2016 (7) TMI 952 - AT - Income Tax

Tribunal remands appeal for fresh adjudication, directs careful scrutiny of evidence & compliance with Rule 6DD

The Tribunal allowed the appeal filed by the assessee-firm for statistical purposes, remanding the matter back to the Assessing Officer for fresh ... Additions made u/s 40A(3) read with Rule 6DD - cash payment for expenditures - bifurcation of payment - Held that:- As the assessee-firm has taken a plea and contended that each payment in a day to the payee’s is less than ₹ 20000/- and the case is covered under exception as provided u/r 6DD of Income Tax Rules, 1962 as the individual payment in a day is to be reckoned separately for considering exception u/r 6DD of Income Tax Rules, 1962 and not aggregate payments in a day which is supported by the decisions relied upon by the assessee-firm as set-out above, but the assessee-firm has to bring on record cogent evidences to substantiate the same plea which need examination and verification by the authorities below. It is incumbent for the assessee-firm to bring on record the evidences and circumstances to prove its case that it falls under the exception to Section 40A(3) of the Act provided u/r 6DD of Income Tax Rules,1962. Keeping in view the overall facts and circumstances of the case, we are of the considered view that the matter needs to be set-aside and restored back to the file of the A.O. for fresh adjudication on merits based upon the evidences and explanations filed by the assessee-firm to substantiate and corroborate its pleas which need examination and verification by the authorities below. Accordingly we set aside this matter to the file of the A.O. and direct the A.O. to scrutinize the evidences and explanations filed by the assessee firm and evaluate the attraction of provisions of section 40A(3) of the Act read with exceptions as provided under Rule 6DD of Income Tax Rules, 1962 and de novo redetermine the matter in accordance with law and judicial precedents - Decided in favour of assessee for statistical purpose Issues Involved:1. Disallowance under Section 40A(3) of the Income Tax Act, 1961.2. Applicability of Rule 6DD of the Income Tax Rules, 1962.3. Genuineness of cash payments made on Sundays.4. Compliance with TDS provisions.Issue-wise Detailed Analysis:1. Disallowance under Section 40A(3) of the Income Tax Act, 1961:The primary issue revolves around the disallowance of 20% of cash payments exceeding Rs. 20,000 made by the assessee-firm for transportation charges, as per Section 40A(3) of the Income Tax Act, 1961. The AO observed that the assessee-firm made substantial cash payments totaling Rs. 41,07,793 to six parties, and disallowed 20% of these expenses amounting to Rs. 8,21,559, citing non-compliance with Section 40A(3). The AO noted that the assessee-firm failed to provide supporting documents to prove that these payments were made on Sundays.2. Applicability of Rule 6DD of the Income Tax Rules, 1962:The assessee-firm contended that the cash payments were covered under the exceptions provided in Rule 6DD of the Income Tax Rules, 1962, as they were made on Sundays when banks are closed, and the truck drivers and cleaners insisted on cash payments. The CIT(A) upheld the AO's disallowance, stating that the assessee-firm did not substantiate its claim with adequate evidence and that the payments appeared to be deliberately shown on Sundays to attract the exception under Rule 6DD.3. Genuineness of Cash Payments Made on Sundays:The assessee-firm argued that the payments were genuine, made under unavoidable circumstances, and duly accounted for with payee details. However, the AO and CIT(A) found that the assessee-firm did not provide sufficient evidence to prove that the payments were made on Sundays. The Tribunal observed that the assessee-firm's claim that truck drivers and cleaners insisted on cash payments on Sundays was not corroborated with concrete evidence.4. Compliance with TDS Provisions:The assessee-firm claimed that TDS was deducted and paid to the government account in time. However, the Tribunal noted that the entire TDS for the year was paid in March 2005, and the assessee-firm did not provide proof of filing TDS returns with complete disclosures. The Tribunal emphasized the need for the assessee-firm to substantiate its claim with proper documentation.Tribunal's Decision:The Tribunal set aside the matter to the AO for fresh adjudication, directing the AO to scrutinize the evidences and explanations provided by the assessee-firm to substantiate its claims. The Tribunal emphasized the need for the assessee-firm to produce necessary evidence and explanations to prove that the payments fall under the exceptions provided in Rule 6DD. The AO was instructed to provide a proper and sufficient opportunity of being heard to the assessee-firm in accordance with the principles of natural justice.Conclusion:The appeal filed by the assessee-firm was allowed for statistical purposes, with the matter remanded back to the AO for de novo determination based on the evidences and explanations to be provided by the assessee-firm. The Tribunal's order emphasized the need for thorough examination and verification of the assessee-firm's claims in compliance with the relevant legal provisions.