Merely because cash payment has been made is not an indicator that the transaction is non-genuine or bogus: ITAT Jaipur
SHREE SHANKER GAURI AGRO PRODUCT PVT. LTD. VERSUS THE ACIT, SAWAI MADHOPUR (RAJ.)
No.- ITA No. 367/JP/2018 (Assessment Year: 2014-15)
Dated.- September 2, 2019
1. Ad hoc disallowance- Deleted. As there is no specific finding recorded by the AO in terms of any of these expenses having not been incurred for the purpose of business or bogus in nature.
2. Cash expenses addition Deleted. Merely because cash payment has been made is not an indicator that the transaction is non-genuine or bogus
Firstly, we find that it is a clear case of adhoc disallowance of expenses wherein the Assessing Officer has disallowed 5% of the manufacturing expenses, building repair, hamali expenses, machinery expenses and transportation expenses. Further, 10% of car running, insurance and depreciations claim as well as telephone and miscellaneous expenses have also been disallowed. There is no specific finding recorded by the Assessing Officer in terms of any of these expenses having not been incurred for the purpose of business or bogus in nature. The disallowance of expenses have thus been made in the routine manner without pointing out any specific defects in the vouchers or the fact that where the payments have been made in cash, such expenses are not incurred for the purposes of business. Mere incurrence of expenditure in cash by itself cannot be a ground for denial of genuine claim of the assessee. There are business necessities which warrant the assessee to incur the expenditure in cash, a fact which has been recognized by the legislature and adequate safeguards have been put in place by way of section 40A(3) of the Act. Though lately there is a policy shift towards digital and cashless transactions which no doubt is a welcome step in the right direction, at the same time, there are certain business exigencies which warrant cash payments. Therefore, merely because cash payment has been made is not an indicator that the transaction is non-genuine or bogus or the cash payment has not been made for purposes of business. Where in particular facts and circumstances of the case, the Assessing officer is of the view that there are suspicious cash payments, in such a situation, he should carry out further examination and investigation in the matter and should come out with specific and conclusive findings. However, in the instant case, we donot see any specific finding recorded by the Assessing officer. Further, on perusal of the ledger accounts produced by the ld. AR, it is observed that though there are cash payments, at the same time, there are also payments made by cheque and entries towards expenses which have been claimed as subsequently paid by cheque. Therefore, observation of the AO that payments have been made in cash doesn’t apply as far as these transactions are concerned. We therefore find that in absence of any specific findings by the Assessing Officer, there is no basis for disallowance of expenses on an adhoc basis which cannot be sustained in the eyes of law. Hence, the disallowance so confirmed by the ld. CIT(A) is hereby directed to be deleted.