TaxTMI 
TaxTMI 
1981 (7) TMI 123
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.... a disallowance of Rs. 25,000 should be made under section 40A(3). 2. When the matter went in appeal to the Commissioner (Appeals), he asked the ITO to submit a remand report. In the remand report the ITO admitted that the disallowance under section 40A(3) was really Rs. 40,000 and not Rs. 25,000 as wrongly mentioned by him. The payment in cash to K.B. Enterprises was made as follows: ....
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....nbsp; 10,000 6-2-1975 5,000 &nb....
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....tside the accounting period and, therefore, could not be considered in the assessment year 1975-76. He upheld the addition of Rs. 5,000 on the ground that it did not come within the exempted categories mentioned in rule 6DD(j). The revenue is in appeal. 3. The learned departmental representative argued that the disallowance is in respect of the expenditure incurred in the year for which cash payment has been made. The expenditure referred to by the ITO is the purchase made by the company. Section 40A(3) does not require that only the cash payments made during the accounting year are to be disallowed. What is to be disallowed is the expenditure which is met by cash payment irrespective of the time at which the payment is made. If the ITO ha....
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.... and subsequently during any previous year the assessee makes any payment in respect thereof in a sum exceeding two thousand five hundred rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, the allowance originally made shall be deemed to have been wrongly made and the Income-tax Officer may recompute the total income of the assessee for the previous year in which such liability was incurred and make the necessary amendment, and the provisions of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the assessment year next following the previous year in which the payment was so made." It is clear from the re....