SALEM FOOD PRODUCTS LTD.,CHENNAI vs. DCIT, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 15, Chennai, dated 13.07.2016 and pertains to assessment year 2010-11.

There was a delay of 65 days in filing this appeal by the assessee. The assessee has filed a petition for condonation of delay. We have heard the Ld.counsel for the assessee and the Ld. D.R. We find that there was sufficient cause for not filing the appeal before the stipulated time. Therefore, we condone the delay and admit the appeal.

Shri V.K. Gurunathan, the Ld.counsel for the assessee, submitted that the Assessing Officer disallowed a sum of `15,61,661/- under Section 40A(3) of the Income-tax Act, 1961 (in short 'the Act') on the ground that the assessee has made cash payment exceeding `20,000/-. Similarly, a disallowance of `1,15,000/- was also made by the Assessing Officer. The Ld.counsel submitted that the payment was for purchase of wheat products and lorry booking charges. A consolidated disallowance was made by the Assessing Officer without considering the independent payments made to respective persons. According to the Ld. counsel, the payment made by the assessee does not exceed `20,000/- in any way. On a query from the Bench, whether the Assessing Officer disallowed the payments on the ground that only self-made vouchers were produced? The Ld.counsel submitted that all the payments were accepted by the Assessing Officer and the disallowance was made only under Section 40A(3) of the Act on the ground that the payment exceeded `20,000/-.

We have heard Shri AR.V. Sreenivasan, the Ld. Departmental Representative also. The Ld. D.R. submitted that the assessee has produced only self-made vouchers before the Assessing Officer. The assessee has made payments to M/s Pitchaiah Lorry Service / Meridian Agency exceeding `20,000/-.

We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer disallowed the claim of the assessee on the ground that the assessee has produced only self-made vouchers. When the Assessing Officer doubted the payment on the ground that the assessee is maintaining only self-made vouchers, it is not known why the provisions of Section 40A(3) of the Act was invoked? For the purpose of invoking Section 40A(3) of the Act, the Assessing Officer has to accept that the payment as genuine. Only in respect of genuine payments which exceeded `20,000/-, disallowance can be made under Section 40A(3) of the Act. If the payments were not genuine and the assessee could not establish the genuineness of payment, then the disallowance can be for not supporting the expenses. Moreover, the assessee claims that no payment was made exceeding `20,000/-. The assessee claims that the Assessing Officer has taken aggregate payments made to particular person on different dates. In view of the above, this Tribunal is of the considered opinion that the matter needs to be reconsidered.

Coming to the other issue with regard to levy of interest under Section 234B and 234C of the Act is concerned, the levy of interest is mandatory and consequential. Since the main issue of disallowance under Section 40A(3) of the Act is remitted back to the file of the Assessing Officer, the levy of interest also needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside. The Assessing Officer shall reconsider the issue of levy of interest under Section 234B and 234C of the Act once again in accordance with law, after giving a reasonable opportunity to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes.