Case Law Details
Gouri Shankar Jain Vs CIT(A) (ITAT Kolkata)
Introduction: In the case of Gouri Shankar Jain vs CIT(A), the dispute centers around the disallowance of Rs. 69,500 under Section 40A(3) of the Income Tax Act. The disallowed amount pertains to cash expenditures exceeding Rs. 20,000 for repairs, specifically Rs. 34,500 for body-making charges on 12.10.2012 and Rs. 35,000 for alternator repairing works on 08.01.2013. The crux of the matter lies in the assertion that these payments were made by the driver, acting as an agent of the assessee.
Detailed Analysis: The Assessing Officer (AO) disallowed the repairs and maintenance expenses, invoking Section 40A(3) due to cash payments. The appellant argued that the payments were made by the driver, acting as an agent, and fall under the exception provided by Rule 6DD(k) of the Income Tax Rules. This rule exempts payments made in cash by a person to his agent for goods or services on his behalf.
The appellant highlighted that the exceptional circumstances, including the lack of banking facilities while a vehicle was in transit, justified the cash payments made by the driver. The ledger accounts and bills were presented as evidence to support the genuineness of the transactions.
Conclusion: The Tribunal, upon considering the facts and Rule 6DD(k), found merit in the appellant’s contention. The disallowance under Section 40A(3) was set aside, emphasizing that the payments were made by the driver, acting as an agent. The case underscores the importance of understanding exceptions to tax provisions and providing substantiating evidence for genuine transactions.
The Gouri Shankar Jain vs CIT(A) case serves as a reminder that meticulous documentation and adherence to tax rules, coupled with an understanding of exceptions, are crucial. The tribunal’s decision reflects a balanced approach, considering the practicalities faced by businesses, such as the need for immediate repairs during transit.
We find that the issue relates to disallowance of Rs. 69,500/- u/s 40A(3) of the Act incurred in cash exceeding twenty thousand rupees on account of repairs and maintenance which includes payment of Rs. 34,500/- on 12.10.2012 towards body making charges and Rs. 35,000/- towards altinator repairing works on 08.01.2013. However, going through the material facts and circumstances of the case, we find force in the contention of the assessee that the alleged amount was not paid in cash by the assessee but was paid by the driver acting as an agent of the assessee.
We set aside the orders of the Ld. CIT(A) and allow the ground raised by assessee challenging the disallowance of Rs. 69,500/- u/s 40A(3) of the Act.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is appeal filed by the assessee against the order of Ld. CIT(A), National Faceless Appeal Centre dated 31.12.2015 for A.Y. 2013-14.
2. At the outset, it is noted that there is a delay of 100 days on the part of the assessee in filing this appeal before the Tribunal. In this regard, the assessee has filed an application seeking condonation of the said delay and keeping in view the reasons given therein, we are satisfied that there is a sufficient cause for the delay of 100 days on the part of the assessee in filing this appeal before the Tribunal and delay in filing the instant appeal is accordingly condoned.
3. The assessee raised the issue in this appeal are as follows:
i. For that the Ld. Commissioner of Income Tax (Appeals)-NFAC failed to appreciate that none of the conditions precedent existed for the Ld. Assistant Commissioner of Income Tax, Central Circle 2(1), Kolkata for his specious action of assuming jurisdiction u/s 40A(3) of the Income Tax Act, 1961, in the present context and the alleged addition upheld in the sum of Rs. 69,500/- on that basis, therefore, ab initio void, ultra vires and ex-facie null in law.
ii. For that on a true and proper interpretation of the scope of the provisions of section 40A(3) of the Income Tax Act, 1961, the Ld. Commissioner of Income Tax (Appeals)-NFAC was absolutely in error in upholding the specious addition of Rs. 69,500/- resorted to by the Ld. Assistant Commissioner of Income Tax Central Circle 2(1), Kolkata without considering the facts and circumstances in the light of Rule 6DD(k) of the Income Tax Rules, 1962 and such spurious conclusion derived from extraneous considerations not germane to the issue in dispute is totally arbitrary, unwarranted and perverse.
