• Jun
  • 20
  • 2012

Disallowance u/s. 40A(3) for consolidated entry of cash payment in excess of Rs. 20000/- at year end?

A.O. In  his assessment order has stated that the impounded disc. containing the books of accounts under JR-I & JR-2 from where the cash payments on 31.03.2008 were found, were not manually entered as apparent from the printout. The entries were computerized, not manual. Furthermore, as stated in the submissions dated 24.12.2010, it is not tenable as during the survey, no corroborative evidence and documents were found in support of assessee’s claim from business premises. The same has been repeated by the AO in the Remand Report also. But to that contrary it is observed from the ledger account filed by assessee as reported in the preceding paragraphs and the assessee’s contentions also is that the ld. CIT(A) should have considered that all the parties from whom the assessee purchased goods, were old and regular parties with whom assessee maintains current account regularly. The Ld. CIT (A) should have also considered the Tax Audit Report which shows that” the assessee firm has maintained Cash Book Bank Book, General Ledger, Party Ledger, Sales / Purchase Register, Journal & Stock Book Manual & Computer System”. Therefore, we set aside the order of the revenue authorities on this issue and direct AO to verify the entries made in the ledger account of 14 parties as mentioned in the paper book and if it is found that the payments as recorded in the ledger account are tallying with the cash book, then in our considered opinion, no addition is required to be made by placing reliance on the computer statements which are not having any corroborative evidences.

INCOME TAX APPELLATE TRIBUNAL, KOLKATA

ITA No.145/Kol/2012 – Assessment Year: 2008-09

M/s. Shalimar Floors Kolkata

-Versus-

I.T.O.

Date of Pronouncement: 16.05.2012.

ORDER

Per Shri C.D.Rao, AM

This is an appeal filed by the assessee against order dated 31.10.2011 of CIT (A) –XXXII, Kolkata pertaining to A.Yr. 2008-09.

2. In this appeal assessee has raised the following grounds of appeal:-

“1) For that Ld. CIT (A) was not justified when he refused to accept the entries in assessee’s cash book showing that there was no payment in cash more than Rs 20,0001= at a time.

2) For that Ld. CIT ( A) should have considered that all the parties from whom the assessee purchased goods, were old and regular parties with whom assessee maintains current account regularly.

3) For that Ld. CIT (A) should have considered the Tax Audit Report which shows that” the assessee firm has maintained Cash Book Bank Book, General Ledger, Party Ledger, Sales / Purchase Register, Journal & Stock Book Manual & Computer System”.

4) For that the appeal order is otherwise wrong unjust & unfair.”

3. The brief facts of this issue are that while doing the scrutiny assessment Assessing Officer has added an amount of Rs.23,49,260/- by observing that:

“During the course of survey, a compact disc containing books of a/cs. were impounded. The print out of the same disc has been taken in presence of Sri Sudipta Hazra, one of the partners of M/ s Shalimar Floors. ,JR- 1 & JR-2 contain the print out of books of a/cs.

On scrutiny of JR- 2 vide page no.2 & 3 which was impounded, reveals that the assessee firm made some payments through cash, amounting to Rs. 23,49,260/- to various purchase parties. The A/R was asked to explain in this regard. In response, the A/R filed ledger copies of 14 parties to whom payments were made a @ Rs.20000/- each time and also produced computerized cash book to show the reflection. He was again asked why only on 31.3.2008, at the fag end of the year, cash payment amounting to Rs.2349260/- was paid to 14 parties? In reply, the A/ R submitted through written submissions

“that the entries in question which is apparently seen in the incomplete position of accounts seized by the authority is nothing but a consolidated figure of the head of accounts paid or received through out the captioned financial year as rough workings of our accountant occurred from the manual books for preparing and drawing a Trial Balance.”

 In earlier elaborate discussions during the course of assessment proceedings, the A/R never uttered about such double maintenance of books of accounts. This is a clear deviation from the earlier stand. Moreover, on 24.12.2010, the partner of the firm submitted that

“that during the course of survey, you have collected a compact disc containing a rough cash book with a lump sum figures entered therein on various dates which were duly recorded in the final cash book maintained constantly under manual system. The same were also transfer under the first time introduced computer system in business of the assessee.

That all the payments in page No. 2 & 3 of JR-2 of the survey report were well within the limit u/s.4OA(3) of the income Tax Act as recorded in the final Cash Book maintained under both manual System and computer systems as well and your assessee has never paid more than Rs.20000/- at a time in a day to a single party.”

