RAJAMANI BALACHANDER, CHENNAI V. DCIT, CENTRAL CIRCLE-3(3), CHENNAI

ITA 196/CHNY/2023

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The case involves appeals by Rajamani Balachander, an event manager, against the disallowances made by the Assessing Officer under section 40A(3) of the Income Tax Act, 1961, for the assessment years 2018-19 and 2019-20. The primary contention was regarding the cash expenses incurred which exceeded \\u20b910,000 per day per person, a violation of section 40A(3). The Tribunal considered the nature of the assessee's business, which necessitated cash transactions, and found that a partial disallowance was appropriate. The Tribunal's decision aimed to balance the legal provisions with the practical realities of the assessee's business operations.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134767 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 04-04-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 14-02-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause; Condonation of delay; TDS
• Section: 40A(3); 143(3); 44AB

Judgement Text

आयकर अपीलीय अिधकरण, ‘ए’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ŵी वी. दुगाŊ राव, Ɋाियक सद˟ एवं ŵी मनोज कु मार अŤवाल, लेखा सद˟ के समƗ । Before Shri V. Durga Rao, Judicial Member & Shri Manoj Kumar Aggarwal, Accountant Member आयकर अपील सं./I.T.A. Nos.196 & 197/Chny/2023 िनधाŊरण वषŊ/Assessment Years: 2018-19 & 2019-20 Rajamani Balachander, 28, Judge Jambulingam Road, Mylapore, Chennai 600 004, Tamil Nadu. [PAN:AWKPB4668D] Vs. The Deputy Commissioner of Income Tax, Central Circle 3(3), Chennai. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri R. Venkata Raman, CA ŮȑथŎ की ओर से/Respondent by : Shri AR V Sreenivasan, Addl. CIT सुनवाई की तारीख/ Date of hearing : 05.04.2023 घोषणा की तारीख /Date of Pronouncement : 21.04.2023 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: Both the appeals filed by the assessee are directed against separate orders of the ld. Commissioner of Income Tax (Appeals) 18, Chennai, both dated 07.12.2022 relevant to the assessment years 2018- 19 and 2019-20. 2. Both the appeals filed by the assessee are delayed by ten days in filing the appeals before the Tribunal. The assessee has filed petitions for condonation of delay against which, the ld. DR has not objected. Since I.T.A. Nos.196 & 197/Chny/23 2 the assessee was prevented by reasonable cause, we hereby condone the delay of ten days in filing the appeals and admit the appeals for adjudication. 3. Brief facts of the case are that the assessee is an individual, engaged in the business of event management for corporate and filed her return of income for the assessment year 2018-19 on 31.10.2018 admitting total income of ₹.19,34,210/-. A survey operation under section 133A of the Income Tax Act, 1961 [“Act” in short] was initiated at the business premises of the assessee. Subsequently, the case was selected for scrutiny and issued statutory notices to the assessee. After following due procedure, the Assessing Officer has completed the assessment under section 143(3) of the Act dated 30.09.2021 by assessing total income of the assessee at ₹.44,57,658/- after making various additions. In the assessment order, the Assessing Officer has noted that on verification of the cash expenses incurred from April to December, 2017 as per impounded vouchers, the assessee had incurred a sum of ₹.12,69,740/- by violating the provisions of section 40A(3) of the Act by making payment exceeding ₹.10,000/- to a single person on a day till December, 2017. In the course of assessment proceedings, the assessee was called upon to furnish the details of such cash payments made in I.T.A. Nos.196 & 197/Chny/23 3 violation of the provisions of section 40A(3) for the period from January, 2018 to March, 2018 which was reported to be ₹.1,84,196/-. The Assessing Officer, after taking into account the above, made a total disallowance of ₹.14,53,936/- as incurred by violating the provisions of section 40A(3) of the Act. On appeal, the ld. CIT(A) allowed 50% of the expenses incurred upto December, 2017 (₹.6,34,870/-) as an admissible expenditure and sustained the balance disallowance. 