TMI Blog2016 (1) TMI 898X X X X Extracts X X X X X X X X Extracts X X X X ..... into several cash payments, each below ₹ 20,000/-. There is no dispute that payments were found to be recorded in cash book which were less than ₹ 20,000/-. Therefore, from the above, it is apparent that the assessee had not violated the provisions of section 40A(3) as admittedly the payments recorded in the cash book were ₹ 20,000/- or below. As regards examination by Assessing Officer regarding violation of there provisions, we find that the Assessing Officer had raised this issue on two occasions and the assessee had replied to the Assessing Officer and after being satisfied that no payment of more than 20,000/- was paid by assessee he did not make the addition and therefore, the order of Assessing Officer on this account cannot be said to be erroneous and prejudicial to the interest of revenue.- Decided in favour of assessee. Assessing Officer did not examine the amount of lorry charges - Held that:- The view taken by one Assessing Officer in one year, if it differs from the view taken by Assessing Officer in succeeding year on the same issue cannot be said to be erroneous provided the view taken by Assessing Officer is a plausible view. The Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Asst. Year 2007-08. The Commissioner of Income Tax exercised powers under section 263 and passed order under section 263 vide order dated 21.03.2012, which the assessee challenged before the Hon'ble ITAT, Amritsar Bench. The Hon'ble ITAT Amritsar Bench set aside the order of Commissioner of Income Tax vide its order 31.10.2013 with the directions that assessee be provided sufficient opportunity of being heard and therefore, after affording the assessee adequate opportunity, the Commissioner of Income Tax again passed order under section 263 with the same directions which were in original order under section 263 dated 21.03.2012. The show cause notice issued by the Commissioner for initiating proceedings under section 263 is reproduced as below. 2. On going through the proposal and the accompanying records, it is observed that during the year under consideration, expenditure of ₹ 1,65,23,105/- has been debited under the head fuel account. During the course of the assessment proceedings the ledger account of fuel consumption has been called for by the Assessing Officer and is placed on records. From perusal of the details, it is seen that cash payments in exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2. It is further observed that vide questionnaire dated 10.12.2009, the Assessing Officer confronted the issue with regard to the payments being made in cash in contravention of the provisions of section 40A(3) of the Income Tax Act, 1961. In response, vide reply dated 17.11.2009, it was submitted by you as under:- The cash payments made to Shalimar Transporters have not been made in violation section 40A(3) of the Income Tax Act, 1961 but have been made on parts during the day and in separate transaction.'. 3.3 The above reply along with the copy of day book is also placed on records. However, it is seen that payments made to a single party have been split up into individual entries below 20,000/- to circumvent the provisions of section 40A(3) of the Income Tax Act, 1961. For example, in respect of entry dated 24.06.2006, the payments are shown to have been made as under:- Fuel Account 24.06.2006 2,00,000/- ₹ 20,000/- Cash ₹ 20,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . You may also file your submissions together with all the evidence in support thereof, in writing before the undersigned, if you so desire. From the above show cause notice, it is observed that the Commissioner had raised two objections against the assessment, one is related to the allegation that the assessee had made payments to one M/s. Shalimar Transporters, Baramulla, in excess of ₹ 20,000/-, however, in the books of account the payments has been spilt up into individual entries below ₹ 20,000/- to circumvent the provisions of section 40A(3) of the I.T. Act. The other allegation of Commissioner is that the Assessing Officer during the course of assessment proceedings for Asst. Year 2008-09 had called for information under section 133(6) of the I.T. Act, 1961, from RTO, Srinagar, Baramulla and had found that in some of the cases, the hiring charges were paid to bogus parties/ vehicles, which the Assessing Officer had not done for Asst. Year 2007-08, although the similar hiring charges were paid by the assessee in this year also. The assessee in its reply to the above show cause notice filed following reply which is reproduced as below. That the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le as the words in section 40A(3) prior to amendment of 2009 clearly mention Where the assessee incurs any.....in a sum exceeding twenty through rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft twenty per cent of such expenditure shall not be allowed as a deduction. Hence the order under section 143(3) read with section 115WE (3) dated 24.12.2009 is neither erroneous nor prejudicial to the interest of revenue therefore the proceedings under section 263 of the Income Tax Act 1961 may kindly be dropped. 