Cash payment disallowance for land purchase upheld where business convenience did not justify bypassing non-cash modes.

Cash payments for purchase of land by a real estate developer were held not to fall outside section 40A(3) merely on a plea of business convenience or genuineness of the transactions. The Tribunal noted that acquisition of immovable property did not require immediate cash payment and that the assessee had sufficient time and opportunity to pay by cheque or demand draft. Because the cash payments exceeded the statutory limit and no sufficient business necessity was shown, the disallowance was upheld and the addition sustained.

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Issues: Whether the disallowance under section 40A(3) of cash payments made for purchase of land by a real estate developer was liable to be deleted on the ground of business necessity and genuineness of the transactions.

Analysis: The assessee had purchased land in cash from different sellers and contended that the payments were compelled by practical business considerations. The Tribunal distinguished cases involving immediate cash-driven business exigencies, noting that purchase of immovable property for land development did not require cash payment and that the assessee had sufficient time and opportunity to make payment by cheque or demand draft. On the facts, the cash payments exceeded the statutory limit and the circumstances did not justify exclusion from the operation of section 40A(3).

Conclusion: The disallowance under section 40A(3) was upheld and the addition was sustained, against the assessee.

Final Conclusion: The appeal failed in relation to the cash-payment disallowance, and the assessment order as affirmed by the first appellate authority was maintained.

Ratio Decidendi: Cash payments for purchase of land by a real estate developer are not exempt from section 40A(3) merely on a claim of business convenience where there was adequate opportunity to make non-cash payment.

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