TMI Blog2017 (7) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... uch adhoc disallowance, can be justified. Accordingly, the adhoc disallowance confirmed by the by the CIT (A) at ₹ 2,00,000/- out of various expenses is deleted - ITA No.30/Agr/2015 - - - Dated:- 31-3-2017 - SHRI A.D. JAIN, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER For The Assessee : Mahesh Agrawal, Adv. For The Revenue : Washim Arshad, Sr. DR ORDER PER, DR. MITHA LAL MEENA, AM: This appeal, by the assessee, is directed against the order dated 21- 11-2014 of the Commissioner of Income Tax (Appeals), Gwalior [herein after referred to as the CIT (A) ], in respect of the assessment year 2010- 11, wherein, the grounds of appeal, reads as under 1. That under the facts and circumstances of the case and in law, the Ld CIT(A) has erred to uphold the addition of ₹ 80,024/- made by the Ld AO U/s 40A(3) of the Act. He has failed to appreciate the circumstances compelling the assessee to make such payments in cash. 2 2. That the Ld CIT(A) has erred in law and facts to confirm the disallowance of ₹ 2,00,000/- out of total disallowance made by the Ld AO at ₹ 4,09,304/- on adhoc basis without rejecting the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of Sec. 40A (3) was to check black money and not to disallow genuine expenses. It is further submitted that even if his case was not covered by Rule 6DD, it was covered by the proviso to Sec 40A (3A), inserted with effect from 01/10/2009 and which equally applies to Sec 40A (3) also. 2.4. Per contra Ld DR relied on the impugned order. 2.5. We have heard both the parties, perused the material on record and considered the cases cited before us. It is an undisputed fact that the 4 impugned payments have all been made in cash exceeding ₹ 20000/-. The issue to be decided by us is whether the payments made by assessee in cash, in excess of ₹ 20000/- is allowable as an expense or not u/s 40A(3). Provision of section 40A (3) reads as under: Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day otherwise than by an account payee bank cheque drawn on a bank or account payee bank draft exceeds twenty thousand rupees no deduction shall be allowed in respect of such expenditure. 2.5.1 The ld AR of the assessee contended that there is also a proviso appended to sub section 3(A) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heck evasion of taxes, so that, no payment is made from undisclosed sources and also the payment from banking channels leave a trail of the transaction. It can never be the intention of law makers to punish the assessee involved in genuine transaction. 2.6. The Hon ble Apex Court in the case of Attar Singh Gurmukh Singh Etc vs. Income Tax Officer reported in 191 ITR 0667 had observed in para 5 as under The terms of s. 40A(3) are not absolute. Considerations of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the 6 satisfaction of the Assessing Of ficer the circumstances under which the payment in the manner prescribed in s. 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 s. 40A(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the ITAT, Agra Bench, Agra in the case of Tejveer Singh vs. ITO, Mathura, in ITA No.329/Agra/2015, we hold that order of the ld CIT(A) is not based on finding of facts or correct application of law. We, accordingly hold that CIT(A) was not justified in upholding the addition of ₹ 80,024/- made by the Ld AO U/s 40A(3) of the Act. The addition of ₹ 80024/- made u/s 40A (3) of the Act is deleted. Thus, the 1st ground of appeal is allowed. 8 3. The next ground of appeal pertains to confirming the disallowance of ₹ 2,00,000/- out of total disallowance made by the Ld AO at ₹ 4,09,304/- on adhoc basis without rejecting the books of account and pointing out any specific instance of unverifiable or unvouched expense. 3.1 On perusal of Trading, Profit Loss Account annexed with the return the AO observed that the assessee has incurred following expenses - Sr No Particulars Amount (Rs) 1 Conveyance Expenses 165449/- 2 Postage Telegram Exp 177161/- 3 Telephone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 2,09,304/- 3.3. The Ld AR submitted that the assessee is a limited company and its accounts were audited under the Companies Act as well as U/s 44AB of the Income Tax Act; and the Auditors have not pointed out any shortcomings or defect in the accounts or maintenance of vouchers etc; and the AO has also not rejected the books of account or pointed out any specific bill or voucher that could not be verified; and no expense is alleged to be for non business purpose or of capital nature; and the AO s observation that assessee did not respond to the query raised vide order sheet entry dated 18/03/2013, it was his submission that no such query 10 was ever raised on the alleged date or any other date through the order sheet, and brought to our notice the copy of order sheet filed in Paper Book at Pg. 48 to 52; and that the CIT (Appeals) has also not appreciated assessee s submissions and has sustained the disallowance at ₹ 2,00,000/- in mechanical and arbitrary manner without assigning any cogent reason or logic. 3.4 Per contra Ld DR relied on the orders of the authorities below. 3.5. We find that the disallowance made by the AO is on adhoc basis @ 15% of certain expe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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