RK POWERGEN PRIVATE LIMITED,CHENNAI vs. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1), CHENNAI

आदेश / O R D E R PER MANJUNATHA.G, AM: This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-18, Chennai, dated 24.05.2022 and pertains to assessment year 2016-17.

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5. For these and other grounds that may be adduced at the time of hearing, it is prayed that the returned income be accepted and justice rendered. 3. The brief facts of the case are that a search and seizure operations u/s.132 of the Income Tax Act, 1961 (in short “the Act") was carried out in M/s.Sri Ramachandra University Trust Group of cases on 23.11.2015. As a part of search operation, search was also conducted in the business premise of the assessee. During the course of search, loose sheets and books were seized. The case was taken up for scrutiny and during the course of assessment proceedings, it was noticed that the assessee has made cash payment in excess of Rs.20,000/- in violation of provisions of Sec.40A(3) of the Act. In response, the assessee submitted that each cash payment to a party on one occasion does not exceed the prescribed limit and further, although aggregate of said cash payment exceeding Rs.20,000/- per day to a person, but the assessee explained the reasons for making cash payments. The AO, however, was not convinced with the explanation of the assessee and according to the AO, the assessee has made cash payment to transportation charges and debited to supplier’s a/c and each cash payment was in excess of Rs.20,000/- as prescribed u/s.40A(3) of the Act. Therefore, rejected the arguments of the assessee and made addition of Rs.8,64,900/- u/s.40A(3) of the Act.

Before the Ld.CIT(A), the assessee has reiterated its arguments made before the AO in light of the decision of the ITAT in the assessee’s own case in to 1867/Mds/2015 & CO Nos.125 to 128/Mds/2015 for the ITA No.586/Chny/2022 :: 3 ::

AYs 2008-09 to 2011-12, where similar cash payments disallowed u/s.40A(3) of the Act, has been deleted by the Tribunal. The Ld.CIT(A) after considering relevant submissions of the assessee and also taken note of decision of ITAT, observed that the assessee has made cash payment in excess of Rs.20,000/- as prescribed u/s.40A(3) of the Act, and further, cash payments made by the assessee are also not covered under any exception as provided u/r.6DD of the Income Tax Rules, 1962. Therefore, sustained the additions made by the AO towards disallowance of cash payment u/s.40A(3) of the Act. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us.

Further, the assessee has explained the reasons for cash payments. He further submitted that an identical issue has been considered by the Tribunal in the assessee’s own case for earlier assessment years and after considering relevant facts held that there is a business exigency in making cash payments, and then, cash payments cannot be disallowed u/s.40A(3) of the Act. Therefore, he submitted that the Ld.CIT(A) erred in sustaining additions made by the AO towards cash payments u/s.40A(3) of the Act.

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transporters but debited to supplier’s account. From the above, it is very clear that primary responsibility to make payment to transporters was on supplier. Therefore, the assessee cannot claim that there was an urgent requirement to make payment in cash considering business exigency.

Further, there is no dispute with regard to the fact that sum paid by the assessee in a single day to one person is in excess of prescribed limit provided u/s.40A(3) of the Act. Further, the assessee could not make out a case that the cash payment made to three parties comes under any exception as provided u/r.6DD of Income Tax Rules, 1962. Therefore, we are of the considered view that there is no error in the reasons given by the AO and Ld.CIT(A) to disallow cash payment in excess of prescribed limit u/s.40A(3) of the Act. In so far as, case law relied upon by the assessee in the assessee’s own case for earlier assessment years, we find that although, the co-ordinate bench of ITAT Chennai in the assessee’s case has considered certain cash payments u/s.40A(3) of the Act, but on perusal of findings of the Tribunal in earlier assessment years, we find that the assessee has paid cash towards transportation cost, such as fuel expenses, driver expenses, etc., which is to be settled then and there in cash. In this case, the AO has brought out clear facts to the effect that there is no obligation on the part of the assessee to make payment towards transportation charges. Further, the assessee itself has accepted the fact that payment of transportation charges was the responsibility of the supplier and in fact, whatever amount paid to three parties has been ITA No.586/Chny/2022 :: 6 :: debited to supplier’s account. Therefore, we are of the considered view that findings and facts recorded by the Tribunal in earlier assessment year does not apply to the facts of the present case. Hence, it cannot be said that the case of the assessee is covered by the decision of the ITAT for earlier assessment year.