TaxTMI 
TaxTMI 
2018 (12) TMI 1998
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....of Rs. 12,12,400/- in respect of loading and unloading expenses at Rs. 1,81,800/- on lump sum basis. Considering the facts of the case in its totality, he ought to have deleted the entire addition." 3. The brief fact of the case is that return of income declaring income of Rs. 24,84,044/- was filed. Subsequently, the case was selected under security by issuing of notice u/s. 143(2) of the act on 18th August, 2010. M/s. S.N.R. Logistics is a propriety concern of the assessee engaged in the business of transport of goods by road truck and contractors. The main activity of the assessee is to hire the truck and contractors from the transporters and supply them to their clients company. On verification of the details filed, the assessing officer noticed that assessee made cash payment in excess of Rs. 20,000/-. Therefore, the assessee was issued a show cause notice as to why the amount paid in excess of Rs. 20,000/- to a single party in a day should not be disallowed and added back to the income of the assessee. The assessee has explained that it has made payment which includes all purposes like payment to driver, cleaner, diesel expenses, other spare parts p....
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....Ld. CIT (A) has partly allowed the appeal of the assessee. The relevant part of the decision of the Ld. CIT (A) is reproduced as under "3.5. I have carefully gone through the facts of the case, various written submissions, remand report of the A.O and rejoinder to the remand report. It is noticed that the appellant could not submit the detailed reply along with the analysis and supporting bills/vouchers to justify the payments made exceeding Rs. 20,000/- in cash as the voluminous transactions were involved in the given short time to comply the requisitions of the A.O. So the necessary details and evidences were furnished in the appellate proceedings and report of the A.O. was also called for. Thus, it is a fit case for admitting the evidences under Rule-46A of the I.T. Rules as the order has been passed by the A.O. without giving sufficient opportunity to the appellant to adduce the evidences relevant to the grounds of appeal. Even the A.O. has not made any objections to the admission of such additional evidences and she gave the remand report on merits of the issue. Therefore, the additional evidences are admitted under 46A of the I.T. Rules in view of the decision o....
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....ime. The appellant has not quantified such amount. (Page No. l 19 to 127 of paper book) Each of the above heads under which the payments have been classified by the appellant are discussed hereunder:- (1) Details of payments below Rs. 20,000/- each to various parties totaling to Rs. 20,73,420/-. Since each payment was less than Rs. 20,000/- even on a single day for a single transaction and hence the provisions of Section 40A(3) does not apply as per the appellant. (Page No. 21 to 44 of Paper Book) I have carefully gone through the facts of the case, various written submissions, remand report of the A.O and rejoinder to the remand report. The appellant has claimed that in fact the A.O. has made the disallowance of the cash payment of Rs. 20,000/- on a single day to the single party on which provisions of Section 40A(3) does not apply as for invoking the provisions the cash payments should be exceeding Rs. 20,000/-. The appellant's contention is found correct to this extent. It is noticed that in the following cases, the payments to the parties were made upto Rs. 20,000/- on a single day on which there is no viola....
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....nd report of the A.O and rejoinder to the remand report. It has been submitted by the appellant that he has paid and incurred certain expenses on account of various RTO fees at check posts, reimbursement of the toll at various Toll Nakas and other expenses besides the food and beverage expenses of the drivers and helpers. So the total payment made for a single trips includes various expenses under aforesaid heads besides diesel/repairing, maintaining expenses for the truck/trailers etc. Since these expenses were paid to different payees and do not individually exceed the limit of Rs. 20,000/- so no disallowance should be made on this account. 2.1. On going through the various details and submissions and the copies of vouchers and the records it is undisputed that the appellant has to make the payment in cash for the various RTO fees levied in the trips at RTO check posts on various accounts besides toll payments at various Toll Nakas. All these 3 payments are mandatorily to be made by way of cash and no cheque/DD could be given for such payments. Hence, the payments towards RTO fees and the toll payments made in cash does not qualify for the disallowance in view of th....
