TaxTMI 
TaxTMI 
2016 (9) TMI 1033
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....A(3) of the Act in the computation of taxable income without assigning proper reasons and justification. 3) The CIT(A) erred in partly sustammg the disallowance of salary payments in the computation of taxable income without assigning proper reasons and justification 3. The Brief facts of the case are that the assessee is in the business of manufacturer of fertilizer and proprietor of M/s. Kannappa Corporations, Trichy and M/s. Ganga Cauvery Fertilizers Corporation, Salem. The Return of Income was filed on 12.10.2009 with total income of Rs. 61,65,060/- and the Return of income was processed u/s.143(1) of the Act and subsequently the case was selected for scrutiny under CASS and notice u/s.143(2) of the Act was issued. In compliance to notice, the ld. Authorised Representative of assessee appeared from time to time and produced Books of accounts and other evidences as called for. The ld. Assessing Officer found on verification of evidence that the assessee has claimed lorry freight expenses Rs. 52,60,281/- in financial statements and no TDS was deducted and Breakup of expenses statement was furnished. On perusal, the ld. Assessing Officer found some of the payments exce....
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....hority or the person authorized by it, such particulars, in such form and within such time as may be prescribed''. On applying the above provisions of law, the ld. Assessing Officer should be furnished with Permanent Account Number of lorry owners, which is mandatory requirement for not deducting of TDS and further the ld. Commissioner of Income Tax (Appeals) order does not refer the said provision, considering the apparent facts, provisions of law, we are of the opinion that the ld. Assessing Officer has to examine the nature of expenditure and provisions under 194C(6) of the Act and collect information of lorry owners and pass the order on merits after providing adequate opportunity of being heard to the assessee. The ground of the assessee is allowed for statistical purpose. 4 The next ground raised by the assessee that the ld. Commissioner of Income Tax (Appeals) erred in sustaining the disallowance of Rs. 7,40,252/- by applying the provisions of Sec. 40A(3) of the Act on account of fuel expenses. 4.1 In the assessment proceedings, the ld. Authorised Representative explained that payments are made in respect of fuel expenses which are below Rs. 20,000/- on various date....
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....he ld. CIT(A) erred in confirming the findings of the ld. Assessing Officer and failure to consider the factors of banking facilities and cash payments fall within exception of Rule 6DD of the Act and prayed that the disallowance are not warranted as the local farmers always insist for cash payments. Further most of the supply are illiterate and farmers who do not have bank account and assessee purchase country coal from farmers who are in the habit of supplying and selling the products at the work site of the assessee and moving from place to place and does not have any permanent place of business and Deal only on cash basis. Further educating the farmers for opening of bank account and make Bank payments is highly impractical. Considering time and place of work in rural areas and it is a regular phenomenon faced by the assessee and due to Business exigencies and the cash payment transactions are unavoidable and some transactions also take place on public holiday, Saturday and Sunday. The assessee has been maintaining sufficient bank balance as per Books of account but because the recipient a small farmers who does not have bank accounts and question of issuing of cheques does not....
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....(b) where the payment is made to the Government and, under the rules framed by it, such payment is required to be made in legal tender; (c) where the payment is made by- (i) any letter of credit arrangements through a bank; (ii) a mail or telegraphic transfer through a bank; (iii) a book adjustment from any account in a bank to any other account in that or any other bank; (iv) a bill of exchange made payable only to a bank; (v) the use of electronic clearing system through a bank account; (vi) a credit card; (vii) a debit card. Explanation.-For the purposes of this clause and clause (g), the term "bank" means any bank, banking company or society referred to in subclauses (i) to (iv) of clause (a) and includes any bank [not being a banking company^65 as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)], whether incorporated or not, which is established outside India; (d) where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee; ^6(....
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....or exclusion of Rule 6DD of Income Tax Rules, 1962. The section must be read alongwith Rule and on reading together, it is very clear that provisions are not intended to restrict the business activities. The ld. Assessing Officer cannot restrict the Business of the assessee on application of the Rule 6DD, further the provisions of Sec. 40A(3) of the Act empowers the ld. Assessing Officer to disallow deduction claimed as expenditure were payments are not by account payee cheque/draft. The ld. Assessing Officer should analysis the payments either by Crossed Cheque or Bank Draft and ascertain whether the payments are genuine considering business expediency, genuineness and bonafide peculiar transactions of the business. The assessee makes cash payments in the circumstances as per the intention of the farmers/supplier who transact on cash basis and no credit facility is available in the villages. So, considering the apparent facts and nature of business of the assessee and purchase of country coal from small farmers who are illiterate and does not have permanent place of Business and also vendors deliver country coal at the working site of assessee. We support our opinion with the deci....