2014 (9) TMI 1050 - AT - Income Tax

Disallowance u/s 40A(3) - cash payment to the agents - Held that - Issue in question is squarely covered in assessee s own case for A.Y. 2007-08 wherein the ITAT by considering the same issue about the alleged cash payments of purchase of petrol/diesel held that provisions of section 40A(3) are not applicable to the assessee s case. - Decided against revenue

Summary

Issues:
- Appeal against order of CIT(A) for assessment year 2008-09
- Disallowance under section 40A(3) for cash payment to agents
- Agent's requirement to pay in cash
- Exception under Rule 6DD(k) for cash payments

Analysis:
The appeal was filed by the Revenue challenging the CIT(A)'s order for the assessment year 2008-09. The main issue raised was the disallowance of Rs. 2,41,14,570 made by the Assessing Officer under section 40A(3) regarding cash payments to agents. The Revenue contended that the CIT(A) erred in deleting the addition without appreciating that there was no requirement for the agent to be paid in cash and that the recipients of cash were not established as agents by the assessee.

During the proceedings, the Departmental Representative (DR) relied on the AO's order, while the Authorized Representative (AR) for the assessee argued that the issue was covered by a previous ITAT decision for the assessment year 2007-08. The ITAT's earlier ruling stated that the assessee's payments to agents, though initially made to their bank accounts, were in compliance with Rule 6DD(k) as the agents were required to make cash payments for purchasing petrol or diesel at various locations.

The CIT(A) based his decision on the ITAT's previous judgment and cited that there were no material changes in the circumstances between the relevant years. Furthermore, the AR emphasized that there were no alterations in the facts and circumstances between the two assessment years, leading to the CIT(A) rightfully allowing relief to the assessee. The ITAT, after considering the arguments and materials, upheld the CIT(A)'s order by following the precedent set in the earlier judgment for the assessment year 2007-08.

Ultimately, the ITAT dismissed the Revenue's appeal, affirming the decision of the CIT(A) based on the consistency of facts and the application of Rule 6DD(k) in the case of cash payments to agents. The judgment was pronounced on 05-09-2014, with the appeal of the Revenue being dismissed.