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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Shri Rajpal Yadav, Judicial Member And Shri Amarjit Singh, Accountant Member ITA No. 3053/Ahd/2014 Assessment Year 2010-11
M/s. Nilkanth Quarry The ITO, Works, Rajpur Sabarkantha, Vadagam, Ta: Dansura, Vs Ward-4, Modasa Dist: S.K. (Respondent) PAN: AABFN3956H (Appellant)
Revenue by: Shri Mudit Nagpal, Sr. D.R. Assessee by: Shri Umaid Singh Bhati, A.R. Date of hearing : 31-07-2017 Date of pronouncement : 13-09-2017 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This assessee’s appeal for A.Y. 2010-11, arises from order of the CIT(A)-VIII, Ahmedabad dated 19-09-2014, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
The assessee has raised following grounds of appeal:- “1.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in only partly allowing the appeal of the appellant.
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2.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming the disallowance in respect of cash payments amounting to Rs. 9,14,235/- u/s 40A(3) of the Income Tax Act, 1961. 3.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming the disallowance out of various expenses viz. JCB Expenses, Drilling & Explosive Expenses, Mines Opening Expenses, Mud Cleaning Expenses and Tractor Carting Expenses etc. amounting to Rs.2,82,675/-.” 3. At the time of hearing, ld. counsel of the assessee has not pressed the ground no.3 of the appeal, so, the same is dismissed as not pressed.
In this case, return of income declaring income of Rs. 1,17,230/- was filed on 24th September, 2010. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 3rd July, 2012. During the course of assessment proceedings, the assessing officer noticed that assessee has made payment of Rs. 9,14,235/- to Uttar Gujarat Vij Co. Ltd. at various dates in cash. He further observed that each payment was exceeding Rs. 20,000/- which was in violation of section 40A(3). Consequently, he has made disallowance under the provision of section 40A(3) of the act.
Aggrieved against the decision of the assessing officer, the assessee filed the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee by observing as under:- “3.3 Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has made disallowance under section 40A(3)of the Act as the appellant has made payment for electricity expenses in cash. The appellant has submitted that payment of Rs. 914235/- has been made to use UGVCL for electric expenses. It has been submitted by the appellant that the provisions of section 40A(3) were not attracted in view of the Rule 6 DD of the Income Tax Rules as the payment has been made to a
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government company and an exception has been provided under the Rule for the same. It is also placed reliance on the judgement of honourable ITAT Ahmedabad in the case of Trivedi Corporations Private Limited (supra). On a careful consideration of entire facts related to the issue it is noted that though the UGVCL is a Government company, it does not mandatorily asks its customers to make payment by cash. The rule 6DD provides an exception in cases where the payment has been made to a government organisation and the Rules prescribed in this behalf requires payment in cash compulsorily. The appellant has failed to establish such circumstance. It has not given any reasonable cause as to why the payment was made in cash in spite of the fact that appellant has a bank account from which all other expenses have been incurred. The Provisions of section 40A(3) are very clear and it provides specific exception to the Provisions under Rule 6DD. The case of the appellant is not covered under any of the exceptions provided in Rule 6DD. The appellant has claimed that UGVCL generally insist for payment through local bank cheque and the appellant was not holding any account with local bank and accordingly cash payment was made. In my opinion, this is not a reasonable cause for making the payment in cash. The appellant is running a big business establishment and it also has bank account at the place nearby. It could have obtained demand draft for payment of electricity dues and accordingly made the payment in compliance of the Provisions of Income tax Act. The reliance placed by the appellant on the judgement of Trivedi Corporations Private Limited is also not proper as in that case the appellant had established a reasonable cause by mentioning that the Gujarat State Electricity Board insisted for payment through State Bank of India. In the case of the appellant it has not furnished any documentary evidence in support of its claim that it could not make the payment by cheque. The circumstances in the present case are therefore, different and accordingly the judgement of the honourable ITAT would not be applicable. Accordingly, the case of the appellant is not covered by any of the exceptions provided in Rule 6 DD. The disallowance made by the AO is accordingly upheld. The ground of appeal is accordingly, dismissed.” 6. During the course of appellate proceedings before us, the ld. counsel has contended that there was no banking facility available at the village where the assesse was doing business under the year under consideration. The UGVCL Uttar Gujarat Vij Company Ltd being Government undertaking company has insisted on making payment through local bank cheque. The assessee was not holding bank a/c in any of the local bank, therefore, the payment for electricity expenses was made in cash. He has also placed reliance on the decision of the Jurisdictional High Court in the case of Anupam Tele
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Services and decisions of the C-ordinate Benches of ITAT in the case of Shiv Krupa Tin Containers Vs ITO vide ITA No. 136/Ahd/2016 and Trivedi Corporation Pvt. Ltd. Vs. ITO vide ITA No. 2844/Ahd/2006. On the other hand, the ld. departmental representative has supported the order of the ld. CIT(A).
We have heard both the sides and perused the material on record. We have perused the judicial pronouncements of the Jurisdictional High Court in the case of Anupam Tele Services Vs. ITO wherein it was held:- “The paramount consideration of section 40A(3) is to curb and reduce the possibilities of black money transactions. Section 40A(3) does not eliminate considerations of business expediencies. In the present case, the appellant assessee was compelled to make cash payments on account of peculiar situation. Such situations were as follows: [i] the principal company, to which the assessee was a distributor, insisted that cheque payment from a cooperative bank would not do, since the realization takes a longer time; [ii] the assessee was, therefore, required to make cash payments only; [iii] Tata Teleservices Limited assured the assessee that such amount shall be deposited in their bank account on behalf of the assessee; [iv] It is not disputed that the Tata Teleservices Limited did not act on such promise; [v] if the assessee had not made cash payment and relied on cheque payments alone, it would have received the recharge vouchers delayed by 4/5 days and thereby severely affecting its business operations. The payments between the assessee and the Tata Teleservices Limited were genuine. The Tata Teleservices Limited had insisted that such payments be made in cash, which Tata Teleservices Limited in turn assured and deposited the amount in a bank account. In the facts of the present case, rigors of section 40A(3) of the Act must be lifted. Further the exceptions contained in Rule 6DD are not exhaustive and the said rule must be interpreted liberally. The question is answered in favour of the appellant assessee and against the Revenue.”
We have also perused the decision of the Co-ordinate Bench of the ITAT in the cases as mentioned supra in this order. We have also
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perused the decision of the coordinate in the case of Trivedi Corporation stating that the GEB was insisting payment through SBI only, therefore, the cash payment was made as the assessee was not holding account in the SBI. The assessee had made payment towards electricity expenses in cash and the genuineness of the payment was not in dispute. We observed that the assessee was doing quarry business at Raipur village where no banking facility was available. We have also noticed that contention of the assessee that Uttar Gujarat Viz Company Ltd. generally insists for payment through local bank cheque. The assessee was not having any bank account with local bank consequently cash payment was made to the UGVCL. We observed that the facts of not holding any account with local bank by the assessee and insisting for payment through local bank by the UGVCL were not disproved by the lower authorities. Therefore, after considering the aforesaid facts and the judicial findings, we are not inclined with the decision of the ld. CIT(A). Therefore, the appeal of the assesssee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 13-09-2017
Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 13/09/2017 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:-
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Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद