TaxTMI 
TaxTMI 
2012 (2) TMI 307
X X X X Extracts X X X X
X X X X Extracts X X X X
....1993-94 and 1994-95 respectively. 2. After hearing counsel for both the parties, we hereby frame the substantial question of law, being common to the three appeals, as under: - "(i) Whether Income Tax Appellate Tribunal was right in holding that the payments above Rs.10,000/- each made in cash by the appellant assessee violated Section 40A (3) of the Income Tax Act, 1961 read with Rule 6 DD (j) of the Income Tax Rules, 1962." 4. The appellant-assessee is engaged in the business of film distribution. During the three relevant assessment years, the appellant-assessee made payments in cash, the details of which are given as under: - DESCRIPTION OF CASH TRANSACTION FOR ASSESSMENT YEARS 1992-93, 1993-94 & 1994-95 INVOLVED IN THE APPEALS" ASS....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 40A(3) of the Income-tax Act, 1961, shall be made where the assessee satisfies the Income-tax Officer that the payment could not be made by way of a crossed cheque drawn on a bank or by a crossed bank draft - (a) due to exceptional or unavoidable circumstances; or (b) because payment in the manner aforesaid was not practicable, or would have caused genuine difficulty to the payee, having regard to the nature of the transaction and the necessity for expeditious settlement thereof; and also furnishes evidence to the satisfaction of the Income-tax Officer as to the genuineness of the payment and the identity of the payee. xxxx xxxx xxxx 4. All the circumstances in which the conditions laid down in rule 6DD(j) would be applicable cannot be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....et the requirements of rule 6DD(j)." 7. The Tribunal has rejected the explanation given by the appellant-assessee, inter alia holding that the said payments should have been made through account payee drafts and by depositing cash in the bank account in order to issue the drafts. The reasoning given by the Tribunal in the impugned order reads as under: - "12. The general rule is that the explanation offered by the assessee should not be vague, fantastic or fanciful. It must be an explanation acceptable to the fact finding authority. It must be supported with cogent reliable and relevant evidence only then the explanation offered by the assessee could be called genuine and bonafide. In the instant case in order to get out of the clutches o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... From the facts narrated above, we conclude that the explanation offered by the assessee is fantastic and fanciful but does not appeal to reason in view of the circumstances, as detailed hereinabove, and, hence, the same cannot be accepted being not bonafide and genuine and is accordingly rejected. For the reasons stated above the consolidated order of CIT(A), confirming the order of AO in making the impugned addition under provisions of S. 40A(3) of I.T. Act, is upheld. The ground nos.1 to 3 of the instant appeals of the assessee are rejected." 8. There is no dispute in the present case regarding the identity of the payee and genuineness of the transaction/ payment and the respondent-Revenue has not denied and/ or contested the sam....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appellant-assessee did not have sufficient cash balance. This position is clear and cannot be doubted. The appellant-assessee had submitted that if they had failed to make cash payments, they would have breached terms of the agreements entered into with the third parties or would have missed out on the business opportunity. In cases of earlier bounced cheques and when a party is facing liquidity problem, it can get difficult as third parties are reluctant to accept cheques and insist on cash payments. Arranging funds is also a problem and not easy. It is submitted that the Assessing Officer did not doubt the funds and no addition on this ground and reason was made. The stand of the appellant was that the cash was made available since M/s. R....