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2016 (6) TMI 1410 - AT - Income TaxAddition u/s 40A(3) for cash payments made exceeding ₹ 20,000/- per day - HELD THAT - In the case of the assessee, it is apparent that each and every transporter delivers the raw materials from the supplier in the factory premises of the assessee and collects transport charges at the place of delivery by cash. Further, most of the expenses relate to transportation cost such as fuel expense, driver expense etc., which has to be settled then and there in cash. The lorry drivers will not be able to refuel the lorry if he accepts cheque which would take some time for withdrawal of cash. Most of the lorry drivers would not be having bank account to en-cash cheque. In these circumstances, payment by cash is inevitable - there is nothing on record to establish that the transport charges are paid to a single person above ₹ 20,000/- in cash in the case of the assessee. The genuineness of the payment is also not in dispute. Based on these facts and the detailed observations made by the learned Commissioner of Income Tax (Appeals), he has deleted the additions made under section 40A(3). Disallowance under section 14A r.w.r 8D - investments made for acquiring the shares of the assessee s sister concerns - HELD THAT - As relying on LAKSHMI RING TRAVELLERS, COIMBATORE 2012 (3) TMI 464 - ITAT CHENNAI we remit the issue back to the file of the learned Assessing Officer to verify as to whether the assessee had invested out of its non-interest bearing funds in its sister concerns or associate concerns for strategic reasons and if found so delete the addition made on that regard, however if found otherwise, pass appropriate orders as per merit law, after affording sufficient opportunity of being heard to the assessee. It is ordered accordingly for all the relevant assessment years. Addition u/s. 68 being unexplained cash credits - HELD THAT - The source of advances is established in the case of the assessee. The advances are made to petty land owners for purchase of land from them. Since the assessee was not agreeable to the price determined by the State Govt., for acquiring those lands, the project was dropped and the advances made were returned and the same was re-deposited in the assessee s bank account. The names address of the intermediaries are also furnished by the assessee. All these facts could have been easily verified by the Revenue by examining the coordinators and the land owners of that area. Revenue has miserably failed to make any enquiries even at the preliminary level. Revenue has failed to prove the onus caste upon it for rebutting the explanation made by the assessee. In this situation, we are of the considered view that CIT (Appeals) has rightly given relief to the assessee by directing the learned Assessing Officer to delete the addition. Deduction under section 80IA had to be granted on the income derived from the undertaking after all disallowances made by invoking the provision of Section 40A(3), 14A 68 - HELD THAT - It is needless to mention that section 80IA of the Act is a provision with fiction by which the benefit of deduction is granted towards the income earned by the assessee. Hence, for the purpose of computing deduction under section 80IA of the Act, section 40A(3) and 14A cannot be given effect. Therefore, to that extent the deduction will not be available to the assessee. Further, section 68 provides that any sum which is credited to the books of the assessee against which no explanation is satisfactorily offered, such sum so credited, will be charged to income tax as the income of the assessee. Thus the statute clearly provides that irrespective of any other factors this amount will be brought into the ambit of tax as a distinct income which is not disclosed. Further Section 68 of the Act is also provision with legal fiction, wherein the unexplained credit in the books of accounts of the assessee is deemed to be the unexplained income of the assessee. Therefore, we do not find any merit in this ground raised by the learned Authorized Representative. Accordingly, this ground raised by the assessee is hereby dismissed.
Issues Involved:
1. Addition made under section 40A(3) for cash payments exceeding ?20,000/- per day. 2. Disallowance under section 14A read with Rule 8D. 3. Addition under section 68 being unexplained cash credits. 4. Deduction under section 80IA on income derived after all disallowances. 5. Validity of reopening assessment under section 147. Detailed Analysis: 1. Addition under section 40A(3) for cash payments exceeding ?20,000/- per day: The Revenue challenged the deletion of additions made under section 40A(3) by the Assessing Officer (AO) for cash payments exceeding ?20,000/- per day. The AO observed significant cash payments to suppliers, which the assessee explained were for transportation charges paid to lorry drivers, not exceeding ?20,000/- per day. The Commissioner of Income Tax (Appeals) [CIT(A)] found that these payments were routine trade practices for diesel, toll charges, and other expenses, and the payments did not exceed ?20,000/- per day to any single transporter. The CIT(A) thus deleted the additions, considering the practical business expediency and routine trade practices. The Tribunal upheld the CIT(A)'s decision, confirming that the payments did not attract section 40A(3) as they were genuine and necessary for business operations. 2. Disallowance under section 14A read with Rule 8D: The AO made additions under section 14A read with Rule 8D for investments in subsidiary companies, claiming they incurred expenses for earning exempt income. The CIT(A) directed the AO to re-compute the disallowance by excluding investments in subsidiary companies. The Tribunal referred to precedents where investments in sister concerns for strategic purposes were not subjected to section 14A disallowance if made from non-interest-bearing funds. The Tribunal remitted the issue back to the AO to verify if the investments were made from non-interest-bearing funds and for strategic purposes, directing deletion of the addition if these conditions were met. 3. Addition under section 68 being unexplained cash credits: The AO added ?60,60,000/- under section 68 for unexplained cash deposits in the assessee's bank account. The CIT(A) deleted the addition, accepting the assessee's explanation that the cash was refunded by landowners for uncompleted land purchases. The CIT(A) found the transactions genuine, supported by bank records and the context of land acquisition disputes. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue failed to verify the genuineness of the transactions despite having sufficient details to do so. 4. Deduction under section 80IA on income derived after all disallowances: The assessee argued that disallowances under sections 40A(3), 14A, and 68 should not affect the deduction under section 80IA. The Tribunal rejected this view, stating that legal fictions under sections 40A(3), 14A, and 68 cannot be extended to section 80IA. Thus, the increased profit due to these disallowances would not qualify for the section 80IA deduction. 5. Validity of reopening assessment under section 147: The assessee raised an additional ground challenging the reopening of assessment under section 147 for the assessment years 2008-09 and 2009-10. The Tribunal remitted this issue back to the AO for consideration, providing the Revenue an opportunity to address the assessee's challenge. Conclusion: The Tribunal partly allowed the Revenue's appeals for statistical purposes, dismissed the assessee's cross objections for the assessment years 2010-11 and 2011-12, and partly allowed the cross objections for the assessment years 2008-09 and 2009-10 for statistical purposes. The order was pronounced on June 22, 2016.
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