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TMI Blog2018 (12) TMI 1998X X X X Extracts X X X X X X X X Extracts X X X X ..... al pronouncements referred by the CIT (A) in his elaborated findings demonstrating that due relief have been provided under the different circumstances cited by the assessee according to the provision of law and rule. Therefore, considering the detailed findings of the ld. CIT(A), we do not find any merit in the appeal of the assessee, therefore, the same is dismissed. Disallowance of loading and un-loading expresses - no TDS was deducted - assessee explained that payment made against the loading and unloading expenses were not more than Rs. 20,000/- for a day to a group of 4 to 5 persons - HELD THAT:- Ais undisputed fact that these expenses were made at the loading and unloading destinations to small workers in cash on self made vouchers because of nature of expenses, it is difficult to check and verify such payment, therefore, due to non-verifiable nature of these expenses, we observed that CIT (A) has restricted the said disallowance to a very reasonable level of 15% of the aforesaid expenses of Rs. 12,12,400/- on lump sum basis. Considering the reasonableness of the disallowance made by the ld. CIT (A) on the basis of non-verifiable nature of expenses, we do not find any merit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, he is supposed to pay the rentals for the vehicles owners 03. Drivers/ cleaners etc. are not associated with the assessee as employee but they work for vehicle owners 04. Drivers salary/ cleaners salary, diesel expenses spare parts and other incidental expenses are not the responsibility of the assessee but are of the vehicle owners. 05. Thus claim of the assessee that he has paid for these expenses are far from reality and in no way is supported by any appropriate evidence 06. It appears that the narration given by the assessee as advance' is an afterthought. 07. It is noticed that the advance payments are directly transferred to expense account which proves beyond doubt that payments made by assessee are actually in the nature of expenses but by assessee has used the colorable devise and have given the name as 'advance' and have tried to take shelter the technicalities of Section 40A(3) and rule 6D. 08. Assessee has actually made payments in excess of Rs. 20,000/- in all the above cases. 09. Under the facts and circumstances, assessee case squarely falls under the provisions of Sec. 40A(3). The assessing officer has stated that as per section 40A(3) payment in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to various parties totaling to Rs. 20,73,420/-. Since each payment was less than Rs. 20,000/- even on a single day for a single transaction and hence the provisions of Section 40A(3) does not apply as per the appellant. (Details on Page No. 21 to 44 of Paper Book). - Also claimed that to a single party total payment exceeding Rs. 20,000/- was made in a single day for different trips but the payment relating to each trip was less than Rs.20,000/-. (2) Details of the amounts segregating the Road/RTO expenses out of the each payments and the balance payment towards transport being less than Rs. 20,000/- and hence the provisions of Section 40A(3) does not apply as per the appellant. Total amount on such payments stated to be at Rs. 5,23,790/-. ( Details on Page No. 45 to 53 of Paper Book) (3) Each of the payments in cash made on Saturdays, Sundays and holidays when the banking facilities were not available and hence same was falling under Rule-6DD(J) to Section 40A(3) of the I.T. Act and hence no disallowance to be made as per appellant. The total amount on this account stated to be at Rs. 49,26,891/-. ( Details on Page No. 54 to 98 of Paper book) (4) The details of payments where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not listed above but disallowance has been made in assessment order then those may also be not considered for any disallowance u/s. 40A(3) of the I.T. Act. Here the appellant's second argument is that if two or more payments considering each payment below Rs. 20,000/- to a single party on a single day does not attract the provisions of Section 40A(3) of the Act as each payment was made with regard to a different set of transactions/different trip. The appellant's contention in this regard is not acceptable for the reason that under the provisions of Section 40A(3) it is clearly mentioned that if the assessee incurres any expenditure in respect of which a payment or aggregate of payments made to a person in a day otherwise than by an account payee cheque exceeds Rs. 20,000/- no such deduction shall be allowed. So, the payment/payments should not