V.P. Elhence, Judicial Member - (1.) THE assessee is aggrieved of the order dated 21-12-1981 of the learned Commissioner (Appeals).
(2.) The assessee, Ingenieurs & Agents, Halwasiya Court, Lucknow, is a registered firm which enjoys income from civil work, supply, erection, installation and commissioning of Ash Handling Plant of Thermal Power Station. During the year under consideration, the work done was at Tata Iron and Steel Company Ltd., Jamshedpur and at Guru Nanak Thermal Power Station, Bhatinda (Punjab). In the Bhatinda set, the first ground of appeal relates to the disallowance of Rs. 16,000 under Section 40A(3) of the Income-tax Act, 1961 ('the Act'). The addition comprises of the following payments : (i)Rs. 5,000 paid to Union Timber Stores in three amounts of Rs. 2,000, Rs. 1,500 and Rs. 1,500 on the same day, i.e., 3-3-1972. (ii) Rs. 4,000 in two amounts of Rs. 2,000 each on 8-3-1972 to Union Timber Stores. (iii) Rs. 4,000 on 13-12-1972 again to Union Timber Stores in one lump sum. (iv) Rs. 3,000 on 31-5-1972 in two amounts of Rs. 1,000 and Rs. 2,000 for purchase of Tibri sand to Din Dayal Raj Kumar. The explanation furnished by Ihe assessee not having been accepted by the ITO, addition was made under Section 40A(3). In appeal, the learned Commissioner (Appeals) confirmed this addition on the following grounds : (a) The application of Section 40A(3) cannot be circumvented by breaking the payment to a particular party in amounts which are less than Rs. 2,500. As the facts stated above would show, the payments have been made on the same date and most probably at the same time but to avoid the application of Section 40A(3) these have been broken into smaller amounts. (b) In the cash book and in the vouchers that have been produced before me, there is mention about 'bills' submitted by the respective parties but no such bills have been shown to me at the time of the hearing of the appeal. It is very likely that the parties concerned might have submitted consolidated bills for amounts of Rs. 5,000, Rs. 4,000, Rs. 4,000 and Rs. 3,000 but payments have been made to them in smaller amounts just to bypass Section 40A(3). (c) The learned representative has not been able to satisfy me that the payments made fall within the purview of Rule] 6DD and CBDT's Circular No. 220. There is no evidence that the recipient desired that the moneys be. paid to them in cash and the appellant's business would have been adversely affected if such requests from the recipients would not have been accepted.
(3.) SHRI D.B. Bhargava, learned counsel for the assessee, submitted that there were separate vouchers for these payments. Relying upon the decision of the Hon'ble Orissa High Court in the case of CIT v. Aloo Supply Co. [1980] 121 ITR 680, he pointed out that since the amounts were paid on different occasions on the same day, the assessee could not be subjected to the statutory restriction contained in Section 40A(3) unless any one payment was above Rs. 2,500. He pointed out that the word 'sum' in Section 40A(3), second proviso of the Act, is used only to indicate an amount of money and does not refer to the totality of the expenditure. So far as the payment of more than one sum of less than Rs. 2,500 at one time on the same day is concerned, SHRI Bhargava pointed out that law permitted tax avoidance to the assessee. He pointed out that there were different vouchers and different entries. Referring to the orders of the income-tax authorities on this point, SHRI Bhargava alternatively submitted that regarding the circumstances under which cash payments were made of sums exceeding Rs. 2,500, opportunity was not afforded to the assessee and that the matter could be sent back to the ITO for the purpose.;