RAJENDRA MULCHAND GOTHI,,NASHIK vs. ASSISTANT COMMISSIONER OF INCOME TAX,, NASHIK

The relevant facts as culled out from the material on record are as under :- The assessee is an individual stated to be engaged in the business of supplying of construction material and land development. The assessee electronically filed his return of income for A.Y. 2013-14 on 27.09.2013 declaring total income at Rs.97,59,490/-. The case was taken up for scrutiny and thereafter, assessment was framed u/s 143(3) of the Income- tax Act, 1961 (hereinafter referred to as „the Act‟) vide order dated 01.02.2016 and the total income was determined at Rs.1,02,54,690/-. Aggrieved by the order of Assessing Officer, assessee carried the matter before Ld.CIT(A), who vide order dated 10.03.2017 (in appeal No.Nsk/CIT(A)-1/690/2015-16) granted partial relief to the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised the following ground: 1. On the basis of facts and the circumstances of the case and as per law, the Commissioner of Income Tax (Appeal)-1, Nashik is not justified in confirming the disallowance of Rs.1,99,195/- made by the Assessing Officer under section 40A(3) of the Act on account of payments made to M/s. Natraj Petroleum in cash particularly when the genuineness of the payments made are not in dispute.

During the course of assessment proceedings, the Assessing Officer noticed that in the audit report filed u/s 44AB of the Act it was stated that there was violation of provisions of section 40A(3) of the Act amounting to Rs.4,90,897/. The assessee was asked to explain as to why the amount stated in the audit report not be disallowed, to which the assessee made the submissions which were not found acceptable to the Assessing Officer. The Assessing Officer thereafter held that there was violation of provisions of section 40A(3) of the Act and accordingly, disallowed Rs.4,90,897/-. Aggrieved by the order of Assessing Officer, assessee carried the matter

Aggrieved by the order of CIT(A), the assessee is now in appeal before us.

Before us the ld. AR reiterated the submissions made before the Assessing Officer and CIT(A) and further submitted that the assessee is a contractor who needs to get the diesel for his vehicles. The assessee gets the diesel from M/s. Natraj Petroleum, which is situated at Khambale, Tal– Igatpuri, Dist. Nashik, where the assessee does not have bank account. He submitted that all the payments have been made to M/s. Natraj Petroleum and are for the purpose of business and have been necessitated on account of business expediency and it is not case where the payees are not identifiable or the payments have been found to be bogus and the genuineness of payments is not in doubt. He further relying on the decision in the case of Attar Singh Gurmukh Singh Vs. ITO (1991) 191 ITR

The ld. DR on the other hand supported the orders of Assessing Officer and CIT(A).

We have heard the rival submissions and perused the material on record. The issue in the present appeal is with respect to disallowance made u/s 40A(3) of the Act for payments made in cash. It is not in dispute that the payments have been made in cash by the assessee to M/s. Natraj Petroleum. The payments made for the purchase of diesel to the aforesaid parties are not found to be bogus for the purpose of purchase of diesel. We find that Hon‟ble Apex Court in the case of Attar Singh Gurmukh Singh Vs. ITO (supra) has held that the terms of section 40A(3) of the Act are not absolute and that considerations of business expediency and other relevant factors are not excluded. It has further held that genuine and bonafide transactions are not taken out of the sweep of the section and it is open to assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payments in the manner prescribed in section 40A(3) of the Act was not practicable or would have caused genuine difficulty to payee. It further observed that provisions of section 40A(3) of

In the result, the appeal of assessee is allowed.