be exceeding Rs. 20,000/- to a single person to avoid the disallowances. Meaning thereby that the provisions doesn't give any immunity for every set of trips/separate trip the payment exceeding Rs. 20,000/- even if paid on a single day to a same person]) So the appellant's argument in this regard is not correct and hence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnataka) Date of decision: 18.09.2013 (2) CIT Vs. Kishor Project (P) Ltd. (2013) 36 taxmann.com 94 (Gujarat) Date of Decision 19.03.2013 Tribunal upheld order of Commissioner (Appeals) - Whether since t had been made at a place where it -was not feasible to make payment by way of cheque or demand draft, impugned order passed by appellate authorities was to be confirmed - Held, yes. (3) Saraswati Housing Developers Vs. Addl.CIT, Range-2 142 ITD 98 (Delhi) Date of decision : 01.03.2013 It was noted from records that asses see made cash payments to sellers before Sub- Registrar at places, where banking facilities were not available - Moreover, there was no dispute regarding identity of payees and genuineness of land transactions in respect of which payments had been made - Weather on facts, payments in question were covered under second proviso to section 40A(3) and rule 6DD(h) and, therefore, impugned disallowance was to be deleted - Held, yes [Paras 12 14] (4) Basu Distributor (P) Ltd. Vs. ACIT (2012) 19 taxmann.com 11 (Delhi) Date of Decision: 09.02.2012 Section 40A(3) of the Income-tax Act, 1961 read with rule 6DD(j) of the Income-tax Rules, 1962 - Business disallowance - Cash pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tringency warranting cash payments, in such circumstances, disallowance of part of payment so made was unjustified - Held, yes (9) CIT Vs. Kalyan Prasad Gupta (2011) 51 DTK 191 Cash payments made by the assessee to the State Government who granted the contract to collect royalty on behalf of the Government cannot be disallowed under section 40A(3) in view of Rule 6DD(b). (10) CIT V. Balkrishan Jagdish Chand (2007)213 CTR 174 Multiple payments to same party on a single day, various cash payments made to one party on one day were not required to be clubbed and treated as one cash payment and, for that reason, total cash payments exceeding Rs. 2,500 in a day to that party were not to be held as violative of section 40(3), so also the payments made after banking hours (A.Y. 1986-87) (11) CIT Vs. Pravin Co. (2005) 274 ITR 534 Once identity of the payee was established, genuineness of the payment was not doubled, the materials purchased under cash payments were utilized for construction activity carried on by the asses see, it was not possible to hold that purpose of payment in cash was to frustrate proper investigation by the Department; and as such disallowance of such payments in cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trip and No. of days likely to be taken etc. Thereafter, these advance payments made by the appellant were reduced from the total freight payments to the transporter and the balance is paid through cheque. So, in the instant case from each of the payments excluding the Road and RTO expenses as shown in last column of the table the balance payment remains below Rs. 20,000/- which was for meeting out the various expenses noted above. Since, each of the remaining expenses paid in cash are below Rs. 20,000/- that too for various independent heads and hence no disallowance u/s. 40A(3) could be made as there is no violation of the provisions of the said section. It has been noticed that the A.O. has not given any adverse finding about the genuineness of the aforesaid claims. There is nothing on record brought out by the AO saying that any bogus expenses in respect of above have been debited by the appellant. So, the courts in some of the cases cited above in this regard interpretated the purpose and nature of the provisions of Section 40A(3) of the I.T. Act saying that it was brought to curb the circulation of the unaccounted money in the economy 2.5. In this regard, the appellant gets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be liable for disallowance u/s. 40A(3) of the I.T. Act. (4) The details of payments where the transporters did not have any office near to loading points of the trucks and hence the provisions of Section 40A(3) could not be applied as per the appellant. The total amount on this account comes to Rs. 79,79,711/-. (Page No. 99 to 101 of Paper book) I have carefully gone through the facts of the case, various written submissions, remand report of the A.O and rejoinder to the remand report. The appellant has claimed that the transporters did not have any office near to the loading point of the truck