TaxTMI 
TaxTMI 
TaxTMI 
2016 (8) TMI 693
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.... relief to the assessee. Aggrieved by the order of the ld.CIT(A), assessee is now in appeal before us and has raised the following grounds:- "1. Learned CIT(A) has wrongly making different disallowance amounting to Rs. 15,97,999/- u/s.40A(3). 2. Learned CIT(A) has wrongly disallowed different expenses made of Rs. 25,58,026/- u/s.40(a)(ia) as TDS was not deducted." 3. The Registry has pointed out that there is delay of one day in filing the appeal. Assessee has filed an Affidavit dated 13/02/2015, wherein inter alia it is submitted that the delay was caused due to error in counting the period of sixty days and that the delay in filing the appeal was neither intentional nor deliberate. It was, therefore, prayed that that the delay of filing of appeal by one day be condoned. 4. The ld.CIT-DR did not seriously object to the prayer of condonation of the delay. We therefore condone the delay and admit the appeal for hearing. 4.1. First ground is with respect to disallowance u/s.40A(3) of the Act. 4.2. During the course of assessment proceedings and on perusing the cash book and ledger, AO noticed that assessee on various occasions and under various heads of expenses had paid ca....
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.... a person residing or carrying on business etc in that village or town. The circumstances have not even been claimed. Further, the assessee himself has made payment to the same party by cheques also which have been allowed also. In these circumstances the payments made in cash are covered u/s. 40A(3) and are therefore not allowable. The disallowance made by the A.O. is confirmed. 3.2 Cash payment to MGT International of Rs. 52.964/- The assessee's submissions can be summarized as follows: "The Learned DCIT has disallowed the Rs. 52964/-u/s 40A (3) for payment made to MGT International. Actual we have Paid only 23140/- to MGT International for advances to fuel exps. During the work at site to the employee of MGT International, If Instruction given by transportation supplier for his need we have to give cash in transit in normal business condition, According to law of natural justice we have not breach of section 40A(3). The Learned DCIT forget in facts and he is shown Rs. 52,964 paid to MGT International instead of Rs. 23140/-. We pray to you honour delete the addition made u/s 40A (3) cash payment made to MGT international." As far as the dispute regarding the amoun....
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....e not made any breach of S.40A (3) of the I. T.Act and it is our humble request to you honour delete the addition made of Rs. 597538/- for foreign Travel Exps paid in cash." Having considered the submissions, I hold that the payments are not covered in any of the exceptions as provided in Rule 6DD. The assessee has tried to say that the payment could not be made by crossed bank cheque or draft due to exceptional or unavoidable circumstances. No such clause is now available. Now the assessee has to claim and prove that circumstances in one of the present clauses as applicable to the assessment year under question were existing. Payments are definitely taken in cheque by travel agents. The assessee itself says that if payment by cheque are made and they are delayed than only interest is payable. These could be conditions for any payments but does not entitle the assessee to infringe the law. Such conditions can be applied by any supplier of goods and services. In these circumstances the payments made in cash are covered u/s. 40A(3) and are therefore not allowable. The disallowance made by the A.O. is confirmed. 3.4 Cash payment for Out of repairs and maintenance expense of Rs. ....
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.... for transportation work carried out at sites of our Grain work. Our Employee has made payment to the party at site of work we have to no option other than payment of cash if he demand charges in cash and we want to complete our work without interruption or delayed in work in adverse condition we have to compulsion to make payment in cash. According to Natural Justice we have no breach of section 40A(3), You honour able to understand our business of transportation. We are request to delete the addition made of Rs. 192000/- payment made to K.K. Transport for transportation exps." Having considered the submissions, I hold that the payments are not covered in any of the exceptions as provided in Rule 6DD. The assessee has tried to say that the payment could not be made by crossed bank cheque or draft due to exceptional or unavoidable circumstances. No such clause is now available. Now the assesses has to claim and prove that circumstances in one of the present clauses as applicable to the assessment year under question were existing. In these circumstances the payments made in cash are covered u/s. 40A(3) and are therefore not allowable. The disallowance made by the A.O. is confirm....
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....ng the day has to be considered as disallowance is made w.e.f. 01/04/2009. Before us, Revenue has not placed any material on record to demonstrate that the amendment made to sub-section(3) to section 40A by Finance Act, 2008, would be applicable to AY 2008-09. Further, there is no finding of lower authorities as to whether each of the payment made by the assessee exceeded Rs. 20,000/- or the aggregate payment in the year exceeded Rs. 20,000/-. Apart from aforesaid, we find that the Hon'ble Jurisdictional High Court in the case of Anupam Tele Services vs. ITO reported at (2014) 366 ITR 122 (Guj.) has held that the paramount consideration of section 40A(3) is to curb and reduce the possibilities of black money transactions and section does not eliminate considerations of business expediencies. In view of the aforesaid facts, we are of the view that the issue needs to be reexamined at the end of ld.CIT(A). We, therefore, restore the issue back to the file of ld.CIT(A) to decide the issue afresh in the light of our observations made hereinabove, the decision of Hon'ble Gujarat High Court cited hereinabove, and in accordance with law. Needless to state that the ld.CIT(A) shall grant ade....
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....o be disallowed." 6.1. Aggrieved by the order of the ld.CIT(A), assessee is now in appeal before us. 6.2. Before us, ld.AR reiterated the submissions made before the AO and ld.CIT(A) and further submitted that no disallowance can be made u/s.40(a)(ia) of the Act, if the person to whom the amount has been paid has already considered the amount as its income in view of the fact that the second proviso to section 40(a)(ia) introduced w.e.f. 01/04/2013 is declaratory and curative in nature and has retrospective effect and for this proposition, he relied on the decision of Agra Tribunal in the case of Rajeev Kumar Agarwal vs. Addl.CIT reported in (2014) 149 ITD 363 (Agra). He further submitted that since there is no finding on fact that whether the payees have considered the payments received by the assessee as their income, matter may be remitted back to the file of ld.CIT(A). The ld.CIT-DR, on the other hand, supported the orders of the AO and ld.CIT(A). 7. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present ground is with respect to disallowance u/s.40(a)(ia) of the Act on acc....