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M/s. Shiv Krupa Tin Containers Versus The ITO, SK Ward-1, Himatnagar

2016 (9) TMI 445 - ITAT AHMEDABAD

Disallowance of Expenses u/s.40(A)(3) - cash payments made to Electricity Company for the supply of Electricity. - Held that:- The payment of Electricity was the purpose of business, the payee to whom the assessee has made the payment has not been doubted by the AO; meaning thereby that the genuineness of payment and identity of the payee are not in doubt. In such a situation, we find that the Hon’ble Jurisdictional High Court in the case of Anupam Tele Services vs. ITO reported at (2014 (2) TMI .....

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ground of assessee is allowed. - Disallowance made u/s.40(a)(ia) - Held that:- The issue in the present case is with respect to disallowance of expenses u/s.40(a)(ia) of the Act on account of non-deduction of TDS. Before us also, apart from the oral submissions, assessee has also not placed any material on record to demonstrate that the recipients of the amounts have considered the amounts received from the assessee as their income. We find that there is no finding of the lower authorities t .....

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nd decide the issue afresh in accordance with law. - I.T.A. No. 136/Ahd/2016 - Dated:- 9-6-2016 - Shri Rajpal Yadav, Judicial Member And Shri Anil Chaturvedi, Accountant Member Appellant by : Shri N.C. Amin, AR Respondent by : Shri B.P.K. Panda, Sr.DR ORDER Per Shri Anil Chaturvedi, Accountant Member This appeal by the Assessee is directed against the order of the Commissioner of Income Tax(Appeals)-2, Ahmedabad dated 03/12/2015 for the assessment year 2010-11. 2. The relevant facts as culled ou .....

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#8377; 7,95,620/-. Aggrieved by the order of Assessing Officer (AO), assessee carried the matter before ld.CIT(A) who vide order dated 03/12/2015 (in Appeal No.CIT(A)-VIII/49/SK Wd.1 HMT/2013-14 and now CIT(A)-2/20/SK Wd.1, HMT/2013-14) dismissed the appeal of the assessee. Aggrieved by the order of ld.CIT(A), assessee is now in appeal before us and has raised following effective grounds:- 1. That the CIT(A)-2 Ahmedabad has erred both in law and on the facts of the case in confirming an addition .....

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g the course of assessment proceedings, on the basis of details furnished by the assessee, AO noticed that the assessee had made several cash payments to Gujarat Electricity Board (GEB) in respect of electricity expenses. (the details of which are listed at page Nos.7 & 8 of the assessment order), the aggregate of such cash payments aggregated to ₹ 2,49,497/-. The assessee was asked to explain as to why expenses not be disallowed u/s.40A(3) to which assessee inter alia submitted that t .....

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. He accordingly disallowed the payments in excess of ₹ 20,000/- which aggregated to ₹ 2,49,497/- u/s.40A(3) of the Act. Aggrieved by the order of the AO, the assessee carried the matter before ld.CIT(A) who upheld the order of the AO by holding as under:- 5.3. Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has made disallowance under section 40A(3) of the Act, as the appellant has made payment of .....

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n able to make out a case of unavoidable circumstances so as to claim the benefit of Rule 6DD. Further held that the payment made to GEB was not a payment to the government and also did not submit that GEB did not accept the payments through cheques and it was the compulsion to make the payments in cash. 5.4. On the other side, the appellant submitted that these payments were made to the GEB / UGVCL and their genuineness has not been doubted. Thus, the liberal interpretation of the Rule 6DD has .....

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this behalf requires payment in cash compulsorily. The appellant has failed to establish such circumstance. It has not given any reasonable cause as to why the payment was made in cash in spite of the fact that appellant has a bank account from which all other expenses have been incurred. The Provisions of section 40A(3) are very clear and it provides specific exception to the Provisions under Rule 6DD. The case of the appellant is not covered under any of the exceptions provided in Rule 6DD. T .....

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jivan Synthetics wherein the cash payments to labours were made on Sunday i.e. Bank Holiday to avoid labour problems. Further, the appellant also relied upon the judgment of Hon ble Cochin ITAT in the case of P.M. Abdul Razak, wherein the payments to the small cultivators were made in cash who refused to get payments by cross cheques. The facts and circumstances under which payment made in the aforesaid cases are totally different from the facts of the case, and hence, reliance is misplaced and .....

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ls at a time to the same party also attracts the provisions of section 40(a)(3) of the I.T. Act. Accordingly, the case of the appellant is not covered by any of the exceptions provided in Rule 6DD. The disallowance made by the AO is accordingly upheld. 2.3. Aggrieved by the order of ld.CIT(A), assessee is now in appeal before us. 3. Before us, ld.AR reiterated the submissions made before the AO and ld.CIT(A) and further submitted that the AO has not disputed that the payments made by the assesse .....

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s to whether each payment in a day made by the assessee exceeded ₹ 20,000/-. He further submitted that provisions of section 40A(3) was intended with the objective of avoiding tax evasion. He submitted that when the payments are genuine and are made out of income from disclosed sources, no disallowance u/s.40A(3) can be made. He further placed reliance on the judgement of Hon ble Gujarat High Court in the case of Anupam Tele Services vs. ITO reported at (2014) 366 ITR 122 (Guj.). He also p .....

