2023 (2) TMI 1375 - AT - Income Tax

Addition u/s 40A - purchase of bio-mass and for transport payments - cash payments to three parties in a single day is in excess of sum of Rs. 20,000/- - HELD THAT - AO has brought out clear facts to the effect that there is no obligation on the part of the assessee to make payment towards transportation charges. Further, the assessee itself has accepted the fact that payment of transportation charges was the responsibility of the supplier and in fact, whatever amount paid to three parties has been debited to supplier s account. Therefore, we are of the considered view that findings and facts recorded by the Tribunal in earlier assessment year does not apply to the facts of the present case. No error in the reasons given by the Ld.CIT(A) to confirm the addition made towards cash payments u/s. 40A(3) - Decided against assessee.

Summary

Issues:
Interpretation of provisions of section 40A(3) of the Income Tax Act regarding cash payments exceeding prescribed limits.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) pertaining to the assessment year 2016-17. The case involved a search and seizure operation under section 132 of the Income Tax Act, where it was found that the assessee had made cash payments exceeding Rs. 20,000 in violation of section 40A(3) of the Act. The Assessing Officer (AO) disallowed cash payments totaling Rs. 8,64,900 under section 40A(3). The assessee argued that each payment to a party did not exceed the limit, but the aggregate exceeded Rs. 20,000 per day. The Commissioner of Income Tax (Appeals) upheld the AO's decision, noting that the payments were not covered under exceptions provided in the Income Tax Rules. The assessee then appealed to the ITAT.

The ITAT considered the arguments of both parties. The assessee cited a previous ITAT decision in their favor for earlier assessment years, where similar cash payments disallowed under section 40A(3) were deleted. The assessee contended that there was a business exigency for the cash payments and that the earlier ITAT decision should apply. However, the Departmental Representative supported the CIT(A)'s order, stating that the assessee failed to show how the cash payments fell under any exceptions in the IT Rules.

After reviewing the facts and submissions, the ITAT found that the primary responsibility for payments to transporters lay with the suppliers, not the assessee. The ITAT noted that the cash payments exceeded the prescribed limit under section 40A(3) and that the assessee did not qualify for any exceptions under the Income Tax Rules. The ITAT distinguished the earlier ITAT decision cited by the assessee, emphasizing that the facts of the present case differed significantly. Consequently, the ITAT upheld the CIT(A)'s decision to disallow the cash payments under section 40A(3) and dismissed the appeal filed by the assessee.

In conclusion, the ITAT affirmed the CIT(A)'s findings and upheld the addition made towards the cash payments under section 40A(3) of the Income Tax Act for the assessment year in question. The appeal by the assessee was dismissed, and the decision was pronounced in Chennai on the specified date.