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TMI Blog2016 (1) TMI 898X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 40A(3) by splitting a particular high value payment to one person into several cash payments, each below 20,000/-. There is no dispute that payments were found to be recorded in cash book which were less than 20,000/-. Therefore, from the above, it is apparent that the assessee had not violated the provisions of section 40A(3) as admittedly the payments recorded in the cash book were 20,000/- or below. As regards examination by Assessing Officer regarding violation of there provisions, we find that the Assessing Officer had raised this issue on two occasions and the assessee had replied to the Assessing Officer and after being satisfied that no payment of more than 20,000/- was paid by assessee he did not make the addition and therefore, the order of Assessing Officer on this account cannot be said to be erroneous and prejudicial to the interest of revenue.- Decided in favour of assessee. Assessing Officer did not examine the amount of lorry charges - Held that:- The view taken by one Assessing Officer in one year, if it differs from the view taken by Assessing Officer in succeeding year on the same issue cannot be said to be erroneous provided the view taken by A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Asst. Year 2007-08. The Commissioner of Income Tax exercised powers under section 263 and passed order under section 263 vide order dated 21.03.2012, which the assessee challenged before the Hon'ble ITAT, Amritsar Bench. The Hon'ble ITAT Amritsar Bench set aside the order of Commissioner of Income Tax vide its order 31.10.2013 with the directions that assessee be provided sufficient opportunity of being heard and therefore, after affording the assessee adequate opportunity, the Commissioner of Income Tax again passed order under section 263 with the same directions which were in original order under section 263 dated 21.03.2012. The show cause notice issued by the Commissioner for initiating proceedings under section 263 is reproduced as below. "2. On going through the proposal and the accompanying records, it is observed that during the year under consideration, expenditure of ₹ 1,65,23,105/- has been debited under the head fuel account. During the course of the assessment proceedings the ledger account of fuel consumption has been called for by the Assessing Officer and is placed on records. From perusal of the details, it is seen that cash payments in excess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in respect of such expenditure. It appears that the provisions of section 40A(3) of the I.T.Act,1961, were clearly applicable but the Assessing Officer has failed to invoke the said provisions and bring to tax the amount of ₹ 45,45,731/-. 3.5. Further, it has also been stated that during the course of the assessment proceedings for the Assessment Year 2008-09, the Assessing Officer called information u/s 133(6) of the Act, 1961, from RTO Srinagar, Baramulla & Jammu and found that in some of the cases, the hiring charges were paid to bogus parties/vehicles. However, the perusal of the assessment records for the Assessment Year 2007-08 reveals that the Assessing Officer while completing the assessment proceedings has failed to make any such enquiry although similar hiring charges have been paid by you during this year also. 4. Keeping in view the above, it appears that the assessment framed by Deputy Commissioner of Income Tax, Circle-III, Srinagar referred to above is erroneous and prejudicial to the interests of revenue and accordingly you are requested to show cause as to why the provisions of section 263 may not be invoked in your case and the assessment order under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make an assessment order erroneous & prejudicial to the interests of the revenue and these views are also supported by decisions held by the Hon'ble Supreme Court in the case of CIT vs. Greenworld Corporation [2009] 181 Taxman 111/314 ITR 81 (SC), Malabar Industrial Co. Ltd. vs. CIT 243 ITR 83 (SC). Jai Kumar Kankaria Vs. CIT 251 ITR 707 hence the proceedings under section 263 of the Income Tax Act 1961 may kindly be dropped. 2. That the payments made to M/s. Shalimar Transporters for purchase of fuel have been made in para below ₹ 20,000/- on different times in a day. The word 'sum' in section 40A(3) is used only to indicate an amount of money and does not refer to the totality of the expenditure. It is only w.e.f. 1.4.2009 when the amendment was made in the Income Tax Act 1961 by the Finance Act, 2008 the total sum was taken as disallowable. The position is well explained in CBDT CIRCULAR NO-1/2009 EXPLANATORY NOTES TO THE PROVISIONS OF THE FINANCE ACT, 2008 PARA-13.4 which clearly mentions that the amendment in sec. 40A(3) shall be applicable in Assessment Year 2009-2010 and the purpose of amendment has also been mentioned in para-13.2 of CBDT CIRCULAR NO- 1/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 1961 as laid down by the Hon'ble Courts in the case of including CIT vs. Aloo Supply Co. [1990] 121 ITR 680(Ori.). M.R.Soap (P.) Ltd. vs. IAC[1988] 32 TTJ (Delhi) 505 ITR CIT vs. Triveniprasad Pannalal [1997] 94 Taxman 381 (MP)/CIT vs. Kothari Sanitation & Tiles (P.) Ltd.