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TMI Blog2016 (10) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... ber And Shri Mahavir Prasad, Judicial Member For the Appellant : Shri S.N. Soparkar with Ms. Ukti Shah. For the Respondent : Shri Prasoon Kabra, Sr. D.R. ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER : 1. With this appeal, the assessee has challenged the correctness of the order of the Ld. CIT(A)-I, Ahmedabad dated 02.05.2013 pertaining to A.Y. 2009-10. 2. The sole grievance of the assessee is that the ld. CIT(A) erred in upholding disallowance u/s 40A(3) for Freight Outward Expense for ₹ 1,00,72,769/- and for freight Inward Expense for ₹ 27,18,197/-. 3. The assessee filed E-return of income for the year under consideration on 26/09/2009 declaring total income at ₹ 44,98,960/-. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. 4. During the course of the scrutiny assessment proceedings, the A.O. noticed that the assessee has made payments in cash exceeding ₹ 20,000/- in contravention to the provisions of section 40A(3) of the Act which can be understood by the following chart:- FREIGHT (OUTWARD) S. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r with the A.O. who heavily relying upon the provisions of Section 40A(3) made additions of ₹ 2,25,30,984/- and 1,30,10,312/-. 8. Assessee carried the matter before the ld. CIT(A) and reiterated what has been stated during the course of the assessment proceedings. 9. After considering the facts and the submissions, the ld. CIT(A) admitted that the A.O. has not doubted the genuineness of the expenditure incurred by the assessee but at the same time observed that it does not mean that disallowance u/s. 40A(3) cannot be made. The ld. CIT(A) accordingly confirmed the assessment. 10. Aggrieved by this, the assessee is before us. The ld. counsel for the assessee reiterated what has been stated before the lower authorities. The ld. D.R. strongly supported the findings of the revenue authorities. 11. We have carefully considered the orders of the authorities below. It is an undisputed fact that the genuineness of the payments have not been doubted by the revenue authorities. It is also an admitted fact that the assessee has deducted tax at source from the applicable rates and the TDS has been deposited in the government account. It is also an admitted fact that the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of peculiar situation. Such situation was as follow (i) the principal company, to which the assessee was a distributor, insisted that cheque payment from a co-operative bank would not do, since the realization takes a longer time; (ii) the assessee was, therefore, required to make cash payments only; (iii) Tata Tele services Limited assured the assessee that such amount shall be deposited in their bank account on behalf of the assessee; (iv) It is not disputed that the Tata Tele services Limited did not act on such promise; (v) if the assessee had not made cash payment and relied on cheque payments alone, it would have received the recharge vouchers delayed by 4/5 days and thereby severely affecting its business operations. The payments between the assessee and the Tata Tele services Limited were genuine. The Tata Tele services Limited had insisted that such payments be made in cash, which Tata Teleservices Limited in turn assured and deposited the amount in a bank account. In the facts of the present case, rigors of section 40A(3) must be lifted. The Division Bench of the Rajasthan High Court in case of Smt. Harshila Chordia v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions. 19. It was because of these considerations that this Court in case of Hynoup Foods (P.) Ltd. (supra) observed that the genuineness of the payment and the identity of the payee are the first and foremost requirements to invoke the exceptions carved out in rule 6DD(j) of the Income-tax Rules, 1962. 20. In the present case, neither the genuineness of the payment nor the identity of the payee were in any case doubted. These were the conclusions on facts drawn by the Appellate Commissioner. The Tribunal also did not disturb such facts but relied solely on Rule 6DD (j) of the Rules to hold that since the case of the assessee did not fall under the said exclusion clause nor was covered under any of the clauses of Rule 6DD, consequences envisaged in Section 40A(3) of the Act must follow. 21. In our opinion, the Tribunal committed an error in coming to such a conclusion. We would base our conclusions on the following reasons : (a) The paramount consideration of Section 40A(3) is to curb and reduce the possibilities of black money transa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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