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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 ..... Merilyn Shipping and Transports v. Addl. CIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM ]. Disallowance made u/s.40A(3) - Held that:- We find that though the payments were made in cash in excess of ₹ 20,000/- on account of business expenditure, as the assessee made the payments at the work place for the purpose of purchase of materials and labourers. Further, the drudging work was carried on at odd hours at sea coast and it cannot be accepted that the material suppliers or labourers would take the cheques from the assessee. The provisions of the section 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. 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 cash payments to various parties, technicians, artists etc. for the period of 2 to 6 days under business compulsions. We find that the above payment was made un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,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 ₹ 20,95,600/- and ₹ 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 warrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 49,69,800/- made u/s.40(a)(ia), 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year relevant to the assessment year either in the name of the party or outstanding expenses. Hence, in the interest of justice, we are remitting the issue back to the file of the Assessing Officer with direction to verify the claim 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 ₹ 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 ₹ 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 ₹ 20,000/-. Materials for contract works 13,56,596 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the business compulsions the appellant had to pay cash and procure the material for the contract works. Hence it is most humbly prayed that this respected authority may be pleased to delete the disallowance made u/s.40A(3) of ₹ 13,56,596/- paid in cash towards procurement of material for contract works. WIP CSD (Vishupriva II) for GPL: The appellant purchased an old boat for its business purposes and named it as Vishnupriya II. The appellant had to incur an expenditure of ₹ 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 del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal before the Ld.CIT(A). 7.2 On appeal, the Ld.CIT(A) deleted the addition made u/s.40A(3) of the Act with reference to purchase of material for contract work at ₹ 13,56,596/- by way of cash incurred at the work site in the form of construction material, spare parts, bunkering vessels for carrying water or fuel to the ships, etc. These payments have been made in cash to procure materials for emergency needs for completion of the works in time which requires on the spot payments. In order 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 ₹ 13,56,596/-. Similarly, the appellant had to incur ₹ 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. Ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the parties and perused the material on record. We have gone through the order of Ld.CIT(A) on this issue. We find that though the payments were made in cash in excess of ₹ 20,000/- on account of business expenditure, as the assessee made the payments at the work place for the purpose of purchase of materials and labourers. Further, the drudging work was carried on at odd hours at sea coast and it cannot be accepted that the material suppliers or labourers would take the cheques from the assessee. The provisions of the section 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 com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of income for the assessment year 2010-11. A copy of the acknowledgement for filing the return of income along with the computation of income, capital account and balance sheet of both these partners are enclosed for the perusal of this respected authority. It may be noted that these were filed before the Assessing Officer during the course of the assessment proceedings. However the Assessing Officer without verifying the same concluded that the partners have not shown these amounts in their accounts. 8.4 As far as the contribution from Shri.Alagappa Vandayar is concerned, it is submitted that he has passed away on 10.02.2012 and was 89 years old when he passed away. He was not an assessee and has not filed 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 Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirm the order of the CIT(A). 8.7 Regarding sustaining the addition of ₹ 15,80,000/- u/s.68 of the Act in respect of current account balance in the name of Shri Alagappa Vandayar, the assessee is not able to show any proof that Shri Alagappa Vandayar has contributed this amount. In view of the insufficiency of evidence, the addition is to be considered u/s.68 of the Act. The same is confirmed. This ground in Cross objection is dismissed. 9. The assessee has raised one more ground in C.O is with regard to sustaining the disallowance of expenditure at 10% in respect of self-made vouchers. 9.1 In this issue, certain payments amounting at 20% of ₹ 2,49,55,733/- supported by self-made vouchers. The AO disallowed 20% of these payments, worked out at ₹ 49,91,146/-. On appeal, the CIT(A) observed that similar disallowance was made in earlier year i.e. assessment year 2009-10 and he was of the opinion that there is every chance of bifurcating expenditure in self-made vouchers and has sustained 10% of tha expenditure. Against this, the assessee is in appeal before us. 9.2 We have heard both the parties and perused the material on record. The total expenditure w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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