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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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 ITA Nos.1864 to 1867/Mds/2015 & CO Nos.125 to 128/Mds/2015 for the

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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.

Benches in the assessee’s own case for the AYs 2008-09 to 2011-12 in

ITA Nos.1864 to 1867/Mds/2015 & CO Nos.125 to 128/Mds/2015 and also

details of cash payments to three parties submitted that cash payment to

single party on any day does not exceed the prescribed limit u/s.40A(3) of

the Act, although, sum paid to a single person exceeds the prescribed limit.

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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submitted that the assessee could not explain how cash payment in excess

of prescribed limit comes under exception as provided u/r.6DD of IT Rules,

1962. The Ld.DR further submitted that the assessee is not in dispute with

regard to the fact that cash payment in a single day to a person is in excess

of Rs.20,000/- as prescribed u/s.40A(3) of the Act. Since, the assessee

failed to make out a case of any exception as provided u/r.6DD of IT Rules,

1962, the Ld.CIT(A) has rightly confirmed the addition made towards

disallowance of cash payment and their orders should be upheld.

record and gone through orders of the authorities below. The AO has

disallowed cash payments of Rs.8,64,900/- u/s.40A(3) of the Act, on the

ground that the cash payments to three parties in a single day is in excess

of sum of Rs.20,000/- as prescribed u/s.40A(3) of the Act. It was the

explanation of the assessee that each payment to one person does not

exceeds the specified limit, however, sum paid in a single day to a person

was in excess of Rs.20,000/- as prescribed u/s.40A(3) of the Act. According

to the assessee, there is an urgent requirement of cash payments to

transporters of bio-mass waste, because, the assessee is procuring bio-

mass waste from local persons and requires to pay in cash to the transports

for their requirements. We find that as per the observations of the AO &

the Ld.CIT(A), the responsibility to make payments to transporters was on

the suppliers. In fact, the assessee had also made payments to

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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

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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.

circumstances of the case, we are of the considered view that there is no

error in the reasons given by the Ld.CIT(A) to confirm the addition made

towards cash payments u/s.40A(3) of the Act, and thus, we are inclined to

uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the

assessee.

Order pronounced on the 28th day of February, 2023, in Chennai. Sd/- Sd/- (वी. दुगा� राव) (मंजूनाथा.जी) (MANJUNATHA.G) (V. DURGA RAO) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 28th February, 2023. TLN आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 4. आयकर आयु�/CIT 2. ��यथ�/Respondent 5. िवभागीय �ितिनिध/DR 3. आयकर आयु� (अपील)/CIT(A) 6. गाड� फाईल/GF