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2014 (1) TMI 906 - AT - Income TaxAddition made u/s 40A(3) of the Act Held that - The disallowance u/s. 40A(3) of the Act for payments made to drivers/sub-contractors, who are agents of assessee - The CIT(A) deleted the disallowance by holding that for the relevant assessment year, which is prior to the amendment w.e.f. Assessment Year 2009-10, where aggregate of cash payment in a day exceeding Rs.20,000/- is subject matter of disallowance, position during Assessment Year 2006-07 speaks of single cash payment in a day exceeding Rs.20,000 - The assessee made payment exceeding Rs. 20,000/- otherwise than by A/c. Payee Cheques or A/c Payee Bank Draft to the drivers/sub -contractors who are nothing but agent of the assessee - In view of provisions contained in Rules 6DD(1) such payments are permissible - The decision in ITO Versus Rajesh Kr Garg 2011 (8) TMI 632 - ITAT Kolkata followed - The assessee as well as recipient had shown cash payment less than Rs.20,000 - Then, a single day more once but single entry of payment is not exceeding Rs.20,000 - the assessee has not violated the Section 40A(3) of the IT Act decided in favour of Assessee. Disallowance u/s 36(1)(vii) of the Act - Addition made on claim of bad debts Business or trading loss u/s 28(1) of the Act Held that - The appellant allowed Shri Rajeshbhai R. Mistry to collect money from the market from the debtors regularly as claimed by the appellant but not deposited with the firm - The appellant had debited the salary in the name of Shri Rajeshbhai R. Mistry and there was a full control of the employer on employee - The appellant had not brought on record any evidence that from which party he had collected money and not deposited - the appellant had not established his case that this is a permanent loss for him as no FIR lodged against the employee to recover the money - He has recovered to the extent of Rs. 2 lacs through the purchase of immovable property from Shri Rajeshbhai R. Mistry, which was not submitted before the A.O. or CIT(A) - there is no bad debt or no business loss to the appellant order of the CIT(A) confirmed Decided partly in favour of Assessee.
Issues Involved:
1. Validity of notice u/s. 148 and reassessment order u/s. 143(3) r.w.s. 147 2. Passing a speaking order against objections raised before reassessment 3. Addition u/s. 40A(3) of Rs. 2,50,980 4. Disallowance of Rs. 2,13,842 as bad debts or business/trading loss Issue 1 - Validity of notice u/s. 148 and reassessment order u/s. 143(3) r.w.s. 147: The appellant contended that the notice u/s. 148 was invalid as it was based on a mere change of opinion without new material. Citing legal precedents, the appellant argued for quashing the reassessment order. However, the grounds related to this issue were dismissed as not pressed by the appellant. Issue 2 - Passing a speaking order against objections raised before reassessment: The appellant raised concerns about the Assessing Officer's failure to pass a speaking order against objections raised before proceeding with reassessment. Referring to legal judgments, the appellant argued that this failure rendered the assessment unsustainable. The Tribunal, however, dismissed this ground. Issue 3 - Addition u/s. 40A(3) of Rs. 2,50,980: The Assessing Officer disallowed a portion of cash payments made by the appellant under section 40A(3) of the IT Act. The CIT(A) upheld the disallowance, stating that the appellant's submissions were against the provisions of the Act. The Tribunal, after considering the appellant's arguments and relevant legal judgments, allowed the appeal, concluding that the appellant did not violate section 40A(3). Issue 4 - Disallowance of Rs. 2,13,842 as bad debts or business/trading loss: The Assessing Officer disallowed an amount as bad debts due to embezzlement by an employee, considering it not admissible under section 36(1)(vii). The CIT(A) confirmed the addition, noting the lack of evidence of embezzlement. The Tribunal, after reviewing the evidence presented by the appellant, concluded that there was no bad debt or business loss, upholding the CIT(A)'s order. In conclusion, the Tribunal partially allowed the appellant's appeal, ruling in favor of the appellant on the issue of addition under section 40A(3) but confirming the disallowance related to bad debts or business/trading loss.
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