9911796707
TMI Blog2023 (5) TMI 1256X X X X Extracts X X X X X X X X Extracts X X X X ..... s at different locations of assessee s construction sites and cumulatively, on a single day exceeds Rs.20,000/-. Considering that since major portion of sand will consist of lorry freight, drivers who bring delivery of sand would demand cash payment in night in order to make wage payments. Hence although, provisions of section 40A(3) applies to present case, but neither the Assessing Officer nor the CIT(A) has gone into factum of delivery of sand load of trucks, whether truck drivers are agents of assessees or agent of sand supplier. No clarity is coming out from the orders of lower authorities on this issue. Hence, another angle is that in case, entire amount of Rs.2.59 crores is added to the returned income of the assessee, profit margin of the assessee will be more than 50%, which is not at all possible in the given scenario and nature of business of the assessee. Therefore we estimate fair amount of disallowance and thus, we estimate disallowance at 25% of sand supplied by the assessee - Appeal of the Revenue is partly allowed. - SHRI MAHAVIR SINGH, VICE-PRESIDENT AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER For the Appellant : Mr. R. Mohan Reddy,CIT For the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is engaged in the business of real estate and developing properties. A search operation u/s.132 of the Act, was carried out by the Income tax Department in the assessee s group cases, including the assessee firm, M/s.Sree Daksha Property Developers on 05.09.2013. Subsequently, notice u/s.153A of the Act was issued to the assessee and the assessee filed return of income in response to the same for the relevant assessment year 2013- 14 on 07.12.2015. The Assessing Officer during the scrutiny proceedings noticed that the assessee firm has paid in cash to one Mr. M.Palanisamy in excess of Rs.20,000/- per day on account of purchase of sand and total payment during the year was made to the tune of Rs.2,59,07,222/- . Therefore, the Assessing Officer required the assessee to show cause as to why expenditure claimed in regard to cash payment in excess of Rs.20,000/- per day be not disallowed by invoking provisions of section 40A(3) of the Act. The assessee replied vide submissions dated 28.03.2016 that an amount of Rs.2,59,07,222/- has been paid in cash to Mr. M.Palanisamy during financial year 2012-13 relevant to the assessment year 2013-14 towards supply of sand and said amount h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) finally recorded that when looking at the timing of transaction and nature of commodity, it clearly falls under exception as provided under Rule 6DD(k) of the I.T. Rules. Further, he noted that each transaction involving one lorry supply is less than Rs.20,000/-. Hence, he deleted the addition. Aggrieved, the Revenue is in appeal before the Tribunal. 6. Before us, the learned CIT DR argued during the course of search, statement of Shri R.Mohan, Managing Director of M/s.Sree Daksha Property Developers (India) Pvt.Ltd. was recorded, wherein he stated that amount in cash were paid for sand purchases to Mr. M.Palanisamy. The ld. CIT DR referred to the statement recorded and relevant question No.43 and relevant answer which is being reproduced as under:- Q.No 43: I am showing you the ledger account of M Palaniswamy for the FY 11-12 maintained in tally account at your office premises wherein total cash payment is Rs. 34,34,939/- is reflected. Similarly in FY 2012-13 ledger account maintained in tally package at your office premises a cash payment of Rs. 2,59,07,222/-. Please explain the transaction? Ans: He is the sand supplier. He was paid in cash. Our vehicle goes to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bros Vs. ITO (2014) 41 taxmann.co. 538 (Mad). Finally, he stated that relation of principal-agent is between M.Palanisamy and drivers and not between the assessee and drivers as noted by the CIT(A) and hence, the assessee s case falls on this very ground. Accordingly, he asked the Bench to confirm order the Assessing Officer . 7. On the other hand, the learned counsel for the assessee explained nature of business and how sand supply is being carried out. He also explained that considering the practicability and the customs prevalent in the line of trade, the learned Assessing Officer ought to have appreciated the practical difficulties. Though ultimately bills for sand procurement are subsequently given by Mr. Palanisamy, the fact is to be considered that the sand is transported by trucks past midnight on account of their prohibition to run on the day. According to him, the sand loads carried by different truck drivers were delivered to the different locations and projects on the same day and the cost of each load delivered in one single site may not exceed Rs. 20,000/-. He submitted that on the same day a different driver may have delivered different loads in different locatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another argument that in case, the Bench is not agreeable to any of the arguments, the matter can be referred back to the file of the Assessing Officer to verify whether any cash payment made on account of sand delivered in different locations by drivers separately is below Rs.20,000/- or in excess of Rs.20,000/-. In term of the above, learned counsel for the assessee asked the Bench to confirm order of the CIT(A). 8. We have heard rival contentions and gone through facts and circumstances of the case. The disallowance u/s.40A(3) of the Act is on account of amount being paid to Mr. M.Palanisamy in excess of Rs.20,000/- in a day to procurement of sand. The total payment made during the year was Rs.2,59,07,222/-. The assessee admitted the fact that cost of sand delivered on a single day in a particular site of construction does not exceed Rs.20,000/-, but, after taking into account total sand supplied on different locations, of different parties, supervised by different employees of the assessee total payments exceed Rs.20,000/-. Going by nature of business and practicability of the line of trade, we have to consider that though ultimate bill of sand procured subsequently given b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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