TMI Blog2017 (6) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... yment. The CIT(A) is also directed to examine the claim of the assessee in respect of a cash payment made on holidays for an amount of ₹ 29,38,968/-. in terms of Rule 6 DD of Income Tax Rules. Appeal of the assessee is allowed for statistical purpose. - I.T.A No.1237/Bang/2013 - - - Dated:- 9-6-2017 - SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER, AND SHRI. LALIET KUMAR, JUDICIAL, JUDICIAL MEMBER For The Assessee : Shri. Narendra Sharma, Advocate For The Revenue : Shri. G. Kamaladar, Standing Counsel ORDER PER LALIT KUMAR, JUDICIAL MEMBER: This appeal by the assessee is filed against the order of the CIT (A), Belgaum, dt.15.04.2013, for the assessment year 2009-10. 02. The assessee has raised the following grounds of appeal before us : 03. Ground no1, has not been pressed by the assessee and is therefore dismissed as not pressed. We shall be deciding all the remaining issues collectively as they interrelated and interdependent. The assessee is a civil contractor carrying on civil construction work for the Government Departments within the state of Karnataka. He filed his return of income declaring a total income of ₹ 1,18,98,890 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso submitted that the authorities below have failed to appreciate the business exigencies and other relevant factors of the trade of the assessee. It was further submitted that the assessee is in the business of construction of road, bridge and civil contract for PWD, on account of business exigencies, expediency and practical necessities, it was incumbent upon the assessee to make several payments to the vendors for purchase of cement, refilling of diesel in the vehicles, for which cash payment was required to be made. It was also submitted that the case of the assessee comes within the scope of commercial expediency under Rule 6DD of IT Rules. The Assessee has submitted that he has undertaken ten civil contracts as under, during the year under consideration: 1. Almatti to Bagalkot construction of roads and bridges; 2. Reliance Tower Projects ; 3. Gulbarga Development Authority Development of sites ; 4. KNNL Dharwad construction of roads and bridges ; 5. NH Division Bijapur construction of roads and bridges ; 6. PRE Division Bijapur construction of roads and bridges ; 7. PMGSY formation of roads in and around Muddebihal and Indi taluks ; 8. PRE D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of ₹ 36,79,555/- was also paid to M/s. Sangam Sales Corporation for purchase of cement and the sum of ₹ 14,80,000/- was paid to M/s. Patil Petroleum for purchase of petrol. ₹ 28,60,869/- was spent for purchase of cement, petrol etc., Thus, in our opinion, the AO has not disputed either the genuineness of the transaction or has not disputed the person to whom payment in cash was made by the assessee. The AO has only disallowed the deduction in view of Section 40A(3) of the Act Rule 6DD of the IT Rules. In our view, once the AO has not disputed the identity of the person to whom the payment was made and has also not disputed the business exigency, the disallowances made by the AO is not sustainable in the eyes of law. In the identical facts and circumstances of the case, Hon ble Delhi High Court in the matter of Honey Enterprises v. CIT [ITA.163/2002, dt.08.12.2015, in para 26 to 37, held as under : 26. The Revenue did not accept the CIT(A)'s decision and preferred appeals before the ITAT. The ITAT did not accept the view that the payments in question were outside the scope of Section 40A(3) of the Act; however, the ITAT accepted the contention that such p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an the 31st day of March, 1969) as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding ten thousand rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, such expenditure shall not be allowed as a deduction: Provided that where an allowance has been made in the assessment for any year not being an assessment year commencing prior to the 1st day of April, 1969, in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year the assessee makes any payment in respect thereof in a sum exceeding ten thousand rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, the allowance originally made shall be deemed to have been wrongly made and the Assessing Officer may recompute the total income of the assessee for the previous year in which such liability was incurred and make the necessary amendment, and the provisions of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the assessment year next following the prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eller, acting as a commission agent, is required to pay cash in turn to persons from whom he has purchased the goods; or (vi) Specific discount is given by the seller for payment to be made by way of cash. 33. CBDT further clarified that the above circumstances are not exhaustive but illustrative. There could be cases other than those falling within the above categories which would also meet the requirements of rule 34. The ITAT had considered the above mentioned CBDT Circular and had rightly concluded that the circumstances as spelt out in CBDT Circular No. 220 (supra) were not exhaustive but were merely illustrative of situations where business exigencies required that the payments be made in cash. The ITAT also referred to the decision of the Gujarat High Court in Hasanand Pinjomal v. CIT: (1978) 112 ITR 134 (Guj.) wherein the Court had observed that the practicability would have to be judged from the angle of a businessmen and not the Revenue. 35. In the present circumstances neither the genuineness of the payment nor the identity of the payee is disputed. The only controversy that needs to be addressed is whether the ITAT's decision that such payments had been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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