Texo The Builders Vs ACIT (ITAT Bangalore)
VAT Bills Don’t Save Cash Payments – ITAT Upholds 40A(3) Despite Genuine Purchases- Cash Payments on Working Days Hit by 40A(3),
Assessee is a real-estate developer. Survey u/s 133A led to detection of substantial cash payments toward materials, labour & other project expenses. AO held that several payments exceeded the monetary limit prescribed u/s 40A(3), made on working days, & not covered by Rule 6DD exceptions. AO completed reassessment u/s 147 with major disallowances. CIT(A) partly allowed relief, directing AO to verify payments category-wise, particularly those claimed to be made on Sundays/bank-holidays, labour payments & material purchases with VAT-paid bills. AO passed OGE, granting partial relief but confirming violations of 40A(3).
Before Tribunal, Assessee argued that construction activity runs through weekends, cash payments were business-expedient, many invoices were < Rs.20,000, labourers were paid individually, & several payments were on non-banking days attracting Rule 6DD(j). Revenue contended that Assessee failed to prove any bank-holiday payments & could not justify cash payments.
Tribunal noted that for AY 2013-14, payments totalling Rs.3,41,850/- were made on regular banking days & not protected by Rule 6DD. Only one item-labour development cess of Rs.99,000/–was remitted back for limited verification to confirm whether it was paid to a Government department, in which event it would not attract 40A(3). Remaining Rs.2,42,850/- was confirmed. Tribunal also upheld disallowance of Rs.6,72,380/- claimed as bank-holiday/Sunday payments since AO’s verification showed all such payments were on working days.
