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TMI Blog2018 (12) TMI 1998X X X X Extracts X X X X X X X X Extracts X X X X ..... ing expenses at Rs. 1,81,800/- on lump sum basis. Considering the facts of the case in its totality, he ought to have deleted the entire addition." 3. The brief fact of the case is that return of income declaring income of Rs. 24,84,044/- was filed. Subsequently, the case was selected under security by issuing of notice u/s. 143(2) of the act on 18th August, 2010. M/s. S.N.R. Logistics is a propriety concern of the assessee engaged in the business of transport of goods by road truck and contractors. The main activity of the assessee is to hire the truck and contractors from the transporters and supply them to their clients company. On verification of the details filed, the assessing officer noticed that assessee made cash payment in excess of Rs. 20,000/-. Therefore, the assessee was issued a show cause notice as to why the amount paid in excess of Rs. 20,000/- to a single party in a day should not be disallowed and added back to the income of the assessee. The assessee has explained that it has made payment which includes all purposes like payment to driver, cleaner, diesel expenses, other spare parts purchase, expenses for puncture tube tire etc. The assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced as under "3.5. I have carefully gone through the facts of the case, various written submissions, remand report of the A.O and rejoinder to the remand report. It is noticed that the appellant could not submit the detailed reply along with the analysis and supporting bills/vouchers to justify the payments made exceeding Rs. 20,000/- in cash as the voluminous transactions were involved in the given short time to comply the requisitions of the A.O. So the necessary details and evidences were furnished in the appellate proceedings and report of the A.O. was also called for. Thus, it is a fit case for admitting the evidences under Rule-46A of the I.T. Rules as the order has been passed by the A.O. without giving sufficient opportunity to the appellant to adduce the evidences relevant to the grounds of appeal. Even the A.O. has not made any objections to the admission of such additional evidences and she gave the remand report on merits of the issue. Therefore, the additional evidences are admitted under 46A of the I.T. Rules in view of the decision of various courts in eluding in the case of Smt. Prabhavati S. Shah V. Commissioner of Income Tax. 231 ITR 1 (BOM). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant are discussed hereunder:- (1) Details of payments below Rs. 20,000/- each to various parties totaling to Rs. 20,73,420/-. Since each payment was less than Rs. 20,000/- even on a single day for a single transaction and hence the provisions of Section 40A(3) does not apply as per the appellant. (Page No. 21 to 44 of Paper Book) I have carefully gone through the facts of the case, various written submissions, remand report of the A.O and rejoinder to the remand report. The appellant has claimed that in fact the A.O. has made the disallowance of the cash payment of Rs. 20,000/- on a single day to the single party on which provisions of Section 40A(3) does not apply as for invoking the provisions the cash payments should be exceeding Rs. 20,000/-. The appellant's contention is found correct to this extent. It is noticed that in the following cases, the payments to the parties were made upto Rs. 20,000/- on a single day on which there is no violation and no disallowance needs to be made as per the provisions of Section 40A(3) of the I.T. Act. Therefore, as per the details given below, the appellant gets the relief of Rs. 5,66, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Toll Nakas and other expenses besides the food and beverage expenses of the drivers and helpers. So the total payment made for a single trips includes various expenses under aforesaid heads besides diesel/repairing, maintaining expenses for the truck/trailers etc. Since these expenses were paid to different payees and do not individually exceed the limit of Rs. 20,000/- so no disallowance should be made on this account. 