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Income Tax Appellate Tribunal, ‘B’ BENCH: BENGALURU
Before: SHRI SUNIL KUMAR YADAV & SHRI INTURI RAMA RAOShri Narayanrao V.Kulkarni,
IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: BENGALURU
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER and SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
ITA No.1236/Bang/2013 (Assessment year: 2009-10)
Shri Narayanrao V.Kulkarni, Viveknagar East, Bijapur-586101. … Appellant PAN:AJKPK 6563 B Vs. Joint Commissioner of Income-tax, Bijapur Range Bijapur. … Respondent
Appellant by : Shri Narendra Sharma, Advocate. Respondent by : Shri G.Kamaladhar, Standing Counsel
Date of hearing : 20/03/2017 Date of pronouncement : 21/04/2017
O R D E R Per INTURI RAMA RAO, AM :
This is an appeal filed by the assessee directed against the order of the CIT(A), Belgaum, dated 15/04/2013 for the assessment year 2009-10.
The assessee raised the following grounds of appeal:
ITA No.1236/Bang/2013 Page 2 of 9
ITA No.1236/Bang/2013 Page 3 of 9 3. Briefly facts of the case are that the assessee is an individual engaged in the business of execution of civil contracts for Public Works Department. Return of income for the assessment year 2009-10 was filed on 29/09/2009 disclosing total income of Rs.39,35,370/-. Against said return of income, the assessment was completed by the Joint Commissioner of Income-tax (JCIT), Bijapur u/s 143(3) of the Income-tax Act,1961 [‘the Act’ for short] vide order dated 30/11/2011 determined total income of Rs.66,94,690/-.
The disparity between returned income and the assessed income is on account of disallowance made under the provisions of section 40A(3) of Rs.27,22,340/- and bringing to tax interest on FDs of Rs.35,981/-. The appellant had agreed during the course of assessment proceedings for addition of Rs.35,981/- on account of interest accrued on fixed deposit with Corporation Bank. Addition that is being challenged by the assessee is addition made u/s 40A(3) of the Act. Factual matrix of addition is that during the course of assessment proceedings, the Assessing Officer (AO) noticed from the cash book that the appellant incurred expenditure in cash exceeding Rs.20,000/- in a day in contravention of the provisions of section 40A(3) amounting to Rs.27,22,340/-. During the course of assessment proceedings, appellant has not disputed the factum of incurring expenditure in cash but only submitted that the above expenditure was incurred in cash on holidays or public holidays on which the banks were
ITA No.1236/Bang/2013 Page 4 of 9 closed. The said explanation was rejected by the AO by holding that said explanation cannot be accepted as no evidence was filed to prove that payments were made due to business expediency on a day on which banks were closed on account of holidays.
Being aggrieved, an appeal was preferred before the CIT(A) who vide impugned order, had confirmed the addition. Being aggrieved, assessee is before us in the present appeal.
Learned counsel for assessee argued that cash payments in contravention of the provisions of section 40A(3) have been made on account of business expediency on the days on which banks closed on account of holidays. He further submitted that in case addition is warranted, amount of addition should be confined to excess of Rs.20,000/- alone. On the other hand, learned departmental representative placed reliance on the orders of the lower authorities.
