Raju Kashyap , Delhi V. ACIT Circle-42(1), Delhi

ITA 905/DEL/2022

AI Insights

The case involves Raju Kashyap, a proprietor of M/s Raju Enterprises, who appealed against the order of the Commissioner of Income-tax (Appeals)-43, New Delhi, which confirmed the addition of Rs. 12,62,990 to his income under Section 40A(3) for cash payments exceeding Rs. 20,000 for the purchase of handloom fabrics. The assessee argued that these payments were made out of business expediency as the vendors insisted on cash payments and were not holding bank accounts. The Tribunal considered the arguments and evidence presented, including the applicability of Rule 6DD(f) of the Income Tax Rules, 1962, which excludes certain payments from the disallowance under Section 40A(3).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 112818 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-12-2022
• Assessment Year: 2016-2017
• Appeal Filed On: 03-05-2022
• Other Referred Cases: Attar Singh Gurumukh Singh Vs. ITO Ludhiana
• Laws Referred To: Income-tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Corroborative evidences
• Section: 40A(3); 143(3); 234B

Judgement Text

1 ITA no. 905/Del/2022 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No. _905/DEL/2022 [Assessment Year: 2016-17 Raju Kashyap, A-89, Adhyapak Nagar, Nangloi, Delhi-110041. PAN- AHPPK5848N Vs ACIT, Circle 42(1), New Delhi. APPELLANT RESPONDENT Assessee represented by Sh. Vinod Garg, CA & Sh. R.S. Negi, Adv. Department represented by Sh.Sumesh Swani, Sr. DR Date of hearing 06.12.2022 Date of pronouncement 02.01.2023 O R D E R PER KUL BHARAT, JM: This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals)-43, New Delhi, dated 03.02.2020, pertaining to the assessment year 2016-17. The assessee has raised following grounds of appeal: “1. That the order of Ld. CIT (A) - 43, New Delhi, confirming the assessment/additions made by AO without appreciating the additional evidences filed, is bad in law in the facts and circumstances of the case. 2 ITA no. 905/Del/2022 2. (a) That on the facts and in the circumstances of the case the Ld. CIT(A)-43, New Delhi is not justified in confirming the addition of 12,62,9901- (out of 14,49,140/-) u/s 40A (3) for cash payments to various parties on account of purchase of handloom fabrics whereas the payments are genuine and bona fide and made due to business expediency (payments not doubted by AO) and also due to the fact that payments were made mostly at the evening hours when the banks were closed and assessee have to make payments to fulfill export consignments/supply of samples and such payments are out of the sweep of section 40A(3) as per proviso to Sec 40A(3). (b) Without prejudice to above the appellant disputes that the quantum of addition confirmed is on higher side. 3. That the Ld. CIT (A) - 43, New Delhi, is not justified in confirming the levy of interest U/s 234B & 234C which is without passing the speaking order. 4. That the appellant craves leave to add, delete or amen' grounds of appeal on or before the disposal of appeal. 2. Facts giving rise to the present appeal are that case of the assessee was taken up for scrutiny assessment and the assessment u/s 143(3) of the Income-tax Act, 1961 (in short “the Act”) was framed vide order dated 05.12.2018. The Assessing officer while making the assessment noticed that the assessee had violated the provisions of Section 40A(3) of the Act, as expenditure was incurred in cash in excess of the mandatory limit. Aggrieved against this, the assessee preferred appeal before the learned CIT(Appeals), who also sustained the addition to the extent of Rs. 12,62,990/- as per Rule 6DD of Income Tax Rules, 1962 (hereinafter referred to as the Rules). Aggrieved against this the assessee is in appeal before this Tribunal. 3 ITA no. 905/Del/2022 3. The only effective ground is against sustaining of the part addition made u/s 40A(3) of the Act amounting to Rs. 12,62,990/- (out of Rs. 14,49,140/-). 