The impounded disc. containing the books of accounts under JR-I & JR-2 from where the cash payments on 31.03.2008 were found, were not manually entered as apparent from the printout. The entries were computerized, not manual. Furthermore, as stated in the submissions dated 24.12.2010, it is not tenable as during the survey, no corroborative evidence and documents were found in support of assessee’s claim from business premises. Further, the payments were made to the parties who are not covered by the exceptions as enumerated in Rule 6DD of the 1. T. Rules. As the expenditure in respect of which payments or aggregate of payments were made in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeding Rs.20000/-, no deduction shall be allowed in respect of such expenditure. Moreover, the contention of the A/R is not based on any cogent reason, reality nor has any force, and also, it is not convincing why on a single day, i.e. on 31.03.2008, a huge cash payment amounting to Rs.2349260/- was made, hence, the amount of Rs.2349260/- which was paid in cash to various parties without account payee cheque drawn on a bank or account payee bank draft, is added to the total income of the assessee firm u/s. 40A(3) of the I. T. Act, 1961.”

3.1. On appeal ld. CIT(A) has confirmed the same by submitting that

“The A.O. in his remand report submitted that from the printout of the computerized books of account it is observed that the payments were made for purchases totaling to Rs.23,49.260/- by way of cash through single vouchers in excess of Rs.20,000/- each. Number of each of the voucher through which payments were made is duly recorded in the cash book. The A.R. claimed that the impugned payments were made in amounts less than Rs.20,000/- each but no payment vouchers of the same were produced to prove his claim. Besides, a monthly summary of cash was also found in the impounded compact disc and such summary clearly proves that the cash payments in excess of Rs.20,000/- each for purchases recorded in the books was correct and actual. There is nothing to suggest that the accounts loaded in the computer of the assessee were not the real and correct accounts.”

3.2. Aggrieved by this now assessee is in appeal before us.

4. At the time of hearing before us, the ld. Counsel appearing on behalf of assessee has submitted that the ledger accounts of the parties mentioned by ld. CIT(A) at page-3 consisting of 14 persons and the payments of cash not exceeding Rs.20,000/-

5. On the other hand, the ld. DR appearing on behalf of the revenue relied on the orders of the revenue authorities.

6. After hearing the rival submissions and on careful perusal of materials available on record, it is observed that the opening balance which was taken by the revenue by mistake as amount paid in cash on careful perusal of the ledger accounts the details are as under :-

Sl.No. Name of the parties Opening balanceas mentioned byld. CIT(A)

(Rs.)

 

Opening balanceas per the ledgercopy mentioned

in the paper

book (Rs.)

 

No.of entrieswhich are belowRs.20,000/-

along with page

nos.

 

Entries  P.No.

 

1 P.N.G.Construction  27,803/- 27,803/- 2        26
2 Lipika Construcitons 24,648/- 24,738/- 5        34
3 Manan Stonex 1,52,390/- 1,52,390/- 14      23
4 Hychoice Marble 2,66,236/- 2,66,236/- 19      22
5 N.P.Marble 2,50,463/- 2,50,463/- 18      25
6 Shagun Marble P.Ltd. 1,41,294/- 1,41,294/- 11      31
7 Sagar Marbles 5,74,496/- 5,50,589/- 35     29-30
8 Rakesh Marbles 4,46,054/- 4,46,054/- 28     27-28
9 Shri Suresh MarbleUdyog & Agency  49,205/- 49,205/- 10     32
10 Tiwari Marble House 1,24,135/- 1,24,135/- 8       33
11 A.G.Marble 66,225/- 66,225/-  4    19
12 Anil Marble 56,121/- 56,121/-  8    20
13 Bohra Marble 42,626/- 42,626/-  9    21
14 Manju Marble 1,27,564/- 1,27,564/- 12   24
Total 23,49,260/-

 6.1. However, the AO in his assessment order has stated that the impounded disc. containing the books of accounts under JR-I & JR-2 from where the cash payments on 31.03.2008 were found, were not manually entered as apparent from the printout. The entries were computerized, not manual. Furthermore, as stated in the submissions dated 24.12.2010, it is not tenable as during the survey, no corroborative evidence and documents were found in support of assessee’s claim from business premises. The same has been repeated by the AO in the Remand Report also. But to that contrary it is observed from the ledger account filed by assessee as reported in the preceding paragraphs and the assessee’s contentions also is that the ld. CIT(A) should have considered that all the parties from whom the assessee purchased goods, were old and regular parties with whom assessee maintains current account regularly. The Ld. CIT (A) should have also considered the Tax Audit Report which shows that” the assessee firm has maintained Cash Book Bank Book, General Ledger, Party Ledger, Sales / Purchase Register, Journal & Stock Book Manual & Computer System”. Therefore, we set aside the order of the revenue authorities on this issue and direct AO to verify the entries made in the ledger account of 14 parties as mentioned in the paper book and if it is found that the payments as recorded in the ledger account are tallying with the cash book, then in our considered opinion, no addition is required to be made by placing reliance on the computer statements which are not having any corroborative evidences. We order accordingly.

7. In the result the appeal of assessee is allowed for statistical purposes.

Order pronounced in the court on 16.05.2012.

Sandeep Kanoi

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