40A(3) payments

[LAKSHMISH IYENGAR]

Sir, My client is a trader is APMC yard and he buys food grains from agriculturists and sells the same to different dealers. The goods will be sent to other states in the country. In the entire year on 7 occasions  he has made payments in excess of Rs.20,000/- by way cash to truck drivers to transport the goods. The same amount is mentioned in the sale bills and the money is recovered from the buyers. In the books of accounts freight charges are debited and parties accounts are credited as freight charges. While concluding the assessment the assessing officer has made an addition of Rs.1,27,000/- u/s. 40A(3) stating that as the payments are made by cash the expenses are disallowed.  Sufficient proof was produced at the time of hearing still it was not accepted.  Now I have filed an appeal and I have quoted Allahabad HC. CIT Vs. Rajs Pal Automobiles (2009 (6) TMI 565 - ALLAHABAD HIGH COURT). I request you to through some more light on this issue.

Regards.

AI Summary

Trader Challenges Disallowed Cash Payments Over Rs. 20,000; Appeals Using Section 40A(3) Case References for Support A trader operating in an APMC yard made cash payments exceeding Rs. 20,000 on seven occasions to truck drivers for transporting food grains, which were later recovered from buyers and recorded as freight charges in the accounts. The assessing officer disallowed these expenses under Section 40A(3), adding Rs. 1,27,000 to the trader's income despite provided proof. An appeal was filed, referencing a case from the Allahabad High Court. A suggestion was made to consider another case, G.A. Road Carriers versus Income-tax Officer, for additional support in the appeal process.