2022 (1) TMI 1449 - AT - Income Tax

Addition of cash payments u/s.40A(3) - assessee has made cash payments in excess of prescribed limit covered u/s.40A(3) of the Act, for purchase and services - assessee argued that said payment is made to his agent, who is required to make payments in cash for goods or services on behalf of the assessee - HELD THAT - The assessee neither appeared nor filed any details to justify its case to argue that payments made in cash in excess of prescribed limit provided u/s 40A(3) of the Act, comes under clause (k) of Rule 6DD of Income Tax Rules, 1962. Thus, cash payments made in excess of prescribed limit for purchase of materials comes under provisions of section 40A(3) of the Act, and hence, there is no error in the reasons given by the AO to make additions towards cash payment u/s.40A(3). There is no error in the reasoning given by the learned CIT(A) to sustain additions made by the AO towards cash payments u/s.40A(3) - Decided against assessee.

Summary

Issues:
- Appeal against order of Commissioner of Income Tax (Appeals)
- Disallowance of cash payments exceeding prescribed limit under section 40A(3) of the Income Tax Act, 1961
- Claim of payment through agents under Rule 6DD clause (k)
- Non-appearance of the assessee during hearings

Analysis:
- The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2010-11. The appellant raised grounds stating that the order was contrary to law, arbitrary, and inconsistent. They argued that the Commissioner did not give fair opportunity and failed to recognize the meaning of 'Agent' in the context of cash payments for materials in civil construction business. The appellant also raised concerns about the timing of the order, indicating a lack of application of mind by the authorities.

- The case involved the disallowance of cash payments exceeding the prescribed limit under section 40A(3) of the Income Tax Act, 1961. The Assessing Officer disallowed cash payments made for various expenses, including materials like cement, sand, bricks, and jelly, amounting to Rs. 35,21,035. The appellant contended that these payments were unavoidable in the civil construction business. However, the Assessing Officer found no exceptions under Rule 6DD of the Income Tax Rules, 1962, and disallowed the cash payments.

- The appellant claimed that the payments were made through agents, as allowed under Rule 6DD clause (k), exempting payments made by a person to their agent for goods and services. The Commissioner, after reviewing the details provided, found that the so-called agents were actually employees of the appellant. Even if the payments were to agents, the Commissioner noted a lack of TDS deductions, making the payments liable for disallowance under section 40(a)(ia) of the Act.

- Despite multiple hearing dates provided, the appellant did not appear or seek adjournment, leading to an ex-parte disposal of the appeal. The Tribunal upheld the decision of the Commissioner, stating that the cash payments exceeded the prescribed limit and did not fall under the exceptions provided in Rule 6DD. The Tribunal found no errors in the reasoning of the Commissioner and dismissed the appeal, emphasizing that the case laws cited by the appellant were not applicable to the present circumstances.

- In conclusion, the Tribunal upheld the order of the Commissioner, confirming the disallowance of cash payments exceeding the limit under section 40A(3) of the Act. The appeal filed by the appellant was dismissed due to non-appearance and failure to provide sufficient justification for the cash payments made, as per the provisions of the Income Tax Act.