT, 1961 - BUSINESS DISALLOWANCES - CASH PAYMENT EXCEEDING PRESCRIBED LIMITS - ASSESSMENT YEAR 2004 - 05 - WHERE STATE GOVERNMENT HAD GRANTED CONTRACT TO COLLECT ROYALTY ON ITS BEHALF, PAYMENT WAS MADE TO CONTRACTOR NOT IN INDIVIDUAL CAPACITY, BUT ON BEHALF OF GOVERNMENT AND, HENCE, NO D ISALLOWANCE UNDER RULE 6DD(B) COULD BE MADE OF ROYALTY PAID BY CONTRACTOR TO GOVERNMENT IN CASH (6) P.M. ABDUL RAZA K VS. ITO (1997) 63 ITD 398 (COCH.) DATE OF ORDER: 05.03.1996 WHETHER SINCE ASSESSING OFFICER DID NOT DOUBT GENUINENESS OF CASH PAYMENTS NOR ALLEGED ANYTHING OF MAKING FALSE CLAIM OF THOSE PAYMENTS, DISALLOWANCE MADE BY HIM COULD NOT BE CONFIRMED - HELD, YE S (7) DY. CIT VS. MAYUR SALES (2001) 116 TAXMAN 95 (JP) (MAG.) DT. OF ORDER: 10.03.2000 SECTION 40A(3) OF THE INCOME - TAX ACT, 1961 - BUSINESS DISALLOWANCE - CASH PAYMENT IN EXCESS OF PRESCRIBED LIMIT - ASSESSEE HAD MADE CERTAIN CASH PAYMENTS TO TRUCK DR IVERS IN EXCESS OF PRESCRIBED LIMIT - ASSESSING OFFICER DISALLOWED SAME - WHETHER CASH PAYMENTS MADE TO TRUCK DRIVERS FOR FREIGHT AND OCTROI CHARGES FELL UNDER EXCEPTIONAL CIRCUMSTANCES AS MENTIONED IN RULE 6DD(J) OF THE INCOME - TAX RULES, 1962, READ WITH C BDT'S CIRCULAR NO. 220, DATED 31 - 5 - 1977 AND, THEREFORE, COMMISSIONER (APPEALS) RIGHTLY DELETED DISALLOWANCE MADE BY ASSESSING OFFICER - HELD, YES (8) WALFORD TRANSPORT (EASTERN INDIA) LTD. VS. CIT (2002) 124 TAXMAN 538 DT. OFORDER:08.10.1999 WHETHER - WHERE AUTHORITIES WERE SATISFIED ABOUT GENUINENESS OF TRANSACTIONS AND IDENTITY OF PAYEE S AND FACT THAT ASSESSEE WAS IN FINANCIAL STRINGENCY WARRANTING CASH PAYMENTS, IN SUCH CIRCUMSTANCES, DISALLOWANCE OF PART OF PAYMENT SO M ADE WAS UNJUSTIFIED - HELD, YES (9) CIT VS. KALYAN PRASAD GUPTA (2011) 51 DTK 191 CASH PAYMENTS MADE BY THE ASSESSEE TO THE STATE GOVERNMENT WHO GRANTED THE CONTRACT TO COLLECT ROYALTY ON BEHALF OF THE GOVERNMENT CANNOT BE DISALLOWED UNDER SECTION 40A( 3) IN VIEW OF RULE 6DD(B). (10) CITV.BALKRISHANJAGDISHCHAND(2007)213CTR174 MULTIPLE PAYMENTS TO SAME PARTY ON A SINGLE DAY, VARIOUS CASH PAYMENTS MADE TO ONE PARTY ON ONE DAY WERE NOT REQUIRED TO BE CLUBBED AND TREATED AS ONE CASH PAYMENT AND, FOR THAT R EASON, TOTAL CASH PAYMENTS EXCEEDING RS.2,500 IN A DAY TO THAT PARTY WERE NOT TO BE HELD AS VIOLATIVE AFJSECTION 40(3), SO ALSO THE PAYMENTS MADEAFTER BANKING HOURS (A.Y. 1986 - 87) (11) CITVS. PRAVIN&CO. (2005) 274 ITR 534 ONCE IDENTITY OF THE PAYEE WAS ESTABLISHED, GENUINENESS OF THE PAYMENT WAS NOT DOUBLED, THE MATERIALS PURCHASED UNDER CASH PAYMENTS WERE UTILIZED FOR CONSTRUCTION ACTIVITY CARRIED ON BY THE ASSES SEE, IT WAS NOT POSSIBLE TO HOLD THAT PURPOSE OF PAYMENT IN CASH WAS TO FRUSTRATE PROPER I NVESTIGATION BY THE DEPARTMENT; AND AS SUCH DISALLOWANCE OF SUCH PAYMENTS IN CASH WAS NOT JUSTIFIED. (12) CIT V. EASTERN CONDIMENTS (P) LTD. (2003) 261 ITR 76 WHEN GENUINENESS OF CASH PURCHASES WAS NOT IN DOUBT AND THERE WAS EVIDENCE THAT VENDORS WOULD O NLY ACCEPT CASH, DISALLOWANCE OF CASH PAYMENTS IN EXCESS OF PRESCRIBED LIMIT WAS NOT JUSTIFIED. (13) SATPAL JAIN VS. ACIT (2003) 79 TTJ 444 (DELHI) I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 7 CONFIRMATION OF RECIPIENT THAT HE DID NOT ACCEPT CHEQUE, WOULD COVER THE CASE UNDER RULE 6DD, AND DISALLOW ANCE OF CASH PAYMENT IN EXCESS OF PRESCRIBED LIMIT WAS NOT JUSTIFIED. 2.3. DURING THE COURSE OF PROCEEDINGS ALONG WITH THE WRITTEN SUBMISSIONS, THE APPELLANT HAS ENCLOSED SAMPLE VOUCHERS TO THE EFFECT OF MAKING THE PAYMENT TO THE DRIVERS WHO HAD TO ULTIMAT ELY MAKE THE PAYMENT RTO FEES AND TOLL NAKA AT THE CHECK POSTS DURING THE TRIPS WHICH ESTABLISHES THAT THE PAYMENTS IN CASH WERE UNAVOIDABLE AND HAS BEEN MADE GENUINELY. EVEN OTHERWISE ALSO IRRESPECTIVE OF THE MAINTENANCE OF THE VOUCHERS/RECEIPTS THE FACT OF MAKING SUCH PAYMENTS TO THE AFORESAID AUTHORITIES COULD NOT BE DENIED AS CAN BE NOTICED FROM THE DETAILS NOTED IN THE TABLE BELOW THAT LONG JOURNEYS HAVE BEEN PERFORMED BY THE VEHICLES BY PASSING THROUGH VARIOUS TOLL NAKAS AND RTO CHECK - POSTS. FOR EXAMP LE, BANGALORE TO BARODA, JNPT TO JAJUDHAN, KALAMBOLI TO NAYVELI. SO AFORESAID PAYMENTS ARE LIABLE TO BE ALLOWED AS DEDUCTION UNDER THE RULE - 6DD. IN VIEW OF THE ABOVE DISCUSSION AND RATIOS IN THE DECISIONS OF VARIOUS COURTS REFERRED ABOVE, THE TOTAL PAYMENT S TOWARDS ROAD/RTO EXPENSES OF RS. 1,73 ,500 / - AS PER THE TABLE ABOVE EVEN EACH' PAYMENT BELOW RS.20,00 0/ - ALSO DOES NOT CALL FOR ANY DISALLOWANCE AND HENCE DISALLOWANCE MADE BY THE A.O. IS DELETED? 2.4. FURTHER, IT IS NOTICED FROM THE TABLE ABOVE THAT EACH ADVANCE INCLUDES THE ROAD AND RTO EXPENSES BESIDES VARIOUS EN - ROUTE OTHER EXPENSES LIKE DIESEL TO BE FILLED IN THE JOURNEY, REPAIRING /MAINTENANCE EXPENSES OF THE VEHICLE, FOOD EXPENSES OF THE DRIVERS AND HELPERS AND MANY OTHER MISCELLANEOUS EXPENSES ETC. IT IS NEEDLESS TO MENTION THAT IN THIS TRANSPORTATION TRADE BEFORE STARTING OF THE TRIP SOME ADVANCE HAS TO BE MADE TO THE DRIVER ON ACCOUNT OF THE AFORESAID REQUIREMENTS AND THAT TO BE MADE IN CASH ONLY AS NO CHEQUES/D.D. COULD BE UTILIZED ON THE R OADS. THIS ADVANCE AMOUNT IS DECIDED DEPENDING UPON THE VARIOUS FACTORS LIKE DISTANCES BETWEEN THE ARRIVAL AND DEPARTURE STATION, TIME TO BE TAKEN IN THE TRIP, NUMBER OF TOLL NAKAS IN THE TRIP AND NO. OF DAYS LIKELY TO BE TAKEN ETC. THEREAFTER, THESE ADVANCE PAYMENTS MADE BY THE APPELLANT WERE REDUCED FROM THE TOTAL FREIGHT PAYMENTS TO THE TRANSPORTER AND THE BALANCE IS PAID THROUGH CHEQUE. SO, IN THE INSTANT CASE FROM EACH OF THE PAYMENTS EXCLUDING THE ROAD AND RTO EXPENSES AS SHOWN IN LAST COLU MN OF THE TABLE THE BALANCE PAYMENT REMAINS BELOW RS.20,000/ - WHICH WAS FOR MEETING OUT THE VARIOUS EXPENSES NOTED ABOVE. SINCE, EACH OF THE REMAINING EXPENSES PAID IN CASH ARE BELOW RS.20,000/ - THAT TOO FOR VARIOUS INDEPENDENT HEADS AND HENCE NO DISALL OWANCE U/S.40A(3) COULD BE MADE AS THERE IS NO VIOLATION OF THE PROVISIONS OF THE SAID SECTION. IT HAS BEEN NOTICED THAT THE A.O. HAS NOT GIVEN ANY ADVERSE FINDING ABOUT THE GENUINENESS OF THE AFORESAID CLAIMS. THERE IS NOTHING ON RECORD BROUGHT OUT B Y THE AO SAYING THAT ANY BOGUS EXPENSES IN RESPECT OF ABOVE HAVE BEEN DEBITED BY THE APPELLANT. SO, THE COURTS IN SOME OF THE CASES CITED ABOVE IN THIS REGARD INTERPRETATED THE PURPOSE AND NATURE OF THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT SAYIN G THA T IT WAS BROUGHT TO CURB THE CIRCULATION N OF THE UNACCOUNTED MONEY IN THE ECONOMY 2.5. IN THIS REGARD, THE APPELLANT GETS THE RELIEF OF RS.3,50,290/ - AS NOTED IN THE TABLE ABOVE. TO SUM - UP THE DELETION OF THE DISALLOWANCES COMES TO RS.5,23,7907 - (RS. 1,73,5007 - + RS.3,50,290/ - ). (3)EACH OF THE PAYMENTS IN CASH MADE ON SATURDAYS, SUNDAYS