[2006] 282 ITR 117 (Mad.) which clarify that till the amendments made in the Income Tax Act 1961 by the Finance Act, 2008 the settled position of is: Limit applies to payment to a party at one time. The statutory limit of ₹ 20,000 applied to payment made to party in the course of the day as recorded in the cash book which in the instant case is the position of the Assessee with regards to applicability of the provisions of sec. 40A(3) of the Income Tax Act 1961. Hence the order under section 143(3) read with section 115WE(3) dated 24.12.2009 is neither erroneous under section 263 of the Income Tax Act 1961 may kindly be dropped. 5. That while passing Assessment order u/s 143(3) Dated 24.12.2009 the assessing Officer has applied his mind and asked detailed questions vide Letter No. ACIT-3SNG/2007-08/267 Dated 16.08.2009, Letter No.Dy./Cricle3/SGR/09-10/588 Dt 30.11.2009, and Letter No.DCIT/Circle3/SGR/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om Asst. Year 2009-10 the aggregate of payments in a single day is to be considered for the purposes of violation of provisions of section 40A(3). The learned AR submitted that circular itself, says that Courts had approved such splitting thereby applying the limit to each transaction. In view of the above, it was submitted that the making of multiple payments in a single day was allowed in the Asst. Year under question. The learned AR, further submitted that the Assessing Officer had duly carried necessary investigation for verifying violation of section 40A(3) and in this respect he invited our attention to a questioner dated 07.12.2009 placed at paper book page 34 to 36. Our specific attention was invited to question10, wherein, the Assessing Officer had specifically required the assessee to explain the violation of provisions of section 40A(3). The learned AR submitted that the assessee had replied to this objection of Assessing Officer vide letter dated 24.11.2009 placed at paper book 37 to 39. Our specific attention was invited to para 10 & 11 wherein the assessee had explained the alleged violation of provisions of section 40A(3). The learned AR submitted that Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08-09, the learned AR submitted that each year is a different year and principle of res judicata is not applicable to the Income Tax proceedings and differentiation of views of Assessing Officer in two years does not make an assessment order erroneous and prejudicial to the interest of revenue. He further, argued that the Commissioner cannot examine the records of another year to form an opinion in another year. 6. The learned DR on the other hand, submitted that assessee had splinted the payments into transactions of less then 20,000/- as in fact he had made payments in lump sum as it is not possible that in a single day the assessee would have made payment to same party 10 times in a day. He argued that human probability does not warrant such type of actions and Assessing Officer had failed to examine this issue as he simply accepted the version of assessee and did not go further to find out as to whether these payments have been made in a manner recorded in the cash book. The learned DR submitted that the fact of making payments 10 times in a single day to same person warranted further probe. Reliance in this respect was placed on the case law of Channa Bros. vs. CIT decided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 40A(3) by splitting a particular high value payment to one person into several cash payments, each below ₹ 20,000/-. The relevant provision of the said Circular as contained in para 13.2 to 13.4 are reproduced below: "13.2 Sub-section (3) of section 40A is an anti tax-evasion measure. By requiring payments to be made by an account payee instrument, it is possible to verify the genuineness of the transaction. Thereby the risk of evasion is substantially mitigated. Field formations have reported that assessees tend to circumvent the provisions of sub-section(3) of section 40A by splitting a particular high value payment to one person into several payments, each below ₹ 20,000/- This splitting is also resorted to for payments made in the course of a single day. The courts have approved such splitting by interpreting the words 'in a sum' used in the section to mean a single sum thereby applying the limit to each transaction. This interpretation is against legislative intent and has, consequently, adversely affected the efficacy of this anti abuse provision. 13.3 Therefore, the provisions of sub-section (3) of section 40A have been amended pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other issue that Assessing Officer did not examine the amount of lorry charges in a particular manner as he did in the subsequent year, we find that each year is a separate year and principle of res- judicata does not apply to Income Tax proceedings. The view taken by one Assessing Officer in one year, if it differs from the view taken by Assessing Officer in succeeding year on the same issue cannot be said to be erroneous provided the view taken by Assessing Officer is a plausible view. The Assessing Officer did carry out necessary examination to arrive at the genuineness of payments and assessee also filed confirmations by parties to whom payments were made. The fact that the assessee had filed confirmations of payees becomes apparent from the reply filed by the assessee to CIT against the show cause notice under section 263. There is a difference between lack of enquiry and no enquiry. It is not a case of no enquiry as Assessing Officer did carry out sufficient examination to arrive at the genuineness of transactions and if he did not take one further step to examine the genuineness of transactions which he took in succeeding year, the assessment order passed in earlier year can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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