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TMI Blog2016 (2) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent amounts mentioned against these numbers, the voucher is signed by only one recipient which is a conclusive proof that the total amount mentioned in that voucher has been paid to a single person on a given date towards truck hire charges. The payment is made to the transport agencies and not to the lorry drivers, thereby attracting provisions of section 40A(3) of the I.T. Act. Therefore, the AO was correct in disallowing an amount of Rs. 1,51,11,864/-u/s. 40A(3) of the I.T. Act. " 3. The Assessee is a partnership firm engaged in transportation business. In the course of assessment proceedings u/s.143(3) r.w.s.147 of the Act, the AO noticed that the Assessee had debited to the profit and loss accounts a sum of Rs. 8,47,45,928 towards truck hire charges. The AO verified the vouchers evidencing the payments made towards truck hire charges and found that the vouchers did not bear any voucher numbers. Further payments to the extent of Rs. 1,51,11,864/- were payments made in excess of Rs. 20,000/- by cash and were liable to be disallowed u/s.40A(3) of the Income Tax Act, 1961 (Act), which provides that where the assessee incurs any expenditure in respect of which a payment or aggr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ata arid other charges. It is only while raising the voucher this individual supplies were clubbed together by the broker. However, the payment per se is made to individual lorry drivers and the respective amounts are also mentioned in the vouchers. The appellant has paid commission to broker separately for arranging these trips. It is a common knowledge that lorry drivers are paid the transport charges upon delivery. From this, it is clear that the payment is made to lorry drivers as listed in the voucher. U/s 40A3 what is relevant is the payment made per person. Under this circumstances, I am of the considered view that the listing out of these payment in a voucher does not attract the provision of sec 40A(3). Hence, the AO is directed to verify the vouchers and see if any particular payment is exceeding the limit prescribed u/s 40A(3) and tax it accordingly. While doing so, the AO should also examine if the payments are made on holidays and exclude the same. " 6. Aggrieved by the order of the CIT(A), the revenue has raised ground No.3 before the Tribunal. The learned DR reiterated the stand of the revenue as reflected in the ground No.3 reproduced above. It is clear from ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he prescribed amount in each transaction, the rigours of section 40A(3) will not apply. To overcome the splitting of payments to the same person made during a day as referred above and to increase the efficacy of the provision, the amendment seeks to substitute the present provision to provide that 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, the disallowance of such expenditure shall be made under the proposed sub-section (3) of section 40A or the payment shall be deemed to be the profits and gains of business or profession under the proposed sub-section (3A) of section 40A, as the case may be. To illustrate with an example, let us assume a taxpayer has incurred an expenditure of Rs. 40,000/-. The taxpayer makes separate payments of Rs. 15,000/-, Rs. 16,000/- and Rs. 9,000/- all by cash, to the person concerned in a single day. The aggregate amount of payment made to a person in a day, in this case, is Rs. 40,000/-. Since, the aggregate payment by cash exceeds Rs. 20,000/-, Rs. 40,000/- will not be allowed as a deduction in computing the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/-. We do not find any infirmity in the order of the CIT(A). Accordingly ground No.3 raised by the revenue is dismissed. 11. Ground No.4 raised by the Revenue reads as follows: "4. The learned CIT(A) has erred in deleting the additions in respect of unexplained cash credits u/s.68 of the I.T. Act as the assessee firm failed to satisfactorily explain the difference in the capital as per ledger account of the partners as well as balance sheet of the assessee firm and the A.O. has correctly added difference amount as unexplained cash credits u/s. 68 of the I.T. Act. " 12. The Partnership firm of the Assessee has three partners. In the capital account ledger of one of the partner Mr.H.Moidinabba, capital to the tune of Rs. 1,85,01,262 by way of cash and cash withdrawal of Rs. 1,47,94,799 was found. Thee was therefore net capital introduction in cash by Sri.H.Moidinabba of Rs. 37,06,463 (Rs.1,85,01,262 - Rs. 1,47,94,799). The AO called upon the Assessee to explain the source and proof of introduction of capital in the capital account of the partner. In the balance sheet of the Assessee filed along with the return of income, the capital introduction by Mr.H.Moidinabba was shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o why amounting totalling Rs. 1,85,01,262 was introduced and then a sum of Rs. 1,47,94,799 was withdrawn from the capital account of H.Moidinabba. The AO therefore held that the Assessee failed to satisfactorily explain capital introduction of Rs. 37,06,463/-. 