ORIENT BUILDERS,CHENNAI vs. ACIT NON CORP. CIRCLE 9(1), CHENNAI

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ITA 1427/CHNY/2018Status: DisposedITAT Chennai12 October 2022AY 2010-113 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal acknowledged the business expediency of cash payments at various construction sites, especially on holidays. It directed the AO to delete additions for payments made on Sundays/holidays and re-compute the disallowance.

What were the facts?

The assessee, a civil contractor, made cash payments exceeding Rs. 20,000 for building materials and labour. The Assessing Officer made an addition under Section 40A(3) for these payments.

What were the issues?

Whether cash payments exceeding Rs. 20,000 for business expenditure are disallowable under Section 40A(3) when made due to business expediency or on holidays.

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, ‘A’ BENCH, CHENNAI

Before: HON’BLE SHRI MAHAVIR SINGH & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2010-11 arises out of the order of learned Commissioner of Income Tax (Appeals)-10, Chennai [CIT(A)] dated 12-01-2018 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s. 147 of the Act on 24-02-2016. The sole grievance of the assessee is confirmation of addition u/s 40A(3) for Rs.35.21 Lacs to the returned income of Rs.6.95 Lacs. The provisions of Sec.40A(3) mandate assessee to pay business expenditure exceeding Rs.20,000/- through 2 - specified banking channels only. The violation of the same would result into disallowance of expenditure. The assessee being resident firm is stated to be engaged in civil construction.

2.

The Ld. AR submitted that the assessee is a civil contractor for the last 24 years. The assessee got construction activities around the city of Chennai in a radius of 60 KMs. Since the work was going at various sites, the payments were made in cash by the supervisors at those sites. The Ld. AR also submitted that few of the payments have been made on Sundays / holidays during which it was not possible to make the payment through Banks. The Ld. Sr. DR relied on the order of Ld. CIT(A) and submitted that no exception as carved u/r 6DD applies to the case of the assessee. Having heard rival submissions and after due consideration of relevant material on record, our adjudication would be as under.

3.

Upon perusal of assessment order, it could be seen that the payments have been made for purchase of building material, purchase of cement, sand, wood & steel, Labour payment and purchase of electrical and hardware material. All these items are supported by relevant bills and vouchers and are related to the business of the assessee. Considering the fact that the assessee was working at various construction sites which were located at different places, it may not be always possible to make the payments through banking channels. It was quite possible that the supervisors had to make the payment in cash to ensure uninterrupted supply of material for construction work. Therefore, to some extent there could be business expediency in making these payments in cash. Therefore, partly accepting the plea of Ld. AR and considering the peculiar facts of the 3 - case, we direct Ld. AO to delete addition of those payments which have been made on holidays / Sundays and re-compute the addition. The assessee is directed to file requisite details. No other ground has been urged before us.

4.

The appeal stands partly allowed for statistical purposes.

Order pronounced on 12th October, 2022.

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