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2023 (9) TMI 249
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....earned CIT(A)-2, Panaji has failed to appreciate the fact that, payment of Rs. 47,33,332/- has made on account of commercial expediency and the Legislature intention to bring the provisions of section 40A(3) was only to curb black money but genuineness of transaction, business expediency and genuine hardship has also been kept as relevant consideration by way of above provision read with Rule 6DD of the Income tax Rules, 1962. 4. The learned CIT(A)-2, Panaji has failed to appreciate the fact that, Rule 6DD of the IT Rules 1962, which provides for situations under which disallowance under section 40A(3) shall not be made and no payment shall be deemed to be the profits and gains of business or profession. 5. The learned CIT(A)-2, Panaji has grossly overlooked the following decisions, which are squarely applicable to appellant's case. 1. M.K. Agrotech Private Limited Vs. ACIT (109 Taxmann.com 337) (Kar) 2. Pr. CIT Vs. GEE Square Exports (100 Taxmann.corn 462) (SC) 6. The learned CIT(A)-2, Panaji has failed to comprehend that, additions/disallowances can be made for this assessment year under 153C, since no incriminating material was unearthed during the course of search....
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.... section 147 of the Act. In response to the above notice, the assessee filed the return of income on 30.9.2018 and declared therein income of Rs. 8,21,704/-. Subsequently, notices u/s. 143(2) and 142(1) of the Act were issued calling for details and assessment was concluded as ex-parte under section 144 r.w.s.147, vide order dated 24.12.2018. In the order of assessment, the Assessing Officer has made additions of Rs. 47,33,332/- as disallowance made under section 40A(3) of the Act and thereby raised tax demand of Rs. 28,99,579/-. 3.2 Being aggrieved by the above order, the Assessee had preferred an appeal before the Commissioner of Income tax (Appeals)-2, Panaji. The Commissioner of Income tax (Appeals) vide his order dated 02.12.2021 in Appeal No.CIT(A)-2/PNJ/10230/2018-19 has dismissed the appeal filed by the Assessee, upholding the additions made by the Assessing Officer as disallowance under section 40A(3) of the Act. The assessee submitted that the learned CIT (Appeals) has also overlooked the following facts and case laws relied by the assessee. 3.3 In respect of the additions made by the Assessing Officer amounting Rs. 47,33,332/- as disallowance under section 40A(3) of th....
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.... a case of business expediency made out, section 40A(3) cannot be invoked. There was no dispute as to the genuineness of the payments as to labour charges, being to identifiable persons, so that no disallowance under Section 40A(3) could be made. In support this, Assessee relied on Rule 6DD of the IT Rules 1962, which provides for situations under which disallowance under section 40A(3) shall not be made and no payment shall be deemed to be the profits and gains of business or profession. 3.5 The ld. A.R. submitted that in the assessee's case, the payment was made in exceptional and unavoidable circumstances or the payment by cheque or bank draft was not practicable or would have caused genuine difficulty-assessee made cash payments to its workers/sub-contractors to smooth carrying on its contract business in the tough competitive period. Almost, daily workers employed were migrating labourers from Bihar, Orrisa, West Bengal and North Eastern State of India and they insist for cash payments on daily basis. 3.6 The ld. A.R. relied on the following decisions, which are squarely applicable to the Assessee's case. 1. M.K. Agrotech Private Limited Vs. AC1T (109 Taxmann.com 337) ....
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....40A(3) such cases where the assessee establishes that the payment could not made by a crossed cheque or a draft due to exceptional and unavoidable circumstances and also furnishes evidence to the genuineness of the payment and the identity of the payee. The Courts have been consistent in their view that the exceptional circumstances are to be seen from the point of view of a businessman keeping in view the exigencies of business. Still, further, the CBDT itself has issued a Circular No. 220 dt. 31st May, 1977 illustrating the circumstances in which residuary exceptions of r. 6DD(j) are attracted. One of the circumstances mentioned by the Board is that the seller is refusing to accept payment by way of crossed cheque or a draft. Para 4 of this circular provides that the requirement of r. 6DD(j) would stand satisfied if a letter is produced by an assessee in respect of each transaction falling within the categories mentioned in the said circular giving full particulars of his address, sales-tax registration number, if any, for the purpose of proper identification to enable the ITO to satisfy himself about the genuineness of the transaction. The AO has not doubted the requirement of c....
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....ode through bank. The assessee's plea is that payment has been made to sub-contractors who in turn make payment to their labourers towards their wages/salary. The weekly payment has been made on the work acknowledged by the site engineer. The contention of ld. D.R. is that these payments have been made to the sub-contractors by way of bearer cheques and in turn these cheques were been withdrawn through assessee's employees' and thereafter proceeds has been received back by the assessee. In fact, the assessee issued bearer cheque and in turn through its employees the amount has been withdrawn and received back by the assessee. Anyhow, the crux of the issue is that assessee has been paid the amount to sub-contractors in cash otherwise than by crossed cheque, Demand draft or electronic mode through bank. These payments made to the sub-contractors has been accounted by assessee and claimed as expenditure. There are certain judgements, which are supporting the assessee fortifying their points, which are as follows: a) CIT & Anr. Vs. Balaji Engineering & Construction Works (323 ITR 351) (Karn.) b) Anupama Tele Services Vs. ITO (366 ITR 122) (Guj.) c) Harshila Chordia (298 ITR 349) ....
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....made to sub-contractors cannot be considered u/s 40A(3) of the Act as held by Hon'ble Karnataka High Court in the case of Balaji Engineering & Construction Works cited (supra) as the Tribunal being subordinate to jurisdictional High Court what matters for the Tribunal is to follow the binding precedent and delete the disallowance in case of cash payments exceeding the stipulated limit coupled with the fact that cash payments are made due to business expediency and being genuine transaction and the parties are identifiable, provisions of section 40A(3) cannot be applied. Accordingly, we are inclined to delete the addition made on this count. 5.3 There are one more payment to the labourers who are migrating labours earning wages and not permanently employed by the assessee, who have no bank accounts and these are payments made in exceptional circumstances as provided under Rule 6DD and these payments cannot fall under the purview of section 40A(3) of the Act and more so, the payments are genuine and parties are identifiable and the expenditure incurred is wholly and exclusively for the purpose of business on account of business exigency. Accordingly, provisions of section 40A(3) of ....