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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-2, Pune dated 23-08-2017 for the assessment year 2014-15.
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The brief facts of the case as emanating from records are: The assessee is a transporter. The assessee filed its return of income for the impugned assessment year on 30-11-2014 declaring total income of Rs.21,26,430/-. The case of the assessee was selected for scrutiny through CASS. Accordingly, statutory notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) was issued to the assessee on 28-08-2015. During the course of scrutiny assessment proceedings, the Assessing Officer observed that the assessee has made cash payments to the tune of Rs.42,05,883/- to M/s. Jagdale Petroleum for alleged purchases of diesel. The assessee was asked to explain the payments made in cash. The Assessing Officer after considering the submissions of assessee made disallowance of Rs.32,97,292/- u/s. 40A(3) of the Act.
Aggrieved by the assessment order dated 23-12-2016, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) rejected the explanation furnished by the assessee and confirmed the disallowance made by Assessing Officer. Now, the assessee is in second appeal before the Tribunal assailing the findings of Commissioner of Income Tax (Appeals) in confirming the disallowance of Rs.32,97,292/- u/s. 40A(3) of the Act.
Shri V. L. Jain appearing on behalf of the assessee submitted that the assessee is resident of Shrirampur, Distt.-Ahmednagar and is having his office at the same place. During the period relevant to the assessment year under appeal the assessee was engaged in transportation of drinking water in the drought affected areas of Man, Medha, Khatav, Koregaon of Satara District. The assessee was playing about 85 trucks in those areas for supply of drinking water. The aforesaid areas are approximately 300 to
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350 K.M. away from Shrirampur. Since, the assessee is not local resident of the area, the assessee had to pay cash for purchase of fuel/diesel for running of the trucks. The ld. AR submitted that the assessee had made cash payments for purchase of diesel on account of the business exigencies. The genuineness of the payments is not disputed, the parties to whom payments are made is identified, therefore, no disallowance u/s. 40A(3) is called for. To support his submissions, the ld. AR placed reliance on the decision of Hon’ble Supreme Court of India in the case of Attar Singh Gurmukh Singh Etc. Vs. Income Tax Officer reported as 191 ITR 667 and the decision of Pune Bench of the Tribunal in the case of Income Tax Officer Vs. M/s. Dhanshree Ispat in ITA No. 794/PUN/2013 for assessment year 2009-10 decided on 31-05-2017.
On the other hand Shri Ajay Modi representing the Department vehemently defended the impugned order. The ld. DR submitted that the Revenue has not accepted the genuineness of all the payments made by assessee to M/s. Jagdale Petroleum. The assessee has not been able to show that the case of assessee falls under the exceptions provided in Rule 6DD for allowing cash payments. The ld. DR contended that the Assessing Officer granted relief to the extent of Rs.9,08,591.86 in respect of cash payments made on bank holidays. The ld. DR submitted that the provisions of section 40A(3) have to be construed strictly. The Hon’ble Kerala High Court in the case of K. Abdu & Co. Vs. Income Tax Officer reported as 170 Taxman 297 has held that even the cash payments made in bank accounts of suppliers would not be eligible for exemption from disallowance u/s. 40A(3) of the Act. In the present case, the assessee has made direct cash payments to the party for purchase of fuel. The ld. DR has submitted that the assessee has not placed any evidence to support
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his contention that the petrol pump dealer refuses to accept payment by cheque. The assessee has shown entries of cash payments in the books just to inflate the expenses and reduce tax liability.
We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The solitary issue raised in the appeal by the assessee is against disallowance of Rs.32,97,292/- u/s. 40A(3) of the Act. The contention of the assessee is that the cash payments were made for purchase of fuel/diesel for running the trucks. Purportedly, the assessee was engaged in supply of drinking water in the drought affected area of Man, Medha, Khatav, Koregaon of Satara District. The assessee has made cash payments to the tune of Rs.42,05,883/- to M/s. Jagdale Petroleum for purchase of fuel. Out of the above said amount, the Assessing Officer granted relief of Rs.9,08,591/- to the assessee under Rule 6DD(j) of the Income Tax Rules, 1962. Thus, the Revenue accepted that the assessee had made cash payments for purchase of fuel from M/s. Jagdale Petroleum.
As regards remaining cash payments of Rs.32,97,292/- is concerned, they do not fall in any of the exceptions provide under Rule 6DD. The assessee has also not furnished any documentary evidence to substantiate that the assessee made cash payments for purchase of fuel under compelling circumstances. The ld. AR in support of his submissions has placed reliance on the decision of Co-ordinate Bench of the Tribunal in the case of Income Tax Officer Vs. M/s. Dhanshree Ispat (supra). We find that the disallowance u/s. 40A(3) in the said case was deleted in the peculiar facts of the said case. The ld. AR of the assessee has prayed that if an opportunity is granted to the assessee, he would be able to
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demonstrate that the cash payments which are subject matter of appeal were made to M/s. Jagdale Petroleum for purchase of fuel under compelling reasons. Taking into consideration the entire facts, we deem it appropriate to remit this issue back to the file of Assessing Officer for de- novo consideration. The Assessing Officer after considering the evidence produced by the assessee, if any shall decide this issue afresh after affording reasonable opportunity of hearing, in accordance with law.
In the result, the appeal of assessee is allowed for statistical purpose.
Order pronounced on Wednesday, the 30th day of May, 2018.
Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 30th May, 2018 RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-2, Pune 3. 4. The Pr. C.I.T.-1, Pune ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “ए” बेंच, 5. ऩुणे / DR, ITAT, “A” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,
यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune