Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: cpt :: ACCOUNTING STANDARD :: Central Excise rule to resale the machines to a new company :: list of goods taxed at 4% :: due date for vat payment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: empanelment :: form 3cd :: ACCOUNTING STANDARDS :: TAX RATES - GOODS TAXABLE @ 4% :: TDS :: VAT RATES :: articles on VAT and GST in India :: ARTICLES ON INPUT TAX CREDIT IN VAT :: VAT Audit
From the Courts »
 Order of a Four-Member Appellate Authority constituted under Chartered Accountants Act is Valid: Delhi HC
 Emami Infrastructure Ltd vs. ITO (ITAT Kolkata)
  Anand Agarwal vs. Vilas Chandrakant Gaokar (Bombay High Court)
 Bar Council of India vs. A. K. Balaji & Ors (Supreme Court)
 ITO vs. Venkatesh Premises Co-op Society Ltd (Supreme Court)
 Pr CIT vs. Amphenol Interconnect India P. Ltd (Bombay High Court)
 Pr CIT vs. Amphenol Interconnect India P. Ltd (Bombay High Court)
 Anand Agarwal vs. Vilas Chandrakant Gaokar (Bombay High Court)
 Principal Commissioner Of Income Tax (Central)-I Vs. Smt. Ritu Singal
 Vinod Kumar Gupta Vs. Deputy Commissioner Of Income Tax Central Circle-17
 How you can gift and still save tax on top of HRA, tuition fee, more Income Tax Returns (ITR) filing top hack

ACIT,Circle 1,Muzaffarnagar V/s .M/s R.A. Castings (P) Ltd.,Meerut Road,Muzaffarnagar
July, 03rd 2012

                                ITA no.4249/Del/2010
                             Assessment year: 2007-08

ACIT,                                  V/s .M/s R.A. Castings (P) Ltd.,
Circle 1,                                   Meerut Road,
Muzaffarnagar                               Muzaffarnagar
                             [PAN : AABCR770G]

(Appellant)                                             (Respondent)

                 Assessee by           None
                 Revenue by            Dr. B.R.R. Kumar,DR

                 Date of hearing                  09-05-2012
                 Date of pronouncement            29-06-2012


 A.N.Pahuja:- This appeal filed on 15.09.2010 by the Revenue against an order
 dated 10-06-2010 of the ld. CIT(A), Muzaffarnagar, raises the following grounds:-

  1.              "That the learned CIT(A) has erred in law and on the
                   facts in deleting the addition of ``18,98,679/- made u/s
                   40A(3) of the Income-tax Act, 1961, because the
                   assessee by making the payments in cash willfully
                   violated the provisions of section 40A(3) of the Income-
                   tax Act, 1961. Further the decision of the Hon'ble
                   Orrissa High Court CIT Vs. Aloo Supply Company
                   reported in 121 ITR 680 (1980) does not apply in this

  2.              On the facts and in the circumstances of the case, the
                  order of the learned CIT(A) deserves to be set aside
                  and that of the Assessing Officer be restored."
                                         2                  I.T.A. no4249/Del./2010

2. At the outset, the Bench rejected the request for adjournment , therebeing no
cogent reasons. Accordingly, considering the nature of issue,& findings of the ld.
CIT(A), the Bench proceeded to dispose of the appeal after hearing the ld. DR.

3.            Facts, in brief, as per relevant orders are that e-return declaring nil
income filed on 31.10.2007 by the assessee, manufacturing of M.S. Ingots etc.,
after being processed u/s 143(1) of the Income-tax Act, 1961 (hereinafter
referred to as the Act), was selected for scrutiny with the service of a notice u/s
143(2) of the Act. During the course of assessment proceedings, the Assessing
Officer[AO in short] noticed that the assessee paid an amount of ``94,93,399/- in
cash as freight against G.R. (bilty). To a query by the AO, the assessee replied
that since the company required sponge iron from out station, it had to make
payment to the truck owners in cash exceeding ``20,000/- each. It was submitted
that the truck owner/driver insisted for cash payment and did not accept any
cheque/draft due to expenses to be incurred by him in the way of diesel etc.
While relying upon the decision of Hon'ble Orissa High Court in CIT Vs. Aloo
Supply Company (1980) 121 ITR 680 (Orrissa), the assessee contended that no
disallowance could be made u/s 40A(3) of the Act. However, the AO did not
accept the submissions of the assessee and disallowed an amount of
``18,98,679/- @ 20% of ``94,93,399/- on the ground that provisions of section
40A(3) of the Act were mandatory and merely by               fragmenting the cash
payments in 2-3 or more instalments below 20,000/- each, could not support the
assessee's claim. Inter alia, the AO distinguished the decision of Hon'ble High
Court in Aloo Supply Company (supra).

4.            On appeal, the ld. CIT(A) allowed the claim of the assessee in the
following terms:-

       "5.    After careful consideration of appellant submission, my
       findings on various issues are as under:-

              The provisions of section 40A(3) are applicable only when
       there is cash payment of more than ``20,000/- made by a person.
                                          3                   I.T.A. no4249/Del./2010

      The same view has also been taken in various cash laws quoted by
      the appellant in its submissions.

              The Assessing Officer has himself accepted the fact that the
      assessee       has not made cash payments of `20,000/- or more in
      a particular day. The only objection of the Assessing Officer is that
      the bill against which cash payments of less than ``20,000/- were
      made exceeded `20,000/-.

