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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
आदेश /O R D E R PER MAHAVIR SINGH, VP: This appeal filed by the assessee is arising out of order of the Commissioner of Income Tax (Appeals)-6, Chennai in dated 31.01.2020. The assessment was framed by the Income Tax Officer, Corporate Ward-2(3), Chennai for
- 2 - 2014-15 u/s.143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’), vide order dated 29.12.2016.
2. The only issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of the AO in making disallowance of sum of Rs.1,78,95,943/- by invoking the provisions of section 40A(3) of the Act for making cash payments in regard to expenditure incurred. For this, assessee has raised the following three grounds:- 1. The CIT Appeals erred in confirming addition of Sum of Rs. 17895943/- U/s.40A(3) made by the Assessing Officer in the order U/s. 143(3) dated 29.12.2016.
The CIT Appeals erred in not appreciating that Section 40A is a section which contemplates disallowance of expenditure claimed by the appellant. As represented to the Commissioner Appeals and borne out by the facts on records the said amount has never been claimed by the appellant as an expenditure and consequently application of Section 40A and disallowance as no relevance here. Section 40A relates to only expenses or payments not deductible in certain circumstances. The section 40A(3) specifically mentions "no deduction shall be allowed in respect of such expenditure".
3. The CIT Appeals erred in confirming the addition made by the AO on the ground that "the appellant has not furnished any proof of disallowance in future year as well". There is no such requirement in Section 40A.
Brief facts are that the AO during the course of assessment proceedings on verification of financials submitted by the assessee noted that during the financial year 2013-14 relevant to this - 3 - 2014-15, assessee has made payments exceeding Rs.20,000/- to the extent of Rs.1.81 crores. As the assessee filed some part details and for the expenditure incurred to the extent of Rs.1.78 crores, assessee could not file any evidences, vouchers etc., that the payment is by account payee cheque or by crossed demand draft, the AO invoking the provisions of section 40A(3) of the Act disallowed the cash payment in excess of Rs.20,000/- to the extent of Rs.1,78,95,943/-. Aggrieved, assessee preferred appeal before CIT(A).
The CIT(A) confirmed the action of the AO as the assessee failed to submit any proof of disallowance by observing in para 5.3 & 5.4 as under:- 5.3 Once the payment is made in cash violating the conditions of Section 40A(3) of the Act, such payment of expenses cannot be claimed as a deductible expenditure calling for disallowance while offering the profit from the said business. In the present case, although the appellant states that it has not claimed the deduction of these expenditures during this year, as it has been capitalized to work-in-progress. But the appellant has not provided any future return of income wherein the profit from the present work in progress has been offered for tax after disallowing the amount of Rs. 1,78,95,943/-. Hence, it can be concluded that no such disallowance has been made while offering the profit of the said capital work in progress. The act of making the payments in excess of Rs. 20,000/- has been carried out during year under appeal. The vital aspect of payment of more than Rs. 20,000/- is at the core of Section 40A(3) for the payments in the nature of expenses, which can be claimed contemporaneously at the time of payment or in future. The nature of assessee's business clearly proves that these payments in excess of Rs. 20,000/ - would be claimed in future when they would be dealing with capital work-in-progress, but the Appellant has not furnished any proofs of - 4 - disallowance in the future year as well. Since, the act of payment of more than Rs. 20,000/- has been committed during this year, the said amounts will have to be therefore disallowed in the year of payment.
5.4 Based on the above facts, I am of the considered view that the AO's act of disallowing an amount of Rs. 1,78,95,943/- u/s 40A(3) of the Act is sustained And the same is upheld. Accordingly, this ground of appeal is dismissed.
Aggrieved, assessee is in appeal before the Tribunal.
We have heard rival contentions and gone through the facts and circumstances of the case. The only submission assessee made before us now is that both the authorities below have concurrent finding that the assessee failed to file evidences in regard to cash payments in excess of Rs.20,000/-. The assessee contended that the payments are less than Rs.20,000/- on each day as the assessee is engaged in business of real estate and developer. The assessee contended that the assessee now has all the evidences to produce before the AO so that he can file the entire evidences before the AO in case, the matter is remitted back to the file of the AO. On query from the Bench, the ld.Senior DR has objected to setting aside, as the assessee failed to file any evidence before the lower authorities.
After hearing both the sides, we are inclined to remit the matter back to the file of the AO as there is a concurrent finding of the authorities below as the assessee only failed to file evidences
- 5 - Rs.20,000/- were never made. As the assessee claim that it has all the evidences available with it, in the interest of justice, we want to give one more opportunity to the assessee. Hence, we remit the issue back to the file of the AO who will re-decide the issue fresh after taking evidences from the assessee. In term of the above, this appeal is allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 25th April, 2023 at Chennai.