M/s N.K. Gupta Builders (P) Ltd., Panchkula V. DCIT, Chandigarh

ITA 319/CHANDI/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9778 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 06-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Section: 40A(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 319/CHD/2016 ASSESSMENT YEAR:2008-09 M/S N.K. GUPA BUILDERS (P) LTD. VS. THE DY. CIT H.NO. 338, SECTOR 6, PANCHKULA CENTRAL CIRCLE-I CHANDIGARH PAN NO. AACCN0843K (APPELLANT) (RESPONDENT) APPELLANT BY : SH. JASPAL SHARMA RESPONDENT BY : SH. S.K. MITTAL DATE OF HEARING : 12/07/2016 DATE OF PRONOUNCEMENT :18/07/2016 ORDER PER ANNAPURNA GUPTA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-3, GURGAON DT. 25/01/2016. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE IMPUGNED ORDER IS BOTH AGAINST FACTS AND ERR ONEOUS IN LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HAVING CONFIRMED THE ADD ITION OF RS. 5,84,600/- MADE BY THE LD. AO U/S 40A(3) OF THE INCOME TAX ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HAVING APPLIED THE JUDGM ENT IN THE CASE OF MRS ROADWAYS VS. CIT(2014) 52 TAXMANN.COM 99 WHICH IS D ISTINGUISHABLE ON FACTS. 3. THE ONLY ISSUE ARISING IN THE PRESENT APPEAL IS RELATING TO DISALLOWANCE MADE UNDER THE PROVISIONS OF SECTION 40A(3) OF THE INCOME TAX ACT 1961. 4. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURIN G ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE HAD MADE PAYMENTS IN CASH EXCEEDING RS. 20,000/- PER DAY TO M/S J.S. CARGO. ON BEING ASKED TO EXPLAIN AS TO WHY ADDITION 2 OF THE IMPUGNED SUM BE NOT MADE, SINCE THE ASSESSEE HAD VIOLATED THE PROVISIONS OF SECTION 40A(3), IT WAS SUBMITTED THAT THE PAYMENT HAD BEEN MADE TO DIFFERENT TRUCK DRIVERS AND EACH PAYMENT WAS LES S THAN RS. 20,000/-. THUS THE ASSESSEE STATED THAT THE PROVISIONS OF SECTION 40A( 3) WERE NOT ATTRACTED IN THE PRESENT CASE. THE AO REJECTED THE ASSESSEES CONTENT ION, ON THE GROUND THAT NO DOCUMENTARY EVIDENCE TO SUBSTANTIATE HIS CLAIM WAS PRODUCED BEFORE HIM. HE THEREFORE MADE AN ADDITION OF RS. 5,84,600/- TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF VIOLATION OF SECTION 40A(3) OF THE INCOM E TAX ACT 1961. 5. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(A), WHERE THE ASSESSEE REITERATED THE CONTENTIONS MADE BEFORE THE AO AND FURTHER STATED THAT THE VERACITY AND GENUINENESS OF THE EXPENSES HAD NO T BEEN DOUBTED AND HENCE THE TRANSACTIONS ARE TAKEN OUT OF THE SWEEP O F THE SECTION 40A(3)AS HELD BY THE APEX COURT IN THE CASE OF ATTAR SINGH GURMUK H SINGH VS. ITO 191 ITR 667, 673. THE LD. CIT(A) UPHELD THE DISALLOWANCE MADE BY STATING THAT THE ASSESSEES CASE DID NOT FALL UNDER ANY EXEMPTION COVERED IN RU LE 6DD AND FURTHER RELIED UPON THE JUDGMENT IN THE CASE OF MRS ROADWAYS VS. C IT[2014] 52 TAXMANN.COM 99. 