ACIT, CHENNAI V. SRM Hotels Pvt. Ltd., CHENNAI

ITA 441/CHNY/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5978 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 19-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Tax effect; Reasonable cause; Capital expenditure
• Section: 40A(3)

Judgement Text

आयकर अपीलीय अिधकरण, ‘डी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI Įी महावीर ͧसंह, उपाÚय¢ एवं Įी मनोज क ु मार अĒवाल, लेखा सदèय के सम¢ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.:441/CHNY/2017 िनधाᭅरण वषᭅ /Assessment Year: 2012-13 The ACIT, Central Circle – 1(3), Chennai-34. v. M/s. SRM Hotels Pvt. Ltd., 2, Veerasamy Street, West Mambalam, Chennai – 600 033. PAN: AABCS 5185L (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) & आयकर अपील सं./ITA No.: 430/CHNY/2017 िनधाᭅरण वषᭅ /Assessment Year: 2012-13 M/s. SRM Hotels Pvt. Ltd., 2, Veerasamy Street, West Mambalam, Chennai – 600 033. PAN: AABCS 5185L v. The ACIT, Central Circle – 1(3), Chennai-34. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) राजˢ की ओर से /Revenue by : Shri G. Johnson, Addl.CIT Ǔनधा[ǐरती कȧ ओर से/Assessee by : Shri D. Anand, Advocate स ु नवाई कȧ तारȣख/Date of Hearing : 28.03.2022 घोषणा कȧ तारȣख/Date of Pronouncement : 28.03.2022 2 I.T.A. Nos.441 & 430/Chny/2017 आदेश /O R D E R PER MAHAVIR SINGH, VP: These cross appeals are arising out of the order of Commissioner of Income Tax (Appeals)-18, Chennai in ITA No.8/15- 16, dated 22.11.2016. The assessment was framed by the ACIT, Central Circle 1(3), Chennai u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) for the assessment year 2012-13 vide order dated 29.03.2015. ITA 441/Chny/2017 2. At the outset, the learned counsel for the assessee pointed out that the tax effect in this appeal is below Rs.50.00 lakhs. The ld.counsel for the assessee further submitted that in view of the CBDT Circular No.17/2019, dated 08.08.2019 brought out by the Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, the appeal was not maintainable and be dismissed. The Ld. Senior DR also agreed to the facts stated by the Ld.counsel for the assessee. 3. We have heard the rival submissions and perused the material on record. We find from the records before us that the tax 3 I.T.A. Nos.441 & 430/Chny/2017 involved in the disputed issue is below Rs.50 lakhs and therefore, in view of the CBDT Circular No. 17/2019 dated 08.08.2019 no appeal should be filed by the Revenue before the Tribunal which has tax effect of Rs. 50.00 lakhs or less and this circular is also applicable retrospectively to all pending appeals. Therefore, the appeal filed by the Revenue is dismissed. ITA 430/CHNY/2017 4. The first issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in disallowing the cash payment made amounting to Rs.7,05,065/- by invoking the provisions of section 40A(3) of the Act. 5. We have heard the rival contentions and gone through facts and circumstances of the case. The AO from the cash book of assessee’s firm noted that the assessee has made cash payment on account of consultancy charges, gifts & compliments, miscellaneous expenses exceeding Rs.20,000/- in one day. The AO narrated the details of total expenditure of Rs.7,05,066/- in a tabular form. The assessee only stated that these payments were made to Government agencies and hence, the genuineness of the same is not in doubt and the same should have been allowed as 4 I.T.A. Nos.441 & 430/Chny/2017 expenditure. The CIT(A) has also confirmed the action of AO by observing in para 8.3 as under:- “8.3 The submission of the assessee company is considered. As seen from the submission of the assessee company, it is clearly found that the assessee company gives the reason of either insistence or reimbursement for cash payments in most of the cases. The contention of the assessee is not acceptable. First of all, the assessee company has not at all produced any proof (bills/invoices/vouchers, etc.,) to verify the genuineness and nature of the payment without which it cannot be established the said expenditure is actually incurred for the business expenditure. Even otherwise, the said payments were made in cash exceeding above Rs.20000/- and as seen from the submission of the assessee it is not made during the course of the business expediency. In view of facts and reasons discussed above, the said cash payments of Rs.7,05,066/- is hereby disallowed and added back to the income of the assessee.” Aggrieved, now assessee is in appeal before the Tribunal. 6. The ld.counsel for the assessee vehemently argued for deletion of disallowance. On a specific query, whether payment to Government agencies is not a subject matter of provisions of section 40A(3) of the Act or not, the ld.counsel could not answer anything. On the other hand, the ld.Senior DR heavily relied on the orders of lower authorities. We noted that the cash payment in excess of Rs.20,000/- is made on one day and there is no reasonable cause for the same or it does not fall in any exemptions as provided under Rule 6DD of the Income Tax Rules, 1962. Once this is the case, we 5 I.T.A. Nos.441 & 430/Chny/2017 have no hesitation in confirming the action of AO and accordingly, this issue of assessee’s appeal is dismissed. 7. The next issue in this appeal is as regards to the order of CIT(A) confirming the action of AO and disallowing expenditure of Rs.29,20,000/- being capital expenditure. 8. Brief facts are that the AO during the course of assessment proceedings noticed from the profit & loss account that the assessee has incurred expenditure of Rs.29.20 lakhs under the head ‘salary – Guindy hotels’. According to AO, the hotel at Guindy was still under construction during financial year 2011-12 relevant to assessment year 2012-13. The assessee contended that salary was paid to employees who were mainly attached to head office and they were entrusted to do some job. Therefore, he requested for allowance of salary. The CIT(A) after detailed noting noted that these persons, who allegedly were in the service of assessee was not provided any proof of service rendered by these parties for Guindy hotel. Once, there is no proof of service, the CIT(A) confirmed the disallowance. Aggrieved, assessee came in appeal before the Tribunal. 6 I.T.A. Nos.441 & 430/Chny/2017 9. After hearing rival contentions and going through the case records, we noted that even now the assessee could not substantiate that these persons rendered services for Guindy hotel, as claimed by assessee. As these parties have not rendered any services or proof is submitted even now before us, we have no hesitation in confirming the disallowance made by AO and confirmed by the CIT(A). This issue of assessee’s appeal is dismissed. 10. In the result, the appeal filed by the Revenue as well as the assessee are dismissed. Order pronounced in the court on 28 th March, 2022 at Chennai. Sd/- Sd/- (मनोज कुमार अᮕवाल) (MANOJ KUMAR AGGARWAL) लेखा सद᭭य /ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 28 th March, 2022 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. िनधाᭅᳯरती/Assessee 2. राज᭭व/Revenue 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकर आयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.