TRANS AIR SERVICES , Mumbai V. CIT (A)-53, Mumbai

ITA 636/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4866 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 05-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT PRATAP SINGH
• Assessee Lawyers: NIKUNJ SHAH
• Keywords: Set aside
• Section: 40A(3); 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.636/M/2019 ASSESSMENT YEAR: 2013-14 M/S. TRANS AIR SERVICES, 166, ADARSH INDUSTRIAL ESTATE, SAHAR ROAD, CHAKALA, ANDHERI (E), MUMBAI 400 099 PAN: AAAFT 0693E VS. CIT(A)-53, AAYAKAR BHAVAN, ROOM NO.619, MUMBAI - 400020 (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI NIKUNJ SHAH, A.R. REVENUE BY : SHRI AMIT PRATAP SINGH, D.R. DATE OF HEARING : 21.01.2020 DATE OF PRONOUNCEMENT : 18.02.2020 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 12.10.2018 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2013-14. 2. GROUND NO.1 IS RAISED BY THE ASSESSEE IN RESPECT OF CONFIRMATION OF DISALLOWANCE OF RS.5,34,710/- BY LD . CIT(A) AS MADE BY THE AO UNDER SECTION 40A(3) IN RESPECT OF P AYMENTS BY CASH EXCEEDING RS.20,000/- DURING THE YEAR. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PA RTNERSHIP FIRM AND FILED THE RETURN OF INCOME ON 30.09.2013 D ECLARING TOTAL ITA NO.636/M/2019 M/S. TRANS AIR SERVICES 2 INCOME OF RS.40,66,600/-. THE CASE OF THE ASSESSEE WAS SELECTED UNDER CASS FOR SCRUTINY AND STATUTORY NOTI CES WERE DULY ISSUED AND SERVED UPON THE ASSESSEE. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT ASSESS EE HAS MADE PAYMENTS OF RS.11,80,970/- ON ACCOUNT OF REPAI RS AND MAINTENANCE AND ACCORDINGLY CALLED UPON THE ASSESSE E TO FURNISH THE DETAILS THEREOF. FROM THE SAID DETAILS , THE AO OBSERVED THAT ASSESSEE HAS MADE PAYMENTS TOWARDS RE PAIRS OF OFFICE, COMPUTER AND FURNITURE, FOR NASTA/POOJA, CL EANING ETC. WHICH AGGREGATED TO RS.5,34,710/- BUT UNDOUBTEDLY E XCEEDING RS.20,000/- AND ACCORDINGLY ISSUED A SHOW CAUSE NOT ICE TO THE ASSESSEE WHY THESE EXPENSES SHOULD NOT BE DISALLOWE D AND FINALLY DISALLOWED THE SAME BY CONCLUDING THAT ASSE SSEE HAS FAILED TO GIVE SATISFACTORY EXPLANATION QUA THE SAI D EXPENSES BEING INCURRED IN CASH AND ADDED THE SAME TO THE IN COME OF THE ASSESSEE. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A), AF TER CONSIDERING THE REPLY OF THE ASSESSEE, DISMISSED TH E GROUND RAISED BY THE ASSESSEE BY OBSERVING THAT ASSESSEE H AS FAILED TO SHOW THAT ITS CASE IS COVERED UNDER RULE 6DD AND O BSERVED THAT NO SPECIFIC EXPLANATION OR EVIDENCE HAS BEEN FILED IN RESPECT OF THESE PAYMENTS EXCEPT STATING THAT THESE WERE INCU RRED OUT OF BUSINESS EXPEDIENCY AND CONSIDERATION. THE LD CIT(A ) HELD THAT SUCH A BALD STATEMENT CAN NOT BE ACCEPTED AND THUS DISMISSED THE APPEAL. 5. THE LD. A.R. ,DURING THE COURSE OF HEARING BEFOR E US, FILED THE DETAILS, BILLS/CERTIFICATES FROM THE RECIPIENTS OF THESE PAYMENTS. THE LD. A.R. WHILE REFERRING TO EACH AND EVERY ITA NO.636/M/2019 M/S. TRANS AIR SERVICES 3 EVIDENCE POINTED OUT THAT IN THESE CASES EITHER THE PAYERS WERE NOT HAVING THEIR BANK ACCOUNT AT THE PLACE OF BUSIN ESS OF THE ASSESSEE AND THEY ARE HAVING THE ACCOUNTS ONLY IN T HE VILLAGES TO WHICH THEY BELONGED TO. THE LD AR SUBMITTED THAT T HESE PAYMENTS ARE MADE