6. AGGRIEVED BY THE SAME THE ASSESSEE FILED THE PRE SENT APPEAL BEFORE US. 7. DURING THE COURSE OF HEARING BEFORE US THE LD. A R ARGUED THAT NO DISALLOWANCE UNDER SECTION 40A(3) COULD BE MADE SIN CE NO SINGLE PAYMENT EXCEEDED RS. 20,000/-, THAT THE PAYMENT WERE MADE T O DIFFERENT TRUCK DRIVERS AND NOT TO THE TRANSPORTER I.E; M/S J.S. CARGO MOVE RS, WHO PROVIDED ONLY TRANSPORTATION FACILITY TO THE ASSESSEE AND THE GEN UINENESS AND VERACITY OF THE PAYMENT HAD NOT BEEN DOUBTED. LD. AR CONTENDED THAT THERE WERE COMPELLING CIRCUMSTANCES TO MAKE THE PAYMENT IN CASH SINCE THE PAYMENTS WERE MADE FOR MEETING EXPENSES DURING THE TRANSPORTATION PERIOD W HEN THE TRUCK REACHED THEIR DESTINATIONS AT ODD HOURS. LD. AR PLACED RELIANCE O N THE JUDGMENT OF THE 3 JURISDICTIONAL HIGH COURT IN THE CASE OF GURDAS GAR G VS. CIT(A) [2015] 63 TAXMANN.COM 289 IN SUPPORT OF ITS CONTENTION THAT W HERE THE GENUINENESS OF THE TRANSACTION HAS NOT BEEN DOUBTED NO DISALLOWANCE UN DER SECTION 40A(3) COULD BE MADE. 8. LD. DR ON THE OTHER HAND CONTENDED THAT THE PROV ISIONS OF SECTION 40A(3) ARE ABSOLUTE AND IN CASE OF VIOLATION OF THE SAME D ISALLOWANCE HAS TO BE MANDATORILY MADE. LD. DR STATED THAT MERELY BECAUSE A TRANSACTION IS GENUINE, IT IS NOT EXCLUDED FROM THE PURVIEW OF THE PROVISIO N OF SECTION 40A(3). LD. DR FURTHER RELIED UPON THE ORDER OF THE LOWER AUTHORIT IES AND STATED THAT THE ASSESSEE HAD NOT SUBSTANTIATED ITS PLEADINGS WITH E VIDENCE TO THE EFFECT THAT THE PAYMENTS WERE MADE TO TRUCK DRIVER WHO REACHED THE DESTINATION AT ODD HOURS AND NOT TO THE TRANSPORTER. LD. DR CONTENDED THAT NEITHER TRUCK WISE / TRUCK OWNER DETAILS NOR ANY OTHER EVIDENCE WAS SUBM ITTED EXCEPT FOR THE COPY OF ACCOUNT OF THE TRANSPORTER I.E; M/S J.S. CARGO. THUS THE LD. DR STATED THAT THE DISALLOWANCE UNDER SECTION 40A(3) HAD BEEN RIGHTLY UPHELD BY THE LD. CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDER OF THE AUTHORITIES BELOW AND ALSO THE DOCUMENTS PLACED BEF ORE US. 10. THE FIRST ARGUMENT ADVANCED BY THE LD. AR IN SU PPORT OF ITS CONTENTION THAT SECTION 40A(3) IS NOT APPLICABLE IN THE PRESEN T CASE IS THAT NO SINGLE PAYMENT MADE EXCEEDED RS. 20,000/-. 