AND HOLIDAYS WHEN THE BANKING FACILITIES WERE NOT AVAILABLE AND HENCE SAME WAS FALLING UNDER RUIE - 6DD(J) TO SECTION 40A(3) OF THE I.T. ACT AND HENCE NO DISALLOWANC E TO BE MADE AS PER APPELLANT. THE TOTAL AMOUNT ON THIS ACCOUNT COMES TO RS.49,26,891/ - . (PAGE NO.54 TO 98 OF PAPER BOOK) I HAVE CAREFULLY GONE THROUGH THE FACTS OF THE CASE, VARIOUS WRITTEN SUBMISSIONS, REMAND REPORT OF THE A.O AND REJOINDER TO THE REMAND REPORT. HERE THE APPELLANT INTEND TO TAKE THE BENEFIT OF RULE - 6DD(J) FOR THE REASON THAT ON THE DATES OF PAYMENT GIVEN IN THE TABLE BELOW THE APPELLANT WAS NOT HAVING THE BANKING FACILITIES IN OPERATIONS AND HENCE HE COULD NOT MAKE THE PAYMENT BY CHEQUES. ON THIS ACCOUNT, THE APPELLANT HAS CLAIMED THE BENEFIT ON ACCOUNT OF SATURDAYS, SUNDAYS AND OTHER BANKING HOLIDAYS. THE I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 8 APPELLANT'S CONTENTION IN RESPECT OF THE CASH PAYMENTS MADE ON THE SUNDAYS AND BANKING HOLIDAYS ON WHICH BANKS WERE CLOSED IS ACCEPTED AND THE PROVISIONS OF SECTION 40A(3) WOULD NOT APPLY FOR SUCH PAYMENTS AS UNDER: - B;DETAILS OF AMOUNT PAID ON SATURDAY'S, SUNDAY'S AND HOLIDAY'S FOR THE PERIOD FROM 01.04.2008 TO 31.03.2009 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX THE A.O. MAY VERIFY THAT THE AFORESAID DATES OF PAYMENTS FALLS ON SUNDAYS AND BANKING HOLIDAYS ONLY. NO DISALLOWANCE IS WARRANTED FOR THE TOTAL CASH PAYMENTS MADE ON SUNDAYS AND BANKING HOLIDA YS TO THE TUNE O F RS.23,04,950/ - (RS. 10,82,600/ - + RS. 12,22,350/ - ) AND THE DISALLOWANCE TO THIS EXTENT IS DELETED. THE A.O. IS ALSO DIRECTED TO S EE THAT ANY OTHER CASH PAYMENTS MADE ON THE SUNDAYS AND BANKING HOLIDAYS OF WHICH DISALLOWNACES MADE WERE BY THE A.O. BUT REMAINED TO BE INCLUDED IN THE ABOVE TABLE MAY ALSO BE CONSIDERED FOR RELIEF. THE DISALLOWANCE WOULD LIABLE TO BE MADE FOR THE CASH PAYMENTS MADE ON SATURDAYS FOR THE REASON THAT THE BANKS ARE OPEN ON THAT DAY AND THEY HAVE THE PUBLIC DEALINGS ALSO. SIMPLY NO CLEARING TAKES PLACE ON SATURDAY CANNOT BE THE REASON IN VIEW OF THE SPECIFIC PROVISIONS IN RULE - 6DD(J). IN OTHER WORDS THE CASH PAYMENTS EXCEEDING RS.20,000/ - MADE IF ANY ON SATURDAYS WOULD BE LIABLE FOR DISALLOWANCE U/S.40A(3) OF THE I.T . ACT. (4)THE DETAILS OF PAYMENTS WHERE THE TRANSPORTERS DID NOT HAVE ANY OFFICE NEAR TO LOADING POINTS OF THE TRUCKS AND HENCE THE PROVISIONS OF SECTION 40A(3) COULD NOT BE APPLIED AS PER THE APPELLANT. THE TOTAL AMOUNT ON THIS ACCOUNT COMES TO RS.79,79,7 11/ - . (PAGE NO.99 TO 101 OF PAPER BOOK) I HAVE CAREFULLY GONE THROUGH THE FACTS OF THE CASE, VARIOUS WRITTEN SUBMISSIONS, REMAND REPORT OF THE A.O AND REJOINDER TO THE REMAND REPORT. THE APPELLANT HAS CLAIMED THAT THE TRANSPORTERS DID NOT HAVE ANY OFFICE N EAR TO THE LOADING POINT OF THE TRUCK AND THEREFORE THE CASH PAYMENTS WERE MADE TO THE DRIVERS OF THE TRUCKS FOR MEETING THE EN - ROUTE EXPENSES LIKE DIESEL EXPENSES, RTO FEES, BORDER FEES, TOLL PAYMENTS, DRIVERS AND HELPERS FOOD AND MISC ELLANEOUS EXPENSES ETC. DETAILS OF THE AFORESAID PAYMENTS ARE AS UNDER: - XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 4.1. THE APPELLANT HAS CLAIMED THAT THE AFORESAID PAYMENTS WERE MADE DUE TO BU SINESS EXIGENCY AND OTHER RELEVANT FACTORS AS SPECIFIED IN THE SECTION ITSELF. SINCE, IT WAS ENGAGED IN THE TRANSPORTATION BUSINESS AND ACCORDINGLY THE GOOD CARRIAGE HAS TO BE MADE FROM ONE PLACE TO ANOTHER AT DIFFERENT GEOGRAPHICAL LOCATIONS INVOLVED. AT SOME PLACES HE WAS NOT HAVING THE DIRECT PRESENCE AND HE WAS REQUIRED TO HIRE A TRUCK PHYSICALLY LYING AT THAT PARTICULAR PLACE. THEN HE HAS TO CONTACT VARIOUS BROKERS REPRESENTING VARIOUS GOODS CARRIAGE OPERATORS TO CARRY OUT THE TRANSPORTATION. FOR EXAMP LE SUPPOSE THE MATERIAL IS TO BE TRANSPORTED FROM PUNE TO CHENNAI THEN THE BROKER WILL GIVE THE CONTACT NUMBER OF THE TRUCK OPERATOR WHO MAY HAVE PLIED HIS GOODS TO PUNE IN PURSUANCE TO SOME OTHER CONTRACT. IN THAT SITUATION, THE APPELLANT CONTACT TO THE O PERATOR OF THE GOODS OF CARRIAGE WITH A REQUEST NOT TO RETURN BACK TO HIS HOME PLACE BUT TO TAKE THE LOAD FROM PUNE AND PROCEEDS FOR CHENNAI. SINCE, AT THAT TIME THE DRIVERS OF THE GOODS CARRIAGE MAY NOT BE HAVING THE SUFFICIENT CASH WITH THEM TO CARRY OUT THE TRANSPORTATION FROM PUNE TO CHENNAI AND IN THAT CASE HE WOULD BE IN NEED OF SOME CASH TO MEET VARIOUS EN - ROUTE EXPENSES. IN THAT SITUATION, SINCE THE APPELLANT DID NOT HAVE ANY REPRESENTATIVE THERE AT PUNE HENCE CERTAIN CASH HAS TO BE DELIVERED TO THE DRIVER AT PUNE EITHER WITH THE HELP OF SOME MESSENGER/COURIER OR BY ANY OTHER MODE BECAUSE NEITHER THE APPELLANT HAS ITS OFFICE AT PUNE NOR THE GOODS CARRIAGE OWNER HAS ANY OFFICE AT PUNE. THEREFORE, IN THAT SITUATION THERE IS NO OPTION THAN TO DELIVER/AR RANGE THE CASH TO THE DRIVER AT PUNE SO AS TO CARRY OUT THE TRANSPORTATION FROM PUNE TO CHENNAI. FOR MAKING AVAILABLE THE CASH AT PUNE THROUGH VARIOUS MODES, THE APPELLANT HAS INCURRED CERTAIN TRAVELLING I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 9 EXPENSES, COURIER EXPENSES ETC. WHICH HAVE BEEN DEBI TED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. SO, IN THIS CASE CONSIDERING THE NATURE OF BUSINESS AND THE BUSINESS EXIGENCIES AND OTHER RELEVANT FACTORS THE CASH PAYMENTS WERE MANDATORILY TO BE PAID OTHERWISE IT WOULD NOT BE POSSIBLE TO CARRY OUT THE TRAN SPORTATION. 4.2. THE APPELLANT HAS CLAIMED THAT THE BORDER EXPENSES AT THE BORDER OF TWO STATES HAS TO BE PAID IN CASH BY THE DRIVERS ONLY FOR WHICH THE CASH IN ADVANCES HAS TO BE PAID TO THEM. THESE ARE THE PAYMENTS MADE TO THE GOVERNMENT DEPARTMENT AN D HENCE THE SAME FALLS UNDER THE RULE - 6DD(B) OF I.T. RULES AND HENCE NO DISALLOWANCES U/S.40A(3) COULD BE MADE FOR SUCH CASH PAYMENTS. THE APPELLANT HAS MAINTAINED THE COPIES OF THE RTO RECEIPTS SHOWING TRUCK NUMBERS, DATES, AMOUNT PAID, SPECIFICATION OF T HE TRUCK/TRAILER WHICH WERE ALSO PRODUCED BEFORE THE AO DURING REMAND PROCEEDINGS AS ADMITTED BY THE A.O. IN THE REMAND REPORT. THESE PAYMENTS HAVE BEEN MADE' AT THE RTO CHECK - POST CONTROLLED BY THE STATE GOVERNMENT. THEREFORE, THE PAYMENTS TO THE EXTENT O F THE BORDER FEES AMOUNTING TO RS.6,73,950/ - DOES NOT WARRANT ANY DISALLOWANCE. HENCE THE SAME ARE DELETED. 4.3. THE APPELLANT HAS ALSO PAID THE ROAD/RTO EXPENSES TO THE TUNE OF RS. 10,82,500/ - IN RESPECT OF THE JOURNIES NOTED IN THE ABOVE TABLE. IT HAS BE EN SUBMITTED BY THE APPELLANT THAT HE HAS PAID AND INCURRED CERTAIN EXPENSES ON ACCOUNT OF VARIOUS RTO FEES, PAYMENT OF THE BORDER FEES AT VARIOUS CHECK - POST AND OTHER EXPENSES BESIDES THE FOOD AND BEVERAGE EXPENSES OF THE DRIVERS AND HELPERS. SO THE TOTAL PAYMENT MADE FOR A SINGLE TRIPS INCLUDES VARIOUS EXPENSES UNDER AFORESAID HEADS BESIDES DIESEL/REPAIRING, MAINTAINING EXPENSES FOR THE TRUCK/TRAILERS. SINCE THESE EXPENSES WERE PAID TO DIFFERENT PAYEES AND DO NOT INDIVIDUALL Y EXCEED THE LIMIT OF RS.20,000 / - SO NO DISALLOWANCE SHOULD BE MADE ON THIS ACCOUNT. 