3. Furthermore the payments made to M/s. Shalimar Transporters for purchase of fuel have been made in parts below ₹ 20,000/- on different times in a day due to exceptional and unavoidable circumstances duly considered by the Ld. Assessing Officer while making the assessment and the cash has been genuinely paid and confirmation letters from the party is placed on record, as these payments by bank draft/Cheque were not practically possible for fuel purchase for Lorries/Buses/Load carries since often cash is paid to Lorry Driver of Bus Driver or Load Carriers Driver so that he fills the fuel in vehicles which are used to complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements/replies dated 27th August,2009, 12th Oct, 2009, 07.12.2009 and 17.12.2009 where in each and every explanation was given before completion of the assessment and no doubt all those questioners and replies have not been expressly mentioned in the assessment order but the record available on file is self explanatory and all the questions have been duly considered and adjudicated by the AO in his assessment order therefore keeping in view the above facts and circumstances and decisions of the Hon'ble High Courts in the cases of CIT vs. Development Credit Bank Ltd. 323 ITR 206 , CIT vs. Ashish Rajpal 320 ITR 674 , Hari Iron Trading Co. vs. CIT 263 ITR and Jurisdictional ITAT Bench, Amritsar decision in Roshan Lal Vegetable Products (p) Ltd. vs. Income Tax Officer 9 ITR 431 ITA 6/Asr/2010 it is requested that the proposed proceedings under section 263 of the Income Tax Act 1961 may kindly be dropped in the interests of justice. The learned Commissioner was however, not satisfied with the reply and he cancelled the assessment order and directed the Assessing Officer to pass a fresh assessment order after giving an opportunity to the assessee of being heard. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had made complete verification and examination and after being satisfied he had accepted that no payments were made in violation of provisions of section 40A(3) and therefore, he had not made any addition. He submitted that omission on the part of Assessing Officer to mention the aspect of verification of a particular transaction in the Assessment order cannot be attributed to Assessee. The learned AR in this respect relied upon the case laws of Hon'ble Delhi Court in the case of CIT vs. Ashish Rajpal 320 ITR 674 (Del) for the proposition that where a query was raised during the course of scrutiny which was satisfactory answered by the assessee but which did not get reflected in the assessment order would not by itself lead to a conclusion that there was no enquiry with respect to transactions carried out by the assessee. The learned AR submitted that as demonstrated the Assessing Officer had verified this issue on two occasions and on two occasions the assessee had filed replies and Assessing Officer being satisfied did not make any addition, however, he did not record his findings in the Asst. Order for which, there is no fault of assessee as the assessee has no control over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly held that while arriving at a conclusion the human probability aspect has to be kept in mind. The learned DR invited our attention to the fact that payments were splitted in a manner that each payment did not exceed ₹ 20,000/-, which was a threshold limited for violation of provisions of section 40A(3). As regards second allegation the learned DR submitted that in Asst. year 2008-09, the Assessing Officer had held that some payments were debited under the head hire charges which were found to be bogus which aspect should have been examined by Assessing Officer to arrive at a correct decision in the year under consideration. In view of the above aspects, the learned DR argued that the order of CIT should be upheld. 7. We have heard the rival parties and have gone through the material placed on record. As regards the first objection of Commissioner of Income Tax, we find that the Commissioner himself in his order has stated that though assessee had recorded payments of ₹ 20,000/- or less to M/s Shalimar Transporters but in fact the assessee must have paid in lump sum and must have recorded the entries by splitting the same. Therefore, the learned CIT has assum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been made applicable with effect from 1st April,2009 and shall accordingly apply for Asst. Year2009-10 and subsequent Assessment Years. In view of the above circular, it is apparent that the assessee was at liberty to pay to a single person any number times in a day provided that each payments must be below ₹ 20,000/-. There is no dispute that payments were found to be recorded in cash book which were less than ₹ 20,000/-. Therefore, from the above, it is apparent that the assessee had not violated the provisions of section 40A(3) as admittedly the payments recorded in the cash book were ₹ 20,000/- or below. As regards examination by Assessing Officer regarding violation of there provisions, we find that the Assessing Officer had raised this issue on two occasions and the assessee had replied to the Assessing Officer and after being satisfied that no payment of more than 20,000/- was paid by assessee he did not make the addition and therefore, the order of Assessing Officer on this account cannot be said to be erroneous and prejudicial to the interest of revenue. The fact that Assessing Officer did not mention this part of examination in the Assessment Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not call for information u/s 133(c) from RTO to further verify the genuineness of payments. Therefore it is a case of inadequate enquiry and not a case of lack of enquiry. The Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar Sharma 335 ITR 83 has held as under: There is a distinction between lack of inquiry and 'inadequate inquiry If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Income-tax Act,1961, merely because he has a different opinion in the matter: Held, dismissing the appeal, that the present case would not be one of lack of inquiry even if the inquiry was termed inadequate. The Tribunal found that complete details were filed before the Assessing Officer and that he applied his mind to the relevant material and facts, although such application of mind was not discernible from the assessment order. The Tribunal held that the Commissioner in proceedings under section 263 also had all these details and material available before him, but had not been able to point out defects conclusively in the material, for arriving at a conclusion that particular i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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