TO LABOUR CLASS WHO ARE SUBSISTIN G ON DAILY WAGES AND WHO REFUSED TO ACCEPT PAYMENTS IN CHEQUE AND IF THIS IS IMPOSED UPON THEM IT IS RATHER IMPOSSIBLE T O GET THE WORK DONE. THE LD. A.R. SUBMITTED THAT THERE IS A BUSIN ESS EXIGENCY AND PRACTICAL DIFFICULTIES IN GETTING THE WORK DONE FROM DAILY WAGE WORKERS AND THUS THIS IS NOT POSSIBLE TO MAKE PAYMENTS BY CHEQUES. THE LD. A.R. THEREFORE SUBMITTED THAT THE ASSESSEES CASE IS CLEARLY COVERED UNDER RULE 6DD OF THE IT RU LES AND THEREFORE THE SAME MAY BE ALLOWED. THE LD. A.R. AL SO SUBMITTED THAT THE GENUINENESS OF THE EXPENDITURE IS NOT IN D OUBT AND NO TAX EVASION HAS TAKEN PLACE IN THIS CASE. SO MUCH S O THAT COMPLETE DETAILS, NAMES AND ADDRESSES AND IN SOME P LACES PAN WERE ALSO GIVEN. UNDER THESE CIRCUMSTANCES, THE OR DER OF LD. CIT(A) IS WRONG AND MAY KINDLY BE REVERSED. 6. THE LD. D.R., ON THE OTHER HAND, RELIED HEAVILY ON THE ORDER OF AUTHORITIES BELOW AND SUBMITTED THAT SECTION 40A (3) OF THE ACT SPECIFICALLY PROVIDES FOR DISALLOWANCE OF EXPENSES INCURRED EXCEEDING A CERTAIN LIMIT AND THERE ARE SPECIFIC EX CEPTIONS WHICH ARE PROVIDED IN RULE 6DD. THE LD DR , THEREFORE, SU BMITTED THAT ASSESSEE HAS TO CLEARLY MAKE OUT A CASE THAT IT FAL LS WITHIN THE AMBIT AND SCOPE OF THOSE EXCEPTIONS. HOWEVER, IN T HIS CASE BOTH THE AUTHORITIES BELOW HAVE RECORDED A FINDING OF FA CTS THAT NO SUCH CASE WAS MADE OUT AND THEREFORE APPEAL OF THE ASSESSEE ON THIS GROUND DESERVED TO BE DISMISSED. ITA NO.636/M/2019 M/S. TRANS AIR SERVICES 4 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE THE PAYMENTS O F LABOUR CHARGES AND FOR PURCHASE OF MATERIAL WAS MADE TO TH E LABOURERS IN RESPECT OF FURNITURE, REPAIRS, GENERAL MAINTENAN CE AND OTHER REPAIRS. THOUGH THE ASSESSEE HAS FURNISHED THE DET AILS OF THE RECIPIENTS OF THE PAYMENTS IN CASH WHICH CERTAINLY EXCEED THE LIMIT AS PRESCRIBED UNDER SECTION 40A(3) OF THE ACT . HOWEVER, AFTER EXAMINING THE DETAILS WHICH COMPRISED OF CERT IFICATES FROM THE RECIPIENTS, BILLS AND VOUCHER WHICH PROVED THA T IN MOST OF THE CASES THE RECIPIENTS WERE NOT HAVING THEIR BANK ACCOUNTS AND THERE WAS PRACTICAL DIFFICULTIES IN MAKING PAYM ENTS OF THESE EXPENSES BY CHEQUES. MOREOVER, THESE ARE IN THE NA TURE OF PETTY PAYMENTS MADE OUT OF CASH IN HAND ON DAY TO DAY BAS IS. IT WAS ALSO STATED THAT WHEN THERE IS AN URGENCY FOR ATTEN DING THESE REPAIRS OR THESE WORKS, THE T LABOURERS DO NOT ACCE PT CHEQUES AND THIS HAS TO BE PAID IN CASH. IN OUR VIEW, CONS IDERING THESE PETTY NATURE OF PAYMENTS THAT TOO TO THE LABOUR CL ASS WHO ARE NOT HAVING THEIR BANK ACCOUNTS AND ALSO THE PRACTIC AL PROBLEMS, WE ARE OF THE VIEW THAT THE SAID PAYMENTS ARE COVE RED UNDER THE EXCEPTIONS PROVIDED RULE 6DD AS THE ASSESSEE HAS MA DE OUT A CASE BEFORE US WHICH JUSTIFIES THE ALLOWANCES OF TH ESE EXPENSES. ACCORDINGLY, WE REVERSE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO ALLOW THESE EXPENSES. 8. THE 2 ND ISSUE RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.2,89,000/- BY LD . CIT(A) AS MADE BY THE AO IN RESPECT OF SALARY. 