TaxTMI 
TaxTMI 
2017 (7) TMI 662
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....nstance of unverifiable or unvouched expense. 3. That the orders of the authorities below be set aside and the impugned addition of Rs. 80,024/- and 2,00,000/- be deleted. 4. That the appellant craves your honour's kind permission to add, delete or modify any ground of appeal, as the need be, at the time of hearing. 2. In ground no.1, the assessee has challenged the addition of Rs. 80,024/- made by the Assessing Officer u/s 40A (3) and uphold by the CIT (Appeals) without appreciating the facts of the case. 2.1. During the course of assessment proceedings, the AO, on perusal of ledger for "Staff Welfare", "Vehicle Running and Maintenance Expense", noted the following payments, exceeding Rs. 20,000/-, made in cash. Sr. No Date of payment Particulars Amount paid in cash 1 22/02/2010 Paid to Jagdish Chand for Uniform Material 30552/- 2 22/02/2010 Paid for Uniform Stiching 27,172/- 3 04/08/2009 Paid to M/s Sumidha Vehicles Pvt Ltd 22,300/- Total 80,024/- Being not satisfied with the assessee's explanation and reasons for the above payments in cash, the AO made the aforesaid disallowance U/s 40A(3) of the Act. 3 2.2. In appeal, while confirmin....
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....ds twenty thousand rupees, in such cases and under such circumstances as may be prescribed having regard to the nature and extent of banking facilities available, consideration of business expediency and other relevant factors" From the bare perusal of the provision of the proviso to the relevant section, it is seen that exception to the substantial provision of the said section are carved out by it. Firstly it provides for such cases and under such circumstances as may be prescribed. We are aware of the fact that such circumstances are provided under Rule 6DD of the Income Tax Rules. However, the said proviso extends further & provides also for such circumstances having regard to the nature & extent of banking facilities available. We observe that the A.O. has given assessee the due benefit of this provision. Though we also observe that he has given the same under rule 6DD (i) of the income tax act rules. Going further in the said proviso, we observe that it provides for circumstances in consideration of business expediency & other relevant factors. This is kind of a residual clause where by looking to 5 the business expediency and other factors the relief to the assessee may b....
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....ome from disclosed sources. In interpreting a taxing statute, the Court cannot be oblivious of the proliferation of black money which is under circulation in our country. Any restraint intended to curb the chances and opportunities to use or create black money should not be regarded as curtailing the freedom of trade or business." 2.6.1. The explanation of the assessee that the expenditure is made in cash under the circumstances that the payees either did not have bank accounts or did not accept cheque/bank drafts is not found false by any of the lower authorities. Genuineness of the payment for the expenditure is also not doubted and the payees are identifiable. Therefore, observations of the Hon'ble Apex Court are clearly applicable to the present case. We also find force in the argument of the Ld AR that the case is also covered by the Proviso to Sec 40A (3A). Agra Bench of the ITAT in the case of Tejveer Singh vs. ITO, Mathura in ITA No.329/Agra/2015 has held as under:- 7 "We are also in agreement with the ld CIT (A) that the case laws cited by the assessee relate to a period before the amendment to rule 6DD. However, we also observe that by the said amendment to rule 6DD t....
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....lly asked why on account of missing of these bills and vouchers (not being mentioned here the no. and date of missing bills and vouchers) of the above expenditure, 15% of these expenses 9 may not be disallowed and added to the total income. The AR of the assessee could not file any reply in this regard rather this fact was admitted by him. Since the assessee produced some of the bills and vouchers of the above expenses and considering other facts of the case, 15% of these expenses i.e. Rs. 409304/- are being disallowed for want of proper verification and justification of these expenses and to cover up all possible leakages of revenue and income, hence the same is added to the income of the assessee." 3.2. On appeal, the ld. CIT(A), while upholding adhoc disallowances at Rs. 2,00,000/-, inter-alia, observed in para 7.2 as under: "After going through the assessment order and written submission carefully, I am of the considered opinion that some disallowance out of these expenses was required to be made by the AO. However, the disallowance appears to be on higher side. Therefore, I am of the considered opinion that it would be fair and reasonable to restrict the disallowance to Rs....