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TMI Blog2024 (7) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... eving that these payments were excluded from the purview of Section 40A(3) of the Act were found to be false. There was no concealment of the particulars of income relating to payments made in violation of Section 40A(3) by the assessee. We completely agree with the ld. Counsel for the assessee that it is simply a case of levying penalty on disallowance of claim of assessee, when the assessee admittedly had disclosed all particulars relating to the issue of payments made in violation of section 40A(3) of the Act and had also bonafidely believed the same as not covered under the said section. The assessee we hold ,cannot be charged with having concealed or furnished inaccurate particulars of income so as to impose penalty u/s 271(1)(c) of the Act. As decided in PRICE WATERHOUSE COOPERS (P.) LTD. [ 2012 (9) TMI 775 - SUPREME COURT] where the assessee was noted to have disclosed all particulars of expense and the assesses explanation for not suo moto disallowing the same as being done by mistake, was found bonafide by the court, penalty levied u/s 271(1)(c) of the Act was deleted by the Apex court. Disallowing loading and unloading expenses was a mere ad-hoc disallowance. The disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : During the course of assessment proceedings the assessing officer observed from the cash book of M/s SNR Logistics that the assessee has made cash payment in excess of Rs. 20,000/-. Accordingly, show cause was issued requesting the assessee as to why the amount paid in cash the excess of Rs. 20,000/- to a single party in a day should not be disallowed. The assessing officer did not accept the reply of the assessee as the assessee is in the business of transport of goods by road, trucks and trailers. The assessee was to hire the trucks and trailers from other transporters and individual truck owners and used to supply to the client companies. The assessee was not the owner of any trucks. The assessee was paying rent on hired trucks and was in turn giving the same on rent to others. The payments given by the assessee to the truck drivers formed part of rent. The assessing officer was of the view that the alleged advance was not an advance in actual sense but was payment made of rent to drivers on behalf of vehicle owners. These truck drivers were employees of the parties from whom the assessee rented the vehicle and accordingly the officer disallowed the payments in excess of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Similarly loading and unloading expenses claimed to have been incurred by the assessee were disallowed on account of the same being non verifiable. And to the extent addition made by the AO was confirmed in appeal by the ITAT, penalty for concealment/furnishing of inaccurate particulars of income was levied on the assessee as per section 271(1)(C) of the Act. 5. The ld. Counsel for the assessee pointed out that the Assessing Officer levied penalty noting that, with respect to the disallowance made u/s 40A(3) of the Act, it was a clear case of concealment of income since substantial payments had been made in violation of Section 40A(3) of the Act and an attempt was made by the assessee to pass on the same as advance; and both the ld. CIT(A) as well as ITAT had concurred with the said view in quantum appeal. That, with respect to the loading and unloading charges, he pointed out that the case of the AO for levying penalty was that the same being non-verifiable, were claimed to inflate expenses and, therefore, it was a clear case of concealment of income. Accordingly, the Assessing Officer levied penalty @ 100% of the tax sought to be evaded on the disallowance so made amounting to Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der u/s 271(1) (c) of the Act noted that the assessment u/s 143(3) was completed on 29.12.2011 by making disallowance u/s 40A (3) of Rs. 1,77,20,947 and disallowance of loading/unloading expenses of Rs. 12,12,400/- The appellant challenged that assessment order before the CIT(A), who partially allowed the appeal. The assessee challenged the order of the CIT(A) before the Hon'ble ITAT. The Hon'ble ITAT dismissed the appeal of the assessee and upheld the order of the order of the CIT(A). The AO therefore taking into account the relief granted by the CIT(A) and the order of the Hon'ble ITAT which upheld the order of the Ld. CIT(A) initiated and levied penalty u/s 271(1)(c) of the Act and passed order imposing penalty of Rs. 22,78,213/- which is 100% of the tax escaped and confirmed by the CIT(A) and confirmed by the Hon'ble ITAT 6.1 The appellant in course of the appellate proceedings challenged the imposition of penalty u/s 271(1)(c) of the Act. Further the appellant relied on a number of case laws to support its grounds of appeal. The submission of the appellant is examined. The issue involved is purely factual and the facts are examined in details by the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other. These documents also contained full and complete details of not only the names of the payees but also the detailed mention as to the specific purposes for which the same were incurred. All these and other details filed by the Appellant before the AO and the appellate authorities in quantum proceedings have never been disputed - either by the Revenue or even by the Tribunal. The Appellant further places on record that the books of account regularly maintained and the documentary evidences supporting the same were verified by the auditors who issued an unqualified audit report under section 44AB of the Act categorically certifying in Form No.3CD as to there being several transactions of cash payments in excess of the prescribed threshold limit and as to these having been incurred on account of business necessity, albeit based on the explanation given by the Appellant. Copy of the relevant pages of the tax audit report is attached herewith. In fact, it was predominantly on the basis of this certification of the tax auditor which triggered the AO to look into these transactions which in turn resulted in the consequential disallowance. No penalty is thus leviable even on thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old limit aggregating to Rs. 1,77,20,947/- was in violation of the provisions of section 40A (3) of the Act and that nothing was thus covered under the exceptions. Contrary to her view, the CIT(A) in a very elaborated order separated this aggregate expenditure into two parts (i) an aggregate sum of Rs. 1,12,00,206/- covered under the exceptions in view of several reasons as mentioned in the body of the order; and (ii) the balance figure of Rs. 65,20,741/- not covered under the exceptions, thus liable for disallowance under section 40A (3) of the Act. Even the Tribunal confirmed the view of the first appellate authority for the reasons stated in the body of the order. This aspect is required to be considered in the undisputed factual backdrop that the Appellant is engaged in the business of transportation and every single expenditure subject to disallowance was in relation to transportation payments, which were disbursed to the truck drivers undertaking the transportation of the contracted goods of the customers from one place to the other across the length and breadth of the Country and it was accordingly not possible for the Appellant every time to make payment by the specified mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansportation, wherein he conducted his business by hiring trucks and the transportation being done across the length and breadth of the country and it was not possible every time to make payment by the specified modes since it would have resulted either in non-crystallization of the transportation contracts or in substantial delay in their execution. That, in such business exigencies, therefore, the payment had been made in violation of the provisions of Section 40A(3) of the Act in cash in excess of Rs. 20,000/-. That mere disallowance of claim of expense would not attract levy of penalty. 13. We have considered the contentions of the ld. Counsel for the assessee and we find merit in the same ,that the mere disallowance of expenses u/s 40A(3) of the Act in the present case would not invite the levy of penalty for concealing or furnishing of inaccurate particulars of income. It is an undisputed fact that all particulars relating to payments made in violation of the provisions of Section 40A(3) of the Act were disclosed by the assessee in its Tax Audit Report filed in terms of section 44AB of the Act, along with the return of income. No discrepancy has been pointed out by the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he either substantiates the explanation offered by him or the explanation even if not substantiated is found to be bona fide. The said decision we agree with the Ld. Counsel for the assessee supports the case of the assessee for levying no penalty. 16. Accordingly, we hold that the levy of penalty on the addition made on account of disallowance made u/s 40A(3) of the Act is not sustainable and we direct deletion of the same. 17. We regard to the addition made by disallowing loading and unloading expenses, the contention made by the assessee before the ld. CIT(A) is as under:- 2.2.1 In so far as the penalty levied in respect of the other disallowance on account of loading and unloading expenses is concerned, suffice is to state that while this expenditure was disallowed at Rs. 12,12,400/- by the AO without appreciating the facts of the case, as very much cross-verifiable from the books of account maintained, the same was thereafter sustained at Rs. 1,81,800/- on lumpsum basis by both the appellate authorities. This can be evidenced from the categorical finding of the first appellate authority appearing on Page No.95 of the order. Relevant portion of the same is reproduced herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... medabad ITAT: - ETCO Profiles (P.) Ltd. vs. ACIT (2015) 61 taxmann.com 470 Mumbai- ITAT - Narayan Singh J. Deora Vs. ACIT-ITA No. 5895/Mum/2010-Mumbai ITAT - ACIT Vs. Allied Construction (2008) 26 SOT 50 Delhi ITAT - ITO Vs. Ravi Khurana (2008) 174 Taxman 26 Delhi ITAT 18. On going through the above, we find that the disallowance made on account of loading and unloading charges was a mere ad-hoc disallowance. The disallowance was not based on any finding of fact that the assessee had claimed bogus expenses of loading and unloading. It was made merely because the claims were not fully verifiable and therefore it was considered fit to disallow 15% of the expenses incurred by the assessee on lump-sum basis . Also while holding that the expenses not verifiable, the ITAT in its order had gone on to note that these expenses of loading and unloading were made to small workers in cash on self-made vouchers, and because of the nature of these expenses, it was difficult to check and verify them. It is evident that again it is not a case of finding the assessee to have claimed bogus expenses. It is merely because of the nature of the expenses having been incurred in relation to small workers ..... X X X X Extracts X X X X X X X X Extracts X X X X
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