KIMIDI SURAPU NAIDU JUTE TWINE INDUSTRIES PRIVATE LIMITED., AMADALAVALASA vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 4(1), VISAKHAPATNAM

PDF · subscribers
ITA 600/VIZ/2018Status: DisposedITAT Visakhapatnam19 February 2020AY 2013-145 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the disallowance of cash payments made to directors, finding that banking facilities were available and the directors resided in an area with banking access. The assessee's case did not fall under any exceptions to Section 40A(3).

What were the facts?

The assessee-company, engaged in jute twine manufacturing, paid remuneration to its directors in cash. The Assessing Officer disallowed these payments under Section 40A(3) citing the availability of bank branches in the factory's locality.

What were the issues?

Whether cash payments made to directors are disallowable under Section 40A(3) when banking facilities are available in the vicinity and the directors reside in an area with banking access.

Which sections of the Income-tax Act were involved?

Section 40A(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM

Before: SHRI V. DURGA RAO, HON’BLE

For Appellant: Shri Y. Appa Rao – CA
For Respondent: Smt. Suman Malik – Sr.DR
Hearing: 30/01/2020

Date of hearing : 30/01/2020. Date of pronouncement : 19/02/2020. O R D E R These appeals by the assessee are directed against the common order of Commissioner of Income Tax (Appeals)-9, Hyderabad, dated 28/06/2018 for the Assessment Years 2012-13 & 2013-14. Since facts and issues are common, clubbed and heard together and disposed of by way of this consolidated order.

2.

There is a delay of 80 days in filing these appeals. The assessee has filed the affidavits wherein he explained the delay in belated filing the appeals. I find that there is a sufficient cause to condone the delay. Accordingly, delay is condoned.

2 & 600/VIZ/2018 (Kimidi Surapu Naidu) 3. For the sake of convenience, facts are taken from ITA No. 599/VIZ/2018. The assessee-company is in the business of manufacturing of Jute Twine, filed its return of income, which was processed u/sec. 143(1) and thereafter case was selected for scrutiny. The Assessing Officer after following due procedure, assessment was completed u/sec. 143(3) dated 18/03/2015. In the assessment order, the Assessing Officer has noted that the assessee-company has paid remuneration to the following Directors in cash:- 1. Sri K. Ganapati Rao Rs. 5,59,830/- 2. Smt. K. Mrunalini Rs. 3,46,866/- 3. Sri Y. Laxmana Rao Rs. 1,56,000/- Total Rs. 10,62,696/- During the course of assessment proceedings, the Assessing Officer asked the assessee as to why the amount paid in cash should not be disallowed u/sec. 40A(3). The AR of the assessee has submitted that there is no banking facility in Regidi and Amadalavalasa where assessee-factory is situated. The Assessing Officer considered the submissions of the assessee and observed that Andhra Bank and Bank of India are having branches in Regidi and Amadalavalasa and by invoking section 40A(3) disallowed the cash payments made to the Directors and added to the total income of the assessee.

3 & 600/VIZ/2018 (Kimidi Surapu Naidu) 4. On appeal, the ld. CIT(A) confirmed the order of the Assessing Officer.

5.

Before me, ld.AR has submitted that there are no bank facilities at the place where assessee-factory is situated and therefore payments made in cash and submitted that case of the assessee comes under the exceptions provided in the Act.

6.

Ld.DR strongly supported the orders of the authorities below.

7.

I have heard both the parties, perused the material available on record and gone through orders of the authorities below.

8.

The Assessing Officer has recorded in his order that assessee has made payments to its Directors in cash, totalling to Rs.10,62,696/-. When the Assessing Officer asked the assessee as to why section 40A(3) should not be invoked, it was replied that there were no banking facilities at Regidi and Amadalavalasa where the factory is situated. However, the Assessing Officer after enquiry gave a finding that Andhra Bank and Bank of India are having branches in Regidi and Amadalavalasa and invoked section 40A(3), disallowed the entire amount paid to the Directors and added to the assessee’s income returned. On appeal, ld.CIT(A) confirmed the order of the Assessing Officer. On appeal before me, the case of the assessee is that no banking facility is available at the place where assessee-factory is situated, however, 4 ITA Nos.599 & 600/VIZ/2018 (Kimidi Surapu Naidu) I find from the assessment order that the Assessing Officer has given categorical finding that Andhra Bank and Bank of India branches available at Regidi and Amadalavalasa. That apart, during the course of hearing, when I enquired about the stay of Directors, all the Directors are living in Visakhapatnam where banks are available. Therefore, the payment made by the assessee in cash is squarely covered under the provisions of section 40A(3) of the Act and therefore I find no reason to interfere with the order passed by the ld. CIT(A). I also find that the case of the assessee does not come under the exceptions provided in section 40A(3) of the Act. Thus, this appeal filed by the assessee is dismissed.

9.

Insofar as ITA No. 599/VIZ/2018. Therefore, our decision in ITA No. 599/VIZ/2018 shall apply mutatis mutandis to this appeal also.

10.

In the result, both the appeals filed by the assessee are dismissed. Order Pronounced in open Court on this 19th day of Feb., 2020.

More judgments on Section 40A(3)

All 3,278 judgments and leading authorities on Section 40A(3) →

Recent GST High Court judgments

Search GST case law →