2016 (7) TMI 952

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....he Passing of Order by CIT (A) 1, Thane upholding AO's disallowance @20% u/s. 40A(3) agreeing with AO that cash payments on Sunday substantial & made to take shelter UR6DD & that payments are made on Sunday is not proved, where as the fact is that out of total truck charges of Rs. 15418422/- the cash payments on Sunday are Rs. 3291218/- which comes to 21 % only of total truck charges payments and payments made on Sundays very well proved with name & address in receipts & are accounted and also paid TDS & filed TDS return to Department & Accounts are duly audited u/s. 44 AB. The Learned A.O. failed to appreciate the fact that even though consolidated payment to various transporters is reflected in our books of accounts but in fact the payment was actually done to various truck drivers and cleaners employed by the transporters on various trucks plied by them with us, for meeting out various expenses like salaries to truck drivers and cleaners, diesel and toll expenses, repairs carried out on those trucks etc. Thus only a consolidated entry cumulating payments to various trucks drivers employed by that transporter was passed in his account in our books of accounts. 2) The learn....

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....y , since Sunday being the market day. The A.O. observed that the assessee-firm makes payment to the truck owners and subsequently the lorry owners make the payment to the drivers and cleaners. The A.O. observed that the assessee-firm has received the freight receipt from Ashapura Mine-Chem Pvt. Ltd. through bank and there was no need for him to withdraw the cash and make payment to the lorry owners in cash. The AO observed that the occasional payments on Sunday due to business expediency can be accepted. Under these circumstances, the A.O. held that the transaction of the assessee-firm shows that the payments were deliberately shown on Sunday and the mitigating circumstances of the same were not proved by the assessee-firm nor payments made on Sunday are proved . The A.O. accordingly disallowed a sum of Rs. 8,21,559/- being 20% of the expenses incurred in cash exceeding Rs. 20,000/- u/s 40A(3) of the Act vide assessment order dated 31-12-2007 passed u/s 143(3) of the Act. 4. Aggrieved by the assessment orders dated 31-12-2007 passed u/s. 143(3) of the Act by the A.O., the assessee-firm has filed its first appeal before the learned CIT(A). 5. Before the leaarned CIT(A) , the ....

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....ive returns of income filed with the Revenue. During assessment proceedings u/s 143(3) read with Section 143(2) of the Act, the assessee-firm could not furnish any details to substantiate the claim that the payments were made on Sundays. The learned CIT(A) observed that there were numerous instances of cash payments to same parties. Thus, the payments have been made deliberately to attract exception provided under Rule 6DD of the Income Tax Rules, 1962 and in the light of the above finding, the learned CIT(A) agree with the finding that disallowance @ 20% by invoking the provisions of section 40A(3) of the Act is very much within the power of the A.O. and the additions made u/s 40A(3) read with Rule 6DD of Income Tax Rules, 1962 by the AO were upheld and sustained by the learned CIT(A) vide appellate orders dated 15-06-2011 passed by the learned CIT(A). 6.Aggrieved with the appellate orders dated 15.06.2011 of the learned CIT(A), the assessee-firm is in second appeal before the Tribunal. 7. The learned Counsel for the assessee-firm submitted that the disallowance were made u/s 40A(3) of the Act by the A.O. as the cash payments of Rs. 41,07,793/- were made to various transport....

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....e and substantiate that the circumstances under which the payments were made on Sunday whereby the assessee-firm was compelled to make payments on Sunday as contemplated under exceptions to Rule 6DD of Income Tax Rules, 1962.The plea has been made that the truck drivers and cleaners insist on cash payments and Sunday being market day and the banks are closed on Sunday, is a bald statement made by the assessee-firm which requires corroboration to substantiate and prove the case of the assessee-firm to take it out of rigours and clutches of provisions of Section 40A(3) of the Act and to fall under exceptions provided u/r 6DD of Income Tax Rules,1962. It is also observed that with respect to these six parties as per confirmation letters filed, no payments to these six parties have been made during the entire previous year by cheque/DD and entire payments were made to these six parties in cash except only two payment of Rs. 55166/- to K T more on 21-03-2005 and Rs. 10704/- to Farookh Arai on 24-03-2005, which cast doubts on the theory of insistence by truck drivers and cleaners insisting on cash payments on Sunday being market day while banks are closed on Sundays, while it could not b....