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TMI Blog2020 (3) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 being cash paid to the agents of coal suppliers ignoring the fact that these cash payments are covered by Rule 6DD(g) and Rule 6DD(h) of the Income Tax Rules, 1962. 2. That the learned CIT(A)-I, Agra has erred in law and on facts in not considering the fact that where the individual payments were below Rs. 20,000/- there was no violation of the provisions of section 40A(3) of the Income-tax Act, 1961. 3. That the learned CIT(A)-I, Agra has erred in law and on facts in not considering the material placed on record and various submissions made by the assessee and more so in not considering the audit report u/s 44AB filed by the assessee certifying that the assessee has not made any violation of the provisions of section 40A(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee firm is engaged in the business of running a brick kiln.During the course of assessment proceedings, the Ld. A.O. has disallowed a sum of Rs. 29,87,114/- u/s 40A(3) of the Income Tax Act, holding that cash payments were made to truck drivers and to the agents of coal suppliers who had supplied coal through trucks at the brick kilns of the assessee firm. According to the Ld.A.O. the assessee on its own convenience made payment in cash violating the provisions of section 40A(3) and no exceptional circumstances as enumerated in Rule 6DD could be found applicable in those cases where the payments were made in cash exceeding Rs. 20,000/-. Thus, he disallowed a sum of Rs. 29,87,114/- u/s 40A(3) read with Rule 6DD. 3. The assessee went in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depends on various agents of coal suppliers and truck drivers who bring coal from Varanasi etc.for making supplies in the area. These agents and truck drivers insist for making cash payments against purchase of coal. These agents and truck drivers also do not have any bank account in the area and insist on cash payments. (ii) Rule 6DD(g) and (j) which contain exceptions to section 40A(3) read as under - Rule 6DD(g) -"where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town" Rule 6DD(j) - "where the payment was required to be made on a day on which the banks were c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers insist for making cash payments against purchase of coal. These agents and truck drivers also do not have any bank account in the area and insist on cash payments. c. The area from which the assessee operates is a hub of hundreds of other Brick Kiln owners who run brick kilns in the area. Similar business practices are followed by all the brick kiln owners as well as by the assessee. d. If the assessee insists on making payment through account payee cheque he will not be able to procure coal and as such he will not be able to carry on business. e. The truck drivers make delivery during the night because of 'NO ENTRY' of heavy vehicles during day time and insist for cash payments at that point of time only. f. Thus, if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95/217 ITR 431 (All.) - Dy. CIT v. K.C.P. Shivaraman [2017] 49 CCH 193 (Chenai Trib.) 5.The Ld. DR on the other hand, has in the hearing before us stated that the action of Ld. A.O. in disallowing Rs. 27,07,320/- u/s 40A(3) was correct and he further submitted a few judgments namely Associated Engineering Enterprise v. CIT [1995] 81 Taxman 91/216 ITR 366 (Gau.) and Hotel Nagas (P.) Ltd. v. CIT [2016] 69 taxmann.com 438 of Hon'ble Madras High Court, however we find that in both these judgements, the fact that banking facilities were not available is not there, hence, the fact of these two cases is different from the facts in hand in this appeal. Thus, these case laws are of no help to the revenue. The Ld. DR also could not controvert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. A.O. has not found any fault with the payment nor has disbelieve the payment made for the coal suppliers who are duly registered with the VAT department. The payment has not been doubted by the A.O. or by the Ld. CIT(A), hence looking to the facts that the payments were made after the banking hours and that too at village Ballarpur, where there are no banking facilities, we are of the considered opinion that even this amount of Rs. 27,07,320/- should not have been disallowed u/s 40A(3) read with Rule 6DD of the Income-Tax Rules as the Ld. CIT(A) had observed in respect of payments made to truck drivers where he deleted the part cash payment of Rs. 2,58,194/-. In that matter, the CIT(A) was not justified in confirming part additions u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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