Income Tax Appellate Tribunal - Hyderabad
Kande Onions, Nellore vs Income Tax Officer, Ward-1, Nellore on 29 March, 2019
ITA No 943 of 2018 Kande Onions Nellore.
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ' A ' SMC Bench, Hyderabad
Before Smt. P. Madhavi Devi, Judicial Member
ITA No.943/Hyd/2018
(Assessment Year: 2014-15)
M/s.Kande Onions Vs Income Tax Officer
Nellore Ward-1
PAN:AAEFK4156B Nellore
(Appellant) (Respondent)
For Assessee : Shri Pandu Rangaiah
For Revenue : Shri Kiran Katta,DR
Date of Hearing: 25.03.2019
Date of Pronouncement: 29.03.2019
ORDER
This is assessee's appeal for the A.Y 2014-15 against the order of the CIT (A)-Tirupathi, dated 28.2.2018. Initially it is found that there is a delay of two days in filing of the appeal before me and the assessee has filed an application explaining the reasons for the delay as under:
"The appellant remitted appeal fee of Rs.10,000/- on 3.5.2018 which is well within time and the appeal was duly singed on even date i.e. on 3.5.2018 and the Advocate after adding necessary orders made it triplicate and entrusted to the Accountant for sending it by speed post on 7.5.2018. Since the appeal was entrusted after closing hours of the post office, the accountant sent the appeal by speed post on the next day i.e. 8.5.2018 and due to postal delay the appeal was received by the Hon'ble ITAT on 11.5.2018. The delay of 2 days occurred which is neither willful nor deliberate and so happened in the peculiar circumstances of the case. Though the appellant has taken due care and caution the delay of 2 days occurred. The delay of 2 days may kindly be condoned and the appeal may be admitted for hearing".Page 1 of 6
ITA No 943 of 2018 Kande Onions Nellore.
2. Taking the above into consideration, I am satisfied that the assessee was prevented by reasonable cause and the delay is neither intentional or willful. Therefore, the delay of two days in filing of the appeal before this Tribunal is condoned.
3. Brief facts of the case are that the assessee firm e-filed its return of income for the A.Y 2014-15 on 22.9.2014 admitting a total income of Rs.3,05,000/-. During the scrutiny proceedings pursuant to CASS, notices were issued for assessment u/s 143(3). On verification of the information furnished by the assessee, the AO observed that the assessee has made a total of cash payment of Rs.8,02,023/- towards Lorry Freight and therefore, the provisions of section 40A(3) of the Act are attracted. He, therefore, asked the assessee's explanation as to why the disallowance should not be made. The assessee submitted that the assessee was dealing in onions which are perishable goods and had to make the payments to the Lorry Drivers in the early hours of the day when they came to deliver the goods and therefore, the provisions of section 40A(3) cannot be applied. The AO however, did not accept the assessee's contention and observed that the assessee was dealing with "onions" which do not fall under the category of "perishable goods" and also held that the time and circumstances of payment to the Lorry Drivers do not demand payment in cash since cheque is to be given in the name of the transporter and not to the Lorry Driver. He therefore, held that the provisions of section 40A(3) are applicable and accordingly disallowed the sum of Rs.8,02,023/-. Aggrieved, the assessee preferred an appeal before the CIT (A), who confirmed the order of Page 2 of 6 ITA No 943 of 2018 Kande Onions Nellore.
the AO and the assessee is in second appeal before us by raising the following grounds of appeal:
"1. The learned CIT Appeals as well as AO failed to appreciate the indisputable fact that fresh onions are perishable Agricultures products. The provisions are not applicable to Agricultural Products Purchase and Transportation.
2. The purchase and transport arrangement were made by the Commission Agents stationed at Maharashtra, Gujarat and Madhya Pradesh by phone arrangement. As per the Commission Agents letter since balance freight charges were paid to the lorry driver in the wee hours of the day while taking delivery of the goods, Circumstances necessitated cash payments vide CIT Vs. ASHOKA STEEL INDUSTRIES AND FLOOR MILLS (2007) 293 ITR 192 (P&H).
3. In fact it is an indivisible contract. The balance freight paid to the driver of the Lorry as per directions of purchasing Agent. In fact the lorry driver insisted at wee horse to affect delivery of the goods. Hence the payment was made in exceptional circumstances in cash to meet contingent expenditure.
4. The reasons and the reasons urged in the Grounds of Appeal before the CIT Appeals and the Written Submissions made before the C1T Appeals may be read as part and parcel of this Appeal.
