2006 (3) TMI 216

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....of Rs. 7,00,232 under s. 40A(3)." 2. In ITA No. 712/Del/2002 briefly the facts are that the assessee is an AOP carrying on business of sale of country liquor, beer and Indian made foreign liquor (IMFL) in the District Jodhpur under a license issued by the Excise Department of Government of Rajasthan. During the year under consideration, the assessee purchased country liquor from Rajasthan State Ganganagar Sugar Mills, an undertaking of Rajasthan State Government after depositing cash and other levies. The IMFL and beer has been purchased from M/s Jai Santoshi Wine,Jodhpur, amounting to Rs. 77,21,479. The assessee also received rebate amounting to Rs. 1,56,491. The net purchases therefore have been claimed at Rs. 70,59,258. The AO observed ....

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....rovided under r. 6DD(j) r/w Circular No. 34, dt.5th March, 1970. The plea of the assessee however did not find favour with the learned CIT(A) who confirmed the decision reached by the assessing authority. 4. Before us, the assessee's counsel contends that he did not incur any expenditure in cash in making payments for purchases. It was stated that out of total payments, the assessee paid Rs. 7,86,878 to the distillers by demand draft and Rs. 39,80,100 have also been paid through demand draft to the Excise Commissioner on behalf of its supplier as per details contained in the written submissions. Provisions of s. 40A(3) were not applicable in these payments. The balance amount of Rs. 22,98,010 was also paid to the Excise Commissioner i.e. i....

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....lity of supplier which was later adjusted against the purchases made by the appellant. The appellant also received discount from the supplier on that account. It, therefore, cannot be held that the appellant made expenditure in violation of s. 40A(3) of the Act. Even otherwise, the genuineness of transaction was also not doubted by the authorities below. The supplier was duly identifiable. and payments stood duly confirmed in that respect. Since the assessee had adduced evidence of genuineness of purchase and necessity to make payment in cash, having regard to IT r. 6DD(j), disallowance under s. 40A(3) was not contemplated. The Hon'ble Dell)i High Court in the case of Ramaditya Investments vs. CIT (2003) 262 ITR 491 (Del) taking note of the....