TaxTMI 
TaxTMI 
2007 (6) TMI 252
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.... Rs. 15,000 ------------ Total Rs. 1,68,245 ------------ 3. The AO found that the above parties had supplied goods to the assessee on credit and payment had been made to them number of days after purchase of goods and that no exceptional circumstances compelled the assessee to make the payment in violation of provisions of s. 40A(3) of the IT Act, 1961. 4. On appeal, the CIT(A) confirmed the addition stating that in my view no exceptional circumstances have been brought out for payment by cash/bearer cheques. Hence, the assessee is in appeal before this Bench of the Tribunal.....
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....egarding the genuineness of the payment and the identity of the payee. The CBDT issued a Circular No. 220, dt. 31st May, 1977 and para 4 of the said circular reads as under: "4. All the circumstances in which the conditions laid down in r. 6DD(j) would be applicable cannot be spelt out. However, some of them which would seem to meet the requirements of the said rule are: (a) the purchaser is new to the seller, or (b) the transactions are made at a place where either the purchaser or the seller does not have a bank account; or (c) the transactions and payments are made on a bank holiday; or (d) the seller is refusing to accept the payment by way of crossed cheque/draft and the purchaser's business interest would suffer due to non-availability of goods otherwise than from this particular seller; or (e) the seller, acting as a commission agent; is required to pay cash in turn to persons from whom he has purchased the goods; or (f) specific discount is given by the seller for payment to be made by way of cash. It is further clarified that the above circumstances are not exhaustive but illustrative. There could be cases other than those falling within the abov....
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....ssed bank draft (except in specified cases) is not arbitrary and does not amount to a restriction on the fundamental right to carryon business. If read together with r. 6DD of the IT Rules, 1962, it will be clear that the provisions are not intended to restrict business activities. There is no restriction on the assessee in his trading activities. Sec. 40A(3) only empowers the AO to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The payment by crossed cheque or crossed bank draft is insisted upon to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of income from undisclosed sources. The terms of s. 40A(3) are not absolute. Consideration of business expediency and other relevant factors is not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the AO the circumstances under which the payment in the manner prescribed in s. 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person ....
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....bsp; 15,000 29/11/90 14,651 3. Insaf Trading Co. 28/11/90 12,000 4. Chhedaram Siaram, Tilhar 27/11/90 26,980 The AO observed that all the above parties had supplied goods to the assessee on credit and payment had been made to them a number of days after purchase of goods and that no exceptional circumstances compelled the assessee to make the payment in violation of provisions of s. 40A(3) of the IT Act, 1961. 11. On appeal, the CIT(A) confirmed the addition of Rs. 1,71,631. Hence, the assessee is in appeal before this Bench of the Tribunal. 12. We have carefully considered the rival submissions and have also perused the orders of the authorities below. Learned counsel for the assessee submitted that the assessee had filed written submissions before the CIT(A) which are reproduced hereinbelow: "Regarding other payments party-wise position with refe....
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....sp; -------- Total 1,05,000 -------- All the parties mentioned at point Nos. 1 to 3 belong to different places as mentioned above and learned AO has nowhere doubted the genuineness of the transactions with these parties. The payments aggregating Rs. 68,631 to parties at point Nos. 1 to 3 as mentioned above were made by the assessee concern (Janta Rice Mill) through bearer cheques. All these parties at point Nos. 1 to 3 mentioned. above do not have....
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....vs. CIT (2004) 138 Taxman 231 (Del). In view of the above it is hereby requested that maximum benefits may kindly be granted to the assessee concern." Learned counsel for the assessee reiterated the submissions made before the lower authorities and, on the other hand, learned Departmental Representative relied on the orders of the authorities below. It is apparent from the record that all the parties mentioned at Sl. Nos. 1 to 3 belong to different places and the AO nowhere doubted the genuineness of the transactions with these parties. There is no dispute that the payments aggregating to Rs. 68,631 to parties mentioned at Sl. Nos. 1 to 3 above were made by the assessee concern through bearer cheques. All three parties did not have bank accounts at Baheri and had insisted payments either by cash or bearer cheque as the outstation cheques would have taken almost 20 to 30 days for clearing. In support of the above contention, the assessee had tiled certificates/letters from the above parties mentioning the fact that they did not have their bank accounts at the place of the assessee concerned. As regards payment made to party No. 4 i.e. M/s Janta Food Grain Agency, Baheri, it is....
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....bsp; 6/12/90 50,000 2. Jai Bajrangbali, Gautra 28/11/90 15,000 29/11/90 14,651 3. Insaf Trading Co. 28/11/90 12,000 4. Chhedaram Siaram, Tilhar 27/11/90 26,980 The AO disallowed Rs. 2,66,550 under s. 40A(3) of the IT Act, 1961. On appeal, the CIT(A) confirmed the addition. 15. Before us, Shri Yogesh Agrawal. learned counsel for the assessee, reiterated the submissions made before the lower authorities. It is seen that the assessee had submitted written submissions before the CIT(A) which are reproduced hereinbelow: Party-wise position with reference to r. 6DD(j) (1) Cheda Lal Sita Ram, Shahjahanpur 27-11-90 26,980 (2) Jai Ba....
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....p; Total 1,05,000 -------- All the parties mentioned above belong to different places as mentioned above and the learned AO has nowhere doubted the genuineness of transactions with these parties. The payments regarding purchases aggregating Rs. 2,66,550 were made to these parties by the assessee concern (Janta Rice Mill) through bearer cheques. All the parties mentioned above do not have bank accounts at Baheri and had insisted payments either vide cash or bearer cheques as the outstation cheques would have taken almost 20 to 30 days for clearing. In support of this contention certificates from all the parties mentioning the fact that they did not have their....