TMI Blog2016 (9) TMI 1033X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on application of the Rule 6DD, further the 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 makes cash payments in the circumstances as per the intention of the farmers/supplier who transact on cash basis and no credit facility is available in the villages. So, considering the apparent facts and nature of business of the assessee and purchase of country coal from small farmers who are illiterate and does not have permanent place of Business and also vendors deliver country coal at the working site of assessee. We support our opinion with the decision of Anupam Tele Services vs. ITO (2014 (2) TMI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ietor of M/s. Kannappa Corporations, Trichy and M/s. Ganga Cauvery Fertilizers Corporation, Salem. The Return of Income was filed on 12.10.2009 with total income of ₹ 61,65,060/- and the Return of income was processed u/s.143(1) of the Act and subsequently the case was selected for scrutiny under CASS and notice u/s.143(2) of the Act was issued. In compliance to notice, the ld. Authorised Representative of assessee appeared from time to time and produced Books of accounts and other evidences as called for. The ld. Assessing Officer found on verification of evidence that the assessee has claimed lorry freight expenses ₹ 52,60,281/- in financial statements and no TDS was deducted and Breakup of expenses statement was furnished. On perusal, the ld. Assessing Officer found some of the payments exceeded ₹ 50,000/- and no TDS were made and the ld. Assessing Officer relied on the provisions of Sec. 40(a)(ia) of the Act for non deduction of TDS and disallowed Lorry freight charges of ₹ 9,18,097/-. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 3.1 In the appellate proceedings, the ld. Commissioner of Income Tax ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r does not refer the said provision, considering the apparent facts, provisions of law, we are of the opinion that the ld. Assessing Officer has to examine the nature of expenditure and provisions under 194C(6) of the Act and collect information of lorry owners and pass the order on merits after providing adequate opportunity of being heard to the assessee. The ground of the assessee is allowed for statistical purpose. 4 The next ground raised by the assessee that the ld. Commissioner of Income Tax (Appeals) erred in sustaining the disallowance of ₹ 7,40,252/- by applying the provisions of Sec. 40A(3) of the Act on account of fuel expenses. 4.1 In the assessment proceedings, the ld. Authorised Representative explained that payments are made in respect of fuel expenses which are below ₹ 20,000/- on various dates to three persons and the said amount was not paid to single person. But the ld. Assessing Officer alleged that the aggregate amount of ₹ 7,40,252/- was paid in cash. These fuel expenses are paid to poor farmers and reflected in the Financial statements and the aggregate payments pertains to five to six consignment. The cash payments are made to purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... armers who do not have bank account and assessee purchase country coal from 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. Further educating the farmers for opening of bank account and make Bank payments is highly impractical. Considering time and place of work in rural areas and it is a regular phenomenon faced by the assessee and due to Business exigencies and the cash payment transactions are unavoidable and some transactions also take place on public holiday, Saturday and Sunday. The assessee has been maintaining sufficient bank balance as per Books of account but because the recipient a small farmers who does not have bank accounts and question of issuing of cheques does not arise and prayed for allowing the ground. 4.4 Contra, the ld. Departmental Representative relied on the order of Commissioner of Income Tax (Appeals) and vehemently opposed the grounds. 4.5 We heard the rival submissions, perused the material on record. The contention of the ld. Authorised Representative that the assessee has to compulsory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank; ( iv ) a bill of exchange made payable only to a bank; ( v ) the use of electronic clearing system through a bank account; ( vi ) a credit card; ( 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 company 65 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 the payee for any goods supplied or services rendered by the assessee to such payee; 6 ( e ) where the payment is made for the purchase of- ( i ) agricultural or forest produce; or ( ii ) the produce of animal husbandry (including livestock, meat, hides and skins) or dairy or poultry farming; or ( iii ) fish or fish products 68 ; or ( iv ) the products of horticulture or apiculture, to the cultivator, grower or producer of such articles, produce or products; ( f ) where the payment is made fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayee 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 makes cash payments in the circumstances as per the intention of the farmers/supplier who transact on cash basis and no credit facility is available in the villages. So, considering the apparent facts and nature of business of the assessee and purchase of country coal from small farmers who are illiterate and does not have permanent place of Business and also vendors deliver country coal at the working site of assessee. We support our opinion with the decision of Anupam Tele Services vs. ITO 366 ITR 122 (Guj) and 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 The last ground raised by the assessee is that the ld. Commissioner of Income Tax (Appeals) erred in confirming the disallowance of salary of ₹ 4,50,000/- made by the ld. Assessing Officer. 5.1 The ld. Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.4 Contra, the ld. Departmental Representative relied on the findings of the Commissioner of Income Tax (Appeals) order and opposed to the grounds. 5.5 We heard rival submissions, perused the material on record. The ld. Commissioner of Income Tax (Appeals) considering the volume of business and CFA activities has granted partial relief to the assessee but sustained ₹ 1,68,000/- as excess salary paid. We on perusal of material found that neither the ld. Assessing Officer nor ld. Commissioner of Income Tax (Appeals) has brought on record any cogent material or evidence or comparables in respect of same line of business in support of the Revenue. So, considering the inflation rate, commercial expediency and employees working conditions we are of the opinion that the order of Commissioner of Income Tax (Appeals) cannot be sustained on the ground and we direct the ld. Assessing Officer to delete the addition of Rs. .1,68,000/- and allow the ground of the assessee. The ground of the assessee is allowed. 6. In the result, the appeal of the assessee is partly allowed. Order pronounced on Wednesday, the 10th day of August, 2016, at Chennai. - - TaxTMI - TMITax - Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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