Income Tax Appellate Tribunal - Pune
Rajenra Cargo Movers P. Ltd., Pune vs Assessee on 30 December, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND Ms. SUSHMA CHOWLA, JUDICIAL MEMBER
ITA No.145/PN/2013
(Assessment Year: 2009-10)
M/s. Rajendra Cargo Movers Pvt. Ltd.,
No.5, Sagar Plaza,
Kasarwadi, Pune - 34.
PAN: AACCR0827P .... Appellant
Vs.
The Income Tax Officer,
Ward-10(1), Akurdi, Pune .... Respondent
Appellant by : Shri V.L. Jain
Respondent by : Shri Rajesh Damor
Date of hearing : 02-12-2014
Date of pronouncement : 30-12-2014
ORDER
PER SUSHMA CHOWLA, JM:
This appeal filed by the assessee is against the order of CIT(A)-V, Pune dated 12.11.2012 relating to assessment year 2009-10 against order passed under section 143(3) of the Income-tax Act.
2. The assessee has raised the following grounds of appeal:
1. The learned CIT(A) has erred on facts and in law in confirming the disallowance of Rs.3,12,300/- on account of freight and lorry hire charges considering them to be non genuine.
2. The learned CIT(A) has erred on facts and in law in confirming the disallowance of Rs.64,60,549/- being cash payment made on account of freight and lorry hire charges in violation of Sec.40A(3) of the Income Tax Act, 1961.
3. The Appellant craves leave to alter, amend or delete any of the grounds of appeal or add to the same, if deemed necessary.2 ITA No.145/PN/2013
Rajendra Cargo Movers Pvt Ltd
3. The issue raised vide ground No.1 is against the disallowance of Rs.3,12,300/- on account of freight and lorry hire charges.
4. The brief facts of the case are that, the assessee was engaged in the business of booking parcels cargoes and luggage of the public in general and to act as carrier of goods. During the course of assessment proceedings, it was noted by the Assessing Officer that the balance sheet of the assessee reflected M/s. Sarvodaya Road Lines as a creditor for Rs.72,418/-. The assessee had claimed that total freight and lorry hire charges of Rs.3,12,300/- was paid to the said M/s. Sarvodaya Road Lines. The assessee was asked to furnish the address of the said party and notice under section 133(6) of the Act was issued at the address provided by the assessee. The notice was sent for service through the Inspector of the office of the Assessing Officer who in turn, reported that no such person existed at the given address. The assessee failed to furnish any confirmation of either the said party or the PAN number of the said party. The assessee was asked to prove the identity, credit worthiness of the transaction held with the said party. In respect of the genuineness of the transaction, the assessee furnished the copies of collection memos / advice and lorry receipts. The Assessing Officer noted that though the lorry receipts shows that the lorries were taken on hire yet it was not established by the assessee that the said lorries were taken on hire from M/s. Sarvodaya Road Lines. The assessee was asked to produce the said party. However, the reliance was placed on the evidences submitted in support of the transactions. The entire transactions with the said party was considered as non-genuine and sum of Rs.3,12,300/- was added to the income of the assessee. The CIT(A) upheld the order of 3 ITA No.145/PN/2013 Rajendra Cargo Movers Pvt Ltd Assessing Officer in view of the non-submission of details / evidence by the assessee.
5. The assessee is in appeal against the said addition of Rs.3,12,300/-. It was pointed by the learned Authorized Representative for the assessee that the total transactions with the said party was of Rs.3,12,300/-, out of which, a sum of Rs.72,418/- was outstanding. The learned Authorized Representative for the assessee pointed out that though the payments were made in cash, tax was deducted at source out of such payments. It was further stressed by the learned Authorized Representative for the assessee that the primary evidence of the transaction was provided by the assessee but since the party was not traceable, the confirmation could not be filed.
6. The learned Departmental Representative for the Revenue pointed out that the primary onus of giving the address of the party and / or confirmation from the said party was not fulfilled by the assessee. It was further pointed by the learned Departmental Representative for the Revenue that all payments were made in cash were less than Rs.20,000/- and this way of liquidating liability does not look normal.
