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2023 (5) TMI 1256 - AT - Income TaxDisallowance u/s.40A(3) - amount being paid in excess of Rs.20,000/- in a day to procurement of sand - HELD THAT:- Going by nature of business and practicability of the line of trade, we have to consider that though ultimate bill of sand procured subsequently given by Mr. M.Palanisamy, the fact is to be considered that sand is transported by trucks past midnight on account of prohibition to run on the day. Actually, there is prohibition to run heavy trucks i.e. from 6.00 am to 6.00 pm in metros and big cities of India. The sand loads carried by different truck drivers are delivered at different locations of projects on the same day past mid-night. Although, cost of each load delivered in one single site may not exceed Rs.20,000/-, but on the same day different drivers have delivered different loads at different locations as is noted from ledger account submitted by the assessee, different drivers have delivered different loads at different locations of assessee’s construction sites and cumulatively, on a single day exceeds Rs.20,000/-. Considering that since major portion of sand will consist of lorry freight, drivers who bring delivery of sand would demand cash payment in night in order to make wage payments. Hence although, provisions of section 40A(3) applies to present case, but neither the Assessing Officer nor the CIT(A) has gone into factum of delivery of sand load of trucks, whether truck drivers are agents of assessees or agent of sand supplier. No clarity is coming out from the orders of lower authorities on this issue. Hence, another angle is that in case, entire amount of Rs.2.59 crores is added to the returned income of the assessee, profit margin of the assessee will be more than 50%, which is not at all possible in the given scenario and nature of business of the assessee. Therefore we estimate fair amount of disallowance and thus, we estimate disallowance at 25% of sand supplied by the assessee - Appeal of the Revenue is partly allowed.
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