2.1. On going through the various details and submissions and the copies of vouchers and the records it is undisputed that the appellant has to make the payment in cash for the various RTO fees levied in the trips at RTO check posts on various accounts besides toll payments at various Toll Nakas. All these 3 payments are mandatorily to be made by way of cash and no cheque/DD could be given for such payments. Hence, the payments towards RTO fees and the toll payments made in cash does not qualify for the disallowance in view of the Rule-6DD(b) because these payments are made to the government authorities or the collecting agents on behalf of the government to whom contracts for collection has been awarded by the government and falls under the exclusion clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d provisions of section 40A(3), read with rule 6DD(j) - Held, yes \ (5) CIT Vs. Kalyan Prasad Gupta (2012) 20 taxmann.com 533 (Raj.) Date of Order: 20.11.2010 " Section 40A(3) of the Income-tax Act, 1961 - Business disallowances -Cash payment exceeding prescribed limits - Assessment year 2004-05 -Where State Government had granted contract to collect royalty on its behalf, payment was made to contractor not in individual capacity, but on behalf of Government and, hence, no disallowance under rule 6DD(b) could be made of royalty paid by contractor to Government in cash (6) P.M. Abdul Razak Vs. ITO (1997) 63 ITD 398 (Coch.) Date of Order: 05.03.1996 Whether since Assessing Officer did not doubt genuineness of cash payments nor alleged anything of making false claim of those payments, disallowance made by him could not be confirmed -Held, yes (7) Dy. CIT Vs. Mayur Sales (2001) 116 Taxman 95 (JP) (Mag.) Dt. of Order: 10.03.2000 Section 40A(3) of the Income-tax Act, 1961 - Business disallowance -Cash payment in excess of prescribed limit - Assessee had made certain cash payments to truck drivers in excess of prescribed limit - Assessing Officer disallowed same - Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has enclosed sample vouchers to the effect of making the payment to the drivers who had to ultimately make the payment RTO fees and toll naka at the check posts during the trips which establishes that the payments in cash were unavoidable and has been made genuinely. Even otherwise also irrespective of the maintenance of the vouchers/receipts the fact of making such payments to the aforesaid authorities could not be denied as can be noticed from the details noted in the table below that long journeys have been performed by the vehicles by passing through various toll nakas and RTO check-posts. For example, Bangalore to Baroda, JNPT to Jajudhan, Kalamboli to Nayveli. So aforesaid payments are liable to be allowed as deduction under the Rule-6DD. In view of the above discussion and ratios in the decisions of various courts referred above, the total payments towards Road/RTO expenses of Rs. 1,73,500/- as per the table above even each" payment below Rs. 20,000/- also does not call for any disallowance and hence disallowance made by the A.O. is deleted? 2.4. Further, it is noticed from the table above that each advance includes the road and RTO expenses besides various en- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully gone through the facts of the case, various written submissions, remand report of the A.O and rejoinder to the remand report. Here the appellant intend to take the benefit of Rule-6DD(J) for the reason that on the dates of payment given in the Table below the appellant was not having the banking facilities in operations and hence he could not make the payment by cheques. On this account, the appellant has claimed the benefit on account of Saturdays, Sundays and other Banking holidays. The appellant's contention in respect of the cash payments made on the Sundays and Banking holidays on which banks were closed is accepted and the provisions of Section 40A(3) would not apply for such payments as under:- B; DETAILS OF AMOUNT PAID ON SATURDAY'S, SUNDAY'S AND HOLIDAY'S FOR THE PERIOD FROM 01.04.2008 TO 31.03.2009 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx The A.O. may verify that the aforesaid dates of payments falls on Sundays and Banking holidays only. No disallowance is warranted for the total cash payments made on Sundays and banking holidays to the tune of Rs.&nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contact number of the truck operator who may have plied his goods to Pune in pursuance to some other contract. In that situation, the appellant contact to the operator of the goods of carriage with a request not to return back to his home place but to take the load from Pune and proceeds for Chennai. Since, at that time the drivers of the goods carriage may not be having the sufficient cash with them to carry out the transportation from Pune to Chennai and in that case he would be in need of some cash to meet various en-route expenses. In that situation, since the appellant did not have any representative there at Pune hence certain cash has to be delivered to the driver at Pune either with the help of some messenger/courier or by any other mode because neither the appellant has its office at Pune nor the goods carriage owner has any office at Pune. Therefore, in that situation there is no option than to deliver/arrange the cash to the driver at Pune so as to carry out the transportation from Pune to Chennai. For making available the cash at Pune through various modes, the appellant has incurred certain travelling expenses, courier expenses etc. which have been debited in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule-6DD(b) because these payments are made to the government authorities or the collecting agents on behalf of the government to whom contracts for collection has been awarded by the government and falls under the exclusion clause under the Rules-6DD of 40A(3) of the XT Act. The L.R's were not required for such enquiry. Further A.O's remarks that enquiry of various parties noted in the chart could not be made in remand report, since appellant could not produce the L.R's, is not significant as the names & addresses of these transporters and details of trips were already available to the AO for making the enquiries but no such enquiries have been made by the A.O. 4.5. The various courts after interpreting the aforesaid rule have taken this views that aforesaid payments does not fall under the disallowance u/s. 40A(3) of the I.T. Act. The same are discussed hereunder:- (1) CIT Vs. Devendrappa M. Kalal (2013) 39 taxmann.com 16 (Karnataka) Date of decision: 18.09.2013 (2) CIT Vs. Kishor Project (P) Ltd. (2013) 36 taxmann.com 94 (Gujarat) Date of Decision 19.03.2013 Tribunal upheld order of Commissioner (Appeals) - Whether since payment had been made at a place wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed anything of making false claim of those payments, disallowance made by him could not be confirmed -Held, yes (7) Dy. CIT Vs. Mayur Sales (2001)116 Taxman 95 (JP) (Mag.) Dt. of Order: 10.03.2000 Section 40A(3) of the Income-tax Act, 1961 - Business disallowance -Cash payment in excess of prescribed limit - Assessee had made certain cash payments to truck drivers in excess of prescribed limit - Assessing Officer disallowed same - Whether cash payments made to truck drivers for freight and octroi charges fell under exceptional circumstances as mentioned in rule 6DDQ) of the Income-tax Rules, 1962, read with CBDT's Circular No. 220, dated 31-5- 1977 and, therefore^ Commissioner (Appeals) rightly deleted disallowance made by Assessing Officer - Held, yes (8) Walford Transport (Eastern India) Ltd. Vs. CIT (2002) 124 Taxman 538 Dt. of Order : 08.10.1999 Whether where authorities were satisfied about genuineness of transactions and identity of payees and fact that asses see was in financial stringency warranting cash payments, in such circumstances, disallowance of part of payment so made was unjustified - Held, yes (9) CIT Vs. Kalyan Prasad Gupta (2011) 51 DTR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D. In view of the above discussion and ratio of decisions of various courts referred above, the total payments towards Road/RTO expenses of Rs. 1,82,500/- as per the table above even each payment below Rs. 20,000/- also does not call for any disallowance and hence disallowance made by the A.O. is deleted. 4.7. Further, it is noticed from the table above that each advance includes the road and RTO expenses besides various en-route other expenses like diesel to be filled in the journey, repairing /maintenance expenses of the vehicle, food expenses of the drivers and helpers and many other miscellaneous expenses etc. It is needless to mentioned that in this transportation trade before starting of the trip some advance has to be made to the driver on account of the aforesaid requirements and that to be made in cash only as no cheque/D.D. could be utilized on the roads. This advance amount is decided depending upon the various factors like distances between the arrival and departure station, time to be taken in the trip, number of toll nakas in the trip and number of days likely to be taken etc. Thereafter, these advance payments made by appellant were reduced from the tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,211/- (Rs.6,73,950/- + Rs. 10,82,5007- + Rs. 14,08,2617- + Rs. 4,37,9007- + Rs. l 1,05,6007-). (5) The details of amounts paid to the parties in excess of Rs. 20,000/- wherein the appellant does not have any presence nor bank account. The total of this amounts are at Rs. 22,52,135/-. (PageNo. 102 to 118 of paper book) I have carefully gone through the facts of the case, various written submissions, remand report of the A.O and rejoinder to the remand report. The appellant has claimed that the cash payment exceeding Rs. 20,000/- has been made for the reason that he did not have any presence nor any bank account at the starting point of the trip.- The details of these payments are given in the table as under:- xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxx 5.1. These are the payments similar to the payments as discussed in preceding para. Since, the payments to the drivers in advance has to be made for various heads like RTO/Road/Border tax and various miscellaneous expenses etc. As such the various govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted - Held, yes [Paras 12 & 14] (4) Basu Distributor (P) Ltd. Vs. ACIT (2012) 19 taxmann.com 11 (Delhi) Date of Decision: 09.02.2012 Section 40A(3) of the Income-tax Act, 1961 read with rule 6DD(j) of the Income-tax Rules, 1962 - Business disallowance - Cash payment exceeding prescribed limits - Assessment years 1992-93 to 1994-95 -Assessee, a film distributor, made payments above Rs. 10,000 in cash to third parties - Lower authorities held that assessee by making payments above Rs. 10,000 in cash to third parties had violated provisions of section 40A(3), read with rule 6DD(j) - Whether since (i) provisions of section 40A(3) and rule 6DDQ) have been incorporated in Act in order to check incurring of bogus and fictitious expenses to non-existing parties, and (ii) lower authorities did not doubt identity of third parties and genuineness of payments, they were wrong in concluding that assessee had violated provisions of section 40A (3), read with rule 6DD(j) - Held, yes (5) CIT Vs. Kalyan Prasad Gupta (2012) 20 taxmann.com 533 (Raj.) Date of Order: 20.11.2010 Section 40A(3) of the Income-tax Act, 1961 - Business disallowances -Cash payment exceeding prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uineness of the payment was not doubled, the materials purchased under cash payments were utilized for construction activity carried on by the asses see, it was not possible to hold that purpose of payment in cash was to frustrate proper investigation by the Department; and as such disallowance of such payments in cash was not justified. (12) CIT v. Eastern Condiments (P) Ltd. (2003) 261 ITR 76 When genuineness of cash purchases was not in doubt and there was evidence that vendors would only accept cash, disallowance of cash payments in excess of prescribed limit was not justified. (13) Satpal Jain Vs. ACIT (2003) 79 TTJ 444 (Delhi) Confirmation of recipient that he did not accept Cheque, would cover the case under Rule 6DD, and disallowance of cash payment in excess of prescribed limit was not justified. (14) DDIT(IT),2(1), Mumbai Vs. Samsung Engg. Co. Ltd. (2011) 43 SOT 36 Date of Order: 10.11.2010 (15) CIT Vs. Parle Sales And Services (P) Ltd. (2008) 307 ITR 87 (Guj.) Date of Order: 11.10.2007 Section 40A(3) of the Income-tax Act, 1961 - Business disallowance -Case payment exceeding prescribed limits Where village concerned did not have banking facility and, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to the drivers have to be made at the loading station where neither the appellant nor the carrier operator exist. Even some times due to the non-banking hours the payments were to be made the drivers in cash otherwise they had to wait for the next working day to get the payments from the bank. At some times due to the holidays also they were unable to use the banking facilities also. Since, to meet out the en-route expenses at the insistence of these parties the appellant had to make the part payment in cash and the balance payment through cheques which itself shows the bonafides of the appellant that part payment in cash was made only to meet the necessary requirement of the trip. There was no doubt on the genuineness of these payments to the parties. 6.3. Under the similar circumstances, the various courts have held that the cash payments made where the payee insists for the cash payments no disallowances u/s. 40A(3) are warranted, more particularly when genuineness of the payments have not been doubted by the A.O. Some of the case laws are as under: - (1) CIT Vs. Devendrappa M. Kalal (2013) 39 taxmann.com 16 (Karnataka) Date of decision: 18.09.2013 (2) CIT Vs. Kishor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) P.M. Abdul Razak Vs. ITO (1997) 63 ITD 398 (Coch.) Date of Order: 05.03.1996 Whether since Assessing Officer did not doubt genuineness of cash payments nor alleged anything of making false claim of those payments, disallowance made by him could not be confirmed -Held, yes (7) Dy. CIT Vs. Mayur Sales (2001)116 Taxman 95 (JP) (Mag.) Dt. of Order: 10.03.2000 Section 40A(3) of the Income-tax Act, 1961 - Business disallowance -Cash payment in excess of prescribed limit - Assessee had made certain cash payments to truck drivers in excess of prescribed limit - Assessing Officer disallowed same - Whether cash payments made to truck drivers for freight and octroi .charges fell under exceptional circumstances as mentioned in rule 6DD(j) of the Income-tax Rules, 1962, read with CBDT's Circular No. 220, dated 31-5-1977 and, therefore, Commissioner (Appeals) rightly deleted disallowance made by Assessing Officer - Held, yes (8) Walford Transport (Eastern India) Ltd. Vs. CIT (2002) 124 Taxman 538 Dt. of Order : 08.10.1999 Whether where authorities were satisfied about genuineness of transactions and identity of payees and fact that assessee was in financial stringency warr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 40A(3) -Held, yes (15) CIT Vs. Rajmohan Filial (2004) 267 ITR 561 Where assessee had established the identity, genuineness of transport and collie charges, one more opportunity had to be given to the assessee to confirmation letters obtained from the transporting agency to the effect that they were not willing to receive the transportation charges by crossed cheques/drafts and they insisted for payment of the charges in cash. 6.4. In view of the above discussion, the relief to the extent of Rs. 25,45,385/- is granted to the appellant on this account. The A.O. is directed to verify that no double relief is granted for these transactions in any of the heads discussed from Point No. 1 to 5 above. 7. In view of the above discussion, this ground is decided and the deletion of the disallowance amounting to Rs. 1,12,00,206/- (Rs.5,66,270/- + Rs. 5,23,790/-+ Rs. 12,22,350/- + Rs. 10,82,600/- + Rs. 47,08,211/- + Rs. 5,51,200/- + Rs. 25,45,785/-) under various heads as above subject to verification by the A.O. as per the directions given under the respective heads. Subject to the above, the ground of the appellant is partly allowed." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 22,52,135/-. The ld. CIT (A) has examined these categories as under. ((i) The assessee has claimed that provision of section 40A(3) does not apply as the cash payment was not exceeding Rs. 20,000/-. The ld. CIT (A) has verified the claim of the assessee and given a relief for Rs. 5,66,270 on the basis of relevant material which demonstrates that amount paid to a single party was below Rs. 20,000/-. The ld. CIT (A) has rejected the claim of the assessee that the provisions does not give any immunity for every set of trips/separate trips the payment exceeding Rs. 20,000/- even if paid on a single day to a same person. (ii) The claim of the assessee that he has incurred certain expenses on account of RTO fees check post, reimbursement of the toll at various toll naka to the amount of Rs. 1,73,500/- the other expenses like diesel, repair, maintenance expenses food expesnes etc. and deleted such addition to the extent of Rs. 3,50,290/-. has been verified by the ld. CIT (A) as per the supporting material furnished by the assessee and deleted the addition to the extent of Rs. 5,23,790 (Rs.350,290/- + Rs. 1,73,500) (iii) The ld. CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,000/- was made to single party in a day. We have considered that ld. CIT (A) has already given relief to the assessee where there is such payment less than 20,000/- and has also excluded the payment which were made to the road expenses/RTO, maintenance expenses and payment which were made on Saturdays, Sundays and holidays and other circumstances as elaborated during the course of appellate proceedings before us. The ld. counsel has failed to controvert the finding of ld. CIT (A) and also failed to point out that how the expenses are allowable in his case as per rule 6DD of the IT rules. We have also noticed that the jurisdictional summary referred by the assessee are distinguishable from the facts of the case of the assessee considering the judicial pronouncements referred by the Ld.CIT (A) in his elaborated findings demonstrating that due relief have been provided under the different circumstances cited by the assessee according to the provision of law and rule. . Therefore, considering the detailed findings of the ld. CIT(A), we do not find any merit in the appeal of the assessee, therefore, the same is dismissed. Second ground of appeal: disallowance of loading and un-loadi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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