and therefore the cash payments were made to the drivers of the trucks for meeting the enroute expenses like diesel expenses, RTO fees, border fees, toll payments, drivers and helpers food and miscellaneous expenses etc. Details of the aforesaid payments are as under:- xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 4.1. The appellant has claimed that the aforesaid payments were made due to business exigency and other relevant factors as specified in the section itself. Since, it was engaged in the transportation business and accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecification of the truck/trailer which were also produced before the AO during remand proceedings as admitted by the A.O. in the remand report. These payments have been made at the RTO check-post controlled by the State Government. Therefore, the payments to the extent of the border fees amounting to Rs. 6,73,950/- does not warrant any disallowance. Hence the same are deleted. 4.3. The appellant has also paid the Road/RTO expenses to the tune of Rs. 10,82,500/- in respect of the journlies noted in the above table. It has been submitted by the appellant that he has paid and incurred certain expenses on account of various RTO fees, payment of the Border fees at various check-post and other expenses besides the food and beverage expenses of the drivers and helpers. So the total payment made for a single trips includes various expenses under aforesaid heads besides diesel/repairing, maintaining expenses for the truck/trailers. Since these expenses were paid to different payees and do not individually exceed the limit of Rs. 20,000/- so no disallowance should be made on this account. 4.4. On going through the various details and submissions and the copies of vouchers and the records it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2012) 19 taxmann.com 11 (Delhi) Date of Decision: 09.02.2012 Section 40A(3) of the Income-tax Act, 1961 read with rule 6DD(j) of the , Income-tax Rules, 1962 - Business disallowance'- Cash payment exceeding prescribed limits - Assessment years 1992-93 to 1994-95 -Assessee, a film distributor, made payments above Rs. 10,000 in cash to third parties - Lower authorities held that assessee by making payments above Rs. 10,000 in cash to third parties had violated provisions of section 40A(3), read with rule 6DDQ) - Whether since (i) provisions of section 40A(3) and rule 6DDQ) have been incorporated in Act in order to check incurring of bogus and fictitious expenses to non-existing parties, and (ii) lower authorities did not doubt identity of third parties and genuineness of payments, they were wrong in concluding that assessee had violated provisions of section 40A (3), read with rule 6DDj) - Held, yes - (5) CIT Vs. Kalyan Prasad Gupta (2012) 20 taxmann.com 533 (Raj.) Date of Order: 20.11.2010 Section 40A(3) of the Income-tax Act, 1961 - Business disallowances -Cash payment exceeding prescribed limits - Assessment year 2004-05 -Where State Government had granted contract to collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty carried on by the assessee, it was not possible to hold that purpose of payment in cash was to frustrate proper investigation by the Department; and as such disallowance of such payments in cash was not justified. (12) CIT v. Eastern Condiments (P) Ltd. (2003) 261 ITR 76 When genuineness of cash purchases was not in doubt and there was evidence that vendors would only accept cash, disallowance of cash payments in excess of prescribed limit was not justified. (13) Satpal Jain Vs. ACIT (2003) 79 TTJ 444 (Delhi) Confirmation of recipient that he did not accept Cheque, would cover the case under Rule 6DD, and disallowance of cash payment in excess of prescribed limit was not justified. 4.6. During the course of proceedings along with the written submissions, the appellant has enclosed sample vouchers to the effect of making the payment to the drivers who had to ultimately make the payment for Border Fees and toll naka at various check posts during the trips which establishes that the payments in cash were unavoidable and has been made genuinely. Even otherwise also of the maintenance of the vouchers/receipts the fact of making such payments to the aforesaid authorities could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Rule-6DD and one has to go by the consideration of business expediency and other relevant factors. Further the Hon'ble Rajasthan High Court in the case of Smt. Harshila Chordia Vs. ITO (2008) 298 ITR 349 has observed that exceptions contained in Rule-6DD are not exhaustive and that the said rule must be interpreted liberally. Further, in the case of Attarsingh Gurumukh Singh Vs. ITO (1991) 59 Taxman 11, the Hon'ble Supreme Court has also endorsed that the cash payments made for business expediency could be made if there is no doubt as to the genuineness of the payment nor the identity of the payee. 