            However, in the case of CIT Vs. Triveniprasad Pannalal
      (1997) 228 ITR 680 Hon'ble M.P. High Court has held as under:-

              "even if cash payment of less than` 2,500/- (now ``20,000/-) is a
      break up of three or four transactions, the same is to be allowed. The
      words used are "in a sum" i.e. single sum has been used. Therefore,
      irrespective of any number of transactions, where the amount does not
      exceed `2,500/- in each transaction, the rigours of section 40A(3) will not

             In the present case although each cash payment of less than
      `20,000/- in a day is a break up of a particular bill but as held in
      above mentioned case, the same are to be allowed and rigours of
      section 40A(3) will not apply in this case.

            Similar view has also been taken in the case of CIT Vs.
      Ashok Iron & Steel Rollling Mills (2010) 320 ITR 101 (All) wherein
      the Hon'ble Allahbad High Court has upheld the decision of ITAT as

             Addition u/s 40A(3) is not justified even though the assessee made
      several payments to the same person on the same day which aggregate
      exceeded ``2,500/- and even when it did not take any plea of any hardship
      or exceptional circumstances or that they had no idea that they would
      have to pay to the same person on more than one occasion during the
      course of particular day.

             In view of the above discussion, I hold that the Assessing
      Officer was not justified in making addition of `18,97,679/- which is

5.           The Revenue is now in appeal against the aforesaid findings of the
ld. CIT(A).The ld. DR supported the order of the AO while relying upon decisions
in Attar Singh Gurmukh Singh vs. ITO,191 ITR 667(SC) and TG Mutha vs.
ITO,54 ITD460(Pune).
                                         4                  I.T.A. no4249/Del./2010

6            We have heard the ld. DR and gone through the facts of the case.
As is apparent from the aforesaid facts , the assessee claimed expenditure of
``94,93,399/- on account of freight against G.R. (bilty) made in cash. The
assessee claimed that the truck owners/drivers insisted on cash payments and
did not accept any cheque/draft due to expenses to be incurred by them for
diesel/tyre etc. in the way . The ld. CIT(A) found that the assessee did not make
cash payments of ``20,000/- or more in a particular day and in identical
circumstances, Hon'ble MP High Court in the case of Triveniparsad Pannalal,228
ITR 680(MP) held

" Shri Tankha, learned counsel for the Revenue, submitted that if 10 transactions
in a sum of Rs. 2,500 are permitted on the same day with the same party, then it
would amount to defeating the purpose of the provision and its object of check on
transactions in sums exceeding Rs. 2,500. If it is permitted, then virtually it will
frustrate the very purpose of the enactment. That is true, but at the same time,
we cannot cause violence to the language which has been used in the statute. It
does not say that the aggregate of the amount should not exceed Rs. 2,500. The
words used are " in a sum ", i.e., single sum has been used. Therefore,
irrespective of any number of transactions, where the amount does not exceed
Rs. 2,500 in each transaction, the rigours of section 40A(3) will not apply. This is
a technical lacuna in the provision for which we cannot supply the omission and
put the provision in a proper form so that this kind of loophole may not be left.
This view has been taken in the case of CIT v. Aloo Supply Co. [1980] 121 ITR
680 (Orissa) and [1983] 143 ITR (St.) 67."

6.1   The aforesaid decision has subsequently been followed in the case of CIT
Vs. Kothar Sanitation & Tiles P Ltd.,282 ITR 117(Mad) and in Shri Mahabir
Corporation vs. ITO, 258 ITR (AT) 55(Bangalore). Hon'ble jurisdictional
High Court in Ashok Iron & Steel Rollling Mills(supra) upheld the findings of
the ITAT that as no        single payment was more than `. 2,500 (now
`20,000/-), the disallowance under section 40A(3) of the Act of the amount
was not justified. Before us, the Revenue did not point out any contrary decision
in their favour. In Attar Singh Gurmukh Singh(supra) relied upon by the ld. DR,
Hon'ble Apex Court while holding that the provisions of s. 40A(3) do not infringe
the fundamental right to carry on a business concluded that the said provision
applies even to payments made for acquiring stock-in-trade and other materials.
                                            5               I.T.A. no4249/Del./2010

The decision in TG Mutha(supra) for the AY 1990-91concerned an issue as to
whether or not the case of the assessee fell within the ambit of the extant rule
6DD(j) of the IT Rules,1962,which is not the case in appeal before us. The ld. DR
did not demonstrate before us as to how these decisions support the case of the
Revenue. In the instant case before us, the ld. CIT(A) concluded that the
assessee       did not make cash payments of ``20,000/- or more in a particular
day. In view of this position and in the light of view taken in the aforesaid
decisions by the Hon'ble MP, Madras & jurisdictional High Court, we are not
inclined to interfere. Therefore, ground no. 1 in the appeal is dismissed.

7.    No additional ground having been raised before us in terms of residuary
ground no.2 in the appeal, accordingly, this ground is dismissed.

8.     No other plea or argument was made before us.

9.    In the result, appeal is dismissed.
                   Order pronounced in open Court

             Sd/-                                            Sd/-
       (U.B.S. BEDI)                                  (A.N. PAHUJA)
     (Judicial Member)                             (Accountant Member)


Copy of the Order forwarded to:-

        1.   M/s R.A. Castings (P) Ltd., Meerut Road, Muzaffarnagar.
        2.   DCIT, Circle-1, Muzaffarnagar.
        3.   CIT concerned
        4.   CIT(A), Muzaffarnagar
        5.   DR, ITAT,'F' Bench, New Delhi
        6.   Guard File.
                                   True copy

                                                                       BY ORDER,

                                                                       ITAT, Delhi
Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - We Bring IT. Offshore software outsourcing company. We use Global Delivery Model (GDM) and believe in Follow The Sun principle

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions