TaxTMI 
TaxTMI 
1995 (4) TMI 128
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.... be done with cash payments only ; the parties from whom these purchases were made were new and that they insisted for cash payment only. It was further stated that most of these purchases were made through agents who insisted for cash payments. Thus, these cash payments were made in exceptional and unavoidable circumstances and were, therefore, covered by rule 6DD(j) of the Income-tax Rules. This plea did not find favour with the Assessing Officer who made disallowance of the aggregate sum of Rs. 10,97,062. 4. On the matter being taken in appeal, it was pleaded before the learned CIT(A) that since the genuineness of the purchases, genuineness of the payments and the identity of the payees was not in doubt, such payment should have been treated as fully covered by the provisions of rule 6DD(j) read with CBDT Circular No. 220 dated 31-5-1977. As regards the exceptional and unavoidable circumstances, the assessee had stated that he had started his business after the dissolution of an erstwhile firm. After the dissolution, he got only the shop premises and there was no goodwill or stock available to the assessee. This had brought down the repute of the assessee in the market and, t....
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....o the aforesaid CBDT circular and following Court decisions : (1) Attar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667 (SC), (2) Giridharilal Goenka v. CIT [1989] 179 ITR 122 (Cal.), (3) Hasanand Pinjomal v. CIT [1978] 112 ITR 134 (Guj.), (4) Venkata Satyanarayana Timber Depot v. CIT [1987] 165 ITR 253 (AP), (5) Navsari Waste Cotton Products v. CIT [1987] 163 ITR 378 (Guj.), (6) CIT v. Chandmull Radhakishun [1987] 163 ITR 697 (Pat.), (7) Paul Bros. v. CIT [1990] 186 ITR 356 (Gau.), (8) CIT v. Sawaran Singh Balbir Singh [1982] 136 ITR 595 (Punj. & Har.), (9) Badrilal Phool Chand Rodawat v. CIT [1987] 167 ITR 404 (Raj.), (10) CIT v. Brij Mohan Singh & Co. [1994] 209 ITR 753 (Punj. & Har.). 6. As against the above, it was submitted by the learned departmental representative that the main legislative intent of section 40A(3) is not only to eliminate bogus claim of expenditure who claim deduction, but also to ensure due accounting of the receipts/incomes by the persons who receive cash payments. The legislative object of this enactment would be frustrated, if a claim of deduction as expenditure is allowed merely on the basis that a transaction was genuine, paym....
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....nt of more than 3%. It would, therefore, not be correct to contend that had the assessee not resorted to cash/ bearer cheque payments, he would have not been able to carry on the business or would have suffered considerably in the matter of profits from the business. We were informed that after the dissolution of the firm, the accounting year relevant to the assessment year under appeal was the third year in which the assessee, as a proprietary concern, has been carrying on the same business. Major part of his business consisted of dealings with the same parties. There was thus no question of loss of repute etc., and no question of the vendors/ agents distrusting the assessee. We have before us a statement showing classification of the disputed payments. This statement in the paper book has been furnished by the assessee. This statement shows that out of the 22 disputed payments, only 3 cash payments were made to the parties who were new. Similarly, the new parties to whom the bearer cheques were delivered numbered only 7. Rest of the 12 parties were such persons with whom the assessee had already been having dealings. Even these new parties or their agents did belong to Pune. The ....
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....the object for which it has been enacted by the Legislature. The courts/revenue authorities should not be party to the frustration/defeating of the object of the law as handed down by the Legislature. So far as the decisions are concerned, the judgment of the Supreme Court reported in Attar Singh Gurmukh Singh's case is the case on which both the authorities have placed their reliance. Now, it would be seen from this judgment that what was in challenge before the Supreme Court was the constitutional validity of the provision and the applicability of the provision to payments made for acquiring stock-in-trade. The Supreme Court in this judgment was not dealing with the question as to whether claim of deductions on account of cash payments in given cases should or should not be allowed. The Supreme Court has upheld the vires of this provision. This judgment thus does not offer any material assistance to the assessee in the case before us. The next judgment is in the case decided by the Gujarat High Court in Hasanand Pinjomal. Here-again, both the parties before us have sought assistance from this decision. It would be useful to reproduce the following portion from this judgment : ....