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Shri. D. Tamilrajan Versus The Joint Commissioner of Income Tax, Range I (i/c) , Madurai

2016 (8) TMI 551 - ITAT CHENNAI

Addition u/s 40A(3) - Held that:- 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 an .....

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anent 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. - Decided in favour of assessee - Disallowance being expenses for tea, coffee, freight char .....

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onsidering 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 dire .....

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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 .....

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3) and 250 of the Income Tax Act, 1961 (herein after referred to as the Act ). 2. There is a delay of 148 days in filing the appeal by the assessee. At the time of hearing the ld. Counsel has filed an affidavit explaining the reasons for delay and the ld. DR has no serious objections for condonation of delay. After hearing the submissions, we are satisfied with sufficient and reasonable cause for filing the appeal belatedly and we therefore condone the delay and admit the appeal for adjudication .....

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)-2 ought to have seen that the appellant has discharged his primary onus both during the assessment proceedings and first appellate proceedings to demonstrate the fact that the cash payments made by the appellant fall under rule 6DD 5.The learned Commissioner Of Income Tax (Appeals)-2 erred in law In disallowing a sum of ₹ 4,58,755/- under the expenses for tea, coffee, freight charges and diesel expenditure are not supported by vouchers. 6. The learned assessing officer as well as the fir .....

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l purchase under the pretext that the vouchers are self-made and are incapable of independent verification. 8.The learned first appellate authority erred in law in drawing analogy between the appellants case to the case of the contractor who declares income on presumptive basis to justify the disallowance of expenses of ₹ 15,95,100/- incurred by the appellant on account of labour charges, jelly purchase, sand purchase and gravel purchase. 4. The Brief facts of the case is that the assessee .....

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resentative of assessee appeared from time to time and produced Books of account, bank statements, bills and vouchers. The ld. Assessing Officer verified Accounts, bills, vouchers and found that assessee has claimed expenditure of 921,87,851/- under various heads were cash exceeding 920,000/- was paid for each occasion and the ld. Assessing Officer issued letter to the assessee on violation of provisions of Sec.40(A)(3) of the Act as cash expenditure incurred was more than 920,000/- on various d .....

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emote villages. The ld. Assessing Officer accepted the nature of the work of the assessee but alleged that the assessee firm being regular contractor and there is no necessity to make cash payment on various occasions and disallowed the claim. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 4.1 In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) has confirmed the order of the ld. Assessing Officer. Aggrieved by the Commissi .....

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d farmers who do not have bank account and assessee firm purchase jelly and sand from hawkers, farmers who are in the habit of supplying and selling the products at the work site of the assessee and moving from place to place and does not have any permanent place of business and Deal only on cash basis. For transactions of supply and undertaking of works in remote village is difficult task, further educating the suppliers for opening of bank account and make Bank payments is highly impractical. .....

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recipient hawkers, vendors does not have bank accounts and question of issuing of cheques does not arise, apart from time limit of work stipulated and prayed for allowing the ground. 4.3 Contra, the ld. Departmental Representative relied on the orders of Commissioner of Income Tax (Appeals) and vehemently opposed the grounds. 4.4 We heard the rival submissions, perused the material on record. The contention of the ld. Authorised Representative that the assessee has to compulsory make cash payme .....

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ions of Sec. 40A(3) of the Act read as:- Where the assessee incurs any expenditure in respect of which a payment of 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, no deduction shall be allowed in respect of such expenditure . and Rule 6DD and exception under Income Tax Rules No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be .....

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of 1949); (ii) the State Bank of India or any subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959); (iii) any co-operative bank or land mortgage bank; (iv) any primary agricultural credit society or any primary credit society as defined under section 56 of the Banking Regulation Act, 1949 (10 of 1949); (v) the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956); (b) where .....

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ard; (vii) a debit card. Explanation.-For the purposes of this clause and clause (g), the term bank means any bank, banking company or society referred to in subclauses (i) to (iv) of clause (a) and includes any bank [not being a banking company65 as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)], whether incorporated or not, which is established outside India; (d) where the payment is made by way of adjustment against the amount of any liability incurred by .....

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the products manufactured or processed without the aid of power in a cottage industry, to the producer of such products; 69(g) where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town; (h) where any payment is made to an employee of the assessee or the heir of any such employee, on or in connection with the retirement, retr .....

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of fifteen days or more in a place other than his normal place of duty or on a ship; and (ii) does not maintain any account in any bank at such place or ship; 70(j) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike; (k) where the payment is made by any person to his agent71 who is required to make payment in cash for goods or services on behalf of such person; (l) where the payment is made by an authorised dealer or a money c .....

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ng 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 whethe .....

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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 366 ITR 122 (Guj) 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. This ground of the assessee is allowed. 5 T .....

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f labour welfare and fuel expenses incurred provided at working site in remote areas Due to moisture and dust the vouchers are tainted torn and worn out. The ld. Assessing Officer having not satisfied with the explanation made disallowance. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals) 5.2 In the appellate proceedings, the ld. Authorised Representative explained that working system of the business on laying of roads and culvert in the remote are .....

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dition. Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed an appeal before Tribunal. 5.3 Before us, the ld. Authorised Representative expressed that this expenditure is necessary to co-ordinate with the labour. Providing coffee and tea during day and night during work of laying of roads and culverts in the villages and there are no proper food facilities and further some time work in forest area and such expenditure is generally incurred to upkeep the labour and .....

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fficer 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 .....

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chase and vouchers are self made could not be verified. 6.1 The ld. Assessing Officer found that the assessee firm has produced self made vouchers in respect of major expenditure claimed in profit and loss account and the expenditure pertaining to payments to local vendors and lorry brokers who are supplying sand and jelly and not providing any bill receipt or vouchers. Therefore, the assessee firm has selfmade vouchers and filed in the assessment which the ld., Assessing Officer considered as d .....

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