iii. For that the Ld. Commissioner of Income Tax (Appeals)-NFAC acted unlawfully in upholding the tenuous addition amounting to Rs. 69,500/-, being the expenses incurred on account of repair charges, made by the Ld. Assistant Commissioner of Income Tax, Central Circle 2(1), Kolkata by an erroneous application of the provisions of section 40A(3) of the Income Tax Act, 1961 read with Rule 6DD(k) of the Income Tax Rules, 1962 and the adverse finding reached on such unconnected parameters not amenable to reasons is wholly illegal illegitimate and infirm in law.
iv. For that the specious action of the Ld. Commissioner of Income Tax (Appeals)-NFAC in upholding the addition u/s 40A(3) of the Income Tax Act, 1961 in the sum of Rs. 69,500/- made by the Ld. Assistant Commissioner of Income Tax, Central Circle 2(1), Kolkata by misreading the evidence adduced establishing the genuinity of such expense adduced on record is completely unfounded, unjustified and untenable in law”
4. The brief facts of the case is that the assessee is engaged in the business of transport in the name of Proprietary concern M/s. Madanlal Gourishankar (Transport Division) and the assessee filed its return of income on 27.09.2013 declaring total income of Rs. 5,34,130/-. The assessment u/s 143(3) was concluded vide order dated 31.12.2015 determining the total income of Rs. 6,03,630/-. While passing the assessment order, the AO made disallowance of repairs & maintenance expenses to the extent of Rs. 69,500/- u/s 40A(3) of the Income Tax Act in view of payment of the same by cash in contravention of the provisions of said section. Against the same assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre which was dismissed on 15.04.2021.
5. Aggrieved by the said order dated 15.04.2021, the assessee is in appeal before us.
6. That at the time of hearing before us, the Ld. AR referring to the ledger account as well as bills in respect of repairing and maintenance expenses incurred Rs. 34,500/- on 12.10.2012 and altinator repairing works amounting to Rs. 35,000/- on 08.01.2013 and he stated that all the transactions were made in cash by the driver of the vehicles who are not fixed and permanent staff and acted as an agent on behalf of the assessee. Further, he submitted that the above transactions falls under the exception provided under Rule 6DD(k) of IT Rules. The said provision states as follows:
6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft exceeds twenty thousand rupees in the facts and circumstances specified herein, namely:-
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(k) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person;”
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7. The Ld. AR also submits that since the assessee is a transporter and while the vehicle was in transit which was struck down due to technical glitch and the driver of the vehicle had to repair the vehicle at any cost to reach the destination, he had incurred the above expenses in cash where there was no banking facility at that point of time, As such, the transaction above made by the driver of the vehicle is covered under the exception provided under the aforesaid Rule 6DD(k) of I.T. Rules, 1962.
7.1. The Ld. AR of the assessese relied on the decision of the coordinate bench in the case of M/s. Pramod Kumar Singh vs ACIT, Circle-2, Durgapur in ITA No. 1456/Kol/2011 and, where the assesse himself had not paid such amount directly to the fuel sellers but through the dirvers of the vehicles who are not his fixed or permanent staff and acted as agent for such purchase, accordingly such payment would fall under Rule 6DD(k) of I.T. Rules and, he further produced relevant extract of Ledger A/c at page 19 of Paper Book and relevant Bills at page 17 & 18 of Paper Book respectively for the aforesaid payment to prove the genuineness of the transaction.
8. On the other hand, the ld. DR appearing on behalf of the revenue relied on the orders of the Ld. CIT(A).
9. After hearing the rival submissions and on careful perusal of materials available on record, we find that the issue relates to disallowance of Rs. 69,500/- u/s 40A(3) of the Act incurred in cash exceeding twenty thousand rupees on account of repairs and maintenance which includes payment of Rs. 34,500/- on 12.10.2012 towards body making charges and Rs. 35,000/- towards altinator repairing works on 08.01.2013. However, going through the material facts and circumstances of the case, we find force in the contention of the assessee that the alleged amount was not paid in cash by the assessee but was paid by the driver acting as an agent of the assessee.
10. Keeping in view all the facts and circumstances of the case as well as the exception provided under Rule 6DD(k) of the IT Rules and Relying on the decision of the coordinate bench in the case of M/s. Pramod Kumar Singh (supra), we are of the view that the disallowance made by the AO is not sustainable and, therefore, we set aside the orders of the Ld. CIT(A) and allow the ground raised by assessee challenging the disallowance of Rs. 69,500/- u/s 40A(3) of the Act. Remaining grounds, being general and consequential in nature, need no adjudication.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 25.02.2022.
