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TMI Blog2011 (8) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... red in accepting the submission and fresh evidence of the assessee filed before him and not providing opportunity to the AO. Thus there is a violation of Rule 46A(1) of the I.T. Rules. 3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 2. The assessee is a firm engaged in the business of transportation of goods. The return of income for AY 2004-05 and 2005-06 filed on 29.10.2004 and 27.10.2005 respectively and assessments for both the years were finalized u/s 143(3) of the Income-tax Act on 22.01.2005 and 31.01.2006 respectively. The cases were reopened by issuing notices u/s 148 of Income-tax Act by recording reasons regarding cash expenditure for lorry hire freight of ₹ 20,000/- in aggregate in a day. AO made addition on this account which had been deleted by CIT (A) by holding as under :- "6. Determination: The Assessing Officer vide order sheet dated 15.04.2009 asked the assessee to explain why the provision of section 40A(3) is not applicable in its case. In response, the assessee had provided the details of expenditure in respect of which pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by CIT (A) in AY 2005-06 3. While pleading on behalf of the revenue, the learned DR submitted that CIT (A) has admitted the additional evidence and no opportunity was granted to the AO, therefore, there is violation of Rule 46A. Further he submitted that the assessee has not submitted the details before the AO which has been entertained by the CIT (A) and for this, he relied on the AO's observation that the assessee has shown his inability to produce the details of the lorry hire charges paid in cash which aggregates more than ₹ 20,000/- to a lorry in a day. He relied on the decision of CIT vs. Kangra Steel Pvt. Ltd., 320 ITR 691 (HP) and Smt. Prabhawati S. Shah vs. CIT, 231 ITR 277 (Mum.). He also pleaded that there was no business expediency for making the cash payments and it is on the assessee to prove that there was business expediency existed for such payments. Learned DR relied on CIT vs. Hynoop Food & Oil P. Ltd. reported in 290 ITR 702 for the proposition that even if business expediency gets established, in the absence of evidence as to the genuineness of the payments and identity of payee, an assessee cannot seek recourse either of two situations laid down in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submissions made by the assessee and arbitrarily disallowed 20% of the entire cash payments made by the assessee. AO's allegation that assessee could not produce any details is completely against the facts of the case. The assessee has submitted that all the relevant books of account were made available before the AO. The AO could not point out any specific defects in these books of account. AO in an arbitrary manner disallowed 20% of the entire sum whether the payments were above ₹ 20,000/- or not. He further submitted that the provisions of section 40A (3) as they stood at the relevant time did not provide for disallowance where the each payment in cash was below ₹ 20,000/-. The relevant provisions for that time provided for disallowance only when the single payment made in cash exceeded the limit of ₹ 20,000/-. He also submitted that there was no provision in the statute to disallow the aggregate of the cash payments to person of ₹ 20,000/- and more made in a day. He also submitted that the threshold limit of ₹ 20,000/- is applicable to a single payment and not to an aggregate payment as per law as it stood at that time. Ld. AR relied on the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding twenty thousand rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, twenty per cent. of such expenditure shall not be allowed as a deduction: ............. Provided further that no disallowance under this sub-section shall be made where any payment in a sum exceeding twenty thousand rupees is made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facl1ities available, considerations of business expediency and other relevant factors." The reliance placed by the assessee on the judicial pronouncements wherein it has been held that number of transactions where the amount does not exceed the specified monetary limit in these transactions, rigor of section 40A(3) shall not apply. Hon'ble Orissa High Court in the case of Aloo Supply Co. vs. CIT, cited supra, had held as under :- "(i) Aloo Supply Co. vs. CIT [1980] 121 ITR 0680 (Orissa) (Special Leave Petition (SLP) dismissed on 26/08/198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , i.e, single sum has been used. Therefore, irrespective of any number of transactions, where the amount does nor exceed ₹ 2,500/- the rigours of section 40A(3) will not apply". In the case of CIT vs. Ashok Iron & Steel Rolling Mills, cited supra, Hon'ble Allahabad High Court held as under :- "4. Heard the learned counsel for the parties and perused the record. Sri A.N. Mahajan, learned standing counsel on behalf of the Department submits that in view of the latest amendment in s. 40A(3) of the Act, the order of the Tribunal cannot be allowed to stand. However, we find that s. 40A(3) of the Act, as it then stood at the relevant point of time, provided that the amount exceeding ₹ 2,500 should not be paid except by way of cheque drawn on a bank or by a crossed bank draft and, if it exceeds that amount, then 20 per cent of the expenditure shall not be allowed as deduction. It does not say that the aggregate of the amounts should not exceed ₹ 2,500. The words used are "in a sum". The said phrase has been interpreted by various High Courts and it has been held that irrespective of any number of transactions, where the amount does not exceed ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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