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expenses and these payments have been made to Electricity Company for the supply of Electricity. The payment of Electricity was the purpose of business, the payee to whom the assessee has made the payment has not been doubted by the AO; meaning thereby that the genuineness of payment and identity of the payee are not in doubt. In such a situation, we find that the Hon ble Jurisdictional High Court in the case of Anupam Tele Services vs. ITO reported at (2014) 366 ITR 122 (Guj.) has held that th .....

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ound is in respect of disallowance made u/s.40(a)(ia) of the Act. 5.1. During the course of assessment proceedings, the AO noticed that the assessee made payment of interest to four parties listed at page Nos.2 and 3 of the assessment order, the aggregate interest payment being of ₹ 4,45,625/- on which the assessee had not deducted TDS. AO was of the view that the expenditure is not allowable u/s.40(a)(ia) of the Act on account of non-deduction of TDS. He accordingly disallowed the aggrega .....

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Financial Services Ltd. ₹ 65,135/- (iii) Reliance Capital ₹ 2,34,415/- (iv) Reliance Finvest Ltd. ₹ 57,803/- Those are NBFCs from whom finance has been taken by the appellant. There was the liability on the part of the appellant to make the TDS u/s. 194A of the I. T. Act on the interest payments, as the interest payment was exceeding to the limits prescribed u/s. 194A of the I. T. Act, 1961. The AO observed that the reliance of the appellant on the decision of Hon'ble Visha .....

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t payment to NBFC and hence the disallowance was made. 3.7. On the other side, the appellant submitted that it has paid the cheques in advance of the amounts included of principal and interest thereupon, hence it was difficult for him to make the TDS. Further, the interest to the finance companies were actually paid and there was no outstanding amount payable at the end of the year. Thus provisions of section 40a)(ia) were not applicable. It was also submitted that these companies were having th .....

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to the NBFCs for the finance taken by the appellant. In view of the provisions of section 194A of the I. T. Act, it was immaterial whether the cheques were given in advance for the consolidated figures consists of principal and interest thereupon. Since the interest amount was segregated and identifiable in respect of the installment amounts that is why the P & L Account has been debited for the interest amount. So, the AOs observation for not making the IDS on the interest payment to NBFC i .....

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appellant has not completed the procedure laid down by way of making a written request specifying the reasons of non - submission of them before the AO in the assessment proceedings. So there was nothing on record to see about furnishing of these additional evidences due to good and sufficient reasons for admission as per the Rule 46A. In absence of the same, these additional evidences are not admitted, and hence, the same are not considered while taking the decision over the issue. 3.9.2. With .....

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arties should have been in the prescribed formal i.e. Form No. 26A as per Rule 31ACB i.e. the certificate from a Chartered' Accountant of the recipient parties. Thus, the appellant has not submitted the Form No. 26A from the recipient parties wherein the certificate has to be issued by the Chartered Accountant of the recipient parties that the recipient company has included the interest income in its return of income and paid the taxes. In absence of such certificates in Form No. 26A, the ap .....

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confirmed. This view is further supported by the judgment in the case of CIT Vs. Sikander Khan N. Tunwar [(2013) 357 ITR 312 (Guj.)]. Relevant portion of the judgment is reproduced hereunder:- "37. In our opinion, the Tribunal committed an error in applying the principle of conscious omission in the present case. Firstly, as already observed, we have serious doubt whether such principle can be applied by comparing the draft presented in Parliament and ultimate legislation which may be passe .....

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t lay down correct law. 39. We answer the question as under:- Question (1) in the negative i.e. in favour of the Revenue and against the assessees. Question (2) also in the negative i.e. in favour of the Revenue and against the assessees. 3.11. The ground of appeal is accordingly dismissed. 5.2. Aggrieved by the order of the ld.CIT(A), assessee is now in appeal before us. 5.3. Before us, ld.AR reiterated the submissions made before the AO and ld.CIT(A) and further submitted that the parties to w .....

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corresponding income was duly brought to tax. He also pointed out to the table placed at page No.2 of the paper-book, wherein the details of the payments are tabulated. He therefore submitted that in the present case no disallowance u/s.40(a)(ia) of the Act is called for. Ld.Sr.DR, on the other hand, supported the orders of the authorities below and submitted that there is no material on record to demonstrate that the parties to whom the assessee had made the payment towards interest have offere .....

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from the oral submissions, assessee has also not placed any material on record to demonstrate that the recipients of the amounts have considered the amounts received from the assessee as their income. We find that there is no finding of the lower authorities to the effect that the payment made by the assessee have been considered by the respective payees as their income. We further find that the Coordinate Bench of Tribunal in the case of Agra Tribunal in the case of Rajeev Kumar Agarwal vs. Add .....

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ce from the related payments for expenditure but the recipient of the monies has taken into account these receipts in computation of his income, paid due taxes, if any, on the income so computed and has filed his income tax return under section 139(1). After considering various decision cited therein, the Coordinate Bench of Tribunal further held at para-9 as under:- When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether or not, on a "fair, j .....

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