9911796707
TMI Blog2019 (9) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... fleet owner and truck repairing job work. Ereturn of income filed on 23.09.2009, declaring income at Rs. 18,36,470/- along with Tax Audit Report u/s 44AB of the IT. Act. Case selected for scrutiny under CASS, followed by serving notices u/s 143(2) & 142(1) of the Act. The assessee's turn over for the year declared at Rs. 10,05,59,163/- and net profit rate is 1.85% after examining the records and considering various submissions filed by the assessee, Ld. AO made following addition: i. Under statement of gross receipts at Rs. 34,358/- ii. Disallowance u/s 40A(3) of the Act at Rs. 2,42,98,279/- which were claimed by the assessee to be genuine business expenditure and cash payments made due to poor creditability in the market. Detailed list of such payments is at Annexure-A forming part of the assessment order. iii. Disallowance u/s 40(a)(ia) of the Act at Rs. 45,42,816/- for non deduction of tax at source u/s 194A/194C of the Act. iv. Addition u/s 68 for unexplained cash credit of Rs. 78,13,987/- v. Disallowance of vehicle expenses at Rs. 27,050/- & telephone/mobile expenses at Rs. 19,515/- after making above addition income of Rs. 3,85,72,470/- 5. Aggrieved assessee prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly for the diesel expenses, transportation charges, roads taxes, installments paid to finance companies. Further, the genuineness of expenses has not been doubted and after making the disallowance the net profit of the assessee will surge to abnormal level which is practically not possible in this trade. In support of his contention that if cash expenditure is incurred for business expediency, no disallowance u/s 40A(3) of the Act is called for, reliance was placed in the following judgments: 1. CIT vs. Raja Pal Automobiles (2010) 2 taxmann.com 284(Allahabad) High Court of Allahabad. 2. Shri Altafhusen Mahemudul Hasan Siddikin vs. ACIT, ITA No.2889/Ahd/2010, ITAT, Ahmedabad 3. ITO vs Pranay Towers (2017) 88 taxmann.cm 783, ITAT, Delhi 4. Gurdas Garg v. CIT (2015) 63 taxmann.com 289 (Punjab & Haryana High Court 10. Per contra Ld. DR vehemently argued supporting the finding of both the lower authorities and special emphasis was made on the following finding of Ld. CIT(A): 11 Reliance on Board Circular No.220 of 1977 misplaced: The appellant has relied upon Board Circular 220 dated 31st May 1977 for stating that where there are exceptional or unavoidable circumstances the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition made u/s.40A(3) is justified." The AO has correctly pointed out that the appellant could not substantiate his claim. The AO haGBP stated that the argument of the appellant that cash payments had to be made to pay the Creditors is of no use because he is not covered by the exceptional circumstances enumerated in Rule 6DD(j) of Income tax Rules. The, AO has also emphasized that 40A(3) violation has been pointed out by the Auditors in Form 3CD Report filed with the return. 12. After going through rival submissions it is seen that the appellant is not covered by Rule 6DD cases or circumstances. The appellant has not cited any sub-clause of Rule 6DD under which he is covered. The huge cash payments at times in lacs in one day do not show that the appellant was facing liquidity crunch. The huge freight receipts shown above Rs. 10 crore in the return do not support the contention of liquidity crunch. Thus for the reasons summarized in para 11 above the addition made by the AO u/s.40A(3) of Rs. 2,42,98,279 is upheld. , It is pertinent to point out here that this amount Rs. 2,42,98,279 of cash payments exceeding Rs. 20,000 is just a small percentage of Rs. 10,37,22,648 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions are carried out but on numerous occasions the assessee has paid cheque return charges due to in sufficient balance in the bank. This shows that there was poor liquidity with the assessee due to which he failed to honour the cheques. 16. Further from perusal of the documents placed at pages 112 to 128 of Paper Book-2 we observe that the assessee was issued notices from various finance companies which gave loans to the assessee for the default in paying the installment. Legal notices and termination notice were issued to the assessee. In one of such notice issued by the GE Capital, the assessee was asked to immediately pay the outstanding demand of Rs. 8,38,523/- within 5 days else the company shall become entitled to repossession of the vehicle in question. Similar letters were also issued by Kotak Mahindra Bank, ICICI Bank, for recalling their loans due to default in payments of loans amount which shows that the assessee was not able to pay the installment on time, since the post dated cheques issued by him were returned by the Bank. The assessee has made payment in cash on various occasions to the finance companies. 