4. At the outset, learned counsel for the assessee reiterated the submissions as made in the written submissions. Learned counsel vehemently argued that the authorities below failed to appreciate the fact that the expenditure was incurred for business exigencies. Learned counsel submitted that the assessee is a proprietary firm M/s Raju Enterprises , which is engaged in the business of manufacture and export of 100% furnishing and gift items. During the year under assessment the assessee made purchases handloom fabric/fabrics etc. amounting to Rs. 14,49,140/- from various parties in cash in excess of Rs. 20,000/- due to business expediency. He contended that vendors of the fabric accepted only cash. Moreover, Rule 6DD(f) would apply to the assessee which excludes payment to handicraft artisans. He, therefore, prayed that the impugned addition may be deleted. Per contra, learned Sr. DR for the Revenue vehemently opposed the submissions and supported the orders of the authorities below. He contended that assessee failed to support his contention by filing the credible evidences before the authorities below. He contended, merely stating that there was business expediency would ipso facto make the assessee entitled for exemption from applicability of the provisions of Section 40A(3). It was incumbent upon the assessee to bring positive evidence in support of his contentions. 4 ITA no. 905/Del/2022 5. I have heard the rival contentions and perused the material available on record. The submissions of the assessee can be summed up as under: (a) The payments were made under the business expediency as the suppliers insisted payment in cash. (b) There was no banking facility at the place of payment and the suppliers were not holding bank accounts. (c) Certain payments during the bank holidays and finally the payments were made to the category of persons who fall under clause (f) of Rule DD of Rules, hence excluded. 6. The learned CIT(Appeals) has decided the issue by observing as under: “5.6 It is clear that the appellant's payments are not covered under any of the provisions of Rule 6DD. The only amount which can be considered is an amount of Rs. 1,86,150 which is eligible under sub clause (j) above. The appellant is granted limited relief on this ground to an extent of Rs. 1,86,150 from the total addition of Rs. 14,49,140. The appellant’s contention w.r.t business expediency is also not acceptable as the section clearly states that the exclusions from the applicability of the said section 40(3) are required to fall under the prescribed rules for the purpose. “Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under subsection (3) and this sub-section where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors” 5 ITA no. 905/Del/2022 The issue of business expediency by itself does not create any exclusion. The prescription itself is based on many factors and business expediency is one of them. 5.7 The grounds of appeal are collectively disposed off as above. The appeal is partly allowed.” 7. From the finding of learned CIT(Appeals) it is clear that clause (f) of Rule 6DD of the Rules was not considered by the learned CIT(Appeals). Looking to the facts, the lower authorities have not doubted the genuineness of the payment. As per clause (f), any payment made for the products for purchase of the products manufactured or processed without aid of power in a cottage industry, such payments to the producer of such products would be excluded from the disallowance u/s 40A(3) of the Act. The claim of the assessee is, therefore, rest on the assertion that the case of assessee fall under clause (f) of Rule 6DD of Rules and explanation to Section 40A(3) of the Act. Learned counsel for the assessee primarily rested his arguments on the transactions being out of business expediency, hence they are out of rigorous of Section 40A(3). So far as the argument that the transactions fall under clause (f) hence would be out of preview of Section 40A(3) of the Act is concerned, no evidence is brought on record for supporting such contention. It is incumbent upon the assessee to prove that purchases were made from such person mentioned under Rule 6DD(f). In the absence of any supporting evidence, no relief could be granted. I, therefore, reject 6 ITA no. 905/Del/2022 this plea of learned counsel. The Learned counsel for the assessee has placed reliance on the judgment of Hon’ble Supreme Court rendered in the case of Attar Singh Gurumukh Singh Vs. ITO Ludhiana 1991 AIR 2109 (SC), wherein it has been held that the term of Section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. Therefore, looking to the facts where the assessee has made clear averments regarding business expediency and the Revenue has not rebutted the same. I, therefore, respectfully following the ratio laid down by the Hon’ble Supreme Court in the case of Attar Singh Gurumukh Singh Vs. ITO (supra), direct the Assessing Officer to delete the impugned disallowance. 8. In the result, appeal of the assessee stands allowed. Order pronounced in open court on 2 nd January, 2023. Sd/- (KUL BHARAT) JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI