Praveen Dutt Sharma , Beawar vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 1031/JP/2011 fu/kZkj.k o"kZ@Assessment Year : 2008-09

Shri Praveen Dutt Sharma cuke The ITO M/s. Mamta Transport Co. Vs. Ward - 1 Ajmer Road, Beawar Beawar LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AEEPS 0989 Q vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mahendra Gargieya, Advocate and Shri B.M. Vyas, CA jktLo dh vksj ls@ Revenue by : Smt. Neena Jeeph, JCIT .

lquokbZ dh rkjh[k@ Date of Hearing : 05/01/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 27/02/2015

vkns'k@ ORDER PER R.P. TOLANI, JM

This is an appeal filed by the assessee against the order of the ld.

CIT(A), Ajmer dated 07-10-2011 for the assessment year 2008-09

challenging the addition of Rs. 11.17 lacs u/s 40A(3) of the Act.

2.1 Brief facts of the case are that the assessee is a transporter for M/s.

Gujarat Ambuja Cement Ltd. During the course of assessment

proceedings, the AO found that the assessee has made payment to other

transporters which in his view were sub-contractors. The assessee made 2 ITA No. 1031//JP/2011 Shri Praveen Dutt Sharma vs. ITO, Ward- 1, Beawar . .

cash payments exceeding Rs. 20,000/-, therefore, the addition was

disallowed by the AO recoursing to Section 40A(3).

2.2 Aggrieved, the assessee preferred first appeal wherein it was

contended that the assessee did not have adequate number of trucks to

fulfill its obligation of transporting the goods of M/s. Gujarat Ambuja

Cement Ltd. Consequently it had to sublet the work of transportation of

goods to different truck owners for completing this work on contract on

trip wise basis. The assessee qua such sub contract received only

commission and worked as a conduit to pass on the transportation

payments to subcontractors in consideration of the commission. The

expenditure in question was not incurred by the assessee but the same

was incurred by M/s. Gujarat Ambuja Cement Ltd. Reliance is placed in

the cases of CIT vs. Balaji Engineering & Construction Works (2010),

323 ITR 351 (Kar.) and Kedar Nath Manufacturing Co. Ltd. vs. CIT

(1971)82 ITR 363 (SC). However, the ld. CIT(A) upheld the

disallowance by following observations.

''3.3 Argument of the appellant has been carefully considered. From the perusal of records, it is found that appellant has taken contradictory stand before AO. On one hand he has argued before AO that payment was made by him to various sub-contractors (different truck owners who actually transported the goods) and on the other hand in response to query of AO, he replied vide his letter dated 27- 12-2010 that payments were made to different truck owners who were persons of small means and not having bank accounts in Beawar, therefore, payment was made to them in 3 ITA No. 1031//JP/2011 Shri Praveen Dutt Sharma vs. ITO, Ward- 1, Beawar . .

cash. Thus claim of the appellant that payment was made by him to sub-contractors is not acceptable. At the same time no exceptional circumstances have been explained by him either before AO or the undersigned which requirement payment to be made in cash. In view of these facts, AO is justified in making a disallowance of Rs. 11,17,000/- u/s 40A(3). The reliance placed by AO on the decisions of Hon'ble Jurisdictional High Court in the case of Kejriwal Iron Stores (167 ITR 12) and Nahgilal vs. CIT (167 ir 139) is also in order. In both these cases, it was held by Hon'ble High Court that disallowance u/s 40A(3) includes payment made for purchases also. Thus argument of the appellant that advance paid by him to the truck owners is not covered u/s 40A(3) is also not justified. I therefore, hold that disallowance of Rs. 11,17,000/- has been rightly made by AO and the same is confirmed. Ground No. 1 to 4 of the appeal are thus dismissed.''

2.3 Aggrieved, the assessee is before us against order of the first

appellate contending that the ld. CIT(A) has erred in holding that the

assessee had been taking contradictory stand. Besides, it had been alleged

that the assessee has not pleaded any exceptional circumstances either

before the AO or before ld. CIT(A). This finding is not correct inasmuch

as the exceptional circumstances were pleaded which is evident from the

written submission filed before the lower authorities and are part of the

record. It is pleaded that the assessee has explained the circumstances that

in the absence of having sufficient numbers of trucks, the assessee had to

sublet the work to the subcontractors. Hence, in the course thereof, any

available transporter was given the required work of transportation and

the assessee was eligible to agreed amount of commission. The available 4 ITA No. 1031//JP/2011 Shri Praveen Dutt Sharma vs. ITO, Ward- 1, Beawar . .

transporters always insisted for cash payment and they do not agree for

subcontract on credit basis. Thus the hardships of exceptional

circumstances for carrying on transportation business and avoid breach of

contract with Gujrat Ambuja were duly explained to the lower authorities

which have been glossed over. Reliance is placed in the case of CIT vs.

Balaji Engineering and Construction Works (supra) in which cash

payment made to subcontractors is held to be not liable for disallowance

u/s 40A(3), besides the exceptional circumstances have been duly

pleaded, which have not been considered by lower authorities. Further

reliance is placed in the case of G.A. Road Carriers vs. ITO (2011) 44

SOT 145 (Trib. Hyd). The ld. Counsel for the assessee placed reliance in

the case of Kedar Nath Manufacturing Co. Ltd. vs. CIT (supra) for the

proposition that entries in the books of account are not decisive in

determining the real character of transaction and the same should be

ascertained on the basis of realities.

2.4 The ld. DR relied on the orders of the lower authorities.

2.5 We have heard the rival contentions and perused the materials

available on record. We find merit in the contentions of the ld. Counsel

for the assessee. The findings of the lower authorities that the assessee did

not plead any exceptional circumstances are not supported by record

which indicates that the assessee pleaded the business compulsion and 5 ITA No. 1031//JP/2011 Shri Praveen Dutt Sharma vs. ITO, Ward- 1, Beawar . .

existence of exceptional circumstances for making the impugned cash

payments. The Assessee can also be held to have labored under a

bonafide belief that it was entitled to only commission in this behalf and

relevant transportation work had been done by subcontractors. Thus, in

view of the decision of The Hon'ble Karnataka High Court in the case of

CIT vs. Balaji Engineering and Construction Works (supra), the cash

payment should be made. Hence, in view of the above facts and

circumstances of the case, we delete the addition made by the AO u/s

40A(3) of the Act and the appeal of the assessee is allowed.

In the result, the appeal of the assessee is allowed

Order pronounced in the open court on 27 /02/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 27th FEB, 2015 *Mishra

vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Shri Praveen Dutt Sharma, Beawar

2. izR;FkhZ@ The Respondent- The ITO, Ward- 1, Beawar

3. vk;dj vk;qDr¼vihy ) @ CIT(A), Jaipur

3. vk;dj vk;qDr@ CIT, Jaipur

4. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

5. xkMZ QkbZy@ Guard File (ITA No.1031/JP/2011)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@ Assistant. Registrar