11. WE FIND MERIT IN THIS CONTENTION OF THE LD. AR, SINCE AS PER THE PROVISIONS OF SECTION 40A(3) APPLICABLE FOR THE IMPUGNED YEAR, NO DISALLOWANCE COULD BE MADE IF AN INDIVIDUAL / SINGLE PAYMENT DID NOT EXCE ED THE PRESCRIBED LIMIT. THE PROVISIONS OF SECTION 40A(3) APPLICABLE FOR THE IMP UGNED ASSESSMENT YEAR I.E; 2008-09, READ AS FOLLOWS: SECTION 40 A 4 (1) (2) (3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RE SPECT OF WHICH PAYMENT IS MADE, AFTER SUCH DATE (NOT BEING LATER THAN THE 31 ST DAY OF MARCH, 1969) AS MAY BE SPECIFIED IN THIS BEHALF BY THE CENTRAL GOVERNME NT BY NOTIFICATION IN THE OFFICIAL GAZETTE, IN A SUM EXCEEDING TWENTY THOUSAN D RUPEES OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, TWENTY PER CENT OF SUCH EXPENDITURE SHALL NOT BE AL LOWED AS A DEDUCTION. PROVIDED FURTHER THAT NO DISALLOWANCE UNDER THIS SU B-SECTION SHALL BE MADE WHERE ANY PAYMENT IN A SUM EXCEEDING TWENTY THOUSAND RUPE ES IS MADE OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES A S MAY BE PRESCRIBED HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITI ES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. THIS SECTION WAS INTERPRETED BY THE HONBLE HIGH CO URT OF ORISSA IN THE CASE OF CIT VS. ALOO SUPPLY CO. [1980]121 ITR 680 TO MEAN T HAT DISALLOWANCE UNDER THE SECTION WAS APPLICABLE FOR EACH PAYMENT (EMPHASIS SUPPLIED) AND NOT THE AGGREGATE OF VARIOUS PAYMENTS MADE TO THE SAME PAYE E AT DIFFERENT TIMES DURING THE COURSE OF THE DAY. THE HONBLE HIGH COUR T INTERPRETED THE WORD SUM, USED IN THE SECTION, TO INDICATE AN AMOUNT O F MONEY AND NOT THE TOTALITY OF EXPENDITURE. THE HONBLE HIGH COURT ELABORATED O N THE AFORESAID MEANING OF THE WORD SUM AT PARA 5 & 6 OF ITS ORDER AS FOLLOW S: 5. SEC. 40A(3) OF THE ACT PROVIDES: 'WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPE CT OF WHICH PAYMENT IS MADE, AFTER SUCH DATE (NOT BEING LATER THAN THE 31S T DAY OF MARCH, 1969), AS MAY BE SPECIFIED IN THIS BEHALF BY THE CENTRAL GOVERNME NT BY NOTIFICATION IN THE OFFICIAL GAZETTE, IN A SUM EXCEEDING TWO THOUSAND F IVE HUNDRED RUPEES OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CR OSSED BANK DRAFT, SUCH EXPENDITURE SHALL NOT BE ALLOWED AS A DEDUCTION:... .' THE SECOND PROVISO IS TO THE FOLLOWING EFFECT: 'PROVIDED FURTHER THAT NO DISALLOWANCE UNDER THIS S UB-SECTION SHALL BE MADE WHERE ANY PAYMENT IN A SUM EXCEEDING TWO THOUSAND F IVE HUNDRED RUPEES IS MADE OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT, IN SUCH CASES AND UNDER SUCH CIRCUMSTAN CES AS MAY BE PRESCRIBED, HAVING REGARD TO THE NATURE AND EXTENT OF BANKING F ACILITIES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER REL EVANT FACTORS.' RULE 6DD OF THE RULES IS THE APPROPRIATE RULE IN TE RMS OF THE PROVISO. THE WORD 'SUM' HAS NO STATUTORY DEFINITION AND MUST HAVE THE COMMON PARLANCE MEANING. RELYING UPON ITS MEANING AS GIVEN IN THE D ICTIONARY, LEARNED STANDING COUNSEL HAS CONTENDED THAT THE WORD CONVEYS A SENSE OF TOTALITY AND, THEREFORE, EVEN IF AN ASSESSEE HAS PAID A SUM EXCEEDING RS. 2, 500 IN DIFFERENT INSTALMENTS, THE TOTAL HAVING EXCEEDED THE PRESCRIBED AMOUNT, TH E SECTION OPERATED. THE ARGUMENT DOES NOT AT ALL IMPRESS US. THE WORD 'SUM' HAS BEEN USED THERE TO CONVEY THE MEANING OF AMOUNT AND NOT THE SUM TOTAL FIGURE. THE READER'S DIGEST GREAT ENCYCLOPAEDIC DICTIONARY GIVES ONE OF THE MEA NINGS OF 'SUM' AS 'A QUANTITY OR AMOUNT OF OR OF MONEY'. THE OXFORD ENGL ISH DICTIONARY GIVES ONE OF THE MEANINGS OF THE WORD TO BE A QUANTITY OF MONEY OF A SPECIFIED AMOUNT. IN 5 BOUVIER'S LAW DICTIONARY THE MEANING OF THE WORD HA S BEEN GIVEN AS A QUANTITY OF MONEY OR CURRENCY. THE WEBSTER'S UNABRIDGED DICTION ARY GIVES THE SAME MEANING OF THE WORD 'SUM', I.E., A QUANTITY OF MONE Y OR CURRENCY. AS HAS BEEN INDICATED IN WORDS AND PHRASES (PERMANENT EDN., VOL . 40) (WEST PUBLISHING CO.), 'SUM' HAS A DEFINITE MEANING APPROPRIATE TO USE WIT H REFERENCE TO AN AMOUNT OF MONEY. IN THE CASE OF COMMISSIONERS OF CUSTOMS & EX CISE VS. QUEEN'S PARK RANGERS FOOTBALL & ATHLETIC CLUB LTD. (1952) 2 QB 9 18 (QB) IT HAS BEEN INDICATED THAT THE WORD 'SUM' HAS TWO CONNOTATIONS, ONE BEING A DEFINITE AMOUNT, E.G., SO MANY POUNDS AND SHILLINGS, AND THE OTHER ONE BEING AN ADDITION OF INDIVIDUAL AMOUNTS TO CREATE A SUM. IN THIS CONNECTION SEE ALS O KNEEN VS. MARTIN (1935) 1 KB 499 : 19 TAX CASES 33 (CA). IN THE A DICTIONARY FOR ACCOUNTS BY ERIC L. KOHLER, THE MEANING OF 'SUM' HAS BEEN GIVEN AS 'AN AMOUNT, AS O F MONEY'. WHILE LEGISLATING, PARLIAMENT OBVIOUSLY TRIES TO CONVEY ITS INTENTION THROUGH EXPRESS WORDS. IT IS ONE OF THE WELL SETTLED RULES OF INTERPRETATION THAT WHERE A WORD USED IN A STATUTE CARRIES MORE THAN ONE MEANING, THAT MEANING WHICH MAKES THE PROVISION WORKABLE AND IS NEAREST TO THE LEGISLATIVE INTENTION, HAS TO BE ADOPTED. WE ARE OF THE DEFINITE VIEW THAT THE WORD 'SUM' IN THE RELEVANT PROVISION IS USED ONLY TO INDICATE AN AMOUNT OF MONEY AND DOES NOT REFER TO THE TOTALITY OF EXPENDITURE. 6. THERE IS CONSIDERABLE FORCE IN THE STAND ACCEPTE D BY THE TRIBUNAL THAT IF PAYMENTS ARE MADE AT DIFFERENT TIMES DURING THE DAY AND THE ASSESSEE HAS NO IDEA THAT HE HAS TO PAY TO THE SAME PERSON ON MORE THAN ONE OCCASION HE CANNOT BE SUBJECTED TO THE STATUTORY RESTRICTION CO NTAINED IN THE PROVISION IN QUESTION UNLESS ANY ONE PAYMENT IS ABOVE RS. 2,500. SEC. 40A APPEARS IN CHAP. IV OF THE ACT DEALING WITH COMPUTATION OF TOTAL INC OME AND IS CLASSIFIED