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2015 (4) TMI 792 - AT - Income TaxRevision of assessment order - Applicability of Dis-allowance @ 20% u/s 40A(3) of Income Tax Act 1961 on transport charges - Held that - The sole ground for setting aside the assessment order passed u/s 143(3) is that the assessing officer has not examined the transportation charges which was paid in cash from the angle of disallowance u/s 40A(3). As discussed above it is evident from the material placed on record that during the course of the assessment order proceedings the assessing officer has called for the entire details of transportation charges which included party-wise ledger accounts bill and vouchers etc. specifically to examine the nature of cash payment made to the various transporters. From the perusal of such ledger account and bills and vouchers which have been placed before the AO it is seen that none of the payment made by the assessee at a time has exceeded 20, 000/- in cash. This fact is corroborated by the bills issued by transporters and also the vouchers issued by the assessee. These transportation charges are in the nature of advances paid to the drivers and transporters once the assessee books the trucks for the purpose of the purchases outside Maharashtra. If all these details have been verified and examined by the AO then it cannot be held that AO has not made any enquiry or verified the evidences. Here in this case the Ld. CIT has not pointed out that there is any actual violation of section 40A(3) as per the law prevalent in the A.Y. 2007-08. Prior to A.Y. 2009-10 section 40A(3) provided that where the assessee incurs any expenditure in respect of which payment is made for sum exceeding 20, 000/- then no deduction shall be allowed. The statute did not envisaged that the aggregate amount of payments made to a person on a day should exceed 20, 000/-. This specific amendment has been brought in the statute w.e.f. 01.04.2009. This proposition that no disallowance u/s 40A(3) should be made if the payment at a time is less than prescribed limit is fully supported by decision of Hon ble Allahabad High Court in the case of Ashok Iron and Steel Rolling Mills 2009 (10) TMI 414 - ALLAHABAD HIGH COURT and decision of Orissa High Court in the case of Aloo Supply Company 1979 (12) TMI 60 - ORISSA High Court . Thus the AO has rightly not invoked the provision of section 40A(3) while completing the assessment u/s 143(3). On these facts it cannot be held that the assessment order passed by the AO is erroneous so far as it is prejudicial to the interest of the revenue. The Ld. CIT has not given any specific finding from the records as to how there is a violation of section 40A(3) with regard to the payments made by the assessee. Thus we quash the impugned order passed by Ld. CIT u/s 263 and the grounds raised by the assessee is treated as allowed. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act, 1961. 2. Application of Section 40A(3) regarding cash payments. 3. Examination of transport expenses by Assessing Officer (AO). 4. Revisionary jurisdiction and scope of Section 263. Issue-wise Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act, 1961: The Assessee contested the Commissioner of Income Tax (CIT)'s assumption of jurisdiction under Section 263, arguing that the conditions precedent for invoking this section were not satisfied. The CIT had issued a show cause notice under Section 263, pointing out that the AO had not examined the cash payments for transport charges under Section 40A(3). The CIT held that the AO's order was erroneous and prejudicial to the interest of the revenue, directing the AO to re-examine the applicability of Section 40A(3). 2. Application of Section 40A(3) regarding cash payments: The CIT argued that the AO failed to consider the violation of Section 40A(3), which mandates disallowance of expenses exceeding Rs. 20,000 paid in cash. The Assessee countered that no single payment exceeded Rs. 20,000, and the payments were made to truck drivers for transportation expenses, which were sometimes necessary to be in cash. The Assessee also noted that the legal position for the assessment year 2007-08 did not aggregate payments within a day but considered individual payments. 3. Examination of transport expenses by Assessing Officer (AO): The AO had scrutinized the Assessee's transport expenses, noting that 75% of the total transportation charges were paid in cash. The AO verified the bills and vouchers and made an ad hoc disallowance of Rs. 1,25,000 due to unsupported transport expenses. The Assessee provided detailed party-wise transport charges and bills, showing no payment exceeded Rs. 20,000. The Assessee argued that the AO had examined these details, and thus, the CIT's claim of non-examination was unfounded. 4. Revisionary jurisdiction and scope of Section 263: The Assessee argued that the CIT could not invoke Section 263 merely because he had a different view from the AO, especially when the AO had examined the issue and formed an opinion. The Assessee cited various judicial precedents, including the Supreme Court and High Courts, supporting that an AO's view, if plausible, should not be substituted by the CIT under Section 263. The CIT failed to demonstrate any actual violation of Section 40A(3) for the assessment year in question. Conclusion: The Tribunal quashed the CIT's order under Section 263, holding that the AO had duly examined the transport expenses and the cash payments did not exceed Rs. 20,000 as per the legal provisions applicable for the assessment year 2007-08. The Tribunal found that the CIT's order was not justified as there was no clear violation of Section 40A(3) demonstrated. The Assessee's appeal was allowed, and the order pronounced in the open court. Order: The appeal filed by the Assessee is allowed.
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