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.... 40A(3) and rule 6DD(j) have been incorporated in Act in order to check incurring of bogus and fictitious expenses to non-existing parties, and (ii) lower authorities did not doubt identity of third parties and genuineness of payments, they were wrong in concluding that assessee had violated provisions of section 40A(3), read with rule 6DD(j) - Held, yes \ (5) CIT Vs. Kalyan Prasad Gupta (2012) 20 taxmann.com 533 (Raj.) Date of Order: 20.11.2010 " Section 40A(3) of the Income-tax Act, 1961 - Business disallowances -Cash payment exceeding prescribed limits - Assessment year 2004-05 -Where State Government had granted contract to collect royalty on its behalf, payment was made to contractor not in individual capacity, but on behalf of Government and, hence, no disallowance under rule 6DD(b) could be made of royalty paid by contractor to Government in cash (6) P.M. Abdul Razak Vs. ITO (1997) 63 ITD 398 (Coch.) Date of Order: 05.03.1996 Whether since Assessing Officer did not doubt genuineness of cash payments nor alleged anything of making false claim of those payments, disallowance made by him could not be confirmed -Held, yes (7) Dy. CIT ....
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....cash payments in excess of prescribed limit was not justified. (13) Satpal Jain Vs. ACIT (2003) 79 TTJ 444 (Delhi) Confirmation of recipient that he did not accept Cheque, would cover the case under Rule 6DD, and disallowance of cash payment in excess of prescribed limit was not justified. 2.3. During the course of proceedings along with the written submissions, the appellant has enclosed sample vouchers to the effect of making the payment to the drivers who had to ultimately make the payment RTO fees and toll naka at the check posts during the trips which establishes that the payments in cash were unavoidable and has been made genuinely. Even otherwise also irrespective of the maintenance of the vouchers/receipts the fact of making such payments to the aforesaid authorities could not be denied as can be noticed from the details noted in the table below that long journeys have been performed by the vehicles by passing through various toll nakas and RTO check-posts. For example, Bangalore to Baroda, JNPT to Jajudhan, Kalamboli to Nayveli. So aforesaid payments are liable to be allowed as deduction under the Rule-6DD. In view of the above discussion and rat....
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....,23,7907-(Rs. 1,73,5007-+ Rs. 3,50,290/-). (3) Each of the payments in cash made on Saturdays, Sundays and holidays when the banking facilities were not available and hence same was falling under RuIe-6DD(J) to Section 40A(3) of the I.T. Act and hence no disallowance to be made as per appellant. The total amount on this account comes to Rs. 49,26,891/-. (Page No. 54 to 98 of Paper book) I have carefully gone through the facts of the case, various written submissions, remand report of the A.O and rejoinder to the remand report. Here the appellant intend to take the benefit of Rule-6DD(J) for the reason that on the dates of payment given in the Table below the appellant was not having the banking facilities in operations and hence he could not make the payment by cheques. On this account, the appellant has claimed the benefit on account of Saturdays, Sundays and other Banking holidays. The appellant's contention in respect of the cash payments made on the Sundays and Banking holidays on which banks were closed is accepted and the provisions of Section 40A(3) would not apply for such payments as under:- B; DETAILS OF AMOUNT PAID ON SATURDA....
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....ransportation business and accordingly the good carriage has to be made from one place to another at different geographical locations involved. At some places he was not having the direct presence and he was required to hire a truck physically lying at that particular place. Then he has to contact various brokers representing various goods carriage operators to carry out the transportation. For example suppose the material is to be transported from Pune to Chennai then the broker will give the contact number of the truck operator who may have plied his goods to Pune in pursuance to some other contract. In that situation, the appellant contact to the operator of the goods of carriage with a request not to return back to his home place but to take the load from Pune and proceeds for Chennai. Since, at that time the drivers of the goods carriage may not be having the sufficient cash with them to carry out the transportation from Pune to Chennai and in that case he would be in need of some cash to meet various en-route expenses. In that situation, since the appellant did not have any representative there at Pune hence certain cash has to be delivered to the driver at Pune either with t....
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....rious details and submissions and the copies of vouchers and the records it is undisputed that the appellant has to make the payment in cash for the various RTO fees levied in the trips at RTO Check Posts on various accounts besides Border Fees payment at various check-posts. All these payments are mandatorily to be made by way of cash and no cheque/DD could be given for such payments. Hence, the payments towards RTO fees and the Border Fees made in cash does not qualify for the disallowance in view of the Rule-6DD(b) because these payments are made to the government authorities or the collecting agents on behalf of the government to whom contracts for collection has been awarded by the government and falls under the exclusion clause under the Rules-6DD of 40A(3) of the XT Act. The L.R's were not required for such enquiry. Further A.O's remarks that enquiry of various parties noted in the chart could not be made in remand report, since appellant could not produce the L.R's, is not significant as the names & addresses of these transporters and details of trips were already available to the AO for making the enquiries but no such enquiries have been made by the A.O. ....
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....0A(3) of the Income-tax Act, 1961 - Business disallowances -Cash payment exceeding prescribed limits - Assessment year 2004-05 -Where State Government had granted contract to collect royalty on its behalf, payment was made to contractor not in individual capacity, but on behalf of Government and, hence, no disallowance under rule 6DD(b) could be made of royalty paid by contractor to Government in cash (6) P.M. Abdul Razak Vs. ITO (1997) 63 ITD 398 (Coch.) Date of Order: 05.03.1996 Whether since Assessing Officer did not doubt genuineness of cash payments nor alleged anything of making false claim of those payments, disallowance made by him could not be confirmed -Held, yes (7) Dy. CIT Vs. Mayur Sales (2001)116 Taxman 95 (JP) (Mag.) Dt. of Order: 10.03.2000 Section 40A(3) of the Income-tax Act, 1961 - Business disallowance -Cash payment in excess of prescribed limit - Assessee had made certain cash payments to truck drivers in excess of prescribed limit - Assessing Officer disallowed same - Whether cash payments made to truck drivers for freight and octroi charges fell under exceptional circumstances as mentioned in rule 6DDQ) of the Income-tax Rules, 1962....
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.... ultimately make the payment for Border Fees and toll naka at various check posts during the trips which establishes that the payments in cash were unavoidable and has been made genuinely. Even otherwise also of the maintenance of the vouchers/receipts the fact of making such payments to the aforesaid authorities could not be denied as can be noticed from the details noted in the table below that long journeys have been performed by the vehicles by passing through various toll nakas and Border check-posts. For example, Bangalore to Baroda, JNPT to Jajudhan, Kalamboli to Nayveli. So aforesaid payments are liable to be allowed as deduction under the Rule-6DD. In view of the above discussion and ratio of decisions of various courts referred above, the total payments towards Road/RTO expenses of Rs. 1,82,500/- as per the table above even each payment below Rs. 20,000/- also does not call for any disallowance and hence disallowance made by the A.O. is deleted. 4.7. Further, it is noticed from the table above that each advance includes the road and RTO expenses besides various en-route other expenses like diesel to be filled in the journey, repairing /maintenance expen....
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....etails are given as under:- xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxx 4.10. Since in the aforesaid transactions, the border fees payments comes to Rs. 4,37,900/- and road /RTO expenses at Rs. 11,05,600/- which does not warrant any disallowances for the reasons discussed in the preceding paras of this order. In view of the reasons discussed above, the disallowance made by the A.O. in respect of the aforesaid two payments are deleted and the appellant gets the relief on this account. In view of the aforesaid discussion and following various case laws cited above, the deletion comes to Rs. 47,08,211/- (Rs.6,73,950/- + Rs. 10,82,5007- + Rs. 14,08,2617- + Rs. 4,37,9007- + Rs. l 1,05,6007-). (5) The details of amounts paid to the parties in excess of Rs. 20,000/- wherein the appellant does not have any presence nor bank account. The total of this amounts are at Rs. 22,52,135/-. (PageNo. 102 to 118 of paper book) I have carefully gone through the facts of the case, various written submissions, remand report of the A.O and rej....
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....ppeals) - Whether since payment had been made at a place where it was not feasible to make payment by way of cheque or demand draft, impugned order passed by appellate authorities was to be confirmed - Held, yes. N; (3) Saraswati Housing & Developers Vs. Addl. CIT, Range-2 142 ITD 98 (Delhi) Date of decision: 01.03.2013 It was noted from records that assessee made cash payments to sellers before Sub- Registrar at places, where banking facilities were not available - Moreover, there was no dispute regarding identity of payees and genuineness of land transactions in respect of which payments had been made - Whether on facts, payments in question were covered under second proviso to section 40A(3) and rule 6DD(h) and, therefore, impugned disallowance was to be deleted - Held, yes [Paras 12 & 14] (4) Basu Distributor (P) Ltd. Vs. ACIT (2012) 19 taxmann.com 11 (Delhi) Date of Decision: 09.02.2012 Section 40A(3) of the Income-tax Act, 1961 read with rule 6DD(j) of the Income-tax Rules, 1962 - Business disallowance - Cash payment exceeding prescribed limits - Assessment years 1992-93 to 1994-95 -Assessee, a film distributor, made payments above Rs. ....
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....owance of part of payment so made was unjustified - Held, yes (9) CIT Vs. Kalyan Prasad Gupta (2011)51 DTR 191 Cash payments made by the assessee to the State Government who granted the contract to collect royalty on behalf of the Government^ cannot be disallowed under section 40A(3) in view of Rule 6DD(b). (10) CIT V. Balkrishan Jagdish Chand (2007) 213 CTR 174 Multiple payments to same party on a single day, various cash payments made to one party on one day were not required to be clubbed and treated as one cash payment and, for that reason, total cash payments exceeding Rs. 2,500 in a day to that party were not to be held as violative of section 40(3), so also the payments made after banking hours (A.Y. 1986-87) ; (11) CIT Vs. Pravin & Co. (2005) 274 ITR 534 Once identity of the payee was established, genuineness of the payment was not doubled, the materials purchased under cash payments were utilized for construction activity carried on by the asses see, it was not possible to hold that purpose of payment in cash was to frustrate proper investigation by the Department; and as such disallowance of such payments in cash was not justified.....
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....mand report. Alongwith the submission, the appellant has attached copies of letters from 9 parties to whom the cash exceeding Rs. 20,000/- has been paid. The details of the parties to whom such payments have been made at their insistence are tabulated as under:- xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxx 6.2. It is claimed that the aforesaid parties have insisted for cash payments as they had to give the cash to the drivers and helpers to clear and operating the goods carriage and these expenses were largely incur in various parts of the country. It has been noticed that the appellant was compelled to make the payments to the aforesaid parties to meet their requirement at different stations so as to run its transportation business. In this trade, the payments to the drivers have to be made at the loading station where neither the appellant nor the carrier operator exist. Even some times due to the non-banking hours the payments were to be made the drivers in cash otherwise they had to wait for the next working da....
