M/S. GAURAV EXPORT TRADES PVT. LTD.,CHENNAI vs. ITO, CHENNAI

There was a delay of 03 days in filing this appeal by the assessee. The assessee has not filed a petition for condonation of delay. I heard the Ld. counsel for assessee and the Ld. D.R. I find that there was sufficient cause for not filing the appeal before the

Shri A.S. Sriraman, the Ld. counsel for the assessee submitted that the only issue arises for consideration is disallowance made by the Assessing Officer under Section 40A(3) of the Income Tax Act, 1963 (in short ‘the Act’). According to the Ld. counsel, the assessee engaged itself in the business of manufacturing and export of readymade garments. During the year under consideration, the assessee has paid ₹23,14,227/- by cash to various parties in excess of ₹20,000/-. The assessee has also claimed the same as expenditure in the profit & loss account. According to the Ld. counsel many of the payments were made on Saturdays and Sundays. Therefore, the assessee could not pay the money through banking channel. The Ld. counsel further submitted that the expenditure are genuine in nature. The payments are in respect of contract work made to M/s. Deva Fashions to the extent of ₹21,85,000/-, the Ld. counsel submitted that the payment was in fact made to Mrs. Sunita Gupta Proprietrix of the Deva Fashions towards advance for purchase of land. Therefore ₹21,85,000/- was also not claimed as expenditure while computing the taxable income. Hence, the CIT (Appeals) is not justified in not allowing the claim of the assessee.

On the contrary, Shri Sanat Kumar Raha, the Ld. Departmental Representative submitted that the assessee has paid majority of the payment to the very same parties through banking channel. The claim of the assessee that the payments were made on Saturday and Sunday were not justified. The payments were made in excess of ₹20,000/- contrary to the provisions of Section 40A of the Act. Therefore, the CIT (Appeals) has rightly disallowed the claim of the assessee. Referring to the claim of the assessee that a sum of ₹21,85,000/- was paid for purchase of land, the Ld. D.R., submitted that the payment made to M/s. Sunita or M/s. Deva Fashions is not the subject matter of any disallowance under Section 40A(3) of the Act. Therefore, the CIT (Appeals) has rightly confirmed the disallowance made by the Assessing Officer.

We have considered the rival submissions on either side and perused the material available on record. Admittedly, the Assessing Officer disallowed ₹23,14,227/- under Section 40A(3) of the Act. The payments were made to the following parties as follows:

In the result, the appeal of the assessee stands dismissed.