5. The Assessing Officer did not point out any single mistakes, omissions or Commissions or any adversaries and having been satisfied with the Book results has accepted the same. Ko addition was contemplated.
6. Even regarding freight charges paid to lorry driver the AO did not suspect the bonafide.
7. The sales are effected by the appellant by early morning after taking delivery as the appellant has no godown facility for storing and processing perishable onions will emanate foul spell from the third day on wards and will be spoiled.
8. Hence the appellant is in the habit of taking delivery and disposing the Fresh Onions on the same day. The AO as well as the Commissioner of Appeals failed to appreciate these indisputable facts.
9. For these and other reasons as may be urged at the time of hearing of the Appeal the addition made by the AO and uphold by the Commissioner of Appeals may be quashed".Page 3 of 6
ITA No 943 of 2018 Kande Onions Nellore.
4. The learned Counsel for the assessee reiterated the submissions made before the authorities below and submitted that the transport charges are to be paid to the Lorry Drivers in the wee hours of the day and since most of the Drivers are from Maharashtra, Gujarat, Karnataka,etc., they would not accept the cheques and therefore, the assessee was constrained to make the payment in cash exceeding Rs.35,000/-.
5. The learned DR, however, relied upon the orders of the authorities below.
6. Having regard to the rival contentions and the material on record, I find that though the onions are not in the same quality as vegetables referred to by the AO, they are in fact "perishable" if they are not preserved in a proper manner and if they are kept in the closed containers. The assessee had to make payments in cash exceeding of Rs.35,000/- as under:
S.No Lorry No. Cash Date of Amount Total (Rs.) payment payment (Rs.) made to 1 MP09HG5756 Nandura 15.4.2013 54,540 54,540 2 AP02TB0466 Nijampur 16.4.2013 50,400 50,400 3 AP07TU7575 Nandura 24.4.2013 16,458 61,578 45,120 4 AP02TA0018 Nandura 9.5.2013 19,900 85,400 65,500 5 KA56/0416 A.Nagar 22.5.2013 54,000 54,000 6 SP7Y3699 Indore 30.05.2013 55,275 55,275 7 AP02TA7322 Nijampur 31.5.2013 55,650 55,650 8 MP09HG8890 Indore 1.6.2013 12,000 74,000 62,000 9 AP02DB2556 Nijampur 1.6.2013 56,680 56,680 10 AP07TB1989 Sangrampur 6.6.2013 51,200 51,200 11 MP09HG6953 Indore 6.6.2013 70,000 70,000 Page 4 of 6 ITA No 943 of 2018 Kande Onions Nellore.
12 AP16TY6819 Nijampur 7.6.2013 56,700 56,700
13 MP09HG6843 Indore 8.6.2013 76,600 76,600
TOTAL 8,02,023
7. Further, as rightly pointed out by the learned Counsel for the assessee, the AO did not doubt the genuineness of the payments but has only made the disallowance, because the payments were made in cash. The Hon'ble Rajasthan High Court in the case of Smt. Harshila Chordia vs. ITO (2008) 298 ITR 349 (Raj.) has held that the genuineness of the transactions and it being free from vice of any device of evasion of tax is relevant consideration and that it should be examined before invoking the rigors of section 40A(3) of the Act. Similarly, the Hon'ble Allahabad High Court in the case of CIT vs. Choudary 7mCO (1996) 217 ITR 431 (All.) has also held that the object of section 40A(3) is that no fictitious amount should be allowed as revenue expenditure and not that cash payment can never be made or allowed and where the totality of circumstances show that transactions were genuine, disallowance u/s 40A(3) is not called for. Respectfully following the same, I deem it fit and proper to delete the additions made u/s 40A(3) of the Act.
8. In the result, assessee's appeal is accordingly allowed.
Order pronounced in the Open Court on 29th March, 2019.
Sd/-
(P. Madhavi Devi) Judicial Member Hyderabad, dated 29th March, 2019.
Vinodan/sps Page 5 of 6 ITA No 943 of 2018 Kande Onions Nellore.
Copy to:
1 Shri K. Pandu Rangaiah, Advocate, 5-1-679 Stonehousepet, Nellore 524002 2 ITO Ward-1 Nellore 3 CIT (A)-Tirupathi 4 Pr. CIT - Tirupati 5 The DR, ITAT Hyderabad 6 Guard File By Order Page 6 of 6