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....sh to third parties had violated provisions of section 40A(3), read with rule 6DDQ) -Whether since (i) provisions of section 40A(3) and rule 6DD(j) have been incorporated in Act in order to check incurring of bogus and fictitious expenses to non-existing parties, and (ii) lower authorities did not doubt identity of third parties and genuineness of payments, they were wrong in concluding that assessee had violated provisions of section 40A(3), read with rule 6DDQ) - Held, yes. (5) CIT Vs. Kalyan Prasad Gupta (2012) 20 taxmann.com 533 (Raj.) Date of Order : 20.11.2010 Section 40A(3) of the Income-tax Act, 1961 - Business disallowances Cash payment exceeding prescribed limits - Assessment year 2004-05 -Where State Government had granted contract to collect royalty on its behalf was made to contractor not in individual capacity, but on behalf of Government and, hence, no disallowance under rule 6DD(b) could be made of royalty paid by contractor to Government in cash (6) P.M. Abdul Razak Vs. ITO (1997) 63 ITD 398 (Coch.) Date of Order: 05.03.1996 Whether since Assessing Officer did not doubt genuineness of cash payments nor alleged anything of making false cla....
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.... cent of total freight to truck drivers on their insistence at the time of delivery of goods - Genuineness of payment was not disputed - Whether cash payments having been made in an exceptional circumstances, no disallowance could be made - Held, yes. (13) CIT Vs. Amarjit Arora (2005) 143 Taxman 231 (Punj. & Har.) Dt. of Order: 11.05.2004 Tribunal on finding that cash payment was made on insistence of seller, deleted addition - Whether cash payment in instant case was protected by exceptions provided under rule 6DDQ) - Held, yes - Whether, therefore, no question of law arose from order of Tribunal for interference - Held, yes Circulars & notifications - CBDT Circular No. 220 dated 31-5- 1977. (14) CIT Vs. Achal Alloys (P) Ltd. (1996) 218 ITR 46 (MP) \ Dt. of Order :13.11.1995 Whether where payments in cash were duly signed by payees and insistence on making cash payments was founded on fulcrum that payees did not have any bank account and, being illiterates, they required payment in cash, no disallowance could be made under section 40A(3) -Held, yes (15) CIT Vs. Rajmohan Filial (2004) 267 ITR 561 Where assessee had established the i....
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....T (A) on the basis of information provided by the assessee has categorized the cash payments to various transporters in different heads as under. (i) Details of payment below Rs. 20,000/-. The ld. CIT (A) worked such payment to the amount of Rs. 20,73,420/-. Since each payment was less than Rs. 20000/ even on a single day for a single transaction and hence the provision of section 40A(3) does not apply . (ii) Detail of expenses pertaining to Road/RTO expenses out of each payment and balance payment towards transport was less than 20,000/-. Such expenses were determined at Rs. 5,23,790/-. (iii) Payment in cash made in cash on Saturdays, Sundays and holidays. The total amount was determined at Rs. 49,26,891/- on the reason that banking facility was not available because of Saturdays, Sundays and holiday as per rule 6DDD(j) to section 40A(3). (iv) Transporter did not have any office near loading point. The total amount on this account was stated to be Rs. 79,79,711/- (v) The assessee does neither have any presence nor bank account. The total amount of payment in such categories was determined at Rs.&nb....
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....ous expenses etc. and determine d such expenses to the amount of Rs. 14,08,261/- which was also deleted. Further the ld. CIT (A) has also noticed that after reducing expenses incurred towards RTO/road expenses, the expenses which are more than 20,000/- are to be disallowed. Ld. CIT (A) has also determined border fees payment to the amount of Rs. 4,37,900/- and road/RTO at Rs. 11,05,600/- which does not warranty any disallowance for the reason discussed in the preceding paras were also deleted. Where the assessee does not any presence nor bank a/c, the ld. CIT (A) has determined such amount to the extent of Rs. 25,45,385/- and granted relief to the assessee. After considering the above, it is clear that ld. CIT (A) verified in detail the claim of the assessee that in different circumstances as elaborated above CIT (A) has allowed total relief to the assessee to the extent of Rs. 1,12,00,206/- (Rs. 5,66,270 + Rs. 5,23,790+12,22,350 +Rs. 10,82,600+ Rs. 47,08,211+ Rs. 5,51,200+ Rs. 25,45,685) under various heads after verification. Thereafter, the ld. CIT (A) has examined the claim of the assessee and the circumstances under which the pay....