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TMI Blog2016 (2) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... rson on a single day exceeds ₹ 20,000/-. We do not find any infirmity in the order of the CIT(A). Unexplained cash credits u/s. 68 - Held that:- Once the firm has satisfactorily explained that the credit entries in the name of its partners represent the amount invested by them the burden of proof stood discharged and the amount cannot be treated as income of the firm under s. 68. In the light of the legal position stated above and in the light fact that the Assessee has satisfactorily shown receipt of cash from the partners the cash credit in question should be considered as satisfactorily explained. For the reasons given above, we do not find any grounds with the order of the CIT(A) in deleting the addition. Addition made u/s.40(a)(ia) - non deduction of tds - Held that:- Following the decision of the Hon’ble Supreme Court in the case of Vegetable Products Ltd. (1973 (1) TMI 1 - SUPREME Court), we hold that where two views are possible on an issue, the view in favour of the assessee has to be preferred. Disallowance of trick hire charges - Held that:- We are of the view that the disallowance is reasonable considering the quantum of expenditure for which there were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of ₹ 20,000/- by cash and were liable to be disallowed u/s.40A(3) of the Income Tax Act, 1961 (Act), which provides that where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. The Assessee in reply to the query of the AO in this regard pointed out that in transportation business the Assessee has to take the service of huge number of truck owners who are spread throughout the country. These truck drivers are illiterate and demand payment only in cash. The Assessee further pointed out that even though payment of more than ₹ 20,000 by cash is shown in the truck hire charges paid ledger account, the vouchers in support of the aforesaid ledger account would show that payment on each occasion in cash to one person was ₹ 20,000/- or less and therefore provisions of Sec.40A(3) of the Act are not attracted. 4. The AO however on scrutiny of the vouchers was of the view that the vouchers produced by the Assessee in support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. 6. Aggrieved by the order of the CIT(A), the revenue has raised ground No.3 before the Tribunal. The learned DR reiterated the stand of the revenue as reflected in the ground No.3 reproduced above. It is clear from ground No.3 that the revenue has not challenged the finding of the CIT(A) with regard to payment made on holidays in cash to be excluded after verification from the amount to be disallowed u/s.40A(3) of the Act. 7. As far as the other direction of the CIT(A) holding (a) that the individual payments made to various truck drivers were less than ₹ 20,000 and it was the broker who made the payments who aggregated them and based on such aggregation entries in ledger were made and (b) that if the individual payments made to per person on a particular day if it was less than ₹ 20,000/- no disallowance can be made u/s.40A(3) of the Act, we are of the view that the said findings are justified. It was not the case of the AO that a single payment was made to a single person. According to the AO though the vouchers bears different registration numbers of different trucks with different amounts mentioned against those numbers, the vouchers are signed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - all by cash, to the person concerned in a single day. The aggregate amount of payment made to a person in a day, in this case, is ₹ 40,000/-. Since, the aggregate payment by cash exceeds ₹ 20,000/-, ₹ 40,000/- will not be allowed as a deduction in computing the total income of the taxpayer in accordance with the proposed amendment. 9. In an earlier case of CIT vs. Triveniprasad Pannalal (1997) 142 CTR (MP) 562 : (1997) 228 ITR 680 (MP), a sum of ₹ 48,850 was disallowed by the Assessing Officer under section 40A(3). The sum was the aggregate of a number of payments made with respect to the various transactions. When the controversy came up before the Madhya Pradesh High Court, the Court, concurring with the opinion of the Appellate Tribunal, held that the case was not hit by the statutory bar contained in section 40A(3); for, the law only says that the amount exceeding ₹ 2,500 (as it then was) should not be paid except by way of cheque drawn on a bank or by a crossed bank draft and if it exceeds this amount, then such expenditure shall not be allowed as a deduction.... It does not say that the aggregate of the amount should not exceed ₹ 2,50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Moidinabba of ₹ 37,06,463 (Rs.1,85,01,262 ₹ 1,47,94,799). The AO called upon the Assessee to explain the source and proof of introduction of capital in the capital account of the partner. In the balance sheet of the Assessee filed along with the return of income, the capital introduction by Mr.H.Moidinabba was shown only at ₹ 50,000/-. In the capital account ledger of another partner by name Mr.Abdul Raheem Hussain, capital introduced was shown as ₹ 5,00,000. However as per the Balance sheet enclosed with the return of income, the capital introduced by this partner was shown as ₹ 41,50,409. 13. Mr.Abdul Raheem Hussain explained before the AO that he introduced ₹ 41,50,409 as capital of the Assessee firm through his brother H.Moidinabba. He gave a gift of ₹ 5 lacs to his brother H.Moidinabba which was also introduced by him as capital in the Assessee firm. He explained that he was an Non-Resident Indian and was working abroad. He produced his NRI bank account which showed withdrawal of money from NRE SB A/C. as follows: a) SBI NRE SB A/C.No.10568914005 ₹ 45,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts of the other partner Mr. Abdul Rahim Hussain (who is also brother of Mr. Moidinabba) was not correct. The Assessee clarified that the entire capital of both Mr. Moidinabba and Mr. Abdul Rahim Hussain is exclusively from the above NRI funds. This fact has been clearly stated by Mr. Abdul Rahim Hussain (page 7, para 1). It was explained that capital was brought in only by Mr. Abdul Rahim Hussain. However, since the affairs were managed by Mr. Moidinabba, the accountant by mistake had treated capital introduced, as that of Mr. Moidinabba instead of Mr. Abdul Rahim Hussain. This was purely a clerical error and the said credits pertain to capital introduced by Mr. Abdul Rahim Hussain only. Hence, such additions as unexplained cash credit is not correct and needs to be deleted. 