TMI Blog2017 (6) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... d report. The Commissioner of Income Tax (Appeals), accordingly deleted the addition. The ld. DR has not been able to controvert the findings of Commissioner of Income Tax (Appeals) on this issue. We do not find any merit in the ground raised by the Department assailing the findings of Commissioner of Income Tax (Appeals) in deleting the said addition. - Decided in favour of assessee. - ITA No. 794/PUN/2013 - - - Dated:- 31-5-2017 - Shri Anil Chaturvedi, AM And Shri Vikas Awasthy, JM Assessee by : Shri Kishor Phadke Revenue by : Shri Amit Bobde ORDER Per Vikas Awasthy, JM This appeal by the Department is directed against the order of Commissioner of Income Tax (Appeals), Aurangabad dated 24-01-2013 for the assessment year 2009-10. 2. The brief facts of the case as emanating from records are : The assessee is engaged in trading of sponge iron. The assessee purchases sponge iron from vendors in Odisha and Karnataka and sells the same to ingot manufactures at Jalna. During the period relevant to the assessment year under appeal, the assessee incurred freight charges to the tune of ₹ 91,12,689/-. During the course of scrutiny assessment proceedings, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iliation statement the Commissioner of Income Tax (Appeals) deleted the addition. The ld. DR prayed for setting aside the findings of Commissioner of Income Tax (Appeals) on both the issues and for restoring the additions made by the Assessing Officer. 4. On the other hand Shri Kishor Phadke appearing on behalf of the assessee vehemently supported the findings of Commissioner of Income Tax (Appeals) in deleting the additions made by Assessing Officer u/s. 40A(3) and 69C of the Act. The ld. AR submitted that the assessee procures sponge iron primarily from Odisha and Karnataka. The sponge iron is transported to the assessee through trucks. The trucks are provided by various transport agencies to the vendors. Truck hiring charges are included in the payments for supply of sponge iron. Thus, freight charges are not paid by the vendors but are paid by the assessee after delivery of sponge iron. Once the truck reaches the premises of assessee part payment of the transport charges is made to the truck driver immediately. Thereafter, the sponge iron is tested for the contents of iron, etc. After testing, remaining payment is made to the truck driver. The entire process of delivery and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clearly show that the payments are made to the trucks driver towards the freight. It is a well known fact that truck drivers/owners do not accept cheque payments or DD as they do not have bank accounts at various destinations. The truck drivers always receive cash payments, therefore, the payments were made by the assessee in cash. The ld. AR in support of his submissions placed reliance on the following decisions : i. Attar Singh Gurmukh Singh Vs. ITO, 191 ITR 667 (SC); ii. Smt. Harshila Chordiya Vs. ITO, 298 ITR 349 (Raj.); iii. Anupam Tele Services Vs. ITO, 268 CTR 121 (Guj.); iv. Honey Enterprises Vs. CIT, 381 ITR 258 (Del.); v. Gurdas Garg Vs. CIT, 63 taxman.com 289 (P H). 4.2 In respect of Ground No. 2 relating to disallowance u/s. 69C of the Act, the ld. AR submitted that during assessment proceedings the assessee furnished reconciliation statement to the Assessing Officer. However, the Assessing Officer failed to consider the same and made the addition. The same reconciliation statement was filed by the assessee before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) forwarded the same to Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the books of accounts and generation of black money. Secondly, the suppliers have arranged the delivery of goods through transport agencies which are located at faraway places and as per the trade practice, the appellant has to make cash payment on receipt of delivery of goods to the truck drivers. Therefore, it cannot be said that the payment made by the appellant in cash not exceeding ₹ 20,000/- each truck driver on receipt of delivery of goods has resulted into generation of black money or has encouraged avoidance of Income Tax. 6.4 The term person mentioned in section 40A(3) refers to an individual (truck driver in the case under appeal) to whom the payment has been made and not each assessee assessed under different category such as partnership firm, company, AGP etc. The term person has been defined in the Income Tax Act with reference to the status of the assessee which is not relevant for deciding the term person referred to in section 40A(3) of the Act. For example if an assessee who is a company or partnership firm has opened various branches at different places and if goods are purchased from each branch on the same day by an assessee through his d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of section 40A(3) and rule 6DD that they are intended to regulate business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions. ( Mudiam Oil Company v. ITO [1973] 92 ITR 519 (AP)). If the payment is made by a crossed cheque drawn on a bank or crossed bank draft, then it will be easier to ascertain, when deduction is claimed, whether the payment was genuine and whether it was out of the income from disclosed sources. In interpreting a taxing statute, the court cannot be oblivious of the proliferation of black money which is under circulation in our c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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