ITAT: No Benefit Under Rule 6DD for Assessee Not Primarily Responsible for Cash Payments

Case Details: R.K. Powergen (P.) Ltd. v. ACIT - [2023] 149 taxmann.com 447 (Chennai - Trib.)

Judiciary and Counsel Details

• • V. Durga Rao, Judicial Member and Manjunatha G., Accountant Member 
  • V. Ravichandran, CA for the Appellant. M. Rajan, CIT for the Respondent.

Facts of the Case

A search operation was conducted on the business premises of the assessee. During the course of search, loose sheets and books were seized. The case was taken up for scrutiny, and during the course of assessment proceedings, it was noticed that the assessee made cash payment in excess of Rs. 20,000/- in violation of provisions of section 40A(3).

In response, the assessee explained that there was an urgent requirement for cash payments to transporters of bio-mass waste as the assessee was procuring bio-mass waste from local persons. Not satisfied with the explanation provided by the assessee, the Assessing Officer (AO) made additions to the income of the assessee under section 40A(3).

On appeal, CIT(A) upheld the additions made by AO, considering that the payments were also not covered under rule 6DD. Aggrieved by the order, an appeal was made to the Chennai Tribunal.

ITAT Held

The Tribunal held that the responsibility to make payments to transporters was on the suppliers. In fact, the assessee had also made payments to transporters but debited to the supplier’s account. It is very clear that primary responsibility to make payments to transporters wasn’t on the assessee but on supplier.

Further, there was no dispute with regard to the fact that sum paid by the assessee in a single day to one person was in excess of prescribed limit provided in section 40A(3). Also, the assessee could not make out a case that the cash payment made was covered under any exception as provided under rule 6DD of Income-tax Rules, 1962.

Concerning the transport charges allowed in earlier years, the assessee paid cash towards transportation costs, such as fuel expenses, driver expenses, etc., which were to be settled then and there in cash.

Therefore, the assessee cannot claim that there was an urgent requirement to make payment in cash considering business exigency, and there was no error in the reasons given by the AO to disallow cash payment in excess of the prescribed limit under section 40A(3).

List of Cases Referred to

• • Dy. CIT v. R.K. Powergen (P.) Ltd. [IT Appeal Nos. 1864 to 1867 (Mad.) of 2018] (para 4).