THE ITO, WARD-3(4), AHMEDABAD vs. M/S. AMRUT RICE & PULSE MILL, AHMEDABAD

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ITA 1938/AHD/2015Status: DisposedITAT Ahmedabad18 December 2017AY 2007-084 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s deletion of the addition for payments made before July 13, 2006, as the amendment to Section 40A(3) was not applicable. The addition for payments made after this date was not contested by the assessee.

What were the facts?

The assessee made payments for paddy and rice purchases through cross cheques. The Assessing Officer disallowed these expenses under Section 40A(3) as they exceeded Rs. 20,000. The assessee argued that payments made before July 13, 2006, were not subject to the amended provisions requiring account payee cheques.

What were the issues?

Whether payments made by cross cheques before the amendment of Section 40A(3) on July 13, 2006, are disallowable. Whether the assessee provided sufficient evidence for payments made before the amendment.

Which sections of the Income-tax Act were involved?

Section 40A(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH

Before: SHRI N.K. BILLAIYA & SHRI MAHAVIR PRASAD

For Appellant: Shri S. K. Dev, Sr. D.R

PER N.K. BILLAIYA, ACCOUNTANT MEMBER

ITA No. 1938 & C.O. 150/Ahd/2015 2 . A.Y. 2007-08 1. ITA No. 1938/Ahd/2015 & C.O. No. 150/Ahd/2015 are appeal by the revenue and cross objection by the assessee directed against the order of the Ld. CIT(A)-7, Ahmedabad dated 20.04.2015 pertaining to A.Y. 2007-08. 2. The appeal and the cross objection were heard together and are disposed of by this common order for the sake of convenience and brevity.

3.

The only grievance of the revenue is that the ld. CIT(A) erred in deleting the addition of Rs. 58,59,377/- made u/s. 40A(3) of the Act.

4.

During the course of the re-assessment proceedings, the A.O. found that the assessee has made various payments through cross cheques to the suppliers for the purchase of paddy and rice. The A.O. found that the suppliershas discounted the cheques through Mudra Finance. The total payments made through cross cheques were of Rs. 66,43,872/-. The A.O. was of the firm belief that the payments have been made in contravention to the provisions of Section 40A(3) of the Act and accordingly asked the assessee to explain why the same should not be disallowed.

5.

In its reply, the assessee stated that all the payments have been made through cross chques of Nutan Nagarik Co.Op. Bank and Union Co.Op. Bank and were issued in favour of suppliers which have been paid from the bank account of the assessee. Therefore, there is not violation of the provisions of Section 40A(3) of the Act.

6.

The contention of the assessee did not find any favour with the A.O. who was of the opinion that the mandate of Section 40A(3) is very clear in which it has been specifically mentioned that any expenditure exceeding Rs. 20,000/-

ITA No. 1938 & C.O. 150/Ahd/2015 3 . A.Y. 2007-08 incurred in respect of which a payment made to the person otherwise than account payee cheque, the expenses are not deductable. The A.O. accordingly made the addition of Rs. 66,43,872/-.

7.

The assessee carried the matter before the ld. CIT(A) and reiterated that the payments have been made through cross cheques and the amendment brought to Section 40A(3) is with effect from 13.07.2006 whereas the impugned payments have been made prior to 13.07.2006 and therefore, the requirement that the payment should be made by account payee cheques is not applicable on the impugned payments.

8.

After considering the facts and the submissions, the ld. CIT(A) found that payment of Rs. 58,59,377/- were made by cross cheques prior to 13.07.2006. Therefore, there is no violation to the provisions of Section 40A(3) of the Act for payment made before that date. However, on finding that Rs. 7,84,495/- was paid after 13.07.2006, the ld. CIT(A) disallowed 20% and sustained the addition of Rs. 1,56,899/-.

9.

Before us, the ld. D.R. vehemently stated that the assessee has not furnished any evidence to demonstrate that payment of Rs. 58,59,377/- was made prior to 13.07.2006. Per contra, the ld. counsel for the assessee reiterated what has been stated before the lower authorities.

10.

We have carefully considered the orders of the authorities below. It is true that the provisions of Section 40A(3) has been amended with effect from 13.07.2006 by which “cross cheque” was substituted by “account payee cheque”. The First Appellate Authority has given a categorical finding that Rs.

ITA No. 1938 & C.O. 150/Ahd/2015 4 . A.Y. 2007-08 58,59,377/- was paid before 13.07.2006. On such categorical finding of the fact, we do not find any reason to interfere with the findings of the ld. CIT(A). Addition of Rs. 1,56,899/- has not been contested by the assessee and therefore has attained finality.

11.

In the result, the appeal filed by the Revenue is dismissed.

12.

The ld. counsel did not press the cross objection of the assessee and the same is dismissed as not pressed.

Order pronounced in Open Court on 18 - 12- 2017

Sd/- Sd/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER Ahmedabad: Dated 18 /12/2017 Rajesh Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) – 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER

Deputy/Asstt.Registrar ITAT,Ahmedabad

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