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Income Tax Appellate Tribunal, KOLKATA ‘B(SMC
Before: Shri P.M. Jagtap
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-1, Kolkata dated 05.02.2016 and the solitary issue involved therein relates to the disallowance of Rs.7,08,849/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) by invoking the provision of section 40A(3) of the Income Tax Act, 1961.
The assessee in the present case is an individual, who is engaged in the business of trading in iron and steel in the name and style of his proprietary concern M/s. Bharat Supply Company. The return of income for the year under consideration was filed by him on 29.09.2011 declaring total income of Rs.1,84,670/-. In the profit & loss account filed along with the said return, a sum of Rs.20,30,000/- was debited by the
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assessee on account of freight and cartage. On verification of the details of the said expenses as furnished by the assessee, the Assessing Officer found that the following payments were made by the assessee on account of freight charges in cash:- Name of the Party Date Amount 1.New Sohal Transport Co. 24.05.2010 40,000/- (20,000 + 20,000) -do- 25.05.2010 46,940 (23,200 + 23,740) -do- 11.06.2010 45,000/- (25,000 + 20000) -do- 12.06.2010 88,276/- (18,807 + 24,469 + 20,000 + 25,000) -do- 13.06.2010 41,400/- (23,200 + 18,200) -do- 05.11.2010 90,000/- (30,000 + 30,000 + 30,000) -do- 06.11.2010 95,000/- (32,000 + 20,000 + 31,000 + 12,000) Name of the Party Date Amount 2.Suresh Kumar Gupta 08.06.2010 50,000/- (25,000 + 25,000) Name of the Party Date Amount 3.Deol Lorry Broker 25.03.2011 58,000/- (30,000 + 28,000) -do- 26.03.2011 67,000/- (34,000 + 33,000) 27.03.2011 -do- 51,000/- (25,500 + 25,500) -d0 28.03.2011 36,233/- (15,543 + 20,690) TOTAL Rs. 7,08,849/-
As the above payments made by the assessee in cash were hit by the provision of section 40A(3), the assessee was called upon by the Assessing Officer to explain as to why the expenditure incurred by it on freight charges to the extent of Rs.7,08,849/- should not be disallowed by invoking the said provision. In reply, it was submitted by the assessee that no payment in cash exceeding Rs.35,000/- had been paid in a single day to a single driver. This explanation of the assessee was not accepted by the Assessing Officer as he found from the verification of cash book that the amounts in question were paid by the assessee to the concerned parties in cash on a single day. He, therefore, invoked the provision of
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section 40A(3) and made a disallowance of Rs.7,08,849/- on account of freight charges paid by the assessee in cash.
The disallowance made by the Assessing Officer under section 40(a)(ia) was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and the following submission was made by the assesese in writing before the ld. CIT(Appeals) in support of his case on this issue: "In this regard it is stated that the assessee has incurred a sum of Rs.20,30,000/- towards freight and cartage for sending goods to customers for which true extract of the ledger of freight and cartage charge paid to various lorry owners / drivers mentioning the different lorries / drivers numbers and date of payments showing that there is not even a single payment made to a single lorry / driver which exceeds Rs.35,000/- in a single day was submitted to the A.O. during the course of hearing of the case and we are again enclosing herewith a copy of the same. The assessee purchases goods from various plants and our agent send goods through transporters who send goods through their own trucks and also through truck hired from the market. We make payment of the freight to the truck owner not the transporter and payment of freight to truck driver has to make in cash as they do not accept payment by cheque and they do not wait for their freight for two- three days. Therefore, freight has to be paid in cash to the truck owners. Further it is stated that no payment in cash exceeding Rs.35,000/- has been paid in a single day to a single Truck / driver. We have paid freights to different truck and different drivers in cash not exceeding Rs.35,000/- in a single day. Though the transporter may be the same person but the truck and driver are different they do not belong to the transporters. The Transporters hire the truck from the market through Agents and send the goods through their consignment note. Therefore there is no violation of section 40A(3) of the I.T. Act, 1961. Hence, no amount should be disallowed u/s. 40A(3) of the I.T. Act, as the payment are made to separate individual truck Drivers / Owners not the agents transporters”.
The above submission made by the assessee did not find favour with the ld. CIT(Appeals) as he found that the amounts in question were not paid by the assesese to drivers but the same were paid to concerned
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transporters, namely New Sohal Transport Company, Suresh Kr. Gupta, etc. as per the specific finding given by the Assessing Officer in the assessment order. He also noted that all the cash payments in question were made to the concerned parties on a single day exceeding the prescribed limit of Rs.35,000/- as per the finding given by the Assessing Officer. He, therefore, held that the provisions of section 40A(3) were clearly attracted in the case of the assessee and proceeded to confirm the disallowance made by the Assessing Officer under section 40A(3). Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
I have heard the arguments of both the sides and also perused the relevant material available on record. The ld. counsel for the assesese has reiterated before me the submissions made before the ld. CIT(Appeals) on this issue. The said submissions made by her as well as the documentary evidence placed on record in the form of lorry receipts and cash vouchers, however, are not sufficient to conclusively establish that the amounts in question were paid by the assessee to the drivers in cash not exceeding Rs.35,000/- in a single day. On the other hand, a specific finding has been given by the Assessing Officer in his order on verification of the cash book that the amounts in question were paid by the assesee in cash to the transporters and not to the drivers and the same exceeded the prescribed limit of Rs.35,000/- in a single day. The ld. counsel for the assessee has also relied on the decision of the Coordinate Bench of this Tribunal at Jaipur in the case of ITO –vs.- Ramesh Kumar (ITA No. 408/JP/2012 dated 31.12.2014) as well as the decision of the Hon’ble Gujarat High Court in the case of Anupam Tele Services –vs.- Income Tax Officer in Tax Appeal No. 556 of 2013 dated 22nd January, 2014 in support of the assessee’s case. A perusal of the said decision, however, shows that the facts involved in the cases cited by the ld. counsel for the assessee are entirely different from the facts involved in the case of the assessee and the ratio of the said decision, therefore, is of no help to the assessee in the present case. Having regard to all the facts
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of the case as brought out on record by the Assessing Officer, I am of the view that the amount in question towards freight charges was paid by the assessee in cash in violation of the provision of section 40A(3) and the disallowance made by the Assessing Officer by invoking the said provision was rightly confirmed by the ld. CIT(Appeals). In that view of the matter, I uphold the impugned order of the ld. CIT(Appeals) on this issue and dismiss the appeal of the assessee.
In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on August 05, 2016. Sd/-
(P.M. Jagtap) Accountant Member Kolkata, the 5th day of August, 2016 Copies to : (1) Mahabir Prasad Dhakalia, Prop. Bharat Supply Company, 23A, N.S. Road, 10t h Floor, Room No. 34, Kolkata-700 001
(2) Income Tax Officer, Ward-3(2), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700 069
(3) Commissioner of Income Tax (Appeals)-1, Kolkata; (4) Commissioner of Income Tax- , (5) The Departmental Representative (6) Guard File By order
Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.