Case Law Details
K.K. Construction Co. Vs. ACIT (ITAT Jaipur)
Conclusion: Dis allowance under section 40A(3) could not be made as identity of persons from whom purchases had been made was established; source of cash payments was clearly identifiable in form of withdrawals from assessee’s bank accounts and the said details were submitted before AO, thus, the genuineness of the transaction had been established as purchase of construction material for road construction and the test of business expediency had been met.
Held: Assessee was engaged in the business of civil construction. During the course of assessment proceedings, AO observed that assessee had made payment of Rs. 2,38,67,250/- in cash exceeding prescribed threshold in contravention of Section 40A(3) towards purchase of grit and other items for construction to various persons. In responseJ, assessee submitted that the contract work was executed in rural area and the payments were made in cash for purchase of raw material due to non-availability of banking facility in the village area. It was further submitted that there was complete ban on the mining in the State of Haryana since 2010 and the assessee had to purchase the grit, stone & dust from the State of Rajasthan and the business of assessee’s firm is mainly in the state of Haryana and the suppliers do not accept payment through cheque hence the assessee firm was under business compulsion to complete the work in a time bound manner and therefore, had to make the purchases in cash. AO made addition on the ground that since certain payments had been made through RTGS, the argument of banking facility not available did not arise because recipient had got the bank account for receiving payment. In the instant case, it was found that the identity of the persons from whom the purchases had been made has been established and the source of cash payments was clearly identifiable in form of the withdrawals from the assessee’s bank accounts and the said details were submitted before the lower authorities and had not been disputed by them. The genuineness of the transaction had been established as purchase of construction material for road construction and lastly, the test of business expediency had been met as it was the admitted position that the mining activities had been banned in the State of Haryana and assessee had no other option but to buy construction material from State of Rajasthan where the suppliers and stone crushing units had insisted on cash payments at the time of delivery of material. Therefore the genuineness of the transactions and it being free from vice of any device of evasion of tax was relevant consideration for which section 40A(3) had been brought on the statute books and which had been satisfied in the instant case.
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal filed by the assessee against the order of ld. CIT(A)-3, Jaipur dated 10.11.2017 for Assessment Year 2012-13 wherein the assessee has taken following grounds of appeal:-
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