Mr.d.s.madiahswamy v. The Income-Tax Officerward 1(3)Salem 636 007

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 22.01.2019 CORAM : THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMAND THE HONOURABLE MR.JUSTICE N.SATHISH KUMAR TAX CASE (APPEAL) NO.166 OF 2011 Mr.D.S.Madiahswamy ...Appellant/Petitioner Vs The Income-Tax OfficerWard 1(3)Salem 636 007 ...Respondent/Respondent APPEAL under Section 260-A of the Income Tax Act, 1961against the common order dated 18.12.2009 passed by the IncomeTax Appellate Tribunal, “A” Bench, Chennai in I.T.A.No.36/(MDs)/2007 for the assessment years 2003-04. against the Order of theCommissioner of Income Tax (Appeals)3, Salem dated 31.10.2006and made in I.T.A.No.28/06-07, against the Assessment Order,dated 31.03.2006 made in PAN/GIR.No.13PMO598 of the Income TaxOfficer, Ward I(3), Salem for the Assessment year 2003-04. For Appellant : Mr.V.S.Jayakumar For Respondent : Mr.M.Swaminathan SSC Judgment was delivered by T.S.SIVAGNANAM,J This appeal filed by the assessee under Section 260-A of theIncome Tax Act, 1961(the Act) is directed against the orderdated 18.12.2009 passed by the Income Tax Appellate Tribunal,“A” Bench, Chennai in I.T.A.No.36/(MDs)/2007 for the assessmentyears 2003-04, and was admitted on 25.04.2011 on the followingsubstantial question of law: “Whether the Tribunal was right in lawin holding that the payments made in, Cashis to be disallowed under Sec.40A(3) eventhough the same was governed by contractsentered into as a matter of commercialexpediency for that purpose?” https://hcservices.ecourts.gov.in/hcservices/ 2. Mr.V.S.Jayakumar has filed this appeal as the counsel forthe appellant. Today, he has appeared before us and reported noinstruction, since despite hectic efforts, he is unable tocontact his client. Considering the fact that this appeal is ofthe year 2011 and the appellant appears to be not diligent inprosecuting the matter, we proceeded to hear theMr.M.Swaminathan, learned Senior Standing Counsel for theRevenue and take a decision on the merits of the matter. 3. The assessee is engaged in the manufacture and sale oftextiles and filed his return of income for the assessment year2003-2004 showing a total income of Rs.1,82,390/-. Though, theassessee was the proprietor of two concerns, he was able toproduce the books of only one concern when called upon by theAssessing Officer. 4. In respect of a concern, for which books were notproduced the Assessing Officer adopted average net profit of thepreceding three years and accordingly the profit was estimated.The Assessing Officer on perusal of the cash book, which wasproduced in respect of one of the concern noticed cash paymentsexceeding Rs.20,0000/- to various concerns totalling a sum ofRs.67,95,848/- and therefore, the Assessing Officer appliedSection 40A(3) of the Act and made a disallowance ofRs.13,59,169/-. Apart from that Assessing Officer noticed thatthere were cash payments made to seven parties totalling a sumof Rs.10,00,902/- and therefore, applied Section 40A(3) and madea disallowance of Rs.2,00,180/-. 5. The assessee filed an appeal before the Commissioner ofIncome Tax(Appeals), Salem (in short CIT(A)). The CIT(A) byorder dated 31.10.2006 dismissed the appeal. Challenging thesaid order the Assessee preferred an appeal to the Tribunal. TheTribunal in the impugned order dated 18.12.2009 dismissed theappeal filed by the assessee. This has made the assessee to comebefore us by way of this appeal, raising the abovementionedsubstantial question of law. 6. As could be seen from the order passed by the CIT-(A),the Assessee in the written submission accepted the transactionsand stated that it was for business purposes and not forpersonal reasons. The assessee's only plea was that cashpayments were necessitated by a written contract and therefore,should be allowed on consideration of business necessity. 6. As could be seen from the order passed by the CIT-(A),the Assessee in the written submission accepted the transactionsand stated that it was for business purposes and not forpersonal reasons. The assessee's only plea was that cashpayments were necessitated by a written contract and therefore,should be allowed on consideration of business necessity. 7. The CIT(A) considered other submission and took note ofRule 6DD(j) of the Income Tax Rules, 1962(in short Rules) andheld that the assessee has not been able to bring his case underanyone of the conditions stipulated in the said Rule andtherefore, confirmed the disallowance made by the Assessing https://hcservices.ecourts.gov.in/hcservices/ Officer. The correctness of the order passed by the CIT(A) wascontested before the Tribunal. The Tribunal after re-examiningthe factual position held that the assessee has not been able tosubstantiate the existence of any circumstance which would callfor application of Rule6DD(j) and therefore, confirmed the orderpassed by the CIT(A). 8. On going through the factual position, we find that theassessee himself admitted the cash payment and pleaded thatthere was business necessity warranting cash payment.Unfortunately, the Statute does not provide for any relief tosuch an assessee and if at all, the assessee should escape fromthe rigour of Section 40A(3), then he should bring his casewithin the ambit of Rule 6DD(j), which assessee was miserablyfailed. 9. Thus, we find there is no question of law much less asubstantial question of law arising in this appeal. Accordingly,the appeal is dismissed. No costs. Sd/- Assistant Registrar //True Copy// Sub Assistant RegistrarskaTo1.The Income Tax Appellate Tribunal,'A' Bench, Chennai.2.The Commissioner of Income Tax (Appeals)3,No.3, Gandhi Road,Salem-636 007. 3.The Income Tax Officer, Ward I(3), Room No.205, II Floor, No.3, Gandhi Road, Salem-636 007. +1cc to Mr.M.Swaminathan, Advocate, S.R.No.4924 Tax Case (Appeal) No.166 of 2011 GJ(CO)CS/14/03/2019