DAMODARAM SURESH,GOBICHETTIPALAYAM vs. ITO, WARD 1(1), ERODE, ERODE

Pursuant to the Tribunal order, the ld.PCIT issued notices to the assessee dated 18.09.2023, 28.12.2023, Assessee filed reply on 18.09.2023 and on 27.12.2023. However, the assessee failed to demonstrate the non-applicability of the provisions of section 40A(3) of Damodaram Suresh :- 5 -: the Act by filing relevant bills/vouchers. On final notice dated 05.01.2024 none appeared. After considering material on record, the ld.PCIT passed the following order: 4. The submissions of the assessee supra, the facts of the case and the impugned assessment order have been carefully perused. The only issue that was required to be adjudicated in the present proceedings is the violation of provisions of section 40A(3) of the Act as the assessee has made payment in cash in excess of Rs.20,000/- to various parties amounting to Rs.85,03,246/-. Apparently, as per assessee's own admission, there exist certain discrepancies in the data uploaded during the course of assessment proceedings with regard to the cash book etc. Nonetheless, what is to be looked into in the present proceedings is whether or not, the impugned assessment order is erroneous in as much as the same renders it prejudicial to the interest of revenue. Perusal of the facts of the case, the assessment order and the submissions made during the assessment proceedings and the present proceedings, there exists prima facie a case where the entire issue of applicability of provisions of section 40A(3) of the Act requires fresh adjudication and proper investigation. The provisions of section 40A(3) of the Act are trite law and the assessee ought to have made those payments in modes otherwise than cash payments so as to escape from the rigors of disallowance u/s 40A(3) of the Act. As the same is not done in accordance with law, the impugned assessment order so made is held to be consisting of errors rendering it an erroneous assessment order in as much as it is prejudicial to the interest of revenue, requiring an intervention to cure the order so made. In the present proceedings also, had the assessee proved beyond doubt that there did not exist any violation of the said section, the issue could have been considered in accordance with law. Unfortunately, the assessee had not proved beyond doubt that there did not exist any violation of the said provision and therefore, left with no other option, I deem it fit to hold that the impugned assessment order is erroneous in as much as the same is prejudicial to the interest of revenue.

In order to remedy the said error in the order of assessment in the instant case made on 31-12-2019 for the assessment year 2017-18, the recourse would be to resort to provisions of sec.263 of the Act. Accordingly, the order of the AO dated 31-12-2019 for the assessment year 2017-18 in the case of the captioned assessee is, set aside, in exercise of the powers vested in me u/s.263 of the Act.

The Assessing Officer, is hereby, directed to re-do the assessment afresh on this issue alone of invoking of section 40A(3) of the Act, after verification of the facts discussed above. The relevant details shall be Damodaram Suresh :- 6 -: obtained from the assessee and after examining the same, the AO may satisfy himself in accordance with law and proper application of the latest judicial pronouncements made and relied upon by the assessee shall be examined and shall proceed with the assessment and pass appropriate orders in the assessee's case. The Assessing Officer shall give adequate opportunity of being heard to the assessee in this regard before passing the fresh assessment order. The assessee shall provide all the material available to substantiate its claim before the AO.

We have heard the rival submissions and perused the record and application for additional evidence filed under Rule 29 of the Income Damodaram Suresh :- 8 -: Tax (Appellate) Tribunal Rules, 1963. We find from the original order that the issue of applicability of provisions of section 40A(3) of the Act was never questioned during original assessment proceedings. There is also a conflict regarding the veracity of the cash book. Before us, the assessee has filed additional evidence under Rule 29. The admitted facts show cash payments aggregating to Rs.85,03,246/- exceeding statutory limits. Discrepancies in cash book acknowledged by the assessee. No demonstration by the assessee that such payments fell under Rule 6DD exceptions. There is no evidence on record of AO having examined bills/vouchers. No speaking order or reasoning or discussion exists in assessment order regarding applicability of Section 40A(3). It is also not a case that the AO has taken one of view. In fact, no view has been taken by the AO on the applicability of Section 40A(3). The mere filing of a purported cash book does not constitute enquiry. The law is settled that “no enquiry” amounts to an error prejudicial to the Revenue, empowering the ld.PCIT to invoke Section 263 of the Act. Thus, the ld.PCIT had material to form prima facie satisfaction that the assessment order was erroneous and prejudicial. In such circumstances, the AO was required to make detailed enquiry. Damodaram Suresh :- 9 -: The present order is passed pursuant to an order of the Tribunal remand. It is well-settled that when the earlier order is set aside for fresh adjudication, the ld.PCIT obtains fresh limitation from the date of Tribunal order for passing a revised order. Hence, the order dated 09.02.2024 is within limitation. Accordingly, we find no reason to interfere with the revisionary order.

In the result, the appeal of the assessee is dismissed.