Human probability is that truck drivers would insist for cash payment-ITAT deleted additions u/s 40A(3) for cash payments
ABCAUS Case Law Citation:
ABCAUS 3196 (2019) (12) ITAT
The instant appeal was filed by the assessee against the order of the Commissioner of Income Tax [Appeals] in confirming the disallowance u/s 40A(3) for cash payments made by the assessee towards lorry freight Income tax Act, 1961 (‘The Act’).
The assessee submitted that the assessee paid lorry freight for transporting raw material from distant places. The lorry drivers who brought the goods to the assessee insisted for cash payment. Since the assessee had no knowledge about the drivers who came for delivery of goods, the assessee was forced to pay cash as insisted by the lorry drivers.
Therefore, it was claimed that the payment of cash was for commercial expediency. According to the assessee, the lorry drivers used to deliver the goods / cargo only on receipt of lorry freight. Therefore, there was a business necessity for making the cash payment.
The assessee submitted that the details of lorries and drivers are available with him for proving the genuineness of payment therefore, the matter may be remitted back to the file of the Assessing Officer.
The Tribunal observed that CIT(Appeals) had found that the assessee would have employed regular lorry service for supply of goods, therefore, it may not be correct in saying that the assessee was forced make cash payment due to commercial expediency.
This Tribunal opined that merely because voluminous purchases were made, it does not mean that only regular lorries would have been employed by the assessee for supply of goods. Engagement of lorry would depend upon who is loading the goods in the State in which the products were purchased. Therefore, the assessee may not be in the control of lorries which are engaged for transporting the products.
Human probability is that truck drivers insist for cash payment
The Tribunal further opined that all the drivers may not be known to the assessee. Since, voluminous goods were transported, several drivers may not be known to the assessee at all. Even the known drivers may need money for purchasing fuel to run the lorry again. Therefore, it was not the case of known or unknown drivers or known or unknown lorries.
The Tribunal was of the view that irrespective of the fact whether the assessee knew the driver or not, the fact was that the lorry drivers needed money at the time of delivery of goods. When the lorries reach the city in the odd hours, the assessee had to necessarily make cash payment. Moreover, when the lorries were coming from other States, the concerned drivers might not be prepared to go to bank for encashing the cheque received from the assessee.
In view of the above, the Tribunal opined that the human probability was that the drivers would insist for cash payment. Thus the Tribunal held that the assessee had made the payment in cash due to commercial expediency and business necessity to the drivers towards freight charges.
Accordingly, the issue of disallowance made under Section 40A(3) of the Act was remitted back to the file of the Assessing Officer for limited purpose of verification of details that may be furnished by the assessee.
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