TaxTMI 
TaxTMI 
TaxTMI 
2013 (12) TMI 304
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....owing cash payments made to the railway department to the extent of Rs.32,58,905/- towards purchase of scrap by invoking the provisions of section 40(A)(3) of the Income-tax Act, 1961. 3. Brief facts relevant to the issue are as follows:- The assessee is an individual. He is a dealer in scrap materials. For the concerned assessment year, return of income was filed on 30/9/2008 admitting a total income of Rs.2,47,808/-. The assessment was completed vide order dated 16/12/2010 fixing the total income at Rs.35,07,713/-. In the concluded assessment, the Assessing Officer by invoking the provisions of section 40(A)(3), disallowed cash payment made to the railway department to the tune of Rs.32,58,905/-. The relevant observation of the Assessin....
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....lways. Therefore, the payments made by the assessee cannot be termed as legal tender and hence Rule 6DD(b) is not applicable". 3.1 The disallowance made by the Assessing Officer was affirmed by the first appellate authority and hence, the assessee preferred the present appeal before us. 4. At the very outset, the learned AR submitted that the issue in question is squarely covered by the order of the Tribunal in the case of Sri Devendrappa M Kalal in ITA No.220/Bang/2012 dated 30/3/2012. A copy of the same was placed on record. 5. The learned DR was unable to controvert the submissions made by the learned AR. 6. We have heard the rival submissions and perused the materials on record. The Tribunal in the case cited supra on similar facts ....
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....rofit and gains of business or profession'. However, certain exceptions are laid down in Rule 6DD of the Income-tax Rules 1962, which provides the cases and circumstances in which a payment or aggregate of payments exceeding twenty thousand rupees may be made to a person in a day, otherwise than by an account payee cheques drawn on a bank or account payee bank draft. 13. The exception laid down in clause (b) of Rule 6DD of the Income-tax Rules 1962 relates to the payment made to the Government and reads as under:- "where the payment is made to Government and, underthe rules framed by it, such payment is required to be made in legal tender;" 14. From the above provisions, it i....
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....f CIT(A) Vs. Kalyan Prasad Gupta (cited Supra) has held that the payment made in cash by the assessee to the Government cannot be disallowed u/s 40A(3) of the Act, in view of Rule 6DD(b) of the Income-tax Rules 1962. In the present case also the assessee made the payment to the south western railway, which is a part of the Government of India, therefore, no disallowance was called for. On similar issue, the Hon'ble Delhi High Court in the case of CIT Vs. Rhydburg Pharmaceuticals Ltd., 269 ITR 561 (cited Supra) has held that the payee insisted on cash payment and the transactions were found to be genuine and bonafide, the Tribunal was justified in allowing the expenditure. 15. In the present case also, the south western railway....
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....uded. Genuine and bonafide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. T is also open to the assessee to identify the person who has received the cash payment. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a cross cheques or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of section 40A(3) and rule 6DD that they are intended to regulate business transactions and to prevent the use of unaccounte....