4.4. ON GOING THROUGH THE VARIOUS DETAILS AND SUBMISSIONS AND THE COPIES OF VOUCHERS AND THE RECORDS IT IS UNDISPUTED THAT THE APPELLANT HAS TO MAKE THE PAYMENT IN CASH FOR THE VARIOUS RTO FEES LEVIED I N THE TRIPS AT RTO CHECK POSTS ON VARIOUS ACCOUNTS BESIDES BORDER FEES PAYMENT AT VARIOUS CHECK - POSTS. ALL THESE PAYMENTS ARE MANDATORILY TO BE MADE BY WAY OF CASH AND NO CHEQUE/DD COULD BE GIVEN FOR SUCH PAYMENTS. HENCE, THE PAYMENTS TOWARDS RTO FEES AND THE BORDER FEES MADE IN CASH DOES NOT QUALIFY FOR THE DISALLOWANCE IN VIEW OF THE RULE - 6DD(B) BECAUSE THESE PAYMENTS ARE MADE TO THE GOVERNMENT AUTHORITIES OR THE COLLECTING AGENTS ON BEHALF OF THE GOVERNMENT TO WHOM CONTRACTS FOR COLLECTION HAS BEEN AWARD ED BY THE GOVERNMENT AND FALLS UNDER THE EXCLUSION CLAUSE UNDER THE RULES - 6DD OF 40A(3) OF THE XT ACT. THE L.R'S WERE NOT REQUIRED FOR SUCH ENQUIRY. FURTHER A.O'S REMARKS THAT ENQUIRY OF VARIOUS PARTIES NOTED IN THE CHART COULD NOT BE MADE IN REMAND REPORT , SINCE APPELLANT COULD NOT PRODUCE THE L.R'S, IS NOT SIGNIFICANT AS THE NAMES & ADDRESSES OF THESE TRANSPORTERS AND DETAILS OF TRIPS WERE ALREADY AVAILABLE TO THE AO FOR MAKING THE ENQUIRIES BUT NO SUCH ENQUIRIES HAVE BEEN MADE BY THE A.O. 4.5. THE VARIO US COURTS AFTER INTERPRETING THE AFORESAID RULE HAVE TAKEN THIS VIEWS THAT AFORESAID PAYMENTS DOES NOT FALL UNDER THE DISALLOWANCE U/S.40A(3) OF THE I.T. ACT. THE SAME ARE DISCUSSED HEREUNDER: - (1) CIT VS. DEVENDRAPPA M. KALAL (2013) 39 TAXMANN.COM 16 ( KARNATAKA) DATE OF DECISION: 18.09.2013 (2) CIT VS. KISHOR PROJECT (P) LTD. (2013) 36 TAXMANN.COM 94 (GUJARAT) DATE OF DECISION 19.03.2013 TRIBUNAL UPHELD ORDER OF COMMISSIONER (APPEALS) - WHETHER SINCE PAYMENT HAD BEEN MADE AT A PLACE WHERE IT WAS NOT FEASIBLE TO MAKE PAYMENT BY WAY OF CHEQUE OR DEMAND DRAFT, IMPUGNED ORDER PASSED BY APPELLATE AUTHORITIES WAS TO BE CONFIRMED - HELD, YES. (3) SARASWATI HOUSING & DEVELOPERS VS. ADDL.CIT, RANGE - 2 142 ITD 98 (DELHI) DATE OF DECISION : 01.03.2013 IT WAS NOTED FROM RECORDS THAT ASSESSEE MADE CASH PAYMENTS TO SELLERS BEFORE SUB - REGISTRAR AT PLACES, WHERE BANKING FACILITIES WERE NOT AVAILABLE - MOREOVER, THERE WAS NO I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 10 DISPUTE REGARDING IDENTITY OF PAYEES AND GENUINENESS OF LAND TRANSACTIONS IN RESPECT OF WHI CH PAYMENTS HAD BEEN MADE - WHETHER ON FACTS, PAYMENTS IN QUESTION WERE COVERED UNDER SECOND PROVISO TO SECTION 40A(3) AND RULE 6DD(H) AND, THEREFORE, IMPUGNED DISALLOWANCE WAS TO BE DELETED - HELD, YES [PARAS 12 & 14] (4) BASU DISTRIBUTOR (P) LTD. VS. ACIT (2012) 19 TAXMANN.COM 11 (DELHI) DATE OF DECISION: 09.02.2012 SECTION 40A(3) OF THE INCOME - TAX ACT, 1961 READ WITH RULE 6DD(J) OF THE , INCOME - TAX RULES, 1962 - BUSINESS DISALLOWANCE' - CASH PAYMENT EXCEEDING PRESCRIBED LIMITS - ASSESSMENT YEARS 19 92 - 93 TO 1994 - 95 - ASSESSEE, A FILM DISTRIBUTOR, MADE PAYMENTS ABOVE RS. 10,000 IN CASH TO THIRD PARTIES - LOWER AUTHORITIES HELD THAT ASSESSEE BY MAKING PAYMENTS ABOVE RS. 10,000 IN CASH TO THIRD PARTIES HAD VIOLATED PROVISIONS OF SECTION 40A(3), READ WITH RULE 6DDQ) - WHETHER SINCE (I) PROVISIONS OF SECTION 40A(3) AND RULE 6DDQ) HAVE BEEN INCORPORATED IN ACT IN ORDER TO CHECK INCURRING OF BOGUS AND FICTITIOUS EXPENSES TO NON - EXISTING PARTIES, AND (II) LOWER AUTHORITIES DID NOT DOUBT IDENTITY OF THIRD PARTI ES AND GENUIN ENESS OF PAYMENTS, THEY WERE WRONG IN CONCLUDING THAT ASSESSEE HAD VIOLATED PROVISIONS OF SECT ION 40A (3), READ WITH RULE 6DDJ ) - HELD, YES - (5) CIT VS. KALYAN PRASAD GUPTA (2012) 20 TAXMANN.COM 533 (RAJ.) DATE OF ORDER: 20.11.2010 SECTION 40A(3) OF THE INCOME - TAX ACT, 1961 - BUSINESS DISALLOWANCES - CASH PAYMENT EXCEEDING PRESCRIBED LIMITS - ASSESSMENT YEAR 2004 - 05 - WHERE STATE GOVERNMENT HAD GRANTED CONTRACT TO COLLECT ROYALTY ON ITS BEHALF, PAYMENT WAS MADE TO CONTRACTOR NOT IN INDIVIDUAL CAPACITY, BUT ON BEHALF OF GOVERNMENT AND, HENCE, NO DISALLOWANCE UNDER RULE 6DD(B) COULD BE MADE OF ROYALTY PAID BY CONTRACTOR TO GOVERNMENT IN CASH (6) P.M. ABDUL RAZAK VS. ITO (1997) 63 ITD 398 (COCH.) DATE OF ORDER: 05.03.1996 WHETHER SINCE ASSESS ING OFFICER DID NOT DOUBT GENUINENESS OF CASH PAYMENTS NOR ALLEGED ANYTHING OF MAKING FALSE CLAIM OF THOSE PAYMENTS, DISALLOWANCE MADE BY HIM COULD NOT BE CONFIRMED - HELD, YES (7) DY. CIT VS. MAYUR SALES (2001)116 TAXMAN 95 (JP) (MAG.) DT. OF ORDER: 1 0.03.2000 SECTION 40A(3) OF THE INCOME - TAX ACT, 1961 - BUSINESS DISALLOWANCE - CASH PAYMENT IN EXCESS OF PRESCRIBED LIMIT - ASSESSEE HAD MADE CERTAIN CASH PAYMENTS TO TRUCK DRIVERS IN EXCESS OF PRESCRIBED LIMIT - ASSESSING OFFICER DISALLOWED SAME - WHETHER CASH PAYMENTS MADE TO TRUCK DRIVERS FOR FREIGHT AND OCTROI CHARGES FELL UNDER EXCEPTIONAL CIRCUMSTANCES AS MENTIONED IN RULE 6DDQ) OF THE INCOME - TAX RULES, 1962, READ WITH CBDT'S CIRCULAR NO. 220, DATED 31 - 5 - 1977 AND, THEREFORE COMMISSIONER (APPEALS) RIGH TLY DELETED DISALLOWANCE MADE BY ASSESSING OFFICER - HELD, YES (8) WALFORD TRANSPORT (EASTERN INDIA) LTD. VS. CIT (2002) 124 TAXMAN 538 DT. OF ORDER:08.10.1999 WHETHER WHERE AUTHORITIES WERE SATISFIED ABOUT GENUINENESS OF TRANSACTIONS AND IDENTITY OF PAYEES AND FACT THAT ASSES SEE WAS IN FINANCIAL STRINGENCY WARRANTING CASH PAYMENTS, IN SUCH CIRCUMSTANCES, DISALLO WANCE OF PART OF PAYMENT SO MADE WAS UNJUSTIFIED - HELD, YES (9) CIT VS. KALYAN PRASAD GUPTA (2011) 51 DT R 191 CASH PAYMENTS MADE BY THE ASSESSES TO THE STATE GOVERNMENT WHO GRANTED THE CONTRACT TO COLLECT ROYALTY ON BEHALF OF THE GOVERNMENT CANNOT BE DISALLOWED UNDER SECTION 40A(3) IN VIEW OF RULE 6DD(B). (10) CIT V. BALKRISHAN JAGDISH CHAND (2007) 213 CTR 174 MULTIPLE PAYMENTS TO SAME PARTY ON A SINGLE DAY, VARIOUS CASH PAYMENTS MADE TO ONE PARTY ON ONE DAY WERE NOT REQUIRED TO BE CLUBBED AND TREATED AS ONE CASH I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 11 PAYMENT AND, FOR THAT REASON, TOTAL CASH PAYMENTS EXCEEDING RS.2,500 IN A DAY TO THAT PARTY WER E NOT TO BE HELD AS VIOLATIVE OF SECTION 40(3), SO ALSO THE PAYMENTS MADE AFTER BANKING HOURS (A. Y. 1986 - 87) (11) CIT VS. PRAVIN & CO. (2005) 274ITR 534 ONCE IDENTITY OF THE PAYEE - WAS ESTABLISHED, GENUINENESS OF THE PAYMENT WAS NOT DOUBLED, THE MATERIA LS PURCHASED UNDER CASH PAYMENTS WERE UTILIZED FOR CONSTRUCTION ACTIVITY CARRIED ON BY THE ASSESSEE, IT WAS NOT POSSIBLE TO HOLD THAT PURPOSE OF PAYMENT IN CASH WAS TO FRUSTRATE PROPER INVESTIGATION BY THE DEPARTMENT; AND AS SUCH DISALLOWANCE OF SUCH PAYME NTS IN CASH WAS NOT JUSTIFIED. (12) CIT V. EASTERN CONDIMENTS (P) LTD. (2003) 261 ITR 76 WHEN GENUINENESS OF CASH PURCHASES WAS NOT IN DOUBT AND THERE WAS EVIDENCE THAT VENDORS WOULD ONLY ACCEPT CASH, DISALLOWANCE OF CASH PAYMENTS IN EXCESS OF PRESCRIBED LIMIT WAS NOT JUSTIFIED. (13) SATPAL JAIN VS. ACIT (2003) 79 TTJ 444 (DELHI) CONFIRMATION OF RECIPIENT THAT HE DID NOT ACCEPT CHEQUE, WOULD COVER THE CASE UNDER RULE 6DD, AND DISALLOWANCE OF CASH PAYMENT IN EXCESS OF PRESCRIBED LIMIT WAS NOT JUSTIFIED. 