Natvar Construction Co.,, Surat vs Assessee

आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद यायपीठ ''D'', अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, "D" BENCH

सव ौी ौी जी. जी.सी. सी.गु ा, माननीय उपा!य", उपा!य", एवं एन. एन.एस. एस. सैनी, ी, लेखा सदःय के सम" । BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND N.S. SAINI, ACCOUNTANT MEMBER)

ITA No.352/Ahd/2011 [Asstt.Year : 2007-2008]

Natvar Construction Co. बनाम/Vs. DCIT, Cir.9 311, Super Diamond Market Surat. Varachha Road, Surat.

PAN : AACFN 0779 K

(अपीलाथ+ / Appellant) (ू-यथ+ / Respondent)

िनधा .रती क0 ओर से/ : Assessee by Shri M.J. Shah राजःव क0 ओर से/ : Revenue by Shri B.L.Yadav, Sr.DR सुनवाई क0 तार4ख/ : Date of Hearing 16th December, 2014

घोषणा क0 तार4ख/ : Date of Pronouncement 02-02-2015

आदे श / O R D E R

PER SHRI G.C.GUPTA, VICE-PRESIDENT: This appeal by the assessee for the Asstt.Years 2007-08 is directed against the order of the CIT(A)-V, Surat.

2. The ground no.1 and 1.1 of the appeal of the assessee are as under:

"1. The CIT(A) erred in upholding the disallowance of Rs.1,23,044/- under section 40A(3) of the IT Act. ITA No.352/Ahd/2011

1.1 The CIT(A) failed to appreciate the overall facts and circumstances of the case before confirming the disallowance under sec. 40A(3) of the IT Act."

3. The learned counsel for the assessee submitted that the assessee is a government contractor in building roads in remote areas. He submitted that in the process of road making, the assessee has to spend on purchase of fuel for the purpose of warming up of tar-coal and the diesel was purchased from petrol pump situated in surrounding remote site places, and the assessee was unknown to the dealer of diesel. He submitted that some diesel has to be purchased in the odd hours and on holiday also. He submitted that sometimes cash payments were made for purchase of diesel through the agent and the assessee was forced, due to these circumstances, to make the payment in cash. He submitted that the CIT(A) has wrongly decided the issue under the impression that there is no exception to the Rule, and the disallowance under section 40A(3) of the Act for cash payment has to be made, even if circumstances are beyond the control of the assessee. He relied on the decision of the Hon'ble Gujarat High Court in Anupam Tele Services Vs. ITO, 366 ITR 122 (Guj).

4. The learned DR has opposed the submissions of the learned counsel for the assessee. He submitted that there is no discretion in the matter of disallowance under section 40A(3) with the Revenue authority and the only exception is Rule 6DD which provides for certain exceptions wherein the cash payment could be made. He referred to the relevant portions of the assessment order and the appellate order of the CIT(A) in support of the case of the Revenue. He relied on the orders of the AO and the CIT(A).

5. We have considered rival submission and perused the orders of the AO and the CIT(A). We find that in the circumstances of the case of the assessee, where the assessee is a Government contractor in the business of laying roads in remote areas and the diesel has to be purchased as fuel in the machine for warming-up of the tar coal and payment have to be made to unknown petrol

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pump dealers and agents, and sometimes, even after banking hours and on closed holidays. The law does not force that the disallowance has to be made compulsorily, and therefore, approach of the CIT(A) in this regard was not sustainable. In a case where the assessee is able to demonstrate that the cash payments was made due to circumstances, beyond its control, the disallowance may not be sustained, and particularly when the payments fall in one or more of the exceptions provided under Rule 6DD of the I.T. Rules, 1962. We find that in this case the cash payments of purchase of diesel at the site, where the road was being made falls in Explanation provided under Rule 6DD(j) that the payment was required to be made in cash sometimes, when the bank was closed, and also Rule 6DD(k) as some payments were made to the agent of the assessee who was required to make the payment in cash for goods on behalf of the assessee. In these facts of the case, we are of the view that no case of disallowance under section 40A(3) of the Act could be made out by the Revenue and the disallowance is deleted, and the ground no.1 and 1.1 of the assessee are allowed.

6. The ground no.2 and 2.1 of the assessee are as under:

"2. The CIT(A) further erred in confirming the disallowance of Rs.43,507/- under sec. 40a(ia) of the Income tax Act."

2.1 The CIT(A) failed to appreciate the overall facts and circumstances of the case before confirming the disallowance under sec. 40a(ia) of the Income Tax Act."

7. We have heard parties. We find that the CIT(A) has passed a well reasoned order on this issue. In this case, admittedly, the interest payment were made without deducting TDS by the assessee, and therefore, the disallowance

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was rightly confirmed by the CIT(A). Accordingly, the ground no.2 and 2.1 of the assessee's appeal are dismissed.

8. In the result, the appeal of the assessee is partly allowed.

Order pronounced in Open Court on the date mentioned hereinabove.

Sd/- Sd/- एन. एन.एस. (एन एस. सैनी /N.S.SAINI) (जी. जी.सी. सी.गु ा/G.C. GUPTA) लेखा सदःय /ACCOUNTANT MEMBER उपा!य" /VICE-PRESIDENT

Copy of the order forwarded to: 1) : Appellant 2) : Respondent 3) : CIT(A) 4) : CIT concerned 5) : DR, ITAT. BY ORDER

DR/AR, ITAT, AHMEDABAD

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