2011 (8) TMI 1202 - AT - Income Tax

Summary

Issues Involved:
1. Restriction of addition u/s 40A(3) of the I.T. Act.
2. Violation of Rule 46A(1) of the I.T. Rules due to acceptance of fresh evidence by CIT (A).

Summary:

Issue 1: Restriction of Addition u/s 40A(3) of the I.T. Act

The Revenue challenged the CIT (A)'s decision to restrict the addition to Rs. 5,67,057/- against the total addition of Rs. 10,62,57,655/- made by the AO u/s 40A(3) of the I.T. Act. The assessee, a firm engaged in the transportation of goods, had its assessments reopened due to cash expenditures for lorry hire freight exceeding Rs. 20,000/- in aggregate in a day. The CIT (A) held that the AO misread the provision of section 40A(3) applicable to the relevant assessment year, as the terms 'aggregate cash payments' and 'in a day' were missing in the relevant law. The CIT (A) relied on judicial pronouncements such as Aloo Supply Co. Vs. CIT, Shree Mahavir Corporation Vs. ITO, and Triveniprasad Pannalal Vs. CIT, which stated that the rigour of Section 40A(3) does not apply to multiple transactions where each payment does not exceed the specified monetary limit.

Issue 2: Violation of Rule 46A(1) of the I.T. Rules

The Revenue argued that CIT (A) admitted additional evidence without providing an opportunity to the AO, violating Rule 46A. The learned DR contended that the assessee did not submit details before the AO, which were later entertained by CIT (A). The learned AR countered that no additional evidence was submitted before CIT (A), as all details regarding freight payments were already available in the audit report. The Tribunal found that the details were indeed available to the AO, and the assessee had disallowed 20% of the amount exceeding Rs. 20,000/-. The Tribunal upheld that there was no additional evidence submitted before CIT (A) that could have affected the outcome of the appeal.

Conclusion:

The Tribunal upheld the CIT (A)'s order, stating that the AO misinterpreted the provisions of section 40A(3) as they stood at the relevant time. The Tribunal also found no violation of Rule 46A, as no additional evidence was submitted before CIT (A). Consequently, the appeals of the Revenue were dismissed.

Order Pronounced:

The order was pronounced in the open court on 19th August 2011.