Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2018 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (4) TMI 998 - AT - Income TaxDisallowance u/s. 40A(3) - payment to each Trucker, i.e., for each consignment, on any single day, exceeded the prescribed threshold limit - payment shown as made in installments - Held that - The assessee s claim that the payment has been made, in each individual case, over the time actually taken to effect delivery (for that consignment), valid in principle, would require being proved by it. This is as it is untenable and nobody s case that a truck is held up, i.e., after delivery, only to enable discharge of the balance amount in installments, so as to eschew section 40A(3). The arrival of a truck at the assessee s site or, as the case may be, point/station from where it is routed to its destination, co-opting assessee s employee in crew (to oversee delivery and make payments in cash installments); its journey across varies tolls/octroi posts/check points on the way; arrival at its destination (and weighment - gross and tare); unloading at site; journey back to the assessee s premises/work station, etc. would all stand to be evidenced. Subject to this factual verification, we approve the assesee s claim, i.e., in principle. The burden to prove its return, and the claims preferred thereby, is only on the assessee (CIT v. Venkataswamy Naidu - (1956 (2) TMI 3 - SUPREME Court). AO shall, accordingly, adjudicate the matter, issuing definite findings of fact, on the basis of the material on record, and after allowing the assessee a reasonable opportunity to substantiate its case. Disallowance being 1/7th of the total expenditure under several heads of expenditure, viz. entertainment; langer; festival expenses; labour welfare; etc., incurred in cash and supported by self-made vouchers - Held that - We find some merit in the case of either party. An expenditure does not become un-genuine merely because it stands incurred in cash. At the same time, cash expenditure per self-made vouchers is not amenable to verification. The two considerations are to be balanced, and the Revenue s case, as we understand, is one of inflation (of expenditure), which it estimates at 1/7th of the total expenditure. We direct it at 1/10th, and the Revenue gets part relief. Disallowance at the rate of 1/5th of expenditure on vehicles, viz. repair and maintenance, depreciation, etc., on account of personal, i.e., non-business user, which could not be denied in the absence of log records - CIT(A) has reduced it to 1/10th - no cause for interference.
Issues Involved:
1. Sustainability of the disallowance under Section 40A(3) of the Income Tax Act. 2. Disallowance of expenditure due to unverifiable cash payments supported by self-made vouchers. 3. Disallowance of expenditure on vehicles due to personal use. Issue-wise Detailed Analysis: 1. Sustainability of the Disallowance under Section 40A(3): The primary issue in the appeal concerns the disallowance under Section 40A(3) of the Income Tax Act, which was deleted by the Commissioner of Income Tax (Appeals) [CIT(A)]. The Assessing Officer (AO) had disallowed the expenditure on freight and toll payments made in cash, exceeding the prescribed threshold limit of ?35,000 per day. The assessee argued that the payments were staggered over several days to avoid exceeding the limit. The AO, however, considered such staggering beyond three days as an attempt to circumvent Section 40A(3) and disallowed the payments accordingly. The CIT(A) allowed the appeal on the grounds that Section 40A(3) is not absolute and considerations of business expediency and genuine difficulty should be taken into account. The CIT(A) relied on the Supreme Court's decision in Attar Singh Gurmukh Singh and other relevant case laws, asserting that the genuineness of the payments was not in doubt. However, the Tribunal disagreed with the CIT(A), stating that Section 40A(3) applies even when the genuineness of the expenditure is not in doubt. The provision is a fiscal measure intended to regulate the mode of payment and ensure transparency in financial transactions. The Tribunal emphasized that the provision's terms are clear and unambiguous, and exceptions are only allowed under Rule 6DD of the Income Tax Rules. The Tribunal found the AO's acceptance of the assessee's explanation regarding the staggered payments to be fair but highlighted the need for factual verification. The AO's stance that payments could not exceed three days was deemed 'ad hoc,' and the Tribunal directed the AO to adjudicate the matter based on factual verification. 2. Disallowance of Expenditure Due to Unverifiable Cash Payments: The second issue pertains to the disallowance of ?94,000, being 1/7th of the total expenditure of ?6.56 lakhs under various heads such as entertainment, langer, festival expenses, and labor welfare. The AO disallowed this expenditure due to it being incurred in cash and supported by self-made vouchers, making it unverifiable. The CIT(A) allowed relief, stating that no specific defects were pointed out by the AO. The Tribunal found merit in both parties' arguments. It acknowledged that cash expenditure per self-made vouchers is not fully verifiable but does not necessarily imply that the expenditure is un-genuine. Balancing these considerations, the Tribunal directed the disallowance to be reduced to 1/10th of the total expenditure, granting partial relief to the Revenue. 3. Disallowance of Expenditure on Vehicles Due to Personal Use: The third issue involves the disallowance of ?92,000, being 1/5th of the expenditure on vehicles (repair, maintenance, depreciation) due to personal use in the absence of log records. The CIT(A) reduced the disallowance to 1/10th. The Tribunal found no cause for interference with the CIT(A)'s decision and upheld the reduction to 1/10th of the expenditure. Conclusion: The Tribunal partly allowed the Revenue's appeal and partly allowed it for statistical purposes. The Tribunal emphasized the need for factual verification in the case of staggered payments under Section 40A(3) and balanced the considerations of unverifiable cash expenditure and personal use of vehicles. The order was pronounced on 18.04.2018.
|