2015 (10) TMI 246 - AT - Income Tax

Addition u/s 40A(3) - assessee had made cash payments exceeding ₹ 20,000/- for the purchases from a single party in a day during the relevant period - Held that - The assessee does not fall within the exception given in Clause (k) of Rule 6DD. It is not the case of the assessee that the assessee or the suppliers of the materials are not having bank account. The exceptions in Rule 6DD are provided to mitigate the situations where, either of the parties to the transaction does not have the benefit of banking facilities or are strained by some exceptional or unavoidable circumstances to deal in cash. Submissions of the ld. Counsel for the assessee that the cash payments were made to the authorised representative who would travel 90 kms for weekly bazzar to the place of assessee to collect orders and the payments of the material supplied is unsustainable. Travelling 90 kms to collect payment certainly cannot be an excuse to make payment in violation of the provisions of the Income Tax Act. As far as agents referred in Rule 6DD(k) are concerned, the authorised representatives of the supplier of material cannot be equated with the agents referred to in Rule 6DD(k) of Income Tax Rules. The Assessing Officer had not made any addition by applying GP rate by rejecting the books of account of the assessee. It is the case of the assessee that no books of account are maintained. Further, except for the disallowance u/s. 40A(3) no addition has been made by the Assessing Officer in scrutiny assessment. The case of the assessee is entirely on a different footing and no benefit of the case laws relied upon by the ld. Counsel for the assessee can be given. We concur with the findings of the Commissioner of Income Tax (Appeals) confirming the addition made invoking provisions of S. 40A(3). The impugned order is well reasoned and justified, no interference is warranted in the impugned order. - Decided against assessee. Charging of interest u/s. 234A, 234B and 234C is mandatory and consequential (CIT Vs. Anjum M.H. Ghaswala -2001 (10) TMI 4 - SUPREME Court ). - Decided against assessee.

Summary

Issues:
1. Addition made under section 40A(3) of the Income Tax Act.
2. Disallowance of interest under sections 234A, 234B, and 234C.

Analysis:

Issue 1: Addition under section 40A(3) of the Income Tax Act:
The appellant contested the addition of Rs. 1,31,01,987 under section 40A(3) for cash payments exceeding Rs. 20,000 to various parties, arguing that the payments were covered by Rule 6DD(k) of the Income Tax Rules. The appellant claimed that the cash payments were necessitated by business expediency and exceptional circumstances, as the suppliers' representatives traveled long distances to collect orders and payments in cash. However, the Commissioner of Income Tax (Appeals) upheld the addition, stating that the appellant failed to prove the exceptional nature of the cash payments. The Tribunal concurred with the Commissioner's findings, emphasizing that the appellant did not fall within the exception provided in Rule 6DD(k) as the payments did not meet the criteria of unavoidable circumstances or lack of banking facilities. The Tribunal dismissed the appellant's arguments and upheld the addition under section 40A(3).

Issue 2: Disallowance of interest under sections 234A, 234B, and 234C:
The appellant also challenged the levy of interest under sections 234A, 234B, and 234C, contending that it was unjustified. However, the Tribunal ruled that the charging of interest under these sections is mandatory and consequential, citing legal precedent to support this stance. Consequently, the Tribunal dismissed the appellant's appeal on this ground, stating that no interference was warranted in the matter.

In conclusion, the Tribunal upheld the addition under section 40A(3) and dismissed the appeal regarding the disallowance of interest under sections 234A, 234B, and 234C. The judgment was pronounced on September 4, 2015, affirming the decision of the Commissioner of Income Tax (Appeals) and denying relief to the appellant.