TMI Blog2008 (12) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 40A(3) of the Income-tax Act. The addition was deleted by the Ld. CIT(A) but the ITAT as per its order dated 1-8-2005 in ITA No. 1537/K/2004 and CO. No. 8/Kol./2005 set aside the issues and directed the Assessing Officer to finalise a fresh assessment after giving reasonable opportunity of being heard to the assessee. In pursuance of ITAT's order, the Assessing Officer finalized the impugned assessment under section 143(3) read with section 254 as per order dated 15-12-2006 and made an addition of Rs. 1,48,316 disallowing 20 per cent of the expenditure of Rs. 7,41,583 for cash purchases exceeding Rs. 20,000 in view of provisions of section 40A(3) of the Income-tax Act. The Assessing Officer held that the assessee had paid the amount more than Rs. 20,000 in respect of its purchases on the same day to the same person and the provisions of section 40A(3) were attracted to this case. The Ld. CIT(A) took note of the submissions of the assessee that he was a retail. seller of kerosene oil and was required to lift kerosene stock from the dealers within a specific timeframe in view of the quota release system of the Government and the dealer did not accept the cheque payments. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D of the Income-tax Rules. The Ld. Counsel, however, submitted that the assessee was a retailer doing business in village and he was purchasing kerosene from district town of Purulia and Balrampur and that the purchases were made through assessee's employees, that the sellers did not accept the cheques and, therefore, the disallowance under section 40A(3) could not be made in view of clause (1) of rule 6DD of Income- tax Rules, 1962. 5. We have carefully considered the issue. The submission of the Ld. Departmental Representative that the cases relied on by the assessee pertaining to erstwhile provisions of section 40A(3) read with rule 6DD(j) and Circular No. 220 of the CBDT are not applicable in view of the amended provisions of the Act, with due respect, is considered correct. So far as the decision of the ITAT in the case of Sri Renukeshwar Rice Mills is concerned, the payment was made for agricultural produce and was covered in rule 6DD(f) of the Income-tax Rules. Since the assessee has not made the purchases of agricultural produce and the payment was also not made to his agent who was required to make payment in cash or goods, the aforesaid decision is of no help to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement of the assessee that no expenditure was incurred and the goods were delivered by the suppliers to the godown of the assessee without charging anything for transportation could not be accepted. 10. On a careful consideration of facts, orders of the lower authorities and rival submissions of the parties, we are of the considered opinion that the assessee has failed to substantiate its claim that the goods were delivered by the suppliers and transportation charges were not incurred by it. We, therefore, find no reasons to interfere with the decision of the Ld. CIT(A) in confirming the estimated addition of Rs. 50,000 made by the Assessing Officer on account of transportation charges having been incurred by the assessee out of his undisclosed sources. This ground of appeal is also rejected. 11. In the result, the appeals of the assessee are dismissed. Per N.L. Dash, Judicial Member.- Both these appeals were given to my learned Brother Mr. B.R. Kaushik, A.M. for drafting the order. Since I beg to differ in both the years, I give my own reasoning separately by this dissenting order. 2. Regarding appeal in ITA No. 1992/Kol./2007 for the assessment year 2000-01, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortunity of being heard to the assessee. The ground taken by the revenue is therefore allowed for statistical purposes." But the Assessing Officer has redone the assessment in a stereo-type manner. Hence, we find that no purpose will be served in setting aside the assessment again, particularly in a case like this where the assessee is a small kerosene dealer. The case law cited by the ld. AR for the assessee in the case of Attar Singh Gurmukh Singh has been taken into consideration under the specific circumstances of the case. The relevant portion is quoted below for better appraisal of facts:- "Section 40A(3) of the Income-tax Act, 1961, which provides that expenditure in excess of Rs. 2,500 (Rs. 10,000 after the 1987 amendment) would be allowed to be deducted only if made by a crossed cheque or crossed bank draft (except in specified cases) is not arbitrary and does not amount to a restriction on the fundamental right to carryon business. If read together with rule 6DD of the Income-tax Rules, 1962, it will be clear that the provisions are not intended to restrict business activities. There is no restriction on the assessee in his trading activities. Section 40A(3) only em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writing any separate reasoning. With regard to addition of Rs. 50,000 for alleged payment of transport charges, it transpired that it is an addition on estimated basis but the effect remains that transportation charges has to be met with. Hence, in my considered view, the Assessing Officer in a prudent manner should not step into the shoes of an assessee and decide what expenditure requires to be met with. With this logic, I delete the addition on ground No. 2. Hence, on both the issues I am inclined to give relief to the assessee. 8. In the result, both the appeals filed by the assessee are allowed. REFERENCE UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 Since there is a difference of opinion between the Members of the Tribunal, we state the following point of difference and refer the same to the Hon'ble President of the Income-tax Act, 1961. The point of difference is as under:- "Whether on the facts and in the circumstances of the case, the CIT (Appeals) is justified in confirming the additions of Rs. 1,48,316 and Rs. 73,788 under section 40A(3) of the Income-tax Act, 1961 for the assessment years 2000-01 2003-04 respectively and also confirming the addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d recorded as a single payment against such purchases. Since the assessee has failed to file any supporting material either before the Assessing Officer or before us, therefore, the Ld. CIT(A) without giving any opportunity to the Assessing Officer has erred in deleting the same. Therefore, in the interest of justice, we are of the view that the matter should go back to the file of the Assessing Officer and accordingly, we set aside the order of the ld. CIT(A) on this account and restore the matter to the file of the Assessing Officer who shall decide the issue afresh in the light of our above observation hereinabove and according to law after providing reasonable opportunity of being heard to the assessee. The ground taken by the revenue is, therefore, allowed for statistical purposes." 5. The Assessing Officer gave effect to the above order of ITAT vide his order dated 15-12-2006 in which he again made the addition of Rs. 1,48,316 with the following finding:- "1. In the course of hearing it was found that cash was paid more than Rs. 20,000 in contravention of provision of under section 40A(3). Total cash amount paid exceeding Rs. 20,000 was Rs. 7,41,583. According to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for alleged payment of transportation charges, I have heard both the parties and perused the material placed before me. The Assessing Officer made the addition of Rs. 50,000 with the following finding:- "While examining the audited P L A/c. for Kerosene and Fertilizer business, it is seen that the assessee has shown purchase of Kerosene for Rs. 25,12,229 and Rs. 4,73,269 for fertilizer but not claimed/shown any transporting charges for goods. The assessee purchased goods from different parties of Purulia District such as Balarampur, Sirkabad, Purulia town and from Bankura District. The assessee has to bear some expenses towards transporting the goods purchased. The assessee was asked to explain this point by this office letter dated 16-2-2006. The assessee has stated in his letter dated 27-2-2006 that "In this connection it is very respectfully submitted that the assessee deals in two products mainly Kerosene Oil and Fertilizers. The assessee purchases the same in bulk. So far Kerosene oil is concerned, the supplying dealer redirects the Tanker to the assessee's business place and therefore, no transporting charges are required to be paid by the assessee. In the case of Ferti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich could be applied to the facts of the case is section 69C, which reads as under:- "69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year: Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income." From the above it is evident that section 69C would be applicable where in any financial year an assessee has incurred an expenditure for which the assessee is unable to offer any explanation for the source of such expenditure. Thus the Assessing Officer has to first find the evidence of incurring the expenditure. Section 69C cannot be applied on mere presumption or suspicion. In the case under consideration before me, the Assessing Officer has not found any ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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