UNDER THE SUB-HEADING IN GROUP D 'PROFITS AND GAINS OF BUSINE SS OR PROFESSION'. PARLIAMENT MUST HAVE INTENDED A WORKING RULE AND UNLESS BY CLE AR MEANING OF THE WORDS A DIFFERENT INTENTION APPEARS, WE MUST GIVE THE PROVI SION A CONSTRUCTION WHICH WOULD MAKE THE PROVISION WORKABLE. OUR ANSWER TO THE FIRST QUESTION, THEREFORE, IS: THE STATUTORY LIMIT OF RS. 2,500 UNDER S. 40A(3) OF THE ACT APPLIES TO PAYMENTS MADE TO A PARTY AT A TIME AND NOT TO THE AGGREGATE OF PAYMENTS MADE TO A PARTY IN THE COURSE OF THE DAY AS RECORDED IN THE C ASH BOOK. IN VIEW OF SUCH AN ANSWER, IN THE INSTANT CASE, THE PROVISION WAS NOT AT ALL ATTRACTED. RELYING UPON THIS JUDGMENT , THE JURISDICTIONAL HIG H COURT, IN THE CASE OF CIT VS. BAL KRISHAN JAGDISH CHAND (2007) 213 CTR 0174, ALSO HELD THAT MULTIPLE PAYMENTS TO THE SAME PARTY ON A SINGLE DATE, WITH NO SINGLE PAYMENT EXCEEDING THE PRESCRIBED LIMIT WAS NOT VIOLATIVE OF SECTION 40A(3 ) OF THE ACT. THE UNDISPUTED FACT IN THIS CASE IS THAT NO SINGLE PAYMENT MADE BY THE ASSESSEE TO M/S J.S. CARGO EXCEEDED RS. 20,000/- THE LIMIT P RESCRIBED U/S 40A(3) OF THE ACT. THE ASSESSEE, WE FIND, HAS REPEATEDLY POINTED OUT THIS FACT BEFORE THE LOWER AUTHORITIES AND EVEN CORROBORATED IT WITH COPY OF A CCOUNT OF M/S J.S. CARGO. THIS FACT HAS NEITHER BEEN CONTROVERTED BY THE LOWE R AUTHORITIES NOR BY THE LD. DR BEFORE US AND EVEN THE COPY OF ACCOUNT OF M/S J. S CARGO PLACED BEFORE US AT PAPER BOOK 1-54 CONFIRMS THIS FACT. THEREFORE UN DISPUTEDLY NO SINGLE PAYMENT MADE BY THE ASSESSEE TO M/S J.S. CARGO EXCEEDED RS. 20,0000/- I.E, THE LIMIT 6 PRESCRIBED UNDER SECTION 40A(3) OF THE ACT. FOLLOWI NG THE RATIO LAID DOWN BY THE ORISSA HIGH COURT AND THE HIGH COURT OF PUNJAB & HA RYANA REFERRED TO ABOVE, WE HOLD THAT THE ASSESSEE IS NOT HIT BY THE PROVISI ONS OF SECTION 40A(3) OF THE ACT AND THEREFORE THE DISALLOWANCE MADE ON THIS ACCOUNT OF A SUM OF RS. 5,84,600/- IS UNWARRANTED AND OUGHT TO BE DELETED. WE MAY ADD THAT SINCE WE HAVE ALLOWED THE ASSESSEES APPEAL FOR THE AFORESTATED RE ASON, WE DO NOT CONSIDER IT NECESSARY TO ADDRESS THE OTHER ARGUMENTS ADVANCED B Y THE LD. AR FOR THE ASSESSEE NOR THOSE BY THE LD. DR RELATING TO GENUIN ENESS OF TRANSACTION OR ABSOLUTENESS OF THE PROVISION OF SECTION 40A(3) OF THE ACT. 12. IN VIEW OF THE ABOVE WE HOLD THAT THE DISALLOWA NCE MADE U/S 40A(3) OF A SUM OF RS. 5,84,600/- BE DELETED AND THE ORDER OF L D. CIT(A) ON THIS ACCOUNT BE SET ASIDE. 13. IN EFFECT THE APPEAL OF THE ASSESSEE STANDS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :18/07/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR