Case Law Details
Surya Merchants Ltd. Vs DCIT (ITAT Delhi)
There is no dispute to the fact that additions have been made u/s 40A(3) of the IT Act on account of cash payments made by the assessee in excess of Rs.20,000/- to various parties, otherwise than by account payee cheques/ bank drafts the details of which have been given in the preceding paragraph. It is the submission of Ld. Counsel for the assessee that provision of section 40A(3) are not applicable to payments made in cash in excess of Rs.20,000/- on bank holidays/ national holidays and where the payments were made to agents. So far as other payments are concerned, it is the submission of the Ld. Counsel for the assessee that since these payments are made out of “on money” and not recorded in the regular books of accounts and are found from the seized documents, therefore, the provision of section 40A(3)are not applicable.
So far as the payments made in cash in excess of Rs.20,000/- on bank holidays/ national holidays are concerned, we find there is no such payment in A. Y. 2006-07. However, the assessee has incurred such expenses in A. Y.2007-08 Rs.39,12,033/-, in A. Y. 2008-09 of Rs.1,26,24,000/- and Rs. 84,60,000/- in A. Y. 2009-10. The above payments are not in dispute. The Assessing Officer in the remand report also accepted that such payments have been made on bank holidays/national holidays. However, it is the case of the revenue that there was no compulsion on the part of the assessee to make such payments on bank holidays. It is the submission of the Ld. Counsel for the assessee that assessee being a developer of commercial/ residential projects is bound to complete the work in a time bound manner and construction activities are carried out continuously even during holidays. Therefore, when the assessee receives cash from the customers during holidays and purchases materials on the same day or makes the payments to the suppliers the same should not be disallowed under section 40A(3) of the IT Act. We find some force in the above arguments advanced by the Ld. Counsel for the assessee. There is no dispute to the fact that the above amounts were paid in cash in excess of Rs.20,000/- on bank holidays/ national holidays. Although there is no compulsion on the part of the assessee, however, it is an admitted fact that the construction activities of the assessee were carried on during holidays also. Therefore, we find merit in the arguments advanced by the Ld. Counsel for the assessee that the assessee had to procure materials on Sundays/ public holidays to avoid any break in the process of construction. It is also an admitted fact that the payments, were made in cash during holidays as well as working days. Therefore, it cannot be said that the assessee has made cash payments only on bank holidays to avoid the provision of section 40A(3) of the I. T. Act. We find, the Tribunal vide order dated 18.02.2015 had restored the matter to the file of the Assessing Officer to find out whether the payments were made on bank holidays or not.
The Assessing Officer in the remand report has admitted that such payments have been made on bank holidays. The provision of rule 6DD(J) provides that provisions of section 40A(3) shall not be applicable where the payment was required to be made on a day on which the banks were not open on account of holidays or strike. Since the assessee in the instant case has admittedly made the payments on a day on which the banks were not open on account of holidays and the Assessing Officer has also admitted that such payments were made on bank holidays therefore under the facts and circumstances of the case we are of the considered opinion that provision of section 40A(3) are not applicable to the payments made in excess of Rs.20,000/- on bank holidays
FULL TEXT OF THE ITAT JUDGEMENT
Please become a Premium member. If you are already a Premium member, login here to access the full content.
