TaxTMI 
TaxTMI 
2019 (11) TMI 647
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....er side. 3.(a) That the Ld. CIT(A) is not justified in confirming the addition of Rs. 9227520/- on account of purchases u/s 40A(3) of the Income Tax Act 1961 being cash payments to three parties whereas the payments were genuine and bona fide and made at the insistence of the creditors due to business expediency and are out of the sweep of section as per proviso to Sec 40A(3). (b) Without prejudice to above the appellant disputes that the quantum of addition confirmed is on higher side. 4.(a) That the ld CIT(A) is not justified in dismissing the ground of appeal regarding disallowance of depreciation of Rs. 71850/- on Motor Lorry due to difference in cost price amounting to Rs. 239500 on motor lorry by holding that no arguments or explanation was given at the appellate stage whereas the arguments and explanations were duly given in written submissions and it is explained that the difference in price is due to insurance and registration charges, which are in addition to cost of lorry. (b) Without prejudice to above the appellant disputes that the quantum of addition confirmed is on higher side." Difference in License Fee- Addition u/s 43B: 3....
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....ent was made to Excise authorities. Further, regarding the payment of Rs. 7,26,450/- on account of Nathpur vend, this amount has been paid in protest by the assessee as per the demand made by the Excise authorities otherwise the assessee would stand loosing the opportunity of applying the tender for continuation of the license of the vend. 8. On the other, the ld. DR vehemently relied on the orders of the revenue. 9. Heard the arguments of both the parties and perused the material available on record. The undisputed facts are as under: • Letter dated 10.01.2013 confirmed short deposit of Rs. 7,26,450/- • Letter dated 18.02.2013 confirmed the short deposit of Rs. 8,47,000/- • Letter dated 18.02.2013 confirmed total deposit of Rs. 74,23,63,400/- • Amount claimed in P&L a/c of Rs. 74,32,10,400 • The difference is about Rs. 8,47,000/- • As per the letter dated 11.05.2010, the Excise authorities confirmed the payment of Rs. 74,32,10,400/- • There was no outstanding balance payable as per the balance sheet. 10. The Provisions of Section 43B reads as under: Certain deductions to be only on ....
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....bility to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.]" 11. In the reading of the provisions of the Act, the deduction on account of Excise duty is allowable only on the basis of actual payment. From the records, it can be gauged that the assessee has paid an amount of Rs. 74,32,10,400/- and claimed the same in the P&L account. This fact of payment of Rs. 74,32,10,400/- has been confirmed by the Excise authorities vide letter dated 11.05.2010. The balance sheet does not reflect any outstanding payments by the assessee. Hence, keeping in view, the entirety of the fact, we hereby allow the payment made by the assessee on account of Excise duty as confirmed by the Excise authorities. The appeal of the assessee on this ground is allowed. 12. The Assessing Officer has made an addition of Rs. 92,27,520/- as per the provisions of section 40A(3) on account of cash payments to three parties namely, 1. M/s Skol Breweries Ltd. 2. M/s Ashoka Distillers & Chemicals Pvt. Ltd. 3. M/s All....
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.... KGL Networks Pvt. Ltd. (supra) which are as under: "Attar Singh Gurmukh Singh vs. ITO reported in (1991) 191 ITR 667 (SC) "Section 40A(3) of the Income-tax Act, 1961, which provides that expenditure in excess of Rs. 2,500 (Rs. 10,000/- after the 1987 amendment) would be allowed to be deducted only if made by a crossed cheque or crossed bank draft (except in specified cases) is not arbitrary and does not amount to a restriction on the fundamental right to carry on business. If read together with Rule 6DD of the Income-tax Rules, 1962, it will be clear that the provisions are not intended to restrict business activities. There is no restriction on the assessee in his trading activities. Section 40A(3) only empowers the Assessing Officer to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The payment by crossed cheque or crossed bank draft is insisted upon to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of income from undisclosed sources. The terms of section 40A(3) are not absolute. Consideration of business expediency and other relevan....
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....d 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 the Assessing Officer nor the CIT(Appeal) has disbelieved the genuineness of the transaction. There was no dispute that the purchases were genuine." Anupam Tete Services vs ITO in (2014) 43 Taxmann.com 199 (Guj) "Section 40A(3) of the Income-tax Act, 1961, read with rule 6DD of the Income-tax Rules, 1962 - Business disallowance - Cash payment exceeding prescribed limits (Rule 6DD(j)-Assessment year 2006- 07 - Assessee was working as an agent of Tata Tele Services Limited for distributing mobile cards and recharge vouchers - Principal company Tata insisted that cheque payment from assessee's co-operative bank would not do, since realization took longer time and such payments should be made only in cash in their bank account -If assessee would not make cash payment and make cheque payments alone, it would have received recharge vouchers delayed by 4/5 days which would severely affect its business operation - Assessee, therefore, made cash payment - Whether in view of ....
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....ompliance 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 of provision before the consequence can be inflicted upon the defaulter." The Supreme Court has opined that the existence of nexus between the tax evasion by the owner of the goods and the failure of C & F agent to furnish information required by the Commissioner is implicit in section 57(2) and the assessing authority concerned has to necessarily record a finding to this effect before levying penalty u/s. 57(2). Though in the instant case, the issue involved is not with regard to the levy of penalty, but the requirement of law to be followed by the assessee was of as technical nature as was in the case of Swastik Roadways (3 SCC 640) and the consequence to fall for failure to observe such norms in the present case are much higher than which were prescribed under the Madhya Pradesh Sales Tax Act. Apparently, it is a relevant consideration for the assessing authority under the Income Tax Act that before invoking the provisions of section....
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....ereunder, 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 rule says that if the payment is made by a person to his agent who is required to make payment in cash for goods and services on behalf of such person: Admittedly, Shri Arnit Dutta is only the agent of Hutchison Essar Ltd and not the assessee as could be seen very clearly from the Associate Distributor Agreement entered into by the assessee which is on records before us and before the lower authorities. Hence, the payment made by the assessee to Shri Arnit Dutta would not fall under the exception clause of Rule 6DD(k). 4.9. We find that one of the grounds raised by the assessee is violation of principles of natural justice on the part of the Learned CIT(A) to enhance the assessment without giving enhancement notice to the assessee. But from the order of the Learned CITA, it is specifically mentioned that the assessee was given due opportunity and show cause notice for enhancement of assessment by Rs. 54,01,473/- for making further additions on account of section 40A(3) of the Ac....