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2016 (8) TMI 694 - ITAT CHENNAIAddition u/s 40A(3) - payments to the hawkers and vendors - Held that:- The payments to the hawkers and vendors by cash by the assessee firm other than account payee cheques was never doubted by the Revenue. The assessee firm is following prevailing business practice from earlier years. Further, provisions of Sec. 40A(3) of the Act must not be read in isolation or exclusion of Rule 6DD of Income Tax Rules, 1962. The section must be read alongwith Rule and on reading together, it is very clear that provisions are not intended to restrict the business activities. The ld. Assessing Officer cannot restrict the Business of the assessee firm on application of the Rule 6DD, further provisions of Sec. 40A(3) of the Act empowers the ld. Assessing Officer to disallow deduction claimed as expenditure were payments are not by account payee cheque/draft. The ld. Assessing Officer should analysis the payments either by Crossed Cheque or Bank Draft and ascertain whether the payments are genuine considering business expediency, genuineness and bonafide peculiar transactions of the business. The assessee firm makes cash payments in the circumstances as per the intention of the vendors/supplier who transact on cash basis and no credit facility is available in the remote villages. So, considering the apparent facts and nature of business of the assessee being laying of roads, building bridges and culverts in the remote village and purchase of sand, jelly from the local vendors and lorry brokers who are illiterate and does not have permanent place of Business and also vendors and Hawkers deliver the sand, jelly at the working sites of assessee during odd hours in remote areas and we support our opinion with the decision of Anupam Tele Services vs. ITO (2014 (2) TMI 30 - GUJARAT HIGH COURT ) and we set aside the order of the Commissioner of Income Tax (Appeals) and delete the addition made by the ld. Assessing Officer on this ground. Disallowance being expenses for tea, coffee, freight charges and diesel expenditure - Held that:- The fact that nature of expenditure being tea, coffee, freight charges and diesel expenditure, the assessee has claimed these expenditure incurred wholly and exclusively for the purpose of activities of the business and the findings of the ld. Assessing Officer they are not supported with vouchers and doubted the genuineness and disbelieved the transactions. The ld.CIT(A) has confirmed the findings of the ld. Assessing Officer. Considering the apparent facts and material, we are of the opinion that the consent cannot be a reasons for sustaining the addition in exceptional circumstances of the working conditions of the firm and the nature of expenditure incurred. Further their shall not be laxity on the part of the assessee firm in maintenance of vouchers for due compliance of Income Tax provisions. we found that it would be reasonable to restrict the disallowance to 50% due to external circumstances of works and we direct the ld. Assessing Officer to restrict the disallowance of said expenses to 50% only and the ground of the assessee is partly allowed. Disallowance of expenses on account of labour charges, jelly purchase, sand purchase and gravel purchase and vouchers are self made could not be verified - Held that:- The fact that labour charges, jelly purchase, sand purchase and gravel purchase incurred wholly and exclusively for the purpose. Since, the vouchers are self made the ld. Assessing Officer has doubted the transactions and made disallowance. The ld.CIT(A) has confirmed the findings of the ld. Assessing Officer. Considering the facts and nature of expenditure and the laxity on the part of the assessee firm on non maintenance of record and compliance of Income Tax provisions, we found it Reasonable to restrict the disallowance at 50% due to Business activities at remote areas as discussed. We direct the ld. Assessing Officer to restrict the disallowance to 50% only and the ground of the assessee is partly allowed.
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