TaxTMI 
TaxTMI 
2017 (8) TMI 948
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....e of land is bad at law. 4. That in facts and circumstances of the case, the appellant has shown the short term loss in the computation of income which has been carried forward in the subsequent year. The authorities below have failed to give the credit against income of the appellant neither they have carried forward the same in spite of full details on record and as well as the ITO called the information u/ s 131(6) from the respective companies, the act of the authorities below is erroneous and unwarranted. 5. That in facts and circumstances of the case, the credit of the short term loss against the income of the appellant may kindly be allowed. 6. That the addition to the returned income as sustained by the ld. CIT(A) may please be deleted. 7. That in fact and circumstance of the case, the appellant craves leave to add, amend, modify, delete and/ or change all or any of the ground on or before the date of hearing." 2. The brief facts of the case are that assessee filed his return of income electronically on 30.9.2012 declaring income of Rs. 10,81,310/-. The case of the assessee was selected under scrutiny through CASS. Accordingly, Notice u/s. 143(2) of the Income ....
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....on. Thereafter, the AO assessed the income of the assessee at Rs. 17,39,630/- against the return income of Rs. 10,81,310/- vide order dated 30.3.2015 passed u/s. 143(3) of the I.T. Act, 1961. 3. Against the aforesaid order of the AO, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 29.7.2016 has dismissed the appeal of the assessee. 4. Aggrieved with the impugned order, the Assessee is in appeal before the Tribunal. 5. At the time of hearing, Ld. Counsel of the assessee has filed a Paper Book containing pages 1 to 39 in which he has attached the copy of computation of income, acknowledgement of return for AY 2012-13; copy of balance sheet and profit and loss account and tax audit report for AY 2012-13; copy of assessee's reply dated 24.2.2015 together with details of opening stock, purchases, sales and closing stock; copy of assessee's letter dated 27.1.2015 filed to AO; copy of purchase deed of the property and copy of submissions dated 23.5.2016 filed before the Ld. CIT(A). He stated that Ld. CIT(A) has wrongly read the provisions of section 40A(3) stating the word "business expediency" has been deleted. He further stated that the authorities below ha....
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.... not be disallowed u/s 40A(3) of Income Tax Act 1961 and added back to the income of assessee for the year under consideration. In response it was submitted that the case was covered by the case of Attar Singh Gurmukh Singh Reported in 191 ITR 667 (SC) and Saral Motors & General Finance ltd Vs Assistant Commissioner of Income Tax, ITAT, Delhi 'B' Bench reported in (2009) 121 ITD 50 (Del) and therefore it was prayed that no addition be made in this regard. The AO did not find this submission to be acceptable and the cash payment of Rs. 6 lacs was therefore disallowed u/s 40A(3) of Income Tax Act 1961 and rightly added back to the income of the assessee. It was also observed that the assessee had claimed expenses of material purchase and labour at Rs. 1,62,855/-. The AO observed during verification of bills and vouchers of the same, that bills pertaining to material purchase for Rs. 58,315/- were not produced for verification. Therefore he asked the assessee to show cause as to why the same should not be disallowed. No explanation for the same was furnished. Therefore, expenses of material purchase for Rs. 58,315/- were rightly disallowed and added back to the income of the a....
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....nhanced by Ld. CIT(A) in the sum of Rs. 54,01,473/-, the genuineness of the payments and the necessity to incur the said expenditure for the purpose of business of the assesseee was never disputed by the Ld. CIT(A). We hold that since the genuinity of the payments made to the parties is not doubted by the revenue, the provisions of section 40A(3) could not be made applicable to the facts of the instant case. It will be pertinent to go into the intention behind introduction of provisions of section 40A(3) of the Act at this juncture. We find that the said provision was inserted by Finance Act 1968 with the object of curbing expenditure in cash and to counter tax evasion. The CBDT Circular No. 6P dated 6.7.1968 reiterates this view that "this provision is designed to counter evasion of a tax through claims for expenditure shown to have been incurred in cash with a view to frustrating proper investigation by the department as to the identity of the payee and reasonableness of the payment." 4.4. In this regard, it is pertinent to get into the following decisions on the impugned subject:- Attar Singh Gurmukh Singh vs. ITO reported in (1991) 191 ITR 667 (SC) "Section 40A(3) of th....
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.... these facts it is not justified on the part of the AO to disallow 20% of the payments made u/s 40A(3) in the process of assessment. We, therefore, delete the addition of Rs. 17,90,571/- and ground no.1 is decided in favour of the assessee. CIT vs Crescent Export Syndicate in ITA No. 202 of 2008 dated 30.7.2008 - Jurisdictional High Court decision "It also appears that the purchases have been held to be genuine by the learned CIT(Appeal) but the learned CIT(Appeal) has invoked Section 40A(3) for payment exceeding Rs. 20,000/- since it is not made by crossed cheque or bank draft but by hearer cheques and has computed the payments falling under provisions to Section 40A(3) for Rs. 78,45,580/- and disallowed @20% thereon Rs. 15,69,116/-. It is also made clear that without the payment being made by beater cheque these goods could not have been procured and it would have hampered the supply of goods within the stipulated time. Therefore, the genuineness of the purchase has been accepted by the ld. CIT(Appeal) which has also not been disputed by the department as it appears from the order so passed by the learned Tribunal. It further appears from the assessment order that neither t....
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....d to evade the liability to tax on income earned out of such transaction and, secondly, to inculcate the banking habits amongst the business community. Apparently, this provision was directly related to curb the evasion of tax and inculcating the banking habits. Therefore, the consequence, which were to befall on account of non- observation of section 40A(3) must have nexus to the failure of such object. Therefore, the genuineness of the transactions it being free from vice of any device of evasion of tax is relevant consideration. 4.6. The Hon'ble Apex Court in the case of CIT vs Swastik Roadways reported in (2004) 3 SCC 640 had held that the consequences of non-compliance of Madhyapradesh Sales Tax Act, which were intended to check the evasion and avoidance of sales tax were significantly harsh. The court while upholding the constitutional validity negated the existence of a mens rea as a condition necessary for levy of penalty for non-compliance with such technical provisions required held that "in the consequence to follow there must be nexus between the consequence that befall for noncompliance with such provisions intended for preventing the tax evasion with the object....
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.... made by the assessee by the payee is proved beyond doubt. The assessee had also stated that the payee had duly included these payments as his receipts in his returns. 4.8. We are unable to buy the argument of the Learned AR that the assessee had made payment to his agent Mr.Arnit Dutta for purchase of sim cards and others and hence would fall under the exception provided in Rule 6DD(k) of the IT Rules. For the sake of convenience, Rule 6DD(k) is reproduced herein below:- "Rule 6DD(k) of the IT Rules 1962 6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees in the cases and circumstances specified hereunder, namely:- *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** (k) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person;" The said....