14. Before CIT(A) the Assessee argued that the conclusions of the Assessing Officer that net capital introduction of Rs. 37,06,4631/- by one of partners, Mr. H. Moidinabba was unexplained cash credit u/s. 68 (in spite of the sufficient withdrawal of Rs. 1,21,27,0001- is available from the NRI accounts of the other partner Mr. Abdul Rahim Hussain (who is also brother of Mr. Moidinabba) was not correct. The Assessee clarified that the entire capital of both Mr. Moidinabba and Mr. Abdul Rahim Hussain is exclusively from the above NRI funds. This fact has been clearly stated by Mr. Abdul Rahim Hussain (page 7, para 1). It was explained that capital was brought in only by Mr. Abdul Rahim Hussain. However, since the affairs were managed by Mr. Moidinabba, the accountant by mistake had treated capital introduced, as that of Mr. Moidinabba instead of Mr. Abdul Rahim Hussain. This was purely a clerical error and the said credits pert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee unless he is able to show that the withdrawals from the bank account are later in point of time to the introduction of capital in the capital account. The AO has not made out any such case in the order of assessment. The CIT(A) has given a finding that the same amount that was withdrawn was brought into the books and this was done only once. once it is found as a fact that cash was received by the firm from its partners, then, the relevant cash credits could not be assessed under section 68 in the hands of the firm in the absence of evidence to indicate that the cash credits represents the firm's profits and the firm is not further required to explain the source of deposit in the hands of the partners. It was so held in CIT vs. Jaiswal Motor Finance 141 ITR 706 (All) and CIT vs. Anupam Udyog 142 ITR 133 (Pat). In CIT vs. Metachem Industries (2000) 161 CTR (MP) 444 also it was held that once the firm has satisfactorily explained that the credit entries in the name of its partners represent the amount invested by them the burden of proof stood discharged and the amount cannot be treated as income of the firm under s. 68. In the light of the legal position stated above a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Special Bench of ITAT, Vishakapatnam in the case of Merilyn Shipping & Transaports Vs. ACIT (2012) 20 Taxmann.com 244 (Vishakapatnam-Trib.). The CIT(A) did not agree with the aforesaid submission of the Assessee and held that operation of the aforesaid decision had been stayed by the Hon'ble AP High Court and hence the said decision could not be followed. 22. Before us it was pointed out by the learned counsel for the Assessee that in a later decision the Hon'ble AP High Court in the case of CIT Vs. M/s.Janapriya Engineers Syndicate ITA No.352 of 2014 order dated 24.6.2014 was pleased to hold that unless and until the decision of the Special Bench is upset by the High Court, the same is binding on smaller bench and co-ordinate bench of the Tribunal. 23. The ld. DR submitted that the decision of the Hon'ble Special Bench ITAT in the case of Merilyn Shipping (supra) has been reversed by the Hon'ble Gujarat and Calcutta High Courts in CIT Vs. Sikandarkhan N. Tunvar & Others in Tax Appeal No. 905 of 2012 & others dated 02/05/2013 and in CIT Vs. Md.Jakir Hossai Mondal in ITA No.31 of 2013, GA No.320 of 2013 dated 04.04.2013 respectively. 24. The ld. counsel for the assessee po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be invoked to disallow expenditure which has been actually paid during the previous year, without deduction of TDS. 28. In CIT Vs. Sikandarkhan N.Tunvar & Others, TAX APPEAL NO. 905 of 2012 & others Dated02/05/2013, the Hon'ble Gujarat High Court held that in Merilyn Shipping 146 TTJ 1 (Viz) (SB,) the majority held that as the Finance Bill proposed the words "amount credited or paid" and as the Finance Act used the words "amounts payable", s. 40(a)(ia) could only apply to amounts that are outstanding as of 31st March and not to amounts already paid during the year. This view is not correct for two reasons. Firstly, a strict reading of s. 40(a)(ia) shows that all that it requires is that there should be an amount payable of the nature described, which is such on which tax is deductible at source but such tax has not been deducted or if deducted not paid before the due date. The provision nowhere requires that the amount which is payable must remain so payable throughout during the year. If the assessee's interpretation is accepted, it would lead to a situation where the assessee who though was required to deduct the tax at source but no such deduction was made or more flagrantl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch TDS was deductible. In the present case tax was deducted as TDS from the salaries of the employees paid by M/s Mercator Lines Ltd., and the circumstances in which such salaries were paid by M/s Mercator Lines Ltd., for M/s Vector Shipping Services, the assessee were sufficiently explained. It is to be noted that for disallowing expenses from business and profession on the ground that TDS has not been deducted, the amount should be payable and not which has been paid by the end of the year. We do not find that the Tribunal has committed any error in recording the finding on the facts, which were not controverted by the department and thus the question of law as framed does not arise for consideration in the appeal. The income tax appeal is dismissed." 30. SLP by the Revenue against the decision of the Hon'ble Allahabad High Court has been dismissed by the Hon'ble Supreme Court. Thus there are two views on the issue, one in favour of the assessee expressed by the Hon'ble Allahabad High Court and the other against the assessee expressed by the Hon'ble Gujarat & Calcutta High Courts. Admittedly, there is no decision rendered by the jurisdictional High Court on this issue. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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