7. We have heard the rival contentions and perused the record. The assessee was carrying on the business of booking parcels, cargoes and luggage of public at large and was using every type of carrier in particular with road carriers, airlines, steamship lines, railway, etc. for transporting the goods from one place to another place all over India. During the year under consideration, the assessee had claimed an expenditure of Rs.3,12,300/- pertaining to M/s. Sarvodaya Road 4 ITA No.145/PN/2013 Rajendra Cargo Movers Pvt Ltd Lines. In the balance sheet filed for the year under consideration, the assessee had declared the said party as creditor for an amount of Rs.72,418/-. The assessee neither filed the confirmation from the said party nor the said party was produced for verification. The Assessing Officer had issued notice under section 133(6) of the Act at the address provided by the assessee, which could not be served as the said party was not available at the said address. In such circumstances, the onus was upon the assessee to explain that the transaction was genuine. The assessee claims that the said creditor had left the address and was not traceable. However, lorry received by the consignee, the progress note, weigh bridge slip, wherein the details of truck number was mentioned in the progress note of M/s. Sarvodaya Road Lines along with sale bills raised on the customers were filed before the Assessing Officer and also before the CIT(A). The assessee has furnished on record the ledger account of M/s. Sarvodaya Road Lines for the captioned assessment year at page 214 of the Paper Book. As against the lorry charges of Rs.62,500, 64,100/-, 59,100/- and 64,600/-, all booked on 09.07.2008, payment in cash has been made in the range of Rs.10,000/- to Rs.20,000/- from 09.07.2008 to 13.07.2008. Thereafter, on 12.02.2008, there are lorry hire charges of Rs.19,000/- against which the cash of Rs.15,000/- had been paid and on 03.12.2008, there were lorry charges of Rs.23,000/- against which, the cash of Rs.17,000/- was paid on 23.03.2009. There were lorry charges of Rs.20,000/- against which the cash of Rs.15,000/- and thereafter cash of Rs.19,935/- was paid on 25.03.2009. The account of the said party was debited with TDS of Rs.433/- and Rs.206/- and balance of Rs.72,148/- was shown as due from the assessee. The assessee however, furnished on record the copy of the account of the said party for the succeeding year, in 5 ITA No.145/PN/2013 Rajendra Cargo Movers Pvt Ltd which the said credit of Rs.72,148/- has been discharged by making cash payment. The assessee had furnished the primary evidence of the transaction but had failed to furnish the confirmation from the said party nor could the said party be produced for cross-examination. The expenditure incurred by the assessee was Rs.3,12,300/- and though the same has been discharged by making cash payment on different dates, we find merit in the plea of the assessee where, the primary evidence of incurring the expenditure has been filed by the assessee i.e. the lorry receipt numbers, name of consignor, consignee, place of discharge, vehicle numbers, invoice number and date of sale between consignor and consignee; merely because the person could not traced during the course of assessment proceedings and the confirmation from the said party could not be filed does not establish the case of the Revenue that the said expenditure had not been incurred by the assessee. Accordingly, we direct the Assessing Officer to allow the expenditure of Rs.3,12,300/-. The ground No.1 raised by the assessee is thus, allowed.
8. The issue raised in ground No.2 by the assessee is against the disallowance made under section 40A(3) of the Act at Rs.64,60,549/-.
9. The brief facts relating to the issue are that for the year under consideration, the assessee had debited freight and lorry hire charges amounting to Rs.1,74,51,790/-. On the perusal of the books of account, the Assessing Officer noted that freight and lorry charges to different parties were made in cash and the payments were splitted into two or three transactions and each below Rs.20,000/-. However, in many of the cases, the aggregate payments in a day exceeded Rs.20,000/-. The Assessing Officer show caused the assessee as to why such payments should not be disallowed as the same were in 6 ITA No.145/PN/2013 Rajendra Cargo Movers Pvt Ltd contravention to provisions of section 40A(3) of the Act which were amended from the assessment year 2009-10. In reply, the assessee explained that the TDS was deducted at source in the name of brokers who never owned any goods hired by the assessee. The Assessing Officer rejecting the plea of the assessee observed that the classification of sub-contractors or agents was a afterthought and the payments made by vouchers were below Rs.20,000/- each at different times during a day. However, when the amended provisions of law were brought to the notice of the assessee then, he changed his plea that the persons were acting as commission agents in between the assessee and vehicle owner. The Assessing Officer also took note of the statement of director of the assessee company recorded during survey action under section 133A of the Act carried on 24.03.2010, in which, he explained that the payments made in cash were advance lorry hire charges. In the said statement, nowhere he had mentioned that the persons receiving the payments were commission agents. The plea of the assessee that the cash payments were covered under Rule 6DD(k) of Income Tax Rules was also rejected and addition of Rs.64,60,549/- was made in the hands of the assessee.
10. The CIT(A) upheld the addition made by the Assessing Officer rejecting the claim of assessee both on account of payments being made to commission agents and the application of Rule 6DD of IT rules.
11. The assessee is in appeal against the above addition confirmed by the CIT(A).
12. The learned Authorized Representative for the assessee pointed out that in the Notes to accounts annexed to Form 3CD, it was 7 ITA No.145/PN/2013 Rajendra Cargo Movers Pvt Ltd declared that the person to whom the payments were made were commission agents and consequently clause (k) to Rule 6DD of the Rules was applicable.
13. The learned Departmental Representative for the Revenue pointed out that the amendment in section 40A(3) that more than Rs.20,000/- in cash in a day could not be made and when confronted with the amended provisions of the Act, the assessee changes stand that the payments were being made to commission agents and provisions of section 40A(3) of the Act were not applicable. Further, reliance was placed on the query raised and the statement recorded during the course of survey of the director of the assessee company, wherein he admitted that advance lorry charges were paid in cash and no declaration was made that the same were being paid to commission agents.