4.9. The details of the advance in respect of the parties in whose case even excluding the border receipts and RTO/Road expenses remains to be more than Rs. 20,000/- such details are given as under:- xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxx 4.10. Since in the aforesaid transactions, the border fees payments comes to Rs. 4,37,900/- and road /RTO expenses at Rs. 11,05,600/- which does not warrant any disallowances for the reasons discussed in the preceding paras of this order. In view of the reasons discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder CBS. It is correct to say that but ultimately the payment has to be reached in the hands of Driver who was at third place where there is no presence of appellant and transporter and hence the payment through RTGS/NEFT would not be possible to the drivers at such places. 5.2. Various courts have supported this view which are briefly discussed hereunder:- (1) CIT Vs. Devendrappa M. Kalal (2013)39 taxmann.com 16 (Karnataka) Date of decision: i 8.09.2013 \ (2) CIT Vs. Kishor Project (P) Ltd. (2013) 36 taxmann.com 94 (Gujarat) Date of Decision 19.03.2013 Tribunal upheld order of Commissioner (Appeals) - Whether since payment had been made at a place where it was not feasible to make payment by way of cheque or demand draft, impugned order passed by appellate authorities was to be confirmed - Held, yes. N; (3) Saraswati Housing Developers Vs. Addl. CIT, Range-2 142 ITD 98 (Delhi) Date of decision: 01.03.2013 It was noted from records that assessee made cash payments to sellers before Sub- Registrar at places, where banking facilities were not available - Moreover, there was no dispute regarding identity of payees and genuineness of land transactions in respect of which payments had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Rules, 1962, read with CBDT's Circular No. 220, dated 31-5-1977 and, therefore, Commissioner (Appeals) rightly deleted disallowance made by Assessing Officer - Held, yes (8) Walford Transport (Eastern India) Ltd. Vs. CIT (2002) 124 Taxman 538 Dt. of Order : 08.10.1999 Whether where authorities were satisfied about genuineness of transactions and identity of payees and fact that assessee was in financial stringency warranting cash payments, in such circumstances, disallowance of part of payment so made was unjustified - Held, yes (9) CIT Vs. Kalyan Prasad Gupta (2011)51 DTR 191 Cash payments made by the assessee to the State Government who granted the contract to collect royalty on behalf of the Government^ cannot be disallowed under section 40A(3) in view of Rule 6DD(b). (10) CIT V. Balkrishan Jagdish Chand (2007) 213 CTR 174 Multiple payments to same party on a single day, various cash payments made to one party on one day were not required to be clubbed and treated as one cash payment and, for that reason, total cash payments exceeding Rs. 2,500 in a day to that party were not to be held as violative of section 40(3), so also the payments made after banking hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (6) Enclosed certain copies of the letters from few parties stating that they have insisted for the cash payments at the relevant point of time. The appellant has not quantified such amount. (Page No. 119 to 127 of paper book) 6.1 have carefully gone through the facts of the case, various written submissions, remand report of the A.O and rejoinder to the remand report. Alongwith the submission, the appellant has attached copies of letters from 9 parties to whom the cash exceeding Rs. 20,000/- has been paid. The details of the parties to whom such payments have been made at their insistence are tabulated as under:- xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxx 6.2. It is claimed that the aforesaid parties have insisted for cash payments as they had to give the cash to the drivers and helpers to clear and operating the goods carriage and these expenses were largely incur in various parts of the country. It has been noticed that the appellant was compelled to make the payments to the aforesaid parties to meet their requirement at different stations so as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t exceeding prescribed limits - Assessment years 1992-93 to 1994-95 -Assessee, a film distributor, made payments above Rs. 10,000 in cash to third parties -Lower authorities held that assessee by making payments above Rs. 10,000 in cash to third parties had violated provisions of section 40A(3), read with rule 