SRI K C PURUSHOTHAMA,HOLALKERE vs. INCOME TAX OFFICER WARD-1, CHITRADURGA

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ITA 381/BANG/2018Status: DisposedITAT Bangalore12 July 2019AY 2009-104 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the issue to the Assessing Officer for fresh examination, allowing the assessee one more opportunity to substantiate its claim. The assessee was directed to cooperate with the AO for expeditious completion of the assessment.

What were the facts?

The assessee, a civil contractor, made cash payments of Rs. 17.52 lakhs to trade creditors. The Assessing Officer disallowed this amount under Section 40A(3) due to non-compliance with payment rules. The assessee contended that payments were made to laborers in amounts below the prescribed limit.

What were the issues?

Whether cash payments made to trade creditors exceeding the prescribed limit are disallowable under Section 40A(3), and whether the assessee provided sufficient explanation and evidence for such payments.

Which sections of the Income-tax Act were involved?

Section 40A(3),Section 144

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B’’ BENCH : BANGALORE

Before: SHRI B.R BASKARAN & SMT. BEENA PILLAI

For Appellant: Shri Ramasubramanyam, C.A
For Respondent: Shri R.N Siddappaji, Addl. CIT (DR)
Hearing: 11.07.2019Pronounced: 12.07.2019

O R D E R Per B.R Baskaran, Accountant Member

The appeal filed by the assessee is directed against the order dated 13/8/2017 passed by ld CIT(A), Davengere and it relates to asst. year 2009-10.

2.

The assessee is aggrieved by the decision of ld CIT(A) in confirming the disallowance made u/s 40A(3) of the Act.

3.

We heard the parties and perused the record. The assessee is a contractor. During the course of asst. proceedings, the AO noticed that the assessee has made payments by way of cash to various trade creditors to the tune of Rs.17.52 lakhs. The AO asked the assessee to explain as to why the above said transactions will not attract provisions of sec.40A(3) of the Act. Since there was no response to various notices issued, the AO disallowed Rs.17.52 lakhs u/s 40A(3) of the Act.

4.

Before the ld CIT(A), the assessee furnished affidavits obtained from persons to contend that the provisions of sec.40A(3) are not attracted. The ld CIT(A) was of the view that the averment made in the Affidavits were contradictory to the position taken in the grounds of appeal and accordingly confirmed the disallowance.

5. The ld AR appearing for the assessee submitted that there is no such contradiction, as pointed out by Ld CIT(A) . The ld AR submitted that the assessee is a civil contractor and is constrained to make payments by way of cash to workers. The payments were withdrawn by supervisors for making payments to labourers and the amount so paid to each of them was less than the limits prescribed u/s 40A(3) of the Act. The assessee has obtained affidavits in support of the above said explanations. He submitted that these facts have not been verified by the tax authorities and accordingly prayed that the matter may be restored to the file of the AO for examining it afresh.

6.

On the contrary, the ld DR submitted that the assessee did not cooperate with the AO and hence, the AO was constrained to pass the asst. order to the best of his judgment u/s 144 of the Act. The Affidavits filed before the ld CIT(A) was found to be contradictory to the grounds of appeal. Accordingly he submitted that the order passed by ld CIT(A) does not call for any interference.

6. Having heard the rival submissions, in the interest of natural justice, we are of the view that the assessee may be provided with one more opportunity to substantiate its claim. Accordingly we set aside the order passed by ld CIT(A) and restore this issue to the file of the AO for examining it afresh by duly considering the information/ explanations that may be furnished by the assessee. We also direct the assessee to cooperate with the AO for expeditious completion of the assessment. After affording adequate opportunity of being heard to the assessee, the AO may take appropriate decision in accordance with the law.

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