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TMI Blog2023 (5) TMI 1256X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, delay of 9 days is condoned and appeal is admitted. 3. The only issue in this appeal of the Revenue is as regards to order of the CIT(A) deleting disallowance made by the Assessing Officer on account of expenditure incurred in cash in excess of Rs.20,000/-, thereby invoking provisions of section 40A(3) of the Act. For this, the Revenue has raised following grounds of appeal:- "2. The Id. CIT (A) erred in deleting the disallowance u/s.40A(3) of the IT Act, 1961 for AY 2013-14 amounting to Rs.2,59,07,222/- in the assessee's case. 2.1. The Ld. CIT(A) erred in allowing relief to the assessee by deleting the disallowance of Rs. 2,59,07,222/- made u/s.40A(3) by the AO, and observing that, no single entry for expenditure incurred in cash exceeded Rs.20,000/- for the assessee, when the provision of law is that, expenditure in respect of which a payment or aggregate payments made to a person in a day of should be taken into account for the purpose of sec.40A(3) of the Act. 3. The Id CIT(A) ought to have noted the fact that the relationship of 'agent' was between Shri Palanisamy and his drivers, but not between the assessee and the drivers or between the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l style and manner carried out in this line of business is unique i.e procurement of sand through lorries for construction business at various sites. The CIT(A) noted that the assessee firm gets orders from respective sites and the corresponding purchase order will be raised by the firm over phone to various locations, where Mr. M.Palanisamy operate sale of sand all over Tamil Nadu. On receipt of orders, Mr. M.Palanisamy will direct lorry drivers to supply sand through lorries owned or hired by him. Based on cash bill raised on each unit, supply of sand settlement has to be made at the site then and there to the driver on each supply /delivery of sand so as to meet cost of diesel, driver batta, vehicle maintenance etc. It was noted by the CIT(A) that price of sand is inclusive of freight which will be raised as cash bill and sent through driver/cleaner of the vehicle. He further noted that drivers of lorries after reducing cost of expenses, as mentioned above, will settle the accounts to Mr. M.Palanisamy, the supplier and the assessee settles purchases on spot delivery basis and no credit bill was raised by Mr. M.Palanisamy. According to the CIT(A), the assessee's transaction squar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er it is informed sand is critical component in construction progress and the supply of sand is highly regulated. The timely availability of sand is very critical and supplies were made in various project sites. Considering the criticality and business expediency for continuous supply of sand cash payments were made since the supplier demanded cash on delivery and deliveries are made at odd hours. None of the single payments made in a day are exceeding the limits prescribed u/s 40A(3) of the Income Tax Act." The CIT DR stated that it is very clear that Mr. M.Palanisamy is a sand supplier and relation between the assessee and supplier is of purchaser & supplier and nothing more. According to him, there exists no principal-agent relationship as noted by the CIT(A). The CIT DR further controverted statement of the assessee that cash payments have to be made to transporter, who act as agent of sand supplier M.Palanisamy. For this, he stated that the CIT(A) has not considered following facts:- i) M.Palanisamy is a sand supplier and wholesale sand supplier in Tamil Nadu ii) The existence of principal-agent relationship has not been established with any evidence. iii) No evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances and actual custom in the trade. The learned counsel for the assessee further argued that trucks of sand loads are delivered in different locations by the drivers and after collecting cash, ultimately drivers would send details to the suppliers for sand supply. The bills are delivered periodically only after collection of cash by drivers at the delivery spot. He also argued that cost of sand delivered on a single day at the particular site of construction does not exceed Rs.20,000/- and only after taking into account total loads supplied on different locations are supervised by different employees. The total payment made may exceed Rs.20,000/-, but circumstances are beyond control of the assessee. The learned counsel for the assessee also argued that CIT(A) has rightly held that truck drivers are agent of assessee, for this, he explained order for sand is given not to Mr. M.Palanisamy, supplier, but it is given to truck drivers directly by supervisors at different locations and who in turn supply sand, although, bill is raised by main supplier Mr. M.Palanisamy, but for this the assessee is not at all aware he is only making cash payment at the spot, because sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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