Mr.Justice Ks Jhaveri -Since the common question of law arises for consideration in this group of appeals, they are being heard together and disposed of by this common oral judgment.
2. By way of these appeals, the appellant - department has challenged the order passed by the tribunal whereby the Tribunal has dismissed the appeals of the revenue by confirming the order of the CIT (A) and reversed the order of the AO.
3. The short facts of the case are that during the course of the assessment proceedings, the AO found various payments exceeding Rs. 2500/- made in cash, in breach of Section 40A(3) of the Act. The AO therefore made disallowance of Rs. 1,42,17,740/- invoking section 40A(3). The AO assessed a sum of Rs. 16,89,733/- being the amount appearing in credit side of the suspense account because the assessee had not given any cogent reason for explaining the same. 3.1 The CIT (A) deleted the disallowance made under Section 40A(3) and the view taken by the CIT (A) has been confirmed by the Tribunal which has given rise to these appeals.
4. Tax Appeals are admitted on the following question of law of law. However, the amount of disallowance is different in each of the appeal.
"Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT (A) deleting the disallowance of Rs. 1,42,17,740/- made invoking the provisions of Section 40A(3)?"
5. Learned Counsel Mr.Nitin Mehta appearing for the department has contended that the Tribunal has committed serious error while confirming the order passed by the CIT (A) and reversing the order of the AO. He has contended that the AO has considered the material placed before it and thereafter passed the assessment order.
5.1 In support of his contention, learned Advocate has drawn attention of this Court to paragraph No.7 of the order passed by the Tribunal which reads as under:
"7. From the details furnished above, we find that most of the payments were freight charges, allowing which the CIT (A) has followed the decision of the Delhi Bench of the Tribunal in the case of Smt. Ninlal Vs. DCIT [68 TTJ 53], wherein the payment of freight charges in cash could not be disallowed u/s. 40A(3) as it is a general practice that transporters do not accept payments otherwise than in case. The CIT (A) has already disallowed a sum of Rs. 1,60,000, which was payment for purchase of chemicals. Therefore, we do not find any infirmity in the order of the CIT (A) in giving relief to the assessee of Rs. 1,42,17,740. The same is upheld."
5.2 In support of the submissions, learned Counsel for the department has placed reliance upon the decision of the Panjab and Haryana High Court reported in 225 ITR 0072 and Andhra Pradesh High Court reported in 357 ITR 523and contended that the issue may be answered in favour of the department.
6. On the other hand, learned Counsel Mr.Hasurkar has supported the order passed by the tribunal which had confirmed the order of the CIT (A) and the order passed by the tribunal is just and proper and this Court may dismiss the appeal of the department.
7. The CIT (A) in its order has observed thus:
"I have considered the above arguments carefully and I have gone through the assessment order, copies of transport receipts and the case laws reliefs upon by the appellant. I find that considering the nature of business of the appellant, it had to procure raw materials from various places, which were to be transported and on the transport receipts also it is clearly mentioned that "pay cash to the Driver" which clearly means that payment in cash was insisted upon by the transporter. It is also the general trend in transport business that payments are taken in cash on delivery of goods. Rule 6DD(j) also provides that there may be cases also where payment have to be made in exceptional circumstances. In the case of Nuchem Plastic Ltd. 44 TTJ 265, Delhi Bench of ITAT has held that in case of payment to truck drivers it was not practicable to make such payments by cheque or drafts and payments were covered by Rule 6DD(j). This view has been reiterated in the decision in the case of Smt. Ninalal Vs. DCIT reported in 68 TTJ 53 by Delhi Bench of ITAT by holding as under:"
Payment of freight charges in cash could not be disallowed us. 40A(3) as it is a general practice that transporters do not accept payments otherwise than in cash."
It is also seen that in earlier years under similar circumstances no disallowance was made by the Assessing Officer. In view of above following the above decisions, cash payments in respect of freight charges are to be treated as covered under Rule 6DD(j) and the disallowance made are deleted. However, it is seen that a sum of Rs. 60,000/- in respect of purchase of chemicals was also paid in cash. In absence of any confirmation of the payee and in view of decision of payments and Haryana High Court in the case of Agrawal Steel Traders 159 CTR 13, the disallowance of Rs. 1,60,000/- is confirmed (Relief Rs. 1,42,17,740/- )."
8. The Tribunal in its order at paragraph No.32 has observed as under:
"32. We have heard the ld.DR and perused the records. When the Assessing Officer is assessing the amount written back as income of the assessee, which pertained to the earlier year, the expenditure should be allowed as a deduction either as an expenditure of this year or as an adjustment against the amount written back. The CIT (A), therefore, was justified in allowing the claim of the assessee."
9. In view of the above discussion made by the CIT (A) which has been confirmed by the Tribunal, this Court is the opinion that the same is just and proper and we are in complete agreement with the same. Accordingly, we dismiss the tax appeal and issue raised in this appeal is answered in favour of the assessee and against the department.