6 We heard rival submissions and perused material on record. The only issue that comes for consideration is whether in the facts and circumstances of the case, addition u/s 40A(3) is warranted. There is no dispute about factum of cash payments exceeding Rs.20,000/- were made. For better appreciation of law on the issue, provisions of section 40A(3) are reproduced below :
“40A(3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft,
ITA No.1236/Bang/2013 Page 5 of 9 exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. (3A) ...................................................................................... Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3) and this sub- section where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors : Provided further that in the case of payment made for plying, hiring or leasing goods carriages, the provisions of sub-sections (3) and (3A) shall have effect as if for the words “twenty thousand rupees”, the words “thirty-five thousand rupees” had been substituted. On mere reading of the above provision, it is clear that any cash payment exceeding Rs.20,000/- is not allowable as business deduction but the proviso to said section empowers the Government to notify circumstances under which cash payments can be permitted as a deduction. Accordingly, the Government has notified circumstances under which cash expenditure is permissible vide rule 6DD of the IT Rules, 1962. The said rule reads as under: Cases and circumstances in which a payment or aggregate of payments exceeding twenty thousand rupees may be made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft. 6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of
ITA No.1236/Bang/2013 Page 6 of 9 payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees in the cases and circumstances specified hereunder, namely :— (a) where the payment is made to— (i) the Reserve Bank of India or any banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); (ii) the State Bank of India or any subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959); (iii) any co-operative bank or land mortgage bank; (iv) any primary agricultural credit society or any primary credit society as defined under section 56 of the Banking Regulation Act, 1949 (10 of 1949); (v) the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956); (b) where the payment is made to the Government and, under the rules framed by it, such payment is required to be made in legal tender; (c) where the payment is made by— (i) any letter of credit arrangements through a bank; (ii) a mail or telegraphic transfer through a bank; (iii) a book adjustment from any account in a bank to any other account in that or any other bank; (iv) a bill of exchange made payable only to a bank; (v) the use of electronic clearing system through a bank account; (vi) a credit card; (vii) a debit card.
ITA No.1236/Bang/2013 Page 7 of 9 Explanation.—For the purposes of this clause and clause (g), the term “bank” means any bank, banking company or society referred to in sub-clauses (i) to (iv) of clause (a) and includes any bank [not being a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)], whether incorporated or not, which is established outside India; (d) where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee; (e) where the payment is made for the purchase of— (i) agricultural or forest produce; or (ii) the produce of animal husbandry (including livestock, meat, hides and skins) or dairy or poultry farming; or (iii) fish or fish products; or (iv) the products of horticulture or apiculture, to the cultivator, grower or producer of such articles, produce or products; (f) where the payment is made for the purchase of the products manufactured or processed without the aid of power in a cottage industry, to the producer of such products; (g) where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town; (h) where any payment is made to an employee of the assessee or the heir of any such employee, on or in connection with the retirement, retrenchment, resignation, discharge or death of such employee, on account of gratuity, retrenchment compensation or similar terminal benefit and the aggregate of such sums payable to the employee or his heir does not exceed fifty thousand rupees; (i) where the payment is made by an assessee by way of salary to his employee after deducting the income-tax from salary in accordance with the provisions of section 192 of the Act, and when
ITA No.1236/Bang/2013 Page 8 of 9 such employee— (i) is temporarily posted for a continuous period of fifteen days or more in a place other than his normal place of duty or on a ship; and (ii) does not maintain any account in any bank at such place or ship; (j) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike; (k) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person; (l) where the payment is made by an authorised dealer or a money changer against purchase of foreign currency or travellers cheques in the normal course of his business. Explanation.—For the purposes of this clause, the expressions “authorised dealer” or “money changer” means a person authorised as an authorised dealer or a money changer to deal in foreign currency or foreign exchange under any law for the time being in force.] It is the contention of the assessee that the present case falls under clause (j) of the above. But as rightly pointed out by the AO, the onus lies on the assessee to prove that the assessee was forced to make cash payment out of business expediency on a day on which banks were closed. But the assessee had failed to discharge its onus even before us. In the circumstances, the contention of the assessee cannot be accepted. As regards the alternative contention that only an amount which is in excess of Rs.20,000/- alone be disallowed cannot be accepted having regard plain provisions of section 40A(3) of the Act.
ITA No.1236/Bang/2013 Page 9 of 9 7. In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open court on 21st April, 2017
Sd/- sd/- (SUNIL KUMAR YADAV) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Place : Bengaluru. D a t e d : 21/04/2017 srinivasulu, sps Copy to : 1 Appellant 2 Respondent 3 CIT(A) 4 CIT 5 DR, ITAT, Bangalore. 6 Guard file By order Assistant Registrar Income-tax Appellate Tribunal Bangalore