4.6. DURING THE COURSE OF PROCEEDINGS ALONG WITH THE WRITTEN SUBMISSIONS, THE APPELLANT HAS ENCLOSED SAMPLE VOUCHERS TO THE EFFECT OF MAKING THE PAYMENT TO THE DRIVERS WHO HAD TO ULTIMATELY MAKE THE PAYMENT FOR BORDER FEES AND TOLL NAKA AT VARIOUS CHECK PO STS DURING THE TRIPS WHICH ESTABLISHES THAT THE PAYMENTS IN CASH WERE UNAVOIDABLE AND HAS BEEN MADE GENUINELY. EVEN OTHERWISE ALSO OF THE MAINTENANCE OF THE VOUCHERS/RECEIPTS THE FACT OF MAKING SUCH PAYMENTS TO THE AFORESAID AUTHORITIES COULD NOT BE DENIED AS CAN BE NOTICED FROM THE DETAILS NOTED IN THE TABLE BELOW THAT LONG JOURNEYS HAVE BEEN PERFORMED BY THE VEHICLES BY PASSING THROUGH VARIOUS TOLL NAKAS AND BORDER CHECK - POSTS. FOR EXAMPLE, BANGALORE TO BARODA, JNPT TO JAJUDHAN, KALAMBOLI TO NAYVELI. SO A FORESAID PAYMENTS ARE LIABLE TO BE ALLOWED AS DEDUCTION UNDER THE RULE - 6DD. IN VIEW OF THE ABOVE DISCUSSION AND RATIO OF DECISIONS OF VARIOUS COURTS REFERRED ABOVE, THE TOTAL PAYMENTS TOWARDS RO AD/RTO EXPENSES OF RS. 1,82,500/ - AS PER THE TABLE ABOVE EVEN EACH PAYMENT BELOW RS.20,000/ - ALSO DOES NOT CALL FOR ANY DISALLOWANCE AND HENCE DISALLOWANCE MADE BY THE A.O. IS DELETED. 4.7. FURTHER, IT IS NOTICED FROM THE TABLE ABOVE THAT EACH ADVANCE INCLUDES THE ROAD AND RTO EXPENSES BESIDES VARIOUS EN - ROUTE OTHER EXPENSES LIKE DIESEL TO BE FILLED IN THE JOURNEY, REPAIRING /MAINTENANCE EXPENSES OF THE VEHICLE, FOOD EXPENSES OF THE DRIVERS AND HELPERS AND MANY OTHER MISCELLANEOUS EXPENSES ETC. IT IS NEEDLESS TO MENTIONED THAT IN THIS TRANSPORTATION TRADE BEFORE START ING OF THE TRIP SOME ADVANCE HAS TO BE MADE TO THE DRIVER ON ACCOUNT OF THE AFORESAID REQUIREMENTS AND THAT TO BE MADE IN CASH ONLY AS NO CHEQUE/D.D. COULD BE UTILIZED ON THE ROADS. THIS ADVANCE AMOUNT IS DECIDED DEPENDING UPON THE VARIOUS FACTORS LIKE DIS TANCES BETWEEN THE ARRIVAL AND DEPARTURE STATION, TIME TO BE TAKEN IN THE TRIP, NUMBER OF TOLL NAKAS IN THE TRIP AND NUMBER OF DAYS LIKELY TO BE TAKEN ETC. THEREAFTER, THESE ADVANCE PAYMENTS MADE BY APPELLANT WERE REDUCED FROM THE TOTAL F REIGHT PAYMENTS AN D THE BALANCE AMOUNT IS PAID THROUGH CHEQUE. SO, - IN THE INSTANT - EASE FROM EACH OF THE PAYMENTS EXCLUDING THE ROAD AND RTO EXPENSES AND BORDER CHECK POST FEES, THE BALANCE PAYMENT REMAINS BELOW RS.20,000/ - WHICH WAS FOR MEETING OUT THE VARIOUS EXPENSES NOTED ABOVE. SINCE, EACH OF THE REMAINING EXPENSES PAID IN CASH ARE BELOW RS.20,000/ - AND HENCE NO DISALLOWANCE U/S.40A(3) COULD BE MADE AS THERE IS NO VIOLATION OF THE PROVISIONS OF THE SAID SECTION. IN T HIS REGARD, THE APPELLANT GETS THE RELIEF OF RS. 1 4,08,26 1/ - AS NOTED IN THE TABLE ABOVE. 4.8. IN THIS REGARD, IN THE JUDGMENT OF HON'BLE GUJARAT IN THE CASE OF ANUPAM TELE SERVICES VS. ITO TAX APPEAL NO.556 OF 2013 RECENTLY PRONOUNCED ON 22.1.2014 HAS TAKEN A VIEW THAT DISALLOWANCE U/S.40A(3) CANNOT BE MADE EVEN IF THE CASH PAYMENT I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 12 DOES NOT EXCLUSIVELY FIT INTO THE EXCEPTIONS AS CONTAINED IN RULE - 6DD AND ONE HAS TO GO BY THE CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. FURTHER THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SMT.HARSHI LA CHORDIA VS. ITO (2008) 298 ITR 349 HAS OBSERVED THAT EXCEPTIONS CONTAINED IN RULE - 6DD ARE NOT EXHAUSTIVE AND THAT THE SAID RULE MUST BE INTERPRETED LIBERALLY. FURTHER, IN THE CASE OF ATTARSINGH GURUMUKH SINGH VS. ITO (1991) 59 TAXMAN 11, THE HON'BLE SUP REME COURT HAS ALSO ENDORSED THAT THE CASH PAYMENTS MADE FOR BUSINESS EXPEDIENCY COULD BE MADE IF THERE IS NO DOUBT AS TO THE GENUINENESS OF THE PAYMENT NOR THE IDENTITY OF THE PAYEE. 4.9. THE DETAILS OF THE ADVANCE IN RESPECT OF THE PARTIES IN WHOSE CASE EVEN EXCLUDING THE BORDER RECEIPTS AND RTO/ROAD EXPENSES REMAINS TO BE MORE THAN RS.20,000/ - SUCH DETAILS ARE GIVEN AS UNDER: - XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXX 4.10. SINCE IN THE AF ORESAID TRANSACTIONS, THE BORDER FEES PAYMENTS COMES TO RS.4,37,900/ - AND ROAD /RTO EXPENSES AT RS. 11,05,600/ - WHICH DOES NOT WARRANT ANY DISALLOWANCES FOR THE REASONS DISCUSSED IN THE PRECEDING PARAS OF THIS ORDER. IN VIEW OF THE REASONS DISCUSSED ABOVE, THE DISALLOWANCE MADE BY THE A.O. IN RESPECT OF THE AFORESAID TWO PAYMENTS ARE DELETED AND THE APPELLANT GETS THE RELIEF ON THIS ACCOUNT. IN VIEW OF THE AFORESAID DISCUSSION AND FOLLOWING VARIOUS CASE LAWS CITED ABOVE, THE DELETION COMES TO RS.47,08,211/ - (RS.6,73,950/ - + RS.L0,82,5007 - + RS.14,08,2617 - + RS.4,37,9007 - + RS.L 1,05,6007 - ). (5)THE DETAILS OF AMOUNTS PAID TO THE PARTIES IN EXCESS OF RS.20,000/ - WHEREIN THE APPELLANT DOES NOT HAVE ANY PRESENCE NOR BANK ACCOUNT. THE TOTAL OF THIS AMOUNTS ARE AT RS.22,52,135/ - . (PAGENO. 102 TO 118 OF PAPER BOOK) I HAVE CAREFULLY GONE THROUGH THE FACTS OF THE CASE, VARIOUS WRITTEN SUBMISSIONS, REMAND REPORT OF THE A.O AND REJOINDER TO T HE REMAND REPORT. THE APPELLANT H AS CLAIMED THAT THE C ASH PAYMENT EXCEEDING RS. 20,000/ - HAS BEEN MADE FOR THE REASON THAT HE DID NOT HAVE ANY PRESENCE NOR ANY BANK ACCOUNT AT THE STARTING POINT OF THE TRIP. - THE DETAILS OF THESE PAYMENTS ARE GIVEN IN THE TABLE AS UNDER: - XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXX 5.1. THESE ARE THE PAYMENTS SIMILAR TO THE PAYMENTS AS DISCUSSED IN PRECEDING PARA. SINCE, THE PAYMENTS TO THE DRIVERS IN ADVANCE HAS TO BE MADE FO R VARIOUS HEADS LIKE RTO/ROAD/BORDER TAX AND VARIOUS MISCELLANEOUS EXPENSES ETC. AS SUCH THE VARIOUS GOVERNMENT LEVY IN THE FORM OF BONIER TAX AND RTO C HECK - POST PAYMENT C OULD ONLY BE MADE BY WAY OF CASH AND COULD NOT BE THROUGH CHEQUE/DD AND HENCE THE STA RTING POINT ITSELF THE ADVANCES TO MEET OUT SUCH PAYMENTS HAVE TO BE MADE ONLY IN CASH. IN THIS CASE, SINCE BORDER TAX PAYMENTS AND ROAD RTO EXPENSES HAVE BEEN PAID WHICH COULD NOT BE DISALLOWED AS PER THE PROVISIONS OF RULE - 6DD(B) OF I.T. RULES BEING EXCL USION CLAUSE OF THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT. THE REASONS FOR THE DELETION OF THE DISALLOWANCES ON ACCOUNT OF BORDER TAX AND ROAD/RTO EXPENSES ARE DISCUSSED IN THE PRECEDING PARAS OF THIS ORDER AND THEREFORE THE DISALLOWANCES MADE BY TH E A.O. TO THE TUNE OF RS.92,500/ - ON ACCOUNT OF BORDER TAX AND RS.4,58,700/ - ON ACCOUNT OF ROAD/RTO EXPENSES TOTALING TO RS.5,51,2007 - ARE DELETED. IT IS NEEDLESS TO MENTION THAT IN THE REMAND REPORT, A.O. HAS MENTIONED THAT THE PAYMENTS TO THE TRANSPORTER S .COULD HVE BEEN MADE THROUGH RTGS/NEFT BEING ALL THE BANKS ARE COVERED UNDER CBS. IT IS CORRECT TO SAY THAT BUT ULTIMATELY THE PAYMENT HAS TO BE REACHED IN THE HANDS OF DRIVER WHO WAS AT THIRD PLACE WHERE THERE IS NO PRESENCE OF APPELLANT AND TRANSPORTER AND HENCE THE PAYMENT THROUGH RTGS/NEFT WOULD NOT BE POSSIBLE TO THE DRIVERS AT SUCH PLACES. 5.2. VARIOUS COURTS HAVE SUPPORTED THIS VIEW WHICH ARE BRIEFLY DISCUSSED HEREUNDER: - I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 13 (1) CIT VS. DEVENDRAPPA M. KALAL (2013)39 TAXMANN.COM 16 (KARNATAKA) DATE O F DECISION: I 8.09.2013 \ (2) CIT VS. KISHOR PROJECT (P) LTD. (2013) 36 TAXMANN.COM 94 (GUJARAT) DATE OF DECISION 19.03.2013 TRIBUNAL UPHELD ORDER OF COMMISSIONER (APPEALS) - WHETHER SINCE PAYMENT HAD BEEN MADE AT A PLACE WHERE IT WAS NOT FEASIBLE TO M AKE PAYMENT BY WAY OF CHEQUE OR DEMAND DRAFT, IMPUGNED ORDER PASSED BY APPELLATE AUTHORITIES WAS TO BE CONFIRMED - HELD, YES. N ; (3) SARASWATI HOUSING & DEVELOPERS VS. ADDL. CIT, RANGE - 2 142 ITD 98 (DELHI) DATE OF DECISION: 01.03.2013 IT WAS NOTED FROM RECORDS THAT ASSESSEE MADE CASH PAYMENTS TO SELLERS BEFORE SUB - REGISTRAR AT PLACES, WHERE BANKING FACILITIES WERE NOT AVAILABLE - MOREOVER, THERE WAS NO DISPUTE REGARDING IDENTITY OF PAYEES AND GENUINENESS OF LAND TRANSACTIONS IN RESPECT OF WHICH PAYMENTS HAD BEEN MADE - WHETHER ON FACTS, PAYMENTS IN QUESTION WERE COVERED UNDER SECOND PROVISO TO SECTION 40A(3) AND RULE 6DD(H) AND, THEREFORE, IMPUGNED DISALLOWANCE WAS TO BE DELETED - HELD, YES [PARAS 12 & 14] (4) BASU DISTRIBUTOR (P) LTD. VS. ACIT (2012) 19 TAXMANN.COM 11 (DELHI) DATE OF DECISION: 09.02.2012 SECTION 40A(3) OF THE INCOME - TAX ACT, 1961 READ WITH RULE 6DD(J) OF THE INCOME - TAX RULES, 1962 - BUSINESS DISALLOWANCE - CASH PAYMENT EXCEEDING PRESCRIBED LIMITS - ASSESSMENT YEARS 1992 - 93 TO 1994 - 95 - ASSESSEE, A FILM DISTRIBUTOR, MADE PAYMENTS ABOVE RS. 10,000 IN CASH TO THIRD PARTIES - LOWER AUTHORITIES HELD THAT ASSESSEE BY MAKING PAYMENTS ABOVE RS. 10,000 IN CASH TO THIRD PARTIES HAD VIOLATED PROVISIONS OF SECTION 40A(3), READ WITH RULE 6DD(J) - WHE THER SINCE (I) PROVISIONS OF SECTION 40A(3) AND RULE 6DDQ) HAVE BEEN INCORPORATED IN ACT IN ORDER TO CHECK INCURRING OF BOGUS AND FICTITIOUS EXPENSES TO NON - EXISTING PARTIES, AND (II) LOWER AUTHORITIES DID NOT DOUBT IDENTITY OF THIRD PARTIES AND GENUINENES S OF PAYMENTS, THEY WERE WRONG IN CONCLUDING THAT ASSESSEE HAD VIOLATED PROVISIONS OF SECTION 40A (3), READ WITH RULE 6DD(J) - HELD, YES (5) CIT VS. KALYAN PRASAD GUPTA (2012) 20 TAXMANN.COM 533 (RAJ.) DATE OF ORDER: 20.11.2010 3 SECTION 40A(3) OF THE I NCOME - TAX ACT, 1961 - BUSINESS DISALLOWANCES - CASH PAYMENT EXCEEDING PRESCRIBED LIMITS - ASSESSMENT YEAR 2004 - 05 - WHERE STATE GOVERNMENT HAD GRANTED CONTRACT TO COLLECT ROYALTY ON ITS BEHALF, PAYMENT WAS MADE TO CONTRACTOR NOT IN INDIVIDUAL CAPACITY, BUT O N BEHALF OF GOVERNMENT AND, HENCE, NO DISALLOWANCE UNDER RULE 6DD(B) COULD BE MADE OF ROYALTY PAID BY CONTRACTOR TO GOVERNMENT IN CASH (6) P.M. ABDUL RAZAK VS. ITO (1997) 63 ITD 398 (COCH.) DATE OF ORDER: 05.03.1996 WHETHER SINCE ASSESSING OFFICER DID NOT DOUBT GENUINENESS OF CASH PAYMENTS NOR ALLEGED ANYTHING OF MAKING FALSE CLAIM OF THOSE PAYMENTS, DISALLOWANCE MADE BY HIM COULD NOT BE CONFIRMED - HELD, YES (7) DY. CIT VS. MAYUR SALES (2001) 116 TAXMAN 95 (JP) (MAG.) DT. OF ORDER: 10.03.2000 SECTIO N 40A(3) OF THE INCOME - TAX ACT, 1961 - BUSINESS DISALLOWANCE - CASH PAYMENT IN EXCESS OF PRESCRIBED LIMIT - ASSESSEE HAD MADE CERTAIN CASH PAYMENTS TO TRUCK DRIVERS IN EXCESS OF PRESCRIBED LIMIT - ASSESSING OFFICER DISALLOWED SAME - WHETHER CASH PAYMENTS MA DE TO TRUCK DRIVERS FOR FREIGHT AND OCTROI CHARGES FELL UNDER EXCEPTIONAL CIRCUMSTANCES AS MENTIONED IN RULE 6DDQ) OF THE INCOME - TAX RULES, 1962, READ WITH CBDT'S CIRCULAR NO. 220, DATED 31 - 5 - 1977 AND, THEREFORE, COMMISSIONER (APPEALS) RIGHTLY DELETED DISA LLOWANCE MADE BY ASSESSING OFFICER - HELD, YES (8) WALFORD TRANSPORT (EASTERN INDIA) LTD. VS. CIT (2002) 124 TAXMAN 538 DT. OFORDER:08.10.1999 WHETHER WHERE AUTHORITIES WERE SATISFIED ABOUT GENUINENESS OF TRANSACTIONS AND IDENTITY OF PAYE ES AND FACT THAT ASSESSEE WAS IN FINANCIAL STRINGENCY WARRANTING CASH PAYMENTS, IN SUCH CIRCUMSTANCES, DISALLOWANCE OF PART OF PAYMENT SO MADE WAS UNJUSTIFIED - HELD, YES I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 14 (9) CIT VS. KALYAN PRASAD GUPTA (2011)51 DTR 191 CASH PAYMENTS M ADE BY THE ASSESSEE TO THE STATE GOVERNMENT WHO GRANTED THE CONTRACT TO COLLECT ROYALTY ON BEHALF OF THE GOVERNMENT CANNOT BE DISALLOWED UNDER SECTION 40A(3) IN VIEW OF RULE 6DD(B). (10) CIT V. BALKRISHAN JAGDISH CHAND (2007) 213 CTR 174 MULTIPLE PAYM ENTS TO SAME PARTY ON A SINGLE DAY, VARIOUS CASH PAYMENTS MADE TO ONE PARTY ON ONE DAY WERE NOT REQUIRED TO BE CLUBBED AND TREATED AS ONE CASH PAYMENT AND, FOR THAT REASON, TOTAL CASH PAYMENTS EXCEEDING RS.2,500 IN A DAY TO THAT PARTY WERE NOT TO BE HELD A S VIOLATIVE OF SECTION 40(3), SO ALSO THE PAYMENTS MADE AFTER BANKING HOURS (A.Y. 1986 - 87) ; (11) CIT VS. PRAVIN & CO. (2005) 274 ITR 534 ONCE IDENTITY OF THE PAYEE WAS ESTABLISHED, GENUINENESS OF THE PAYMENT WAS NOT DOUBLED, THE MATERIALS PURCHASED UND ER CASH PAYMENTS WERE UTILIZED FOR CONSTRUCTION ACTIVITY CARRIED ON BY THE ASSES SEE, IT WAS NOT POSSIBLE TO HOLD THAT PURPOSE OF PAYMENT IN CASH WAS TO FRUSTRATE PROPER INVESTIGATION BY THE DEPARTMENT; AND AS SUCH DISALLOWANCE OF SUCH PAYMENTS IN CASH WAS NOT JUSTIFIED. (12) CIT V. EASTERN CONDIMENTS (P) LTD. (2003) 261 ITR 76 WHEN GENUINENESS OF CASH PURCHASES WAS NOT IN DOUBT AND THERE WAS EVIDENCE THAT VENDORS WOULD ONLY ACCEPT CASH, DISALLOWANCE OF CASH PAYMENTS IN EXCESS OF PRESCRIBED LIMIT WAS NOT JUSTIFIED. (13) SATPAL JAIN VS. ACIT (2003) 79.TTJ 444 (DELHI) CONFIRMATION OF RECIPIENT THAT HE DID NOT ACCEPT CHEQUE,.WOULD COVER THE CASE UNDER RULE 6DD, AND DISALLOWANCE OF CASH PAYMENT IN EXCESS OF PRESCRIBED LIMIT WAS NOT JUSTIFIED. (14) DDIT(IT) ,2(1), MUMBAI VS. SAMSUNG ENGG. CO. LTD. (2011) 43 SOT 36 DATE OF ORDER: 10.11.2010 (15) CIT VS. PARLE SALES AND SERVICES (P) LTD. (2008) 307 ITR 87 (GUJ.) DATE OF ORDER: 11.10.2007 SECTION 40A(3) OF THE INCOME - TAX ACT, 1961 - BUSINESS DISALLOWANCE - CASE PAYMENT EXCEEDING PRESCRIBED LIMITS WHERE VILLAGE CONCERNED DID NOT HAVE BANKING FACILITY AND, CONSEQUENTLY, NEITHER ASSESSEE NOR SUPPLIER HAD ANY BANKING ACCOUNTS, AND PAYMENTS WERE OTHERWISE HELD TO BE GENUINE, PAYMENTS MADE BY ASSESSEE IN CASH WERE COV ERED BY EXCEPTIONAL CIRCUMSTANCES AS PRESCRIBED BY RULE 6DD(J) [A/Y:N/A] (INFAVOUR OF ASSESSEE) CIT V. PARLE SALES & SERVICES (P.) LTD. [2008] 307 ITR 87 (GUJ.) THE QUESTION AS TO WHETHER THERE WERE COMPELLING REASONS TO MAKE PAYMENT IN CASH OR NOT IS BASI CALLY A QUESTION OF FACT. WHERE BOTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL FOUND THAT THE VILLAGE CONCERNED DID NOT HAVE BANKING FACILITY AND, CONSEQUENTLY, NEITHER THE ASSESSEE NOR SUPPLIER HAD ANY BANKING ACCOUNTS AND PAYMENTS WERE OTHERWISE HELD T O BE GENUINE. THE PAYMENTS MADE BY THE ASSESSEE IN CASH WERE COVERED BY EXCEPTIONAL CIRCUMSTANCES AS PRESCRIBED BY RULE 6DD(J) OF THE INCOME - TAX RULES, (16) JAIN TRADING CO. VS. A.O. (2003) SOT 26 (AMARTISAR) TRIB. WHEN PAYEE HAD NO BANK ACCOUNT AT ASSESSE S'S PLACE, AND ASSESSEE HAD NO BANK ACCOUNT AT PAYEE'S PLACE, IT IS COVERED BY RULE 6DD(J) AND NO DISALLOWANCE IS - WARRANTED, AS PER BOARD'S CIRCULAR NO. 220 DT. 31.5.1997. (6)ENCLOSED CERTAIN COPIES OF THE LETTERS FROM FEW PARTIES STATING THAT THEY HAVE I NSISTED FOR THE CASH PAYMENTS AT THE RELEVANT POINT OF TIME. THE APPELLANT HAS NOT QUANTIFIED SUCH AMOUNT. (PAGE NO.119 TO 127 OF PAPER BOOK) 6.1 HAVE CAREFULLY GONE THROUGH THE FACTS OF THE CASE, VARIOUS WRITTEN SUBM ISSIONS, REMAND REPORT OF THE A.O AND R EJOINDER TO THE REMAND REPORT. ALONGWITH THE SUBMISSION, THE APPELLANT HAS ATTACHED COPIES OF LETTERS FROM 9 PARTIES TO WHOM THE CASH EXCEEDING RS.20,000/ - HAS BEEN PAID. THE DETAILS OF THE PARTIES TO WHOM SUCH PAYMENTS HAVE BEEN MADE AT THEIR INSISTENCE A RE TABULATED AS UNDER: - I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 15 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXX 6.2. IT IS CLAIMED THAT THE AFORESAID PARTIES HAVE INSISTED FOR CASH PAYMENTS AS THEY HAD TO GIVE THE CASH TO THE DRIVERS AND HELPERS TO CLEAR AND OPERATING THE GOODS CARRIAGE AND THESE EXPENSES WERE LARGELY INCUR IN VARIOUS PARTS OF THE COUNTRY. IT HAS BEEN NOTICED THAT THE APPELLANT WAS COMPELLED TO MAKE THE PAYM ENTS TO THE AFORESAID PARTIES TO MEET THEIR REQUIREMENT AT DIFFERENT STATIONS SO AS TO RUN ITS TRANSPORTATION BUSINESS. IN THIS TRADE, THE PAYMENTS TO THE DRIVERS HAVE TO BE MADE AT THE L OADING STATION WHERE NEITHER THE APPELLANT NOR THE CARRIER OPERATOR E XIST. EVEN SOME TIMES DUE TO THE NON - BANKING HOURS THE PAYMENTS WERE TO BE MADE THE DRIVERS IN CASH OTHERWISE THEY HAD TO WAIT FOR THE NEXT WORKING DAY TO GET THE PAYMENTS FROM THE BANK. AT SOME TIMES DUE TO THE HOLIDAYS ALSO THEY WERE UNABLE TO USE THE BA NKING FACILITIES ALSO. SINCE, TO MEET OUT THE EN - ROUTE EXPENSES AT THE INSISTENCE OF THESE PARTIES THE APPELLANT HAD TO MAKE THE PART PAYMENT IN CASH AND THE BALANCE PAYMENT THROUGH CHEQUES WHICH ITSELF SHOWS THE BONAFIDES OF THE APPELLANT THAT PART PAYMEN T IN CASH WAS MADE ONLY TO MEET THE NECESSARY REQUIREMENT OF THE TRIP. THERE WAS NO DOUBT ON THE GENUINENESS OF THESE PAYMENTS TO THE PARTIES. 6.3. UNDER THE SIMILAR CIRCUMSTANCES, THE VARIOUS COURTS HAVE HELD THAT THE CASH PAYMENTS MADE WHERE THE PAYEE IN SISTS FOR THE CASH PAYMENTS NO DISALLOWANCES U/S.40A(3) ARE WARRANTED, MORE PARTICULARLY WHEN GENUINENESS OF THE PAYMENTS HAVE NOT BEEN DOUBTED BY THE A.O. SOME OF THE CASE LAWS ARE AS UNDER: - (1) CIT VS. DEVENDRAPPA M. KALAL (2013) 39 TAXMANN.COM 16 (KARNATAKA) DATE OF DECISION: 18.09.2013 (2) CIT V S. KISHOR PROJECT (P) LTD. (2013) 36 TAXMANN.COM 94 (GUJARAT) DAT E DE CISION 19.03.2013 TRIBUNAL UPHELD ORDER OF COMMISSIONER (APPEALS) - WHETHER SINCE PAYMENT HAD BEEN MADE AT A PLACE WHERE IT WAS NOT FEA SIBLE TO MAKE PAYMENT BY WAY OF CHEQUE OR DEMAND DRAFT, IMPUGNED ORDER PASSED BY APPELLATE AUTHORITIES WAS TO BE CONFIRMED - HELD, YES. (3) SARASWATI HOUSING & DEVELOPERS VS. ADDL. CIT, RANGE - 2 142 ITD 98 (DELHI) DATE OF DECISION : 01.03.2013 IT WAS NO TED FROM RECORDS THAT ASSESSEE MADE CASH PAYMENTS TO SELLERS BEFORE SUB - REGISTRAR AT PLACES, WHERE BANKING FACILITIES WERE NOT AVAILABLE - MOREOVER, THERE WAS NO DISPUTE REGARDING IDENTITY OF PAYEES AND GENUINENESS OF LAND TRANSACTIONS IN RESPECT OF WHICH PAYMENTS HAD BEEN MADE - WHETHER ON FACTS, PAYMENTS IN QUESTION WERE COVERED UNDER SECOND PROVISO TO SECTION 40A(3) AND RULE 6DD(H) AND, THEREFORE, IMPUGNED DISALLOWANCE WAS TO BE DELETED - HELD, YES [PARAS 12 & 14] (4) BASIL DISTRIBUTOR (P) LTD. VS. ACIT (2012) 19 TAXMANN.COM 11 (DELHI) DATE OF DECISION: 09.02.2012 SECTION 40A(3) OF THE INCOME - TAX ACT, 1961 READ WITH RULE 6DD(J) OF THE INCOME - TAX RULES, 1962 - BUSINESS DISALLOWANCE - CASH PAYMENT EXCEEDING PRESCRIBED LIMITS - ASSESSMENT YEARS 1992 - 93 TO 1 994 - 95 - ASSESSEE, A FILM DISTRIBUTOR, MADE PAYMENTS ABOVE RS. 10,000 IN CASH TO THIRD PARTIES - LOWER AUTHORITIES HELD THAT ASSESSEE BY MAKING PAYMENTS ABOVE RS. 10,000 IN CASH TO THIRD PARTIES HAD VIOLATED PROVISIONS OF SECTION 40A(3), READ WITH RULE 6DDQ) - WHETHER SINCE (I) PROVISIONS OF SECTION 40A(3) AND RULE 6DD(J) HAVE BEEN INCORPORATED IN ACT IN ORDER TO CHECK INCURRING OF BOGUS AND FICTITIOUS EXPENSES TO NON - EXISTING PARTIES, AND (II) LOWER AUTHORITIES DID NOT DOUBT IDENTITY OF THIRD PARTIES AND GENU INENESS OF PAYMENTS, THEY WERE WRONG IN CONCLUDING THAT ASSESSEE HAD VIOLATED PROVISIONS OF SECTION 40A(3), READ WITH RULE 6DDQ) - HELD, YES \ (5) CIT VS. KALYAN PRASAD GUPTA (2012) 20 TAXMANN.COM 533 (RAJ.) DATE OF ORDER : 20.11.2010 SECTION 40A(3) OF THE INCOME - TAX ACT, 1961 - BUSINESS DISALLOWANCES CASH PAYMENT EXCEEDING PRESCRIBED LIMITS - ASSESSMENT YEAR 2004 - 05 - WHERE STATE GOVERNMENT HAD GRANTED CONTRACT TO COLLECT ROYALTY ON ITS BEHALF WAS MADE TO CONTRACTOR NOT IN INDIVIDUAL I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 16 CAPACITY, BUT ON BE HALF OF GOVERNMENT AND, HENCE, NO DISALLOWANCE UNDER RULE 6DD(B) COULD BE MADE OF ROYALTY PAID BY CONTRACTOR TO GOVERNMENT IN CASH (6) P.M. ABDUL RAZAK VS. ITO (1997) 63 ITD 398 (COCH.) DATE OF ORDER: 05.03.1996 WHETHER SINCE ASSESSING OFFICER DID NOT DOUBT GENUINENESS OF CASH PAYMENTS NOR ALLEGED ANYTHING OF MAKING FALSE CLAIM OF THOSE PAYMENTS, DISALLOWANCE MADE BY HIM COULD NOT BE CONFIRMED - HELD, YES (7) DY. CIT VS. MAYUR SALES (2001)116 TAXMAN 95 (JP) (MAG.) DT. OF ORDER: 10.03.2000 SECTION 40A (3) OF THE INCOME - TAX ACT, 1961 - BUSINESS DISALLOWANCE - CASH PAYMENT IN EXCESS OF PRESCRIBED LIMIT - ASSESSEE HAD MADE CERTAIN CASH PAYMENTS TO TRUCK DRIVERS IN EXCESS OF PRESCRIBED LIMIT - ASSESSING OFFICER DISALLOWED SAME - WHETHER CASH PAYMENTS MADE TO TRUCK DRIVERS FOR FREIGHT AND OCTROI .CHARGES FELL UNDER EXCEPTIONAL CIRCUMSTANCES AS MENTIONED IN RULE 6DD(J) OF THE INCOME - TAX RULES, 1962, READ WITH CBDT'S CIRCULAR NO. 220, DATED 31 - 5 - 1977 AND, THEREFORE, COMMISSIONER (APPEALS) RIGHTLY DELETED DISALLO WANCE MADE BY ASSESSING OFFICER - HELD, YES (8) WALFORD TRANSPORT (EASTERN INDIA) LTD. VS. CIT (2002) 124 TAXMAN 538 DT. OFORDER:08.10.1999 WHETHER WHERE AUTHORITIES WERE SATISFIED ABOUT GENUINENESS OF TRANSACTIONS AND IDENTITY OF PAYEES A ND FACT THAT ASSESSEE WAS IN FINANCIAL STRINGENCY WARRANTING CASH PAYMENTS, IN SUCH CIRCUMSTANCES} DISALLOWANCE OF PART OF PAYMENT SO MADE WAS UNJUSTIFIED - HELD, YES (9) CIT VS. PRAVIN & CO. (2005) 274 ITR 534 ONCE IDENTITY OF THE PAY EE WAS ESTABLISHED, GENUINENESS OF THE PAYMENT WAS NOT DOUBLED, THE MATERIALS PURCHASED UNDER CASH PAYMENTS WERE UTILIZED FOR CONSTRUCTION ACTIVITY CARRIED ON BY THE ASSESSEE, IT WAS NOT POSSIBLE TO HOLD THAT PURPOSE OF PAYMENT IN CASH WAS TO FRUSTRATE PRO PER INVESTIGATION BY THE DEPARTMENT; AN D AS SUCH DISALLOWANCE OF SUCH PAYM ENTS IN CASH WAS NOT JUSTIFIED. (10) CIT V. EASTERN CONDIMENTS (P) LTD. (2003) 261 ITR 76 WHEN GENUINENESS OF CASH PURCHASES WAS NOT IN DOUBT AND THERE WAS EVIDENCE THAT VENDORS WO ULD ONLY ACCEPT CASH, DISALLOWANCE OF CASH PAYMENTS IN EXCESS OF PRESCRIBED LIMIT WAS NOT JUSTIFIED. (11) SATPAL JAIN VS. ACIT (2003) 79 TTJ 444 (DELHI) CONFIRMATION OF RECIPIENT THAT HE DID NOT ACCEPT CHEQUE, WOULD COVER THE CASE UNDER RULE 6DD, AND DIS ALLOWANCE OF CASH PAYMENT IN EXCESS OF PRESCRIBED LIMIT WAS NOT JUSTIFIED. (12) VIP INDUSTRIES LTD. VS. DCIT (1996) 88 TAXMAN 115 (BOM.) (MAG.) DT. OF ORDER: 07.08.1995 SECTION 40A(3) OF THE INCOME - TAX ACT, 1961 - BUSINESS DISALLOWANCE - CASH PAYMENT IN E XCESS OF PRESCRIBED LIMITS - ASSESSMENT YEAR 1985 - 86 - ASSESSEEPAID AN AMOUNT OFRS. 2.37 LAKHS IN CASH, WHICH WAS ABOUT 3 PER CENT OF TOTAL FREIGHT TO TRUCK DRIVERS ON THEIR INSISTENCE AT THE TIME OF DELIVERY OF GOODS - GENUINENESS OF PAYMENT WAS NOT DISPUT ED - WHETHER CASH PAYMENTS HAVING BEEN MADE IN AN EXCEPTIONAL CIRCUMSTANCES, NO DISALLOWANCE COULD BE MADE - HELD, YES. (13) CIT VS. AMARJIT ARORA (2005) 143 TAXMAN 231 (PUNJ. & HAR.) DT. OF ORDER: 11.05.2004 TRIBUNAL ON FINDING THAT CASH PAYMENT WAS MAD E ON INSISTENCE OF SELLER, DELETED ADDITION - WHETHER CASH PAYMENT IN INSTANT CASE WAS PROTECTED BY EXCEPTIONS PROVIDED UNDER RULE 6DDQ) - HELD, YES - WHETHER, THEREFORE, NO QUESTION OF LAW AROSE FROM ORDER OF TRIBUNAL FOR INTERFERENCE - HELD, YES CIRCULAR S & NOTIFICATIONS - CBDT CIRCULAR NO. 220 DATED 31 - 5 - 1977. (14) CIT VS. ACHAL ALLOYS (P) LTD. (1996) 218 ITR 46 (MP) \ DT. OF ORDER :13.11.1995 WHETHER WHERE PAYMENTS IN CASH WERE DULY SIGNED BY PAYEES AND INSISTENCE ON MAKING CASH PAYMENTS WAS FOUNDED O N FULCRUM THAT PAYEES DID NOT HAVE ANY BANK ACCOUNT AND, BEING ILLITERATES, THEY REQUIRED PAYMENT IN CASH, NO DISALLOWANCE COULD BE MADE UNDER SECTION 40A(3) - HELD, YES I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 17 (15) CIT VS. RAJMOHAN FILIAL (2004) 267 ITR 561 WHERE ASSESSEE HAD ESTABLISHED THE ID ENTITY, GENUINENESS OF TRANSPORT AND COLLIE CHARGES, ONE MORE OPPORTUNITY HAD TO BE GIVEN TO THE ASSESSEE TO CONFIRMATION LETTERS OBTAINED FROM THE TRANSPORTING AGENCY TO THE EFFECT THAT THEY WERE NOT WILLING TO RECEIVE THE TRANSPORTATION CHARGES BY CROS SED CHEQUES/DRAFTS AND THEY INSISTED FOR PAYMENT OF THE CHARGES IN CASH. 6.4. IN VIEW OF THE ABOVE DISCUSSION, THE RELIEF TO THE EXTENT OF RS.25,45,385/ - IS GRANTED TO THE APPELLANT ON THIS ACCOUNT. THE A.O. IS DIRECTED TO VERIFY THAT NO DOUBLE RELIEF IS GRANTED FOR THESE TRANSACTIONS IN ANY OF THE HEADS DISCUSSED FROM POINT NO. 1 TO 5 ABOVE. 7. IN VIEW OF THE ABOVE DISCUSSION, THIS GROUND IS DECIDED AND THE DELETION OF THE DISALLOWANCE AMOUNTING TO RS. 1,12,00,206/ - (RS.5,66,270/ - + RS.5,23,790/ - + RS.12,2 2,350/ - + RS.10,82,600/ - + RS .47,08,211/ - + RS.5,51,200/ - + RS.25,45,785/ - ) UNDER VARIOUS HEADS AS ABOVE SUBJECT TO VERIFICATION BY THE A.O. AS PER THE DIRECTIONS GIVEN UNDER THE RESPECTIVE HEADS. SUBJECT TO THE ABOVE, THE GROUND OF THE APPELLANT IS PARTL Y ALLOWED. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS, LD. COUNSEL H A S SUBMITTED PAPER BOOK SUBMITTING AND DETAIL FURNISHED BEFORE THE ASSESSING OFFICER AND LD. CIT(A) DURING THE COURSE OF ASSESSMENT AND APPELLATE PROCEEDINGS. HE HAS CONTEND THAT LD . CIT(A) THAT HE IS NOT CORRECT IN SUSTAINING THE ADDITION TO THE AMOUNT OF RS. 6520741/ - U/S. 40A(3) OF THE ACT. HE HAS ALSO REFERRED TO THE SUMMARY OF JUDICIAL PRONOUNCEMENTS : - (I) (2010) 2 TAXMANN.COM 284 (ALLAHABAD) (II) (1991) 59 TAXMAN 11 (SC)/(1991 ) 191 ITR 667 (SC)/(1991) 97 CTR 251 (SC) (III) (2015) 63 TAXMANNN.COM 289 (PUNJAB &HARYANA) (IV) (2001) 117 TAXMAN 2 (ALLAHABAD) / (2001) 249 ITR 113 (ALLAHABAD)/(2001) 166 CTR 76 (ALLAHABAD) (V) (1987) 33 TAXMAN 572 (DELHI)/(1987) 166 ITR 529 (DELHI)/(19 87) 59 CTR 16 (DELHI) (VI) (2002) 124 TAXMAN 538 (GAUHATI) / (1999) 240 ITR 902 (GAUHATI) ON OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF LD. CIT(A). 6 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. IT IS NOTICED THAT ASSESSING OFFICER HAS MADE DISALLOWANCE U/S. 40A(3) I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 18 OF THE ACT TO THE AMOUNT OF RS. 1 , 77 , 20 , 947/ - ON ACCOUNT OF CASH PAYMENT IN EXCESS OF RS. 20,000/ - TO A SINGLE PARTY IN A DAY. THE LD. CIT(A) ON THE BASIS OF INFORMATION PROVIDED BY THE ASSESSEE HAS CATEGORIZED THE CASH PAYMENTS TO VARIOUS TRANSPORTERS IN DIFFERENT HEADS AS UNDER. (I) DETAILS OF PAYMENT BELOW RS. 20,000/ - . THE LD. CIT(A) WORKED SUCH PAYMENT TO THE AMOUNT OF RS. 20,73,420/ - . SINCE EACH PAYMENT WAS LESS THAN RS.20000/ EVEN ON A SINGLE DAY FOR A SINGLE TRANSACTION AND HENCE THE PROVISION OF SECTION 40A(3) DOES NOT APPLY . (II) DETAIL OF EXPENSES PERTAINING TO R OAD/RTO EXPENSES OUT OF EACH PAYMENT AND BALANCE PAYMENT TOWARDS TRANSPORT WAS LESS THAN 20,000/ - . SUCH EXPE NSES WERE DETERMINED AT RS. 5,23,790/ - . (III) PAYMENT IN CASH MADE IN CASH ON SATURDAYS, SUNDAYS AND HOLIDAYS . THE TOTAL AMOUNT WAS DETERMINED AT RS. 49,26,891/ - ON THE REASON THAT BANKING FACILITY WAS NOT AVAILABLE BECAUSE OF SATURDAYS, SUNDAYS AND HOLID AY AS PER RULE 6DDD(J) TO SECTION 40A(3) . (IV) TRANSPORTER DID NOT HAVE ANY OFFICE NEAR LOADING POINT. THE TOTAL AMOUNT ON THIS ACCOUNT WAS STATED TO BE RS. 79,79,711/ - (V) THE ASSESSEE DOES N EITHER HAVE ANY PRESENCE NOR BANK ACCOUNT. THE TOTAL AMOUNT OF PAYMENT IN SUCH CATEGORIES WAS DETERMINED AT RS. 22,52,135/ - . THE LD. CIT(A) HAS EXAMINED THESE CATEGORIES AS UNDER. ( (I) THE ASSESSEE HAS CLAIMED THAT PROVISION OF SECTION 40A(3) DOES NOT APPLY AS THE CASH PAYMENT WAS NOT EXCEEDING RS. 20,000/ - . THE L D. CIT(A) HAS VERIFIED THE CLAIM OF THE ASSESSSEE AND GIVEN A RELIEF FOR RS. 5 , 6 6, 270 ON THE BASIS OF RELEVANT MATERIAL WHICH DEMONSTRATES THAT