2016 (10) TMI 193 - AT - Income Tax

Addition u/s 40A - payment of expenditure in cash - Held that - On certain facts available on record such as confirmation of the parties, identity of the payee, payment made by bearer cheques, etc. as noted above. In the present case, we do not find any evidence referred to by the CIT(A) which is formed the foundation for granting the relief. The CIT(A) has merely reiterated the findings given by his predecessors and the ITAT in the earlier year. The question is essentially factual and requires ascertainment of certain facts. The assessee is duty bound to explain the circumstances which compelled him to discard the provisions of section 40A(3) or (3A) of the Act and explain business expediency for making payment otherwise than by account payee cheques each year. These facts are not at all clear on record. The Statement of Facts filed before the CIT(A) also does not appear to explain the cause for contravention of the provisions of section 40A(3) or section 40A(3A) of the Act. Thus, facts of the case, for departure from mandate of section 40A(3) or (3A) requires to be appreciated. In this view of the matter, we restore the matter back to the file of the Assessing Officer for examination of the relevant facts de novo in accordance with law in the light of the ratio laid down by the Co-ordinate Bench of the Tribunal in assessment year 2008-09. Needless to say, assessee shall be afforded proper opportunity of being heard while determining the issue.

Summary

Issues:
Appeal against order of CIT(A) regarding assessment year 2009-10 under section 143(3) r.w.s. 147 of the Income-tax Act, 1961 based on violation of section 40A(3) and section 40A(3A).

Analysis:

1. Violation of Section 40A(3) and Section 40A(3A):
The appellant, an individual in the steel scrap business, faced a re-opening of the case due to non-compliance with sections 40A(3) and 40A(3A) of the Act. The Assessing Officer noted payments exceeding ?20,000 to a single party via non-account payee methods, totaling ?2,91,21,150. The addition of ?1,95,73,979 represented scrap purchase violating section 40A(3), while ?95,47,171 was for sundry creditors contravening section 40A(3A). The CA confirmed the absence of evidence regarding the nature of these payments, leading to their disallowance.

2. CIT(A) Decision and Grounds of Appeal:
The CIT(A) relied on previous decisions and the Gujarat High Court ruling to annul the Assessing Officer's addition. The Revenue contested this decision on grounds of lack of proof of business expediency, payee identity, and non-compliance with section 40A(3). The Ld. DR argued that without essential facts, precedents were inapplicable. The AR cited a previous favorable ruling in the appellant's case for AY 2008-09.

3. Tribunal's Ruling and Conclusion:
The Tribunal reviewed the facts, including confirmation of parties and payment methods, from the appellant's earlier case. Not finding substantial evidence supporting the CIT(A)'s decision, the Tribunal remanded the case to the AO for a fresh examination, emphasizing the need for the appellant to justify deviations from section 40A(3) and 40A(3A) requirements. The decision was based on the factual ambiguity and the necessity for a detailed assessment. The appeal was allowed for statistical purposes, granting the appellant an opportunity to present their case effectively before the AO.