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TMI Blog2016 (8) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, jelly at the working sites of assessee during odd hours in remote areas and we support our opinion with the decision of Anupam Tele Services vs. ITO (2014 (2) TMI 30 - GUJARAT HIGH COURT ) and we set aside the order of the Commissioner of Income Tax (Appeals) and delete the addition made by the ld. Assessing Officer on this ground. - Decided in favour of assessee Disallowance being expenses for tea, coffee, freight charges and diesel expenditure not supported by vouchers - Held that:- The fact that nature of expenditure being tea, coffee, freight charges and diesel expenditure, the assessee has claimed these expenditure incurred wholly and exclusively for the purpose of activities of the business and the findings of the ld. Assessing Officer they are not supported with vouchers and doubted the genuineness and disbelieved the transactions. The ld.CIT(A) has confirmed the findings of the ld. Assessing Officer. Considering the apparent facts and material, we are of the opinion that the consent cannot be a reasons for sustaining the addition in exceptional circumstances of the working conditions of the firm and the nature of expenditure incurred. Further their shall not be laxit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in law in disallowing a sum of ₹ 21,87,851/- by invoking section 40A(3) of the Income Tax Act. 3. The learned Commissioner Of Income Tax (Appeals)-2 erred in law in not considering the business expediency and other factors including extent of banking facility before invoking section 40A(3) of the Income Tax Act. 4. The learned Commissioner Of Income Tax (Appeals)-2 ought to have seen that the appellant has discharged his primary onus both during the assessment proceedings and first appellate proceedings to demonstrate the fact that the cash payments made by the appellant fall under rule 6DD 5. The learned Commissioner Of Income Tax (Appeals)-2 erred in law In disallowing a sum of ₹ 4,58,755/- under the expenses for tea, coffee, freight charges and diesel expenditure are not supported by vouchers. 6. The learned assessing officer as well as the first appellate authoritv failed to appreciate that the appellant is a civil contractor laying roads and constructing bridges in remote area and that it is practically impossible for the appellant to provide vouchers for expenses incurred towards tea, coffee, freight charges and diesel expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to make cash payment on various occasions and disallowed the claim. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 4.1 In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) has confirmed the order of the ld. Assessing Officer. Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed an appeal before Tribunal. 4.2 Before us, the ld. Authorised Representative submitted that the ld. CIT(A) erred in confirming the findings of the ld. Assessing Officer and failure to consider the factors of banking facilities and cash payments fall within exception of Rule 6DD of the Act and prayed that the disallowance are not warranted as the local contractor always insist for cash payments. Further most of the vendors are illiterate and farmers who do not have bank account and assessee firm purchase jelly and sand from hawkers, farmers who are in the habit of supplying and selling the products at the work site of the assessee and moving from place to place and does not have any permanent place of business and Deal only on cash basis. For transactions of supply and undertaking of works in remote v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeds twenty thousand rupees in the cases and circumstances specified hereunder, namely :- (a)where the payment is made to- ( i ) the Reserve Bank of India or any banking company as defined in clause ( c ) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); ( ii ) the State Bank of India or any subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959); ( iii ) any co-operative bank or land mortgage bank; ( iv ) any primary agricultural credit society or any primary credit society as defined under section 56 of the Banking Regulation Act, 1949 (10 of 1949); ( v ) the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956); (b) where the payment is made to the Government and, under the rules framed by it, such payment is required to be made in legal tender; (c) where the payment is made by- ( i ) any letter of credit arrangements through a bank; ( ii ) a mail or telegraphic transfer through a bank; ( iii ) a book adjustment from any account in a bank to any other account in that or any other bank; ( iv ) a bill of exchange m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to be made on a day on which the banks were closed either on account of holiday or strike; ( k ) where the payment is made by any person to his agent71 who is required to make payment in cash for goods or services on behalf of such person; ( l ) where the payment is made by an authorised dealer or a money changer against purchase of foreign currency or travellers cheques in the normal course of his business. The payments to the hawkers and vendors by cash by the assessee firm other than account payee cheques was never doubted by the Revenue. The assessee firm is following prevailing business practice from earlier years. Further, provisions of Sec. 40A(3) of the Act must not be read in isolation or exclusion of Rule 6DD of Income Tax Rules, 1962. The section must be read alongwith Rule and on reading together, it is very clear that provisions are not intended to restrict the business activities. The ld. Assessing Officer cannot restrict the Business of the assessee firm on application of the Rule 6DD, further provisions of Sec. 40A(3) of the Act empowers the ld. Assessing Officer to disallow deduction claimed as expenditure were payments are not by account payee che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. Commissioner of Income Tax (Appeals) has considered the submissions but due to agreed addition by the assessee, non availability of evidence and overlooked the working conditions of the labour at work site has confirmed the addition. Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed an appeal before Tribunal. 5.3 Before us, the ld. Authorised Representative expressed that this expenditure is necessary to co-ordinate with the labour. Providing coffee and tea during day and night during work of laying of roads and culverts in the villages and there are no proper food facilities and further some time work in forest area and such expenditure is generally incurred to upkeep the labour and prayed for allowing the ground. 5.4 Contra, the ld. Departmental Representative relied on the orders of Commissioner of Income Tax (Appeals) and vehemently opposed the grounds. 5.5 We heard the rival submissions, perused the material on record. The fact that nature of expenditure being tea, coffee, freight charges and diesel expenditure, the assessee has claimed these expenditure incurred wholly and exclusively for the purpose of activities of the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure is necessary to carry out the works at remote areas. The amount paid on account of labour charges, jelly purchase, sand purchase and gravel purchase for laying of road and culvert in the villages and there are no proper facilities and some time work in forest area and no separate bills are issued by the vendor. Hence, internal vouchers are prepared to make the payments to vendor and prayed for allowing the appeal. 6.4 Contra, the ld. Departmental Representative relied on the orders of Commissioner of Income Tax (Appeals) and vehemently opposed the grounds. 6.5 We heard the rival submissions, perused the material on record. The fact that labour charges, jelly purchase, sand purchase and gravel purchase incurred wholly and exclusively for the purpose. Since, the vouchers are self made the ld. Assessing Officer has doubted the transactions and made disallowance. The ld.CIT(A) has confirmed the findings of the ld. Assessing Officer. Considering the facts and nature of expenditure and the laxity on the part of the assessee firm on non maintenance of record and compliance of Income Tax provisions, we found it Reasonable to restrict the disallowance at 50% due to Busin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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