9. THE FACTS IN BRIEF ARE THAT AO OBSERVED THAT SAL ARY OF RS.2,89,000/- WAS ADJUSTED AGAINST THE STAFF LOAN A ND THE ITA NO.636/M/2019 M/S. TRANS AIR SERVICES 5 REPAYMENT OF SUCH LOAN WAS NOT MENTIONED IN 3CD REP ORT OF THE ASSESSEE. THE AO NOTED THAT DURING THE YEAR THE AS SESSEE MADE THE PAYMENT OF SALARY OF RS.13,81,800/- AND AFTER C ALLING FOR THE REPORT OF THE ASSESSEE, THE AO NOTICED THAT THIS PA YMENT OF RS.2,89,000/- HAS NOT BEEN MADE EITHER BY CASH OR B Y CHEQUE AND IT IS NOT CLEAR WHETHER THE PAYMENT IS OUTSTAND ING IN THE BOOKS OF ACCOUNT AND ACCORDINGLY A SHOW CAUSE NOTIC E WAS ISSUED WHY THE SAME SHOULD NOT BE DISALLOWED UNDER SECTION 37 OF THE ACT AS THE SAME IS NOT WHOLLY AND EXCLUSIVEL Y INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND CONSEQU ENTLY REJECTING THE REPLY OF THE ASSESSEE ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 10. THE LD. CIT(A), IN THE APPELLATE PROCEEDINGS D ISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 5.2 IN THE APPELLATE PROCEEDINGS, IT WAS SUBMITTED THAT JOYCE SOANS WAS AN EX- EMPLOYEE AND AS A COURSE OF FULL AND FINAL SETTLEME NT, THE AMOUNTS WERE PAID TO HER. THE AMOUNT HAS BEEN PAID TO HER BY WAY OF CHE QUE. 5.3 I HAVE CONSIDERED THE SUBMISSIONS CAREFULLY. T HERE IS NO DOCUMENT FILED TO SHOW THAT THE PAYMENTS WERE MADE BY WAY OF CHEQUE. NO OTHER DOCUMENTS HAVE BEEN FILED TO SHOW THAT SUCH PAYMENTS WERE MADE ON ACCOUNT OF SALARY. GROUND OF APPEAL NO.2 IS THEREFORE DISMISSED . 11. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE THE PAYMENT IS MADE TO EX- EMPLOYEE MRS. JOICE SCONS AS FULL AND FINAL SETTLEM ENT OF HER ACCOUNT. THE AMOUNT HAS BEEN PAID BY CHEQUE AND TH EREAFTER THE FINAL ADJUSTMENT WAS MADE BY DEBITING THE SALAR Y ACCOUNT AS THIS WAS ONLY ON ACCOUNT OF SALARY. HOWEVER, WE NO TE THAT AO HAS DISALLOWED THE SAME ON THE GROUND THAT IT WAS N OT DISCLOSED IN THE 3CD IN AUDIT REPORT AND NOT WHOLLY AND EXCL USIVELY INCURRED FOR THE PURPOSE OF THE BUSINESS WHEREAS TH E LD. CIT(A) ITA NO.636/M/2019 M/S. TRANS AIR SERVICES 6 NOTED THAT NO PROOF OF PAYMENT BY CHEQUE WAS FURNIS HED BEFORE THE LD. CIT(A) AND ACCORDINGLY DISMISSED THE GROUND . 12. THE LD. A.R. SUBMITTED BEFORE THE BENCH THAT TH IS PAYMENT RELATED TO THE SALARY OF THE ASSESSEE WHOSE ACCOUNT WAS SETTLED AS FULL AND FINAL AFTER THE EMPLOYEE LEFT THE JOB A ND THUS IT WAS WHOLLY AND EXCLUSIVELY INCURRED IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE AND PRAYED THAT THE SAME MAY KINDLY BE ALLOWED AS ADMISSIBLE EXPENSE UNDER SECTION 37(1) OF THE AC T. THE LD DR ON THE OTHER HAND RELIED ON THE ORDER OF THE AUTHOR ITIES BELOW. 13. AFTER CONSIDERING THE RIVAL PARTIES AND PERUSIN G THE MATERIAL ON RECORD, WE OBSERVE THAT THIS IS THE PAY MENT TO THE EX-EMPLOYEE AND PAID IN CONNECTION WITH THE SERVICE S RENDERED AND ADJUSTED AS FULL AND FINAL SETTLEMENT OF HER AC COUNT. THEREFORE WE ARE NOT IN AGREEMENT WITH THE CONCLUSI ON DRAWN BY THE INCOME TAX AUTHORITIES ON THIS POINT THAT THE E XPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE. IN OUR VIEW THE PAYMENT IS GENUINE AND THERE IS NO REQUIREMENT OF DISCLOSING THE ADJUSTMENT OF PAYM ENT IN FORM 3CD AND ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.02.2020. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 18.02.2020. * KISHORE, SR. P.S. ITA NO.636/M/2019 M/S. TRANS AIR SERVICES 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.