2013 (11) TMI 15 - HC - Income Tax

Disallowance because of violation of section 40A(3) of the Act read with Rule 6DD of the Income Tax Rules Cash payment in excess of prescribed limit - Held that - Suppliers of the assessee, who were delivering the goods to him invariably insisted on spot payment of cash to the lorry drivers. There is absolutely no evidence for this. The Tribunal went on to hold that since the suppliers do not have bank account in Vijayawada and because they could not rely upon the creditworthiness of the assessee, they did not extend any credit facilities to him. There was an insistence on payment for the supply of goods in cash. In this regard also, there is absolutely no material on record. The Tribunal has further come to the conclusion that, according to the assessee, he used to be ridiculed by the suppliers with regard to obtaining confirmations concerning the transactions. Again, there is absolutely no evidence in this regard - Reliance has been placed upon the judgment in the case of Late Smt. Jyothi Chellaram v. CIT 1988 (3) TMI 36 - ANDHRA PRADESH High Court Decided in favor of Revenue.

Summary

Issues:
Interpretation of Rule 6DD(j) of the Income-tax Rules, 1962 for cash payments exceeding Rs. 10,000.
Validity of the order of the Income-tax Appellate Tribunal under section 260A of the Income tax Act, 1961.

Analysis:
The High Court of Andhra Pradesh heard an appeal under section 260A of the Income tax Act, 1961, concerning an order passed by the Income-tax Appellate Tribunal. The key issue revolved around the interpretation of Rule 6DD(j) of the Income-tax Rules, 1962, which allows exceptions for cash payments exceeding Rs. 10,000 under specific circumstances. The appellant, a trader in Vijayawada, claimed that cash payments were made due to exceptional or unavoidable circumstances. However, the Assessing Officer rejected this explanation, citing the appellant's long business history and the presence of a chartered accountant. The Commissioner of Income-tax (Appeals) also dismissed the appeal, emphasizing the existence of a bank account held by the appellant. The appellant introduced a new ground based on a circular, but the appellate authority found that the circular did not support the appellant's case due to the availability of a bank account. The Tribunal, however, ruled in favor of the appellant, suggesting that suppliers demanded cash payments due to the lack of credit facilities. The High Court criticized the Tribunal for relying on conjectures and surmises without concrete evidence, ultimately concluding that the appellant failed to establish exceptional or unavoidable circumstances as required by Rule 6DD(j).

The Court referred to a previous case to emphasize the necessity of corroborating explanations with evidence. It highlighted discrepancies in the appellant's submissions and criticized the Tribunal's reliance on unsubstantiated claims. Ultimately, the Court ruled against the appellant on both substantial questions of law, supporting the Revenue's position. The judgment underscores the importance of providing concrete evidence to support claims of exceptional circumstances, especially in cases involving cash payments exceeding specified limits. The appeal was disposed of accordingly, affirming the Tribunal's order in favor of the Revenue and against the appellant.