14. The learned Authorized Representative for the assessee in rejoinder pointed out that the audit report in Form 3CD contained the statement of nature of business and also the said persons who were commission agents.
15. We have heard the rival contentions and perused the record. During the year under consideration, the assessee had claimed freight and lorry hire charges of Rs.1,74,51,790/-. The perusal of the said expenses debited to the Profit & Loss Account reflected payments being made in cash each below Rs.20,000/-. However, the Assessing Officer noted that the aggregate payments made in a day exceeded Rs.20,000/-. Under the amended provisions of section 40A(3) of the Act by the Finance Act, 2008 w.e.f. 01.04.2009, where the assessee incurs any expenditure, in respect of which, payments or aggregate 8 ITA No.145/PN/2013 Rajendra Cargo Movers Pvt Ltd payments made in a day, to a person otherwise than by a crossed cheque or bank draft, exceeds Rs.20,000/- then no deduction shall be allowed in respect of such expenditure. Admittedly, the assessee has violated the amended provisions of section 40A(3) of the Act by making the said payments in cash in a day exceeding Rs.20,000/-. However, the plea of the assessee is that it had not violated the provisions of section 40A(3) of the Act since it was covered by the exceptions provided under Rule 6DD of the Rules in particular clause (k) to Rule 6DD of the Rules.
16. Under Rule 6DD of the Rules, cases and circumstances in which payments or aggregate payments exceeding Rs.20,000/- in a day may be made to a person otherwise than a account payee cheque or account payee draft are provided. Under clause (k) to Rule 6DD of the Rules, it is provided that where the payment was required to be made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person, then, even where the payment has been made in cash exceeding Rs.20,000/- in a day, then, no disallowance shall be made under section 40A(3) of the Act.
17. Now, coming to the facts of the case, the assessee has made the cash payments in excess of Rs.20,000/- in a day. The plea of the assessee before us is that such payments have been made to the commission agent, who had provided the trucks / lorries to the assessee for transport of its goods and even tax was deducted at source out of such payment being made to the commission agent. The issue arising in the present appeal is whether the provisions of section 40A(3) of the Act are attracted in the case justifying the disallowance made by the Assessing Officer and upheld by the CIT(A). 9 ITA No.145/PN/2013
Rajendra Cargo Movers Pvt Ltd
18. The assessee had furnished the audited accounts for the year under consideration along with the audit report of the auditor which is placed at pages 1 to 68 of the Paper Book. The auditor in the audit report in Form No.3CD had declared the nature of business carried on by the assessee to be the goods transport contractor and commission agent. It was further pointed out by the learned Authorized Representative for the assessee that the auditor had also given a certificate that no amount was inadmissible under section 40A(3) of the Act read with rule 6DD of the Income Tax Rules. The plea of the assessee before us was that the payments to the said persons were made on account of commission for booking the trucks. Further, the said persons do not own the trucks but were the commission agents, who in turn booked the trucks / carriers for carriage of goods. Our attention was drawn to the various documents issued by the said parties placed at pages 232 and 283 of the Paper Book. The perusal of the collection memo dated 16.03.2009 placed at page 232 of the Paper Book reflects M/s. Sarvodya Road Lines to be the truck supplier. Another such communication is placed at page 248 of the Paper Book. Admittedly, the assessee has made cash payments to the said persons exceeding Rs.20,000/- in a day by different entries. However, under the provisions of clause (k) to Rule 6DD of the Rules, such payments made by the assessee do not violate the provisions of section 40A(3) of the Act. Merely because while deducting the tax at source, the assessee had deducted the tax under section 194C of the Act, does not establish the case of the Revenue, especially, in the circumstances where the assessee had claimed that the deduction of tax was made under a wrong section. The payment made for hired vehicles through commission agents was though paid in cash exceeding Rs.20,000/- falls within the exception provided in clause (k) to the Rule 6DD of the 10 ITA No.145/PN/2013 Rajendra Cargo Movers Pvt Ltd Rules and we find no merit in the orders of authorities below in disallowing the said payment as not allowable under section 40A(3) of the Act. Further in the statement recorded, the Director of assessee company had stated that advance lorry charges were paid in cash to parties. No query was raised as to the persons to whom payments are being made. In the said circumstances, we find no merit in orders of authorities below. Reversing the order of CIT(A), we direct the Assessing Officer to delete the disallowance made under section 40A(3) of the Act at Rs.64,60,549/-. The ground of appeal No.2 raised by the assessee is thus, allowed.
19. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on this 30th day of December, 2014.
Sd/- Sd/-
(G.S. PANNU) (SUSHMA CHOWLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, Dated: 30 th December, 2014.
GCVSR
Copy of the order is forwarded to: -
1) The Assessee;
2) The Department;
3) The CIT(A)-V, Pune;
4) The CIT-V, Pune;
5) The DR "A" Bench, I.T.A.T., Pune;
6) Guard File.
By Order
//True Copy//
Assistant Registrar
I.T.A.T., Pune