SANJAYA KUMAR NANDA,SUNDERGARH vs. ITO, JHARSUGUDA

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ITA 86/CTK/2015Status: DisposedITAT Cuttack18 May 2017AY 2010-115 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that since the genuineness of the payments and the expenditure was not in dispute, and the assessee was compelled to make cash payments due to the peculiar situation and insistence by truck owners, the disallowance under Section 40A(3) was not sustainable. The Tribunal also dismissed a ground related to depreciation disallowance as it did not arise from the CIT(A)'s order.

What were the facts?

The assessee, a transporter, made payments to various truck owners for transportation services. The Assessing Officer disallowed these expenses, alleging violation of Section 40A(3) for payments exceeding Rs. 20,000 in cash. The CIT(A) confirmed the disallowance.

What were the issues?

Whether disallowance under Section 40A(3) is justified when cash payments were made due to peculiar circumstances and the genuineness of the expenditure is not disputed. Whether a ground of appeal not arising from the lower appellate order can be considered.

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, CUTTACK BENCH, CUTTACK

Before: S/SHRI N.S SAINI & KULDIP SINGH

For Appellant: Shri M.Udayapuria/B.Agarwal, AR
For Respondent: Shri D.K.Pradhan, DR
Hearing: 25/04

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND KULDIP SINGH JUDICIAL MEMBER

ITA No. 86/CTK/2015 Assessment Year : 2010-2011

Vs. ITO, Ward-1, Jharsuguda Sanjay Kumar Nanda, M/s. Matarani Transport, Mission Chowk, Sundargarh PAN/GIR No. ACVPN 1075 D (Appellant) .. ( Respondent)

Assessee by : Shri M.Udayapuria/B.Agarwal, AR Revenue by : Shri D.K.Pradhan, DR

Date of Hearing : 25/04/ 2017 Date of Pronouncement : 18 /05/ 2017

O R D E R Per N.S.Saini, AM

This is an appeal filed by the assessee against the order of CIT(A)-

Cuttack, dated 28.11.2014 for the assessment year 2010-2011.

2.

In Ground No.1 of the appeal, the grievance of the assessee is that

the CIT(A) erred in confirming the action of the Assessing Officer

disallowing Rs.11,28,518/-, Rs.14,65,333/- and Rs.14,08,153/- alleging

violation of section 40A(3) of the Act for payments made to truck

owners within limits of Rs.20,000/-.

2 ITA No. 86/CT K/ 2015 Asse ssment Year : 20 10- 201 1

3.

The brief facts of the case are that the Assessing Officer, on

verification of books of account, observed that the assessee had paid

transportation payment of Rs.11,28,518/- to M/s. Gayatri Transport,

Rs.14,65,333/- to Sri Bhawani Prasad Majhi and Rs.14,08,153/- to sub-

contractor M/s. YKGN Transport violating the provisions of section 40(3)

of the Act. The assessee was asked to explain why the same will not be

disallowed. In reply, it was submitted by the assessee that the assessee

is in the business of transportation of coal from Mahanadi Coalfields Ltd.,

to different plants of Jharsuguda, Sundargarh. The modus operandi of

this business is that lot of small truck owners and transporters are

working under big transporter. These small transporters used to

transport material on behalf of big transporter and submit bills to them

giving truck wise details. The big transporter after getting payment from

party directly pay to truck owners and debit the account of these small

transporter. The Assessing Officer did not accept the explanation of the

assessee and disallowed deduction of Rs.11,28,518/-, Rs.14,65,333/-

and Rs.14,08,153/- alleging violation of section 40A(3) of the Act for

payments made to truck owners more than the limits of Rs..20,000/-.

4.

On appeal, the CIT(A) confirmed the action of the Assessing

Officer.

5.

Before us, ld A.R. of the assessee reiterated the submissions made

before the lower authorities and relied on the decision of Hon’ble Gujarat

3 ITA No. 86/CT K/ 2015 Asse ssment Year : 20 10- 201 1

High Court in the case of Anupama Teleservices vs ITO (2014) 268 CTR

(Guj) 121, wherein, it has been held that the assessee was compelled

to make cash payment on account of peculiar situation on insistence

upon by the principal and genuineness and identity of the payee not

being in dispute, the disallowance u/s.40A(3) of the Act was not

sustainable. He also relied on the decision of Cuttack Bench of this

Tribunal in the case of Veer Ghese Joy Gee vs ITO in ITA

No.28/CTK/2014 for assessment year 2009-2010 order dated

16.11.2016, wherein, the Tribunal has deleted the disallowance made

u/s.40A(3) of the Act on similar facts and circumstances.

6.

Ld D.R. relied on the orders of the lower authorities.

7.

We have heard the rival contentions, perused the orders of lower

authorities and materials available on record. The assessee was

engaged in the business of transporting coal from Mahanadi Coalfields

Ltd., to different plants of Jharsuguda, Sundargarh. The modus operandi

of this business was that lot of small truck owners and transporters were

working under big transporter and under instruction of big transporter,

the small transporters used to transport the materials and submit bills

to them giving truck wise details. The contention of the ld A.R. of the

assessee is that the trucks owners insisted cash payment during

transportation. The Hon’ble Gujarat High Court in the case of Anupama

Teleservices vs ITO 2014) 268 CTR (Guj) 121, has held that when the

4 ITA No. 86/CT K/ 2015 Asse ssment Year : 20 10- 201 1

assessee was compelled to make cash payment on account of peculiar

situation on insistence upon by the principal and genuineness and

identity of the payee not being in dispute, the disallowance u/s.40A(3)

of the Act was not sustainable. The contention of the A.R. of the

assessee is that all the payments made are accounted for by the

assessee in its books of account. We find that the genuineness of the

payment made or the expenditure incurred by the assessee by making

such payment is not in dispute or debate. Therefore, the decision of

Hon’ble Gujrat High Court in the case of Anupama Teleservices(supra)

is squarely applicable to the facts of the case. Therefore, the ld CIT(A)

was not justified in sustaining the addition of Rs.Rs.11,28,518/-,

Rs.14,65,333/- and Rs.14,08,153/- being payments were made to

different truck-owners u/s.40A(3) of the Act. We, therefore, set aside

the orders of lower authorities and delete the disallowance of

Rs.Rs.11,28,518/-, Rs.14,65,333/- and Rs.14,08,153/- u/s.40A(3) and

allow the grounds of appeal of the assessee.

8.

Ground No.2 is directed against the order of the CIT(A) in

confirming the part disallowance of depreciation of Rs.1,09,270/-

alleging violation of section 40A(3) of the Act.

9.

From a bare perusal of the order of the CIT(A), we find that this

ground does not arise out of the order of the CIT(A) and, therefore, this

ground of appeal of the assessee is dismissed.

5 ITA No. 86/CT K/ 2015 Asse ssment Year : 20 10- 201 1

10.

In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 18 /05/2017 in the presence of parties.

(Kuldip Singh) (N.S Saini) JUDICIAL MEMBER ACCOUNTANT MEMBER Cuttack; Dated 18 /05/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Sanjay Kumar Nanda, M/s. Matarani Transport, Mission Chowk, Sundargarh 2. The Respondent. ITO, Ward-1, Jharsuguda 3. The CIT(A) Cuttack 4. Pr.CIT, Sambalpur 5. DR, ITAT, Cuttack 6. Guard file. BY ORDER, //True Copy//

SR.PRIVATE SECRETARY ITAT, Cuttack

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