6DDQ) -Whether since (i) provisions of section 40A(3) and rule 6DD(j) have been incorporated in Act in order to check incurring of bogus and fictitious expenses to non-existing parties, and (ii) lower authorities did not doubt identity of third parties and genuineness of payments, they were wrong in concluding that assessee had violated provisions of section 40A(3), read with rule 6DDQ) - Held, yes. (5) CIT Vs. Kalyan Prasad Gupta (2012) 20 taxmann.com 533 (Raj.) Date of Order : 20.11.2010 Section 40A(3) of the Income-tax Act, 1961 - Business disallowances Cash payment exceeding prescribed limits - Assessment year 2004-05 -Where State Government had granted contract to collect royalty on its behalf was made to contractor not in individual capacity, but on behalf of Government and, hence, no disallowance under rule 6DD(b) could be made of royalty paid by contractor to Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f prescribed limits - Assessment year 1985-86 -Assessee paid an amount of Rs. 2.37 lakhs in cash, which was about 3 per cent of total freight to truck drivers on their insistence at the time of delivery of goods - Genuineness of payment was not disputed - Whether cash payments having been made in an exceptional circumstances, no disallowance could be made - Held, yes. (13) CIT Vs. Amarjit Arora (2005) 143 Taxman 231 (Punj. Har.) Dt. of Order: 11.05.2004 Tribunal on finding that cash payment was made on insistence of seller, deleted addition - Whether cash payment in instant case was protected by exceptions provided under rule 6DDQ) - Held, yes - Whether, therefore, no question of law arose from order of Tribunal for interference - Held, yes Circulars notifications - CBDT Circular No. 220 dated 31-5- 1977. (14) CIT Vs. Achal Alloys (P) Ltd. (1996) 218 ITR 46 (MP) \ Dt. of Order :13.11.1995 Whether where payments in cash were duly signed by payees and insistence on making cash payments was founded on fulcrum that payees did not have any bank account and, being illiterates, they required payment in cash, no disallowance could be made under section 40A(3) -Held, yes (15) CIT Vs. Rajmoh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh payments to various transporters in different heads as under. (i) Details of payment below Rs. 20,000/-. The ld. CIT (A) worked such payment to the amount of Rs. 20,73,420/-. Since each payment was less than Rs. 20000/ even on a single day for a single transaction and hence the provision of section 40A(3) does not apply . (ii) Detail of expenses pertaining to Road/RTO expenses out of each payment and balance payment towards transport was less than 20,000/-. Such expenses were determined at Rs. 5,23,790/-. (iii) Payment in cash made in cash on Saturdays, Sundays and holidays. The total amount was determined at Rs. 49,26,891/- on the reason that banking facility was not available because of Saturdays, Sundays and holiday as per rule 6DDD(j) to section 40A(3). (iv) Transporter did not have any office near loading point. The total amount on this account was stated to be Rs. 79,79,711/- (v) The assessee does neither have any presence nor bank account. The total amount of payment in such categories was determined at Rs. 22,52,135/-. The ld. CIT (A) has examined these categories as under. ((i) The assessee has claimed that provision of section 40A(3) does not apply as the cash payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Ld. CIT (A) has also determined border fees payment to the amount of Rs. 4,37,900/- and road/RTO at Rs. 11,05,600/- which does not warranty any disallowance for the reason discussed in the preceding paras were also deleted. Where the assessee does not any presence nor bank a/c, the ld. CIT (A) has determined such amount to the extent of Rs. 25,45,385/- and granted relief to the assessee. After considering the above, it is clear that ld. CIT (A) verified in detail the claim of the assessee that in different circumstances as elaborated above CIT (A) has allowed total relief to the assessee to the extent of Rs. 1,12,00,206/- (Rs. 5,66,270 + Rs. 5,23,790+12,22,350 +Rs. 10,82,600+ Rs. 47,08,211+ Rs. 5,51,200+ Rs. 25,45,685) under various heads after verification. Thereafter, the ld. CIT (A) has examined the claim of the assessee and the circumstances under which the payment in excess of Rs. 20,000/- was made to single party in a day. We have considered that ld. CIT (A) has already given relief to the assessee where there is such payment less than 20,000/- and has also excluded the payment which were made to the road expenses/RTO, maintenance expenses and payment which were made on Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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