17. We further observe that the assessee is having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t can be invoked. Even after knowing this provision he has incurred cash expenditure of this magnitude just for keeping his business running. The revenue has not doubted the gross receipts of the assessee. In the past also same business has been carried out and regular assessments were completed u/s 143(3) of the Act and the net profits declared by the assessee have been accepted. Even in this year when the gross receipts is not in dispute which is from same business transportation and job work and no other sources of revenue has been found then for running the business, the assessee needs to be allowed the claim of expenditure incurred for running such business. In the proviso to section 40A(3) of the Act clearly specify that if the assessee prove that the expenditure has been incurred for business expediency; then the provisions should be applied liberally and no disallowance u/s 40A(3) of the Act should be made. 21. Hon'ble High Court of Allahabad in the case of CIT vs. Raja Pal Automobiles (supra) confirm the view of the Tribunal "which found that the assessee had fully explained details of payment made in cash; that entire evidence in form of bills, cash memos etc. has been f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the business transactions and to prevent the use of unaccounted money or reduce the chances to use black- money for business transactions.. If the payment is made by a crossed cheque drawn on a bank or a 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 country. Any restraint intended to curb the chances and opportunities to use or create black-money should not be regarded as curtailing the freedom of trade or business. 24. From perusal of the above judgment we infer that the assessee should not be subject to the rigorous provision of u/s 40A(3) of the Act if he has incurred the expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cholamandalam Finances Ltd. Rs. 14,35,944/- 2. Tata Motors Ltd. Rs. 3,60,572/- 3. G E Capital Rs. 9,69920/- 4. G Mac Finance Service Rs. 98,828/- 5. India Bulls Finance Sec. Ltd. Rs. 52,084/- 6. Magma Sharachin Fin Ltd. Rs. 5,17,058/- 7. Others Rs. 37,148/- Total Rs. 34,71,554/- 29. In the above list no information is provided by the assessee for the amount paid at Rs. 37,148/-. So the disallowance u/s 40(a)(ia) of the Act for the amount of Rs. 37,148/- stands confirmed. As regards the remaining amounts which are paid to Non- Banking Finance Company, we observe that when a person taken loans from these companies post dated cheques are issued for the installment which comprises of the principle as well as the interest component. Many times the installment are paid as cheques already stands issued but the credit of TDS is not passed on to the assessee for being deposited in the bank account as tax deducted at source. 30. In the instant case, since the assessee was in default on multiple occasions, the amounts were paid lump sum to prevent the vehicle from being detained. Though the provisions are very clear with regard to u/s 40(a)(ia) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad Movers Dabba Loan Rs. 22,95,000 5 Rajmoti Road Movers Hand loan Rs. 21,28,987 6 Krishna Traders Rs. 1,40,000 7 Dilip Transport Rs. 5,40,000 Total Rs. 78,13,987 37. It is contended before us by Ld. counsel for the assessee that in the above list the loan at Rs. 15,00,000/- from Ashapura Carriers Dabba loan & Rs. 22,95,000 from Rajmoti Road Movers Dabba Loan were actually taken during the F.Y. 2006- 07 i.e. A.Y. 2007-08. In the year under appeal the amounts were bifurcated in two parts but the actual loan was received in earlier year only. The copy of ledger account has been placed on record. 38. In our considered view this claim of the assessee needs verification at the end of the Ld AO. We accordingly, direct the Ld. AO to examine this contention of the assessee and if it is found that unsecured loan of Rs. 15,00,000/- and Rs. 22,95,000/- alleged to have been received from Ashapura Carriers Dabba loan & Rajmoti Road Movers Dabba Loan in the earlier year, then no addition will be called for u/s 68 of the Act for unexplained cash credit during the year under appeal. 39. In the above list Rs. 10,000/- loan has been shown as Hand loan Irshabhai, assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,12,716/- Total Rs. 16,47,203/- 43. The tax was not deducted on the above payments we have dealt similar issue in the case of assessee for A.Y. 2008-09 and have set aside the issue to the file of Ld. AO for conducting necessary verification with the assistance of the assessee who should provide sufficient documentary evidences to the Ld. AO for conducting verification. We accordingly, allow ground no.1 for statistical purposes. 44. Apropos ground No.2 for the disallowance u/s 40(a)(ia) of freight payment of Rs. 4,55,802/- after hearing the rival contentions we observe that the alleged amount was paid as freight charges at Rs. 41,204/- to Sharifbhai and Rs. 4,14,598/- to Kaushik Mehta. It is contended before us that the PAN No. of Kaushik Mehta is ACGPM2776E and as per the provision of section 194C no deduction u/s 194C was called for. However, with regard to the freight disallowance of Rs. 41,204/- general reply has been submitted. 45. We, therefore, in the given facts and circumstances of the case confirm the disallowance u/s 40(a)(ia) for freight payment of Rs. 41,204/- and for the remaining amount of Rs. 4,14,598/-, we direct the Ld. AO to verify the PAN No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
