LATE SHRI TIRATH RAJ SINGH,THROUGH LEGAL HEIR SHRI GYANENDRA SINGH, VIDEH NIKUNJ, NEAR JAWAHAR PARK, SIDHI(M.P),SIDHI vs. INCOME TAX OFFICER -2, , REWA
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Income Tax Appellate Tribunal, JABALPUR BENCH JABALPUR
Before: SHRI SUDHANSHU SRIVASTAVA & SHRI ANADEE NATH MISSHRA
IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH JABALPUR BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA No.52/Jab/2023 Assessment Year: 2008-09 Late Shri Tirath Raj Singh, Vs. Income Tax Officer-2, Through Legal Heir Shri Rewa (MP) Gyanendra Singh, Videh Nikunj, Jawahar Park, SIDHI (MP) PAN : AJKPS7948G (Appellant) (Respondent) Appellant by Shri H.S. Modh, Advocate Respondent by Shri Ravi Mehrotra, Sr. DR Date of hearing 10/07/2023 Date of pronouncement 21/07/2023
O R D E R PER SUDHANSHU SRIVASTAVA, J.M.:
This appeal is preferred by the assessee against the order dated 24.03.2023 passed by the National Faceless Appeal Centre (NFAC), Delhi for Assessment Year (AY) 2008-09. 2. The brief facts of the case are that for the captioned assessment year, the original assessment order dated 19.11.2010 passed u/s. 143(3) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) was set aside by the ld. Commissioner of Income Tax (CIT) vide order dated 18.03.2013 on account of alleged omission on the part of the Assessing Officer to examine the issue of payments made in violation of provisions of Section 40A(3) of the Act. In the consequential assessment order, the Assessing Officer made a disallowance of Rs.3,46,050/- on account of
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payments made against purchase of cement on the ground that the assessee had made all the payments below Rs.20,000/- in cash with an aim to avoid the liability of deducting tax at source. 3. Aggrieved, the assessee preferred an appeal before the ld. First Appellate Authority, challenging the disallowance made in the assessment order. However, the assessee’s appeal was dismissed by the NFAC as admittedly there was no compliance by the assessee on any of the three dates on which the assessee was required to file submissions. 4. Now, the assessee has approached this Tribunal, challenging the dismissal of his appeal by raising the following grounds of appeal: “1. That the National Faceless Appeal Centre (NFAC) has grossly erred in facts and circumstances of the case to decide the appeal in the name of the deceased whereas the name of Legal Heir was requested to substitute. 2. That the addition made at Rs. 3,46,050/- on the ground that the payment made to avoid the TDS which is not applicable on the material purchase. 3. That the addition made at Rs. 3,46,050/- is arbitrary and bad in law. 4. That the Assessee crave leaves to raise any other ground/s on or before the date of hearing to prove that the order passed is bad.”
The ld. Authorized Representative submitted that the assessment order passed subsequent to the order passed u/s. 263 of the Act was bad in law as well on facts for the simple reason that all the payments which have been disallowed u/s.40A(3) of the Act were below Rs.20,000/- and further the payments had been made towards purchase of cement which did not attract any liability to deduct tax at source.
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Per contra, the ld. Senior Departmental Representative submitted that the assessee had not complied with the various notices issued by the NFAC and, therefore, the issue cannot be decided without obtaining report from the Assessing Officer. The ld. Senior D.R. also placed reliance on the findings and observations of the Assessing Officer and underlined the reason behind initiating revisionary proceedings in this case i.e. violation of provisions of Section 40A(3) of the Act. 7. We have heard the rival submissions and have also perused the material on record. At this juncture, it will be appropriate to reproduce the relevant portion from the assessment order which deals with the issue at hand. The same is being reproduced hereinunder: “From the verification of Cement Account it is noticed that the assessee has made payment to various parties in excess of Rs. 20,000/. However, from the examination of Bank Account it is found that the assessee has made payments to those parties below Rs. 20,000/- more than once frequently within the interval of 1-2 days. Further, there was sufficient credit balance in Bank Account and there did not seem to be any financial hardship. In the circumstances the assessee was asked to explain the intention of making payments below Rs. 20,000/- in parts within interval of 1-2 days when there was sufficient fund available and also the fact that the amount was due to those parties. On this, it has been stated by the assessee that the payments have been made as per the vouchers produced for examination. Since the vouchers being self made and can be made of any amount and in any manner according to convenience, this plea of the assessee is not accepted. The assessee could not explain the reasons why payments below Rs.20,000/- have been made to various parties when there was sufficient fund available with the assessee and also the fact that the amount was due to parties. In the circumstances it is obvious that the sole strategy of making payments below Rs. 20,000/- was to avoid TDS liability to-wards purchasers. From the counter-foil of Cheque Book only one payment of Rs. 30,360/- is found to have been made through cheque. Since the
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assessee has failed to explain the reasons of making payment in parts and below Rs.20,000/-, I disallow and add such payments, except one payment amounting to Rs. 30,360/- to the income so assessed u/s. 143(3) vide assessment order dated 19/11/2010 Total Income is computed as under:
Income assessed vide order dated 19/11/2010. Rs.456,620/-
Add: Disallowance of Expenses discussed (Rs. 376,410/- minus 30,360/-) Rs.346,050/- Total Income:- Rs.802,670/-
7.1 A perusal of the above extracted paragraph shows that the reason recorded by the Assessing Officer for invoking the provisions of Section 40A(3) of the Act is that the assessee had made payments to various parties from whom cement had been purchased in cash more than once. However, it is undisputed and also verifiable from the assessment order itself that all payments in cash were below Rs.20,000/-. The Assessing Officer has also noted that the assessee could not explain the reason why payments below Rs.20,000/- have been made to various parties. It has also been alleged by the Assessing Officer that the reason behind making the impugned payments below Rs.20,000/- was to avoid liability of deducting tax at source. However, it is seen that Section 40A(3) of the Act, as it stood prior to amendment by the Finance Act, 2017, which came into effect from 01.04.2018, specifies that where the assessee had incurred any expenditure in respect of which 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
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Rs.20,000/-, no deduction shall be allowed in respect of such expenditure. From the assessment order, it is very clear that in the present case no payment in cash exceeding Rs.20,000/- had been made. Therefore, the Assessing Officer has wrongly invoked the provisions of Section 40A(3) of the Act and accordingly, the same cannot be sustained. We set aside the order of the NFAC and direct the Assessing Officer to delete the addition.
In the final result, the appeal filed by the assessee stands allowed.
(Order pronounced in the open court on 21/07/2023 In accordance with Rule 34(4) of the I.T.A.T. Rules.)
Sd/- Sd/- ( ANADEE NATH MISSHRA ) (SUDHANSHU SRIVASTAVA) Accountant Member Judicial Member Dated: 21/07/2023 Aks Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Jabalpur
Asstt. Registrar
