Tribunal allows appeals on disallowed cash payments to Excise Department under section 40A(3)

The Tribunal allowed two appeals where the Assessing Officer disallowed cash payments made to the Excise Department on behalf of suppliers under section 40A(3). The Tribunal found the payments genuine and necessary for business, exempting them from the section's provisions. The absence of a bank account and business compulsion were considered in line with a Delhi High Court ruling, resulting in the deletion of the disallowances in both cases.

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Issues:
1. Addition under section 40A(3) confirmed by CIT(A) in two appeals.

Analysis:
In ITA No. 712/Del/2002, the assessee, an AOP engaged in the liquor business, purchased goods from suppliers and made payments to the Excise Commissioner on behalf of the suppliers. The Assessing Officer (AO) disallowed a portion of the payments under section 40A(3) as they were not made by crossed bank draft or cheque. The CIT(A) upheld the AO's decision. The assessee argued that payments were made under business compulsion and received discounts, thus falling under an exception to section 40A(3). The Tribunal found that payments made to distillers and the Excise Commissioner through demand drafts were not subject to section 40A(3). The remaining cash payments to the Excise Commissioner were also deemed genuine and necessary for business, following the principles laid down by the Delhi High Court in a similar case. Consequently, the disallowance under section 40A(3) was directed to be deleted.

In ITA No. 713/Del/2002, the assessing authority disallowed cash payments made to the Excise Department on behalf of suppliers, resulting in a disallowance under section 40A(3). The CIT(A) affirmed this decision. However, the Tribunal noted that the assessee did not maintain a bank account and made payments to the Excise Commissioner due to business exigency and supplier requests. Citing the genuineness of payments and the absence of a bank account, the Tribunal ruled in favor of the assessee, following the precedent set by the Delhi High Court in a related case. Consequently, the disallowance under section 40A(3) in this appeal was also directed to be deleted, leading to the allowance of both appeals.

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