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2016 (8) TMI 693 - AT - Income TaxDisallowance u/s.40A(3) - AR s submission that as during relevant assessment year, the provisions of the Act were only attracted when each payment exceeded a sum of ₹ 20,000/- and the Act did not stipulate about the clubbing of payments made in the entire day for determining the disallowance - Held that - fore us, Revenue has not placed any material on record to demonstrate that the amendment made to sub-section(3) to section 40A by Finance Act, 2008, would be applicable to AY 2008-09. Further, there is no finding of lower authorities as to whether each of the payment made by the assessee exceeded ₹ 20,000/- or the aggregate payment in the year exceeded ₹ 20,000/-. Apart from aforesaid, we find that the Hon ble Jurisdictional High Court in the case of Anupam Tele Services vs. ITO reported at (2014 (2) TMI 30 - GUJARAT HIGH COURT ) has held that the paramount consideration of section 40A(3) is to curb and reduce the possibilities of black money transactions and section does not eliminate considerations of business expediencies. In view of the aforesaid facts, we are of the view that the issue needs to be reexamined at the end of ld.CIT(A). We, therefore, restore the issue back to the file of ld.CIT(A) to decide the issue afresh - Decided in favour of assessee for statistical purposes. Disallowance u/s.40(a)(ia) - non deduction of tds on payment of labour expenses, crane hire charges, interest payment and audit fee - Held that - here is no finding of the lower authorities on the issue as to whether the payments made by the assessee to the payees have been being considered by them as their income. In view of the aforesaid facts, we are of the view that the issue needs to be restored back to the file of ld.CIT(A) to decide the issue afresh in the light of our aforesaid discussion, the decision of the Coordinate Bench in the case of Rajeev Agarwal (2014 (6) TMI 79 - ITAT AGRA ) and in accordance with law. - Decided in favour of assessee for statistical purposes.
Issues Involved:
1. Disallowance under Section 40A(3) of the Income Tax Act. 2. Disallowance under Section 40(a)(ia) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Disallowance under Section 40A(3): The assessee, a proprietor of Bhupendra House Crane Service, filed an appeal against the disallowance of ?15,97,999/- made under Section 40A(3) for cash payments exceeding ?20,000/-. The Assessing Officer (AO) noted multiple instances where the assessee made such payments, which were not covered under any exceptions provided in Rule 6DD. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the payments did not meet the conditions for exceptions under Rule 6DD and that the assessee failed to prove exceptional or unavoidable circumstances for making cash payments. The CIT(A) provided detailed reasons for each type of payment: - Umiya Trailer & Transport: Payments totaling ?4,60,300/- were made in cash, which were not covered under any exceptions. The CIT(A) noted that payments could have been made by cheque, and thus, the disallowance was confirmed. - MGT International: The AO disallowed ?52,964/-, but the assessee claimed only ?23,140/- was paid. The CIT(A) directed the AO to verify the amount and confirmed the disallowance subject to this verification. - Foreign Travel Expenses: The assessee paid ?5,97,538/- in cash for air tickets, citing business exigencies. The CIT(A) held that such payments should have been made by cheque and confirmed the disallowance. - Repair and Maintenance Expenses: The AO disallowed ?2,70,739/- for cash payments. The CIT(A) found the assessee's explanation unconvincing and confirmed the disallowance. - Travel Corporation of India: A payment of ?24,457/- was made in cash without any justification, leading to the disallowance being confirmed. - K.K. Transport: The assessee paid ?1,92,000/- in cash for transportation work. The CIT(A) held that the payments were not covered under any exceptions and confirmed the disallowance. The Tribunal noted that the assessee argued that the provisions of Section 40A(3) were applicable only if each payment exceeded ?20,000/- and that the amendment regarding aggregate payments was effective from 01/04/2009, not applicable to the assessment year 2008-09. The Tribunal found no evidence that the amendment applied to AY 2008-09 and observed that there was no finding on whether each payment exceeded ?20,000/-. Citing the Gujarat High Court's judgment in Anupam Tele Services vs. ITO, the Tribunal remitted the issue back to the CIT(A) for re-examination. 2. Disallowance under Section 40(a)(ia): The AO disallowed ?25,58,026/- for various expenses (labour, crane hire charges, interest payment, and audit fees) due to non-deduction of TDS. The CIT(A) upheld the disallowance, rejecting the assessee's plea of ignorance and intent to deduct TDS in the future. The CIT(A) emphasized that Section 40(a)(ia) is a provision for disallowance of expenses under certain circumstances, not a penalty provision requiring mens rea. The Tribunal noted the assessee's argument that no disallowance could be made if the payees had already considered the amounts as their income, citing the Agra Tribunal's decision in Rajeev Kumar Agarwal vs. Addl.CIT, which held that the second proviso to Section 40(a)(ia) is retrospective. The Tribunal found no findings on whether the payees had considered the payments as income and remitted the issue back to the CIT(A) for re-examination in light of the Rajeev Kumar Agarwal decision. Conclusion: The Tribunal allowed the appeal for statistical purposes, remitting both issues back to the CIT(A) for re-examination with directions to provide adequate hearing opportunities and for the assessee to cooperate by furnishing required details.
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