RAJENDRA KUMAR RATHI,KOLKATA vs. ITO, WD-33(1), KOLKATA, KOLKATA

Ground nos. 1 to 4 are relating to confirmation of disallowance of Rs.25 lakhs made on account of violation of provisions of section 40A(3) of the Act.

Brief fact of the case are that the assessee is an individual and engaged in the business of commission agent, servicing, trading & travel agency. The assessee filed his return of income for the A.Y under consideration on 13-10-2010 disclosing Rs. Nil. During the course of assessment proceedings the AO found that the assessee made payments without deducting TDS and as such disallowed an amount of Rs. 25 lakhs by invoking the provisions of section 40A(3) of the Act.

Before the CIT-A, it was contended by assessee that the amount of Rs. 25 lakhs was cash trade advance paid to M/s. Sonam Trophel, Bhutan for conducting tour operations in Bhutan on behalf of the assessee. The CIT-A did not consider this submission of assessee. But, he confirmed the same as made by the AO on this issue.

The ld. AR reiterated his same submissions as made before the AO and CIT-A. On the other hand, the ld. DR relied on the orders of the AO/CIT-A.

Heard rival submissions and perused the record. It is noticed from AO’s order at page-3 that the assessee made submissions that he made an advance payment of Rs. 25 lakhs to M/s. Sonam Trophel, Bhutan for conducting tours in Bhutan on behalf of assessee, which were released by phase by phase on four occasion on different dates to the said entity. It is clear from the order of the CIT-A that the assessee made same submission regarding the payment of advance to M/s. Sonam Trophel and the same were released phase by phase to the said entity. The CIT-A did not dispute the same. We find that both the authorities below did not dispute the receipt of advance for the purpose of conducting the tours on behalf of assessee by the said entity in Bhutan. We find that the amounts of Rs.7,50,000/- were released on 30-12-09 and 13-01-2010 and Rs. 5,00,000/- were released on 04-02-2010 and 06-03-2010 respectively. However, the allegation of authorities below was that the payments made in cash exceeding the monetary limit prescribed u/s. 40A(3). Since the provisions of section 40A(3) are applicable only when payment of expenses is made in cash in the sum exceeding Rs. 20,000/- and not to the payment of advances, we are of the view that addition made u/s. 40A(3) is totally unwarranted. The same is accordingly deleted & Ground nos. 1 to 4 are allowed.

Regarding ground no. 5, the ld. AR submits that the assessee is not intended to prosecute this ground of assessee’s appeal. Hence, the same is dismissed as not pressed.

Ground no. 6 is relating to confirmation of addition of Rs. 1,53,118/- made u/s. 40A(3) of the Act.

After hearing both the parties, we find that the details relating to this issue were not submitted either before the AO or the CIT-A. Before us the ld. AR submits that now he is ready to produce the same before the AO, if the Tribunal pleases to remand the issue to the file of the AO for his verification. In view of the same, we remand the issue to the file of AO for his fresh verification. The assessee is at liberty to file necessary evidences, if any, to substantiate his claim and contention. Ground no. 6 raised by the assessee is allowed for statistical purpose.

In the result, the appeal filed by the assessee is partly allowed for statistical purpose. Order pronounced in the open court on 04-07-2018