Can amounts actually paid during the year be disallowed u/s 40(a)(ia) of the Income Tax Act?

XZIN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES “B”: HYDERABAD
(THROUGH VIRTUAL CONFERENCE)
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND
SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

ITA No. 837/H/2017
Assessment Year: 2013-14

Durga Crane Services,
Hyderabad
PAN - AAEFD 3239N

vs

Income-tax Officer,
Ward – 6(2), Hyderabad.

Assessee by:
Shri S. Rama Rao
Revenue by: Shri Rohit Mujumdar
Date of hearing: 11/08/2021
Date of pronouncement: 15/09/2021

O R D E R

Briefly the facts of the case are that the assessee firm in the business of providing crane services filed its return of income on 30/09/2013 admitting taxable income at Rs. 19,41,860/-. Subsequently, the assessee firm revised its return of income on 03/10/20134 revising its income to Rs. 10,09,610/-. Subsequently, the case was selected for scrutiny and accordingly, statutory notices were issued, against which, the AR of the assessee furnished the information.

2. As regards ground No. 5 relating to the addition of Rs. 43,01,600/-, the AO observed that on behalf of the assessee Sri. R. Srinivasa Rao, Managing Partner of the firm had incurred expenses in cash exceeding Rs. 20,000/-, the details of which were extracted by the AO at page 3 of his order. The assessee was asked to produce the relevant vouchers for verification, but the same was not produced. On being asked to explain as to why the said expenditure debited to Profit & Loss Account should not be disallowed uls 40A(3) of the LT. Act, the assessee submitted that the amount spent by Sri R. Srinivasa Rao was only Rs.16,80,600/- towards SRC - Bridge construction expenses and since the construction site was at a remote place where no banking facilities were available, the amount was incurred in cash.

3. As regards ground No. 6 relating to addition of Rs. 2,61,081/- being demurrage charges, the AO observed that the assessee had incurred an amount of Rs.10,74,721/- towards demurrage charges. When the assessee was asked to produce the details, assessee could produce evidences for Rs. 8,13,640/- only, which were incurred at various sites and could not produce the balance details for the amount of Rs. 2,61,081/-. The AO, therefore, disallowed the same. On appeal, the CIT(A) confirmed the disallowance.

4. In the result, appeal of the assessee is party allowed for statistical purposes in above terms.
Pronounced in the open court on 15th September, 2021.

Please find attached the enclosed file for the full judgement