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TMI Blog2016 (9) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 75,95,349/- made u/s.40A(3) without appreciating the fact that the assessee could not produce any evidence regarding name and address of the persons to whom wages were paid, details of site where the work was done, and non availability of Bank facilities at the site. The genuineness of the claim under Rule 6DD was not proved by the assessee. 4. The Id. CIT(A) erred in deleting the addition of Rs. 20,95,600/- and Rs. 21,40,000 made towards unexplained cash credits as appeared in the name of Sri l.Chandrasekar and Sri A.Parthiban without appreciating the fact that the assessee had not produced any evidence explaining source of funds for these cash credits. 2.2 In Cross Objection, the assessee has raising the following grounds. 1. For that the order of the Commissioner of income Tax (Appeals) is contrary to law facts and circumstances of the case to the extent prejudicial to the interest of the respondent and at any rate is opposed to the principles of equity, natural justice and fair play. 2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the disallowance of 10% of expenditure, claimed based on self made vouchers, is not warranted in the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overlooking the provisions of section 37 of the Act which covers these payments 5. The facts of the case are that the assessee is a firm, engaged in the buses of Dregding and Contract. The assessee firm filed its return of income on 24.09.2010 admitting an income of Rs. 67,18,020/-. Subsequently, the case was selected for scrutiny under CASS to examine the various aspects of 'Contactors business" and assessment u/s.143(3) of the Act was completed on 28.03.2013. 5.1 During the assessment proceedings, the AO found that some of the vouchers/bills are self-made and few of them were not produced, and TDS was not deducted for the following expenses. Rs. Hire charges paid, but TDS not deducted 2,00,000 Payment made for dredger transport expenses 3,96,000 Payments made to various sub contactors 43,73,800 Total 49,69,800 Aggrieved by the order of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A). On appeal, the Ld.CIT(A), deleted the addition on the reason that these payments are already made before the end of the close of the Financial year. Nothing was outstanding at the end of the close of the financial year. Further, it was observed that al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of the assessee and the assessee shall place necessary evidence in support of his claim. 5. Further, we make it clear that if the impugned amount is not outstanding at the end of the close of the assessment year in respect of the expenses either as outstanding expenses or as sundry creditors, this amount cannot be disallowed. This ground is remitted back to the Assessing Officer for fresh consideration." Accordingly, this ground is dismissed. 7. The next ground is with regard to deleting the disallowance of Rs. 75,95,349/- made u/s.40A(3) of the Act. 7.1 The facts of the issue are that The AO made an addition of Rs. 75,95,349/- u/s.40A(3) of the Act in respect of the following expenditures for the reason that the said payments were made to a person in a day, otherwise than by an Account payee cheque/draft, in excess of Rs. 20,000/-. Materials for contract works 13,56,596 WIP CSD(Vishupriya II) for GPL 1,23,266 Machinery fuel expenses 1,91,150 Fees and charges paid 28,500 Labour and wage expenses 58,95,837 The payments under various head which has been disallowed by the AO u/s.40A(3) is made by way of cash for the following reasons. Material for contract works: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n expenditure of Rs. 1,23,266/- for the repair and maintenance of the said boat which was paid in cash. The appellant had to incur expenditure for buying wood, for lathe work and for buying second hand motor and some spare parts etc. These payments were made to people like seller of wood, mechanics who deal in selling second hand spare parts etc and hence the payments were made in cash. As the boat which is an old one was purchased for the business purpose of the appellant and since the expenditure in cash was incurred to make the boat fit for working conditions, and since only cash payments can be made to buy second hand spare parts, it is most humbly prayed that this respected authority may be pleased to delete the disallowance made u/s.40A(3) of Rs. 1,23,266/-. Machinery Fuel Expenses: The appellant had to carry out dredging work in three or four sites at the same time and the sites were located within 20 to 30 kms. The appellant procures fuel from one common bunk for all the work sites within that area. The appellant had been allowed credit facility by that bunk and hence fuel was procured whenever there is a need by the workers of the appellant and the bills were finally se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to fulfill the dredging work at odd hours in the inclement weather may force the appellant to work ove night shifts for which the workers need to be paid in cash. All these payments have been made out of business compulsions for obtaining material for contract works amounting to Rs. 13,56,596/-. Similarly, the appellant had to incur Rs. 1,23,266/- for the repair and maintenance of a old boat by name Vishnupriya II thereby incurring expenditure on purchasing of wood, lathe work, second hand motor and some spare parts. Similarly, machine and fuel expenses for carrying out dredging work at 3, 4 sites located near sea coast another amount of 1,91,150/- had to be paid in cash. Over and above, around 50 to 60 workers have been indulged in labour works whose payment did not exceed Rs. 20,000/- in a day. Hence disallowance u/s 40A(3) on labour and wage expenses of Rs. 58,95,837/- is also not justified. The appellant placed his reliance on t1ie jurisdictional ITAT decision in the case of Trident movies in ITA No. 184/MDS dated 17.01.2013 wherein it was held no disallowance u/s 40A(3) can be made taking into consideration the business expediency and other relevant factors. In the instant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40A(3) of the Act which itself provides for exception circumstances having regard to the nature and extent of banking facilities available and business expenditure and other relevant factors. In the present case, the facts and circumstances show that the assessee has bona fide reasons to make cash payments in respect of above expenditure. Further, the following decisions were relied by the assessee's counsel and also in support of assessee's case. 1. In the case of Anupam Tele Services Vs. ITO reported in (2014) 366 ITR 122(Guj.) wherein held that Section 40A(3) does not eliminate considerations of business expediencies, thus where assessee was compelled to make cash payments, disallowance made by invoking s.40A(3) was not justified. 2. In the case of M/s.Trident Movies Vs. ACIT in ITA No.184/Mds./2012 vide order dated 17.01.2013 wherein held that as per the proviso to sec.40A(3), no disallowance can be made u/s.40A(3) taking into consideration the business expediency and other relevant factors. In the present case, the assessee and its team went to a far away place for the purpose of TV serial shooting. The assessee had made cashpayments to various parties, technicians, artists ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led his return of income for the assessment year 2010-11, but still the sums were contributed by him from out of his income. In the light of the above submissions the Authorised Representative prayed to delete the addition of contribution by the partners as these credits are genuine and are accounted in the books of the partners. As far as the disallowance made by the Assessing Officer on account of credits in the partners current account is concerned, the Authorised Representative of the Appellant has filed details of income tax particulars of Shri R.Chandrasekar and A.Parthiban and the investments made by both the partners in the appellant firm and shown in their capital accounts reflected in the returns of income filed for the AY 2010-11 i.e., the year under consideration. On verifying the details filed such as copy of the acknowledgement for filing the return of income along with computation of income, capital account and balance sheet of these partners, their investments have been properly reflected in the capital and hence Assessing Officer is directed to delete the additions made in the case of R.Chandrasekar and A.Parthiban. In the case of Shri Alagappa Vandayar aged 89 y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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