SUMATHI MANIVANNAN,VELLORE vs. ITO WARD 2, VELLORE

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ITA 2537/CHNY/2017Status: DisposedITAT Chennai26 June 2018AY 2013-144 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that depositing cash into the recipient's bank account is equivalent to a cash payment under Section 40A(3). The Tribunal also found no justification for commercial expediency or urgency for such a large cash payment.

What were the facts?

The Assessing Officer disallowed a sum of ₹14,68,120/- under Section 40A(3) of the Income-tax Act for cash payments exceeding ₹20,000/-. The assessee argued that the cash was deposited into the recipient's bank account, not physically delivered, and there was urgency.

What were the issues?

Whether depositing cash into a bank account constitutes a cash payment for the purpose of Section 40A(3) and if commercial expediency justifies such payments.

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, SMC ‘A’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE

For Respondent: Shri B. Sagadevan, JCIT
Hearing: 21.06.2018Pronounced: 26.06.2018

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

1.

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -13, Chennai, dated 11.07.2017 and pertains to assessment year 2013-14.

2.

The only issue arises for consideration is disallowance made by the Assessing Officer under Section 40A(3) of the Income-tax Act, 1961 (in short 'the Act').

3.

Sh. Saroj Kumar Parida, the Ld.counsel for the assessee, submitted that a sum of ₹14,68,120/- was disallowed by the Assessing Officer under Section 40A(3) of the Act. According to the Ld. counsel, the cash was not delivered to anyone physically. However, it was deposited in the bank account of the respective person, therefore, the provisions of Section 40A(3) of the Act is not applicable at all. Moreover, according to the Ld. counsel, there was an urgency in making the payment. The assessee made purchases to the extent of ₹5,35,02,956/-, out of which cash payment exceeding ₹20,000/- was only to the extent of ₹14,68,120/-. Therefore, according to the Ld. counsel, the CIT(Appeals) is not justified in confirming the disallowance made by the Assessing Officer.

4.

We heard Shri B. Sagadevan, the Ld. Departmental Representative also. The fact that the assessee deposited cash in the account of M/s Pandy Ceramics is not in dispute. The only question arises for consideration is when the assessee has deposited ₹14,68,120/- in cash in the account of M/s Pandy Ceramics, whether it would amount to payment of cash under Section 40A(3) of the Act? This Tribunal is of the considered opinion that handing over the cash physically to M/s Pandy Ceramics or depositing the same in the bank account of M/s Pandy Ceramics is one and same. Hence, the payment of ₹14,168,120/- to the credit of M/s Pandy Ceramics in the bank account amounts to violation of Section 40A(3) of the Act. Moreover, merely because the assessee has purchased to the extent of ₹5,35,02,956/-, it cannot be said that there was commercial expediency or urgency in making payment to the extent of ₹14,68,120/- in cash. In view of the above, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

5.

In the result, the appeal filed by the assessee is dismissed.

Order pronounced on 26th June, 2018 at Chennai.

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