AMOUNT PAID TO A SINGLE PARTY WAS BELOW RS. 20,000/ - . THE LD. CIT(A) HAS REJECTED THE CLAIM OF THE ASSESSEE TH AT THE PROVISIONS DOES NOT GIVE ANY IMMUNITY FOR EVERY SET OF TRIPS/SEPARATE TRIPS THE PAYMENT EXCEEDING RS. 20,000/ - EVEN IF PAID ON A SINGLE DAY TO A SAME PERSON. I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 19 (II) THE CLAIM OF THE ASSESSEE THAT HE HAS INCURRED CERTAIN EXPENSES ON ACCOUNT OF RTO FEES CHECK POST, REIMBURSEMENT OF THE TOLL AT VARIOUS TOLL NAKA TO THE AMOUNT OF RS. 1,73,500/ - THE OTHER EXPENSES LIKE DIESEL, REPAIR, MAINTENANCE EXPENSES FOOD EXPESNES ETC. AND DELETED SUCH ADDITION TO THE EXTENT OF RS. 3,50,290/ - . HAS BEEN VERIFIED BY THE LD. CIT(A) AS PER THE SUPPORTING MATERIAL FURNISHED BY THE ASSESSEE AND DELETED THE ADDITION TO THE EXTENT OF RS. 5,23,790 (RS. 350,290/ - + RS.1,73,500) (III) THE LD. CIT(A) HAS VERIFIED AND CONSIDERED THE CLAIM OF THE ASSESSEE OF CASH PAYMENT WERE MADE ON SATURDAYS, SUNDAYS AND HOLIDAYS WHEN THE BANKING FACILITIES WERE NOT AVAILABLE. THE LD. CIT(A) HAS DETERMINED THE TOTAL SUCH EXPENSES TO THE AMOUNT OF RS. 23,09,50/ - WHICH WERE DELETED FROM THE TOTAL ADDITION. (IV) THE LD. CIT(A) HAS ALSO EXAMIN ED THE CLAIM OF THE ASSESSEE OF MAKING PAYMENT IN CASH ON THE GROUND THAT ASSESSEE WAS NOT HAVING OFFICE NEAR THE LOADING POINT. THE LD. CIT(A) HAS DETERMINED SUCH PAYMENT TO THE EXTENT OF RS. 6,73,950/ - AND DELETED THE SAME. THE LD. CIT(A) HAS ALSO DETERMINED AN AMOUNT OF RS. 10,82,500/ - IN DELETING TO THE ROAD/RTO EXPENSES WHICH WERE ALSO DELETED. THE LD. CIT(A) HAS ALSO CONSIDERED THAT THE DRIVER HAD TO MAKE PAYMENT FOR BORDER FEES TOLLNAKA AT VARIOUS CHECK POST DURING THE TRIPS WHICH ESTABLISH T HAT THE PAYMENT IN CASH WERE UNAVOIDABLE AND HAS BEEN MADE GENUINELY. HE HAS DETERMINED SUCH PAYMENT TO THE AMOUNT OF RS. 10,82,500/ - WHICH WAS ALSO DELETED. THE LD. CIT(A) HAS ALSO VERIFIED AND FOUND THAT INSTEAD OF INCURRING VARIOUS IN - ROUTE SEVERAL EX PENSES LIKE DIESEL, REPAIR, FOOD EXPENSES AND MISCELLANEOUS EXPENSES ETC. AND DETERMINE D SUCH EXPENSES TO THE AMOUNT OF RS. 14,08,261/ - WHICH WAS ALSO DELETED. FURTHER THE LD. CIT(A) HAS ALSO NOTICED THAT AFTER REDUCING EXPENSES INCURRED TOWARDS RTO/ROAD EXPENSES, THE EXPENSES WHICH ARE MORE THAN 20,000/ - ARE TO BE DISALLOWED. LD. CIT(A) HAS ALSO DETERMINED BORDER FEES PAYMENT TO THE AMOUNT OF RS. 4,37,900/ - AND ROAD/RTO AT RS. 11,05,600/ - WHICH DOES NOT WARRANTY ANY DISALLOWANCE FOR THE REASON DISCUSSED IN THE PRECEDING PARAS WERE ALSO DELETED. I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 20 WHERE THE ASSESSEE DOES NOT ANY PRESENCE NOR BANK A/C, THE LD. CIT(A) HAS DETERMINED SUCH AMOUNT TO THE EXTENT OF RS. 25,45,385/ - AND GRANTED RELIEF TO THE ASSESSEE. AFTER CONSIDERING THE ABOVE, IT IS CLEAR THA T LD. CIT(A) VERIFIED IN DETAIL THE CLAIM OF THE ASSSESSEE THAT IN DIFFERENT CIRCUMSTANCES AS ELABORATED ABOVE CIT(A) HAS ALLOWED TOTAL RELIEF TO THE ASSESSEE TO THE EXTENT OF RS. 1,12,00,206/ - (RS. 5,66,270 + RS. 5,23,790+12,22,350 +RS. 10,82,600+ RS. 47, 08,211+ RS. 5,51,200+ RS. 25,45,685) UNDER VARIOUS HEADS AFTER VERIFICATION. THEREAFTER, THE LD. CIT(A) HAS EXAMINED THE CLAIM OF THE ASSESSEE AND THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN EXCESS OF RS. 20,000/ - WAS MADE TO SINGLE PARTY IN A DAY. WE HAVE CONSIDERED THAT LD. CIT(A) HAS ALREADY GIVEN RELIEF TO THE ASSESSEE W H ERE THERE IS SUCH PAYMENT LESS THAN 20,000/ - AND HAS ALSO EXCLUDED THE PAYMENT WHICH WERE MADE TO THE ROAD EXPENSES/RTO, MAINTENANCE EXPENSES AND PAYM ENT WHICH WERE MADE ON SATUR DAYS, SUNDAY S AND HOLIDAYS AND OTHER CIRCUMSTANCES AS ELABORATED DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US. THE LD. COUNSEL HAS FAILED TO CONTR OVERT THE FINDING OF LD. CIT(A) AND ALSO FAILED TO POINT OUT THAT HOW THE EXPENSES ARE ALLOWABLE I N HIS CASE AS PER RULE 6DD OF THE IT RULES. WE HAVE ALSO NOTICED THAT THE JURISDICTIONAL SUMMARY REFERRED BY THE ASSESSEE ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE OF THE ASSESSEE CONSIDERING THE JUDICIAL PRONOUNCEMENTS REFERRED BY THE LD.CIT(A) IN HIS ELABORATED FINDINGS DEMONSTRATING THAT DUE RELIEF HAVE BEEN PROVIDED UNDER THE DIFFERENT CIRCUMSTANCES CITED BY THE ASSESSEE ACCORDING TO THE PROVISION OF LAW AND RULE. . THEREFORE, CONSIDERING THE DETAILED FINDINGS OF THE LD. CIT(A), WE DO NOT FIN D ANY MERIT IN THE AP PEAL OF THE ASSESSEE, THEREFORE, T HE SAME IS DISMISSED. SECOND GROUND OF APPEAL: DISALLOWANCE OF LOADING AND UN - LOADING EXPRESSES . 7 . THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS CLAIMED TRANSPORT AND CRANE HIRE CHARGES T O TH E AMOUNT OF RS. 5 , 59 , 76 , 271/ - . HE HAS NOTICED THAT ASSESSEE HAS NOT SUBMITTED ANY DETAIL REGARDING THE LOADING AND UNLOADING EXPENSES OF RS. 12 , 12 , 400/ - . THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN WHY I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 21 THESE EXPENSES SHOULD NOT BE DISALLOWED. THE ASSE SSEE EXPLAINED THAT PAYMENT MADE AGAINST THE LOADING AND UNLOADING EXPENSES WERE NOT MORE THAN RS. 20,000/ - FOR A DAY TO A GROUP OF 4 TO 5 PERSONS. THEREFORE, NO TDS WAS DEDUCTED ON T HESE PAYMENTS HOWEVER T H E ASSESSING OFFICER HAS NOT ACCEPTED THE EXPL ANATION OF THE ASSESSEE STATING THAT PURCHASE REGISTER DOES NOT REF LECT ANY WHERE THE EXPENSES OF RS. 12,12 , 400/ - CLAIMED BY THE ASSESSEE. THEREFORE, HE HAS DISALLOWED THESE EXPLAINED 8 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE T H E LD. CIT(A). T HE LD. C IT(A) HAS RESTRICTED THE DISALLOWANCE TO THE AMOUNT OF RS. 181 800/ - AND GIVEN RELIEF OF RS 10,30,540/ TO THE ASSESSEE. 9 . WE HAVE HEARD RIVAL CONTENTION ON THIS ISSUE AND NOTICED THAT IT IS UNDISPUTED FACT THAT THESE EXPENSES WERE MADE AT THE LOADING AN D UNLOADING DESTINATIONS TO SMALL WORKERS IN CASH ON SELF MADE VOUCHERS BECAUSE OF NATURE OF EXPENSES , IT IS DIFFICULT TO CHECK AND VERIFY SUCH PAYMENT, THEREFORE , DUE TO NON - VERIFIABLE NATURE OF THESE EXPENSES , WE OBSERVED THAT LD. CIT(A) HAS RESTRICTED THE SAID DISALLOWANCE TO A VERY REASONABLE LEVEL OF 15% OF THE AFORESAID EXPENSES OF RS. 12 , 12 , 400/ - ON LUMP SUM BASIS. CONSIDERING THE REASONABLENESS OF THE DISALLOWANCE MADE BY THE LD. CIT(A) ON THE BASIS OF NON - VERIFIABLE NATURE OF EXP ENSES, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE, THEREFORE, THE SAME IS DISMISSED. 10 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 12 - 12 - 201 8 SD/ - SD/ - ( MAHAVIR PRASAD ) ( AMARJIT SINGH ) J UDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 12 /12 /2018 I.T.A NO. 1441 /AHD/20 14 A.Y. 2009 - 10 PAGE NO RAMCHAND BHULCHAND RAJAI VS. J CIT (OSD) 22 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,