15. The CIT(A) held as follows: 10.3 I have considered the rival contentions carefully. It is also argued that the impounded books shows capital in the name of Sri. Moidinabba and similar capital is introduced in the name of Sri. Abdul Raheem Hussain with some differences. It is argued except for the differences, it is the same amount in the books in the name of Sri. Abdul Raheem Hussain and in t he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the absence of evidence to indicate that the cash credits represents the firm's profits and the firm is not further required to explain the source of deposit in the hands of the partners. It was so held in CIT vs. Jaiswal Motor Finance 141 ITR 706 (All) and CIT vs. Anupam Udyog 142 ITR 133 (Pat). In CIT vs. Metachem Industries (2000) 161 CTR (MP) 444 also it was held that once the firm has satisfactorily explained that the credit entries in the name of its partners represent the amount invested by them the burden of proof stood discharged and the amount cannot be treated as income of the firm under s. 68. In the light of the legal position stated above and in the light fact that the Assessee has satisfactorily shown receipt of cash from the partners the cash credit in question should be considered as satisfactorily explained. For the reasons given above, we do not find any grounds with the order of the CIT(A). Accordingly, ground No.4 raised by the revenue is dismissed. 19. In the result, appeal by the Revenue is dismissed. 20. C.O.No. 35/Bang/15: The Assessee has filed an application for condonation of delay in filing C.O. In terms of Sec.253(4) of the Act, a C.O. ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of CIT Vs. M/s.Janapriya Engineers Syndicate ITA No.352 of 2014 order dated 24.6.2014 was pleased to hold that unless and until the decision of the Special Bench is upset by the High Court, the same is binding on smaller bench and co-ordinate bench of the Tribunal. 23. The ld. DR submitted that the decision of the Hon ble Special Bench ITAT in the case of Merilyn Shipping (supra) has been reversed by the Hon ble Gujarat and Calcutta High Courts in CIT Vs. Sikandarkhan N. Tunvar Others in Tax Appeal No. 905 of 2012 others dated 02/05/2013 and in CIT Vs. Md.Jakir Hossai Mondal in ITA No.31 of 2013, GA No.320 of 2013 dated 04.04.2013 respectively. 24. The ld. counsel for the assessee pointed out that the Hon ble Allahabad High Court in the case of Vector Shipping Services Pvt. Ltd. in IT Appeal No.122/2013, order dated 9.7.2013 has however upheld the decision of the Special Bench of the ITAT and SLP filed by the Revenue against the said decision of the Allahabad High Court has also been dismissed by the Hon ble Supreme Court. The ld. counsel submitted that where two views are possible, the view in favour of the assessee should be accepted and in this regard relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts that are outstanding as of 31st March and not to amounts already paid during the year. This view is not correct for two reasons. Firstly, a strict reading of s. 40(a)(ia) shows that all that it requires is that there should be an amount payable of the nature described, which is such on which tax is deductible at source but such tax has not been deducted or if deducted not paid before the due date. The provision nowhere requires that the amount which is payable must remain so payable throughout during the year. If the assessee s interpretation is accepted, it would lead to a situation where the assessee who though was required to deduct the tax at source but no such deduction was made or more flagrantly deduction though made is not paid to the Government, would escape the consequence only because the amount was already paid over before the end of the year in contrast to another assessee who would otherwise be in similar situation but in whose case the amount remained payable till the end of the year. There is no logic why the legislature would have desired to bring about such irreconcilable and diverse consequences. Secondly, the principle of deliberate or conscious omissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the end of the year. We do not find that the Tribunal has committed any error in recording the finding on the facts, which were not controverted by the department and thus the question of law as framed does not arise for consideration in the appeal. The income tax appeal is dismissed. 30. SLP by the Revenue against the decision of the Hon ble Allahabad High Court has been dismissed by the Hon ble Supreme Court. Thus there are two views on the issue, one in favour of the assessee expressed by the Hon ble Allahabad High Court and the other against the assessee expressed by the Hon ble Gujarat Calcutta High Courts. Admittedly, there is no decision rendered by the jurisdictional High Court on this issue. In the given circumstances, following the decision of the Hon ble Supreme Court in the case of Vegetable Products Ltd. (supra), we hold that where two views are possible on an issue, the view in favour of the assessee has to be preferred. We accordingly, allow ground No.2 raised in the CO and direct the addition made u/s.40(a)(ia) of the Act be deleted. 31. Ground No.3 raised in the CO is with regard to the adhoc disallowance of a sum of ₹ 10 lacs from trick hire c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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