4. On being aggrieved on the confirmation of disallowance of ₹.6,34,870/-, the assessee carried the matter in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the assessee, as an event manager incurred various expenses at the site of the event and had to incur cash expenses through the personnel deployed by her to the site due to business exigency, which falls within the ambit of first proviso to section 40A(3) of the Act and prayed for deleting the addition confirmed by the ld. CIT(A). 5. On the other hand, the ld. DR supported the order passed by the ld. CIT(A). 6. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The cash I.T.A. Nos.196 & 197/Chny/23 4 expenses incurred from April, 2017 to March, 2018 in violation of provisions of section 40A(3) of the Act by making payment exceeding ₹.10,000/- to a single person on a day of ₹.14,53,936/- was brought to tax. On appeal, while sustaining the disallowance made for the period from January, 2018 to March, 2018 of ₹.1,84,196/-, out of the disallowance of ₹.12,69,740/- of cash expenses incurred from April, to December, 2017, the ld. CIT(A) allowed relief of 50% to the balance disallowance viz., 6,34,870/- as an admissible expenditure and sustained the balance disallowance of ₹.6,34,870/-. 7. Before us, the ld. Counsel for the assessee has argued that the ld. CIT(A) was not justified in sustaining the disallowance of ₹.6,34,870/- and contended that the assessee, being an event manager incurred various expenses at the site of the event and had to incur cash expenses through the personnel deployed by her to the site due to business exigency, which falls within the ambit of first proviso to section 40A(3) of the Act and prayed for deleting the addition confirmed by the ld. CIT(A). Considering the nature of business of the assessee, wherein cash expenses are inevitable, in order to meet the ends of natural justice, we are of the considered opinion that the disallowance confirmed by the ld. CIT(A) is at an higher side. Accordingly, we direct the Assessing Officer to disallow I.T.A. Nos.196 & 197/Chny/23 5 20% of total disallowance of ₹.12,69,740/- and the income of the assessee may be recomputed accordingly. 8. So far as assessment year 2019-20 is concerned, the Assessing Officer disallowed 30% of the total expenses of ₹.4,90,49,931/-, which comes to ₹.1,47,14,979/- since the assessee could not produce documentary evidences for the expenses incurred. On appeal before the ld. CIT(A), the assessee has submitted that the expenditure to the extent of ₹.2,93,65,308/- is covered by TDS and therefore, the said expenditure should be allowed in full. With regard to the balance amount of ₹.1,96,84,623/-, the assessee has submitted before the ld. CIT(A) that the books of accounts were duly audited under section 44AB of the Act and the Assessing Officer has not pointed any specific defect or discrepancy in the books of accounts and prayed for allowance of entire claim made by the assessee. After considering the submissions of the assessee, to the extent the expenditure covered by TDS of ₹.2,93,65,308/-, the ld. CIT(A) allowed the claim made by the assessee. Since the assessee could not produce evidences to substantiate the business purpose of the expenses, the ld. CIT(A) sustained the disallowance of 30% on the balance non-TDS suffered expenses of ₹.1,96,84,623/-. Considering the nature of business of the assessee being event manager for corporate I.T.A. Nos.196 & 197/Chny/23 6 and the authorities below have not found any specific defect of discrepancy in the books of accounts and the books of accounts were duly accepted, we sustain the disallowance of 10% on the balance non- TDS suffered expenses of ₹.1,96,84,623/-. Accordingly, the Assessing Officer is directed to recompute the income of the assessee. 9. In the result, both the appeals filed by the assessee are partly allowed. Order pronounced on 21 st April, 2023 at Chennai. Sd/- Sd/- (MANOJ KUMAR AGGARWAL) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER Chennai, Dated, 21.04.2023 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ (अपील)/CIT(A), 4. आयकर आयुƅ/CIT, 5. िवभागीय Ůितिनिध/DR & 6. गाडŊ फाईल/GF.