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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI DUVVURU RL REDDY & SHRI S. JAYARAMAN
PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER: The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-15, Chennai, in dated 27.02.2019 for the assessment year 2015-16.
M/s. S.P Coal Resources Pvt. Ltd., the assessee, is in the business of trading in steam coal used for power generation and in chemical and sugar factories. While making the assessment for Assessment Year 2015-16, the Assessing Officer (A.O) noticed that the assessee has paid
2 -: to its creditors and transporters in cash for purchase of coal in excess of Rs. 20,000/- in violation of provisions of s. 40A(3) of the Income Tax Act, 1961 (in short ‘the Act’) therefore, on examination, the A.O held, inter alia, that this payments could have been made through banking channel or online, there were no exceptional circumstances as prescribed under Rule 6DD of the Income Tax Rules, 1962 etc. and hence, made disallowance u/s. 40A(3) of the Act. Aggrieved, the assessee filed an appeal before CIT(A). The ld. CIT(A) held, inter alia, that the assessee as well as the creditors and transporters were established business concerns having bank accounts and they were operating in urban areas, the assessee could not demonstrate exceptional circumstances leading to violation of s. 40A(3) of the Act for seeking exemptions from the disallowance u/s. 40A(3) of the Act and hence upheld the disallowance.
Aggrieved against that order, the assessee filed this appeal.
The case was heard through video conferencing. The Ld. AR submitted that the Ld. CIT(A) erred in confirming the disallowance en masse without looking into the nature of each of the amounts disallowed.
The lower authorities having not appreciated the fact that the impugned sum comprised not only expenditure over Rs. 20,000/- by the cash, but also refund of trade advance received for supply of coal from various parties in the course of assessee’s business as an importer and supplier
3 -: of coal. There are a large number of payments below the threshold limit of Rs. 20,000/-, which do not attract the provisions of s. 40A(3) of the Act. Without appreciating the facts and circumstances with accounts and without giving due opportunity to the assessee, the A.O made the addition and the Ld. CIT(A) confirmed the disallowance. The Ld. A.R invited our attention to the paper book in support of his grounds of appeal.
4. Per contra, the ld. counsel for the D.R invited our attention to the observation made by the Ld. CIT(A) in the order that inspite of reasonable opportunity given, the assessee could not demonstrate exceptional circumstances and hence supported the orders of lower authorities.
We heard the rival submissions and gone through the relevant 5. material on record. It is seen from the assessment order that the assessee has taken a plea that the payment was made due to unavoidable circumstances, because the company was in financial crisis.
Some of the customers refused to accept company’s cheque and to overcome the payments were made in cash etc. It is seen from the assessment order, the A.O has not analyzed individual transactions before taking the decision. In the facts and circumstances of the case, we deem it fit to remit this issue back to the AO for fresh examination.
4 -: The assessee shall furnish relevant material in support of its contention and comply with the requirements of the AO in accordance with law. The AO on due examination of them and after affording due opportunity to the assessee, decide the issues in accordance with law.
In the result, the appeal filed by the assessee is allowed for statistical purpose.
Order pronounced on the day of 27th April, 2021 in Chennai.