Shanti Prime Publication Pvt. Ltd.
Section 40A(3) of the Income-tax Act, 1961 – Business disallowance – Disallowance made under section 40A(3) was deleted as assessee was obliged to do the cash payments as per the business practice.
Facts: Assessee went on appeal before Tribunal and raised the ground that whether CIT(A) has erred in confirming disallowance of Rs.27,07,320/- u/s 40A(3) being cash paid to the agents of coal suppliers ignoring the fact that these cash payments are covered by Rule 6DD(g) and Rule 6DD(h) of the Income Tax Rules, 1962.
Held, that it is seen that the banking facility at village Ballarpur were not there as has been rightly observed by CIT(A). It is also noticed that since, the truck drivers and the coal agents deliver the coal at night because of heavy vehicles cannot ply during the daytime and insistance for cash payments, hence the assessee was obliged to do the cash payments as per business practice in that area where lots of brick kilns are there. AO has not found any fault with the payment nor has disbelieve the payment made for the coal suppliers who are duly registered with the VAT department. The payment has not been doubted by AO or by CIT(A), hence looking to the facts that the payments were made after the banking hours and that too at village Ballarpur, where there are no banking facilities, we are of the considered opinion that even this amount of Rs. 27,07,320/- should not have been disallowed u/s 40A(3) read with Rule 6DD of the Income-Tax Rules as the Ld. CIT(A) had observed in respect of payments made to truck drivers where he deleted the part cash payment of Rs. 2,58,194/-. In that matter, the CIT(A) was not justified in confirming part additions under the same set of facts. In the result, appeal of the assessee is allowed – NEW KALPANA ENT UDYOG Vs. ITO [2020] 181 ITD 507 (ITAT-AGRA)