AI Drafter 
TaxTMI 
TaxTMI 
2016 (9) TMI 995
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....the sake of convenience. We, therefore, are taking the facts of the case for the AY 2009-10 as a lead case for the sake of convenience. The grounds raised by the assessee per its appeal are as under:- "1. That, the appellate order passed by Ld. CIT(A), is arbitrary, erroneous, and hence bad in law. 2. That, on the facts and circumstances of the relevant case, Ld. CIT(A) has erred in confirming the disallowance of Rs. 62,48,722/- [U/s 40A(3) of I.T. Act, 1961 being made by Ld. AO in his order u/s. 143(3)] 3. That, the Ld. CIT(A) has confirmed the disallowance of Rs. 62,48,722/- U/s 40A(3) of I.T Act, 1961 I the said case without appreciating that--- i) That Ld. AO had made the disallowance of Rs. 62,48,722/- in the said without considering the reply of the appellant submitted in response to his show cause letter. ii) The Ld. AO has failed to consider that the payment to excise had been made by the approved bottler here through its Current Account maintained with the State Bank of India, Asansol. iii) The Ld. AO had also failed to consider the circulars of Excise Deptt. Govt. of West Bengal issued with respect to the matter of pay....
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....andates that payment other than by way of account payee cheque or Demand Draft entails disallowance. 6. Rules 4 and 5 of West Bengal Excise (Supply of Country Spirit on payment of Duty) Rules, 2005 prescribe the manner of payment to West Bengal Govt. it states that bottling plant has to make advance payment to Govt. and sums paid by individual dealers are debited to the advance. There is no remittance of case by case remittance of sums paid by dealers to bottling plant for subsequent remittance by bottling plant to Govt. the rules n where prescribe mandatory cash payment. 7. The appellant also relies on observations in paragraph 4 of the order of Hon'ble. Income Tax Appellate Tribunal in M/s Arpita Traders vs. ITO Ward-2 Cooch Behar in ITA No.1542/Kol/2012. Paragraph 4 is not a decision. It narrates a compulsive situation. A part of very same order is being relied upon by me. In paragraph 5 it is stated that "when the Government makes is compulsory to pay in cash." Whether a compulsion exists or not in matter of fact and compulsion is a pr-requisite to be proved. The appellant is duty bound to explain the compulsion. In other words, on facts and circumstances ....
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....Gurmukh Singh vs ITO reported in (1991) 191 ITR 667 (SC) "Section 40A(3) of the Income-tax Act, 1961, which provides that expenditure in excess of Rs. 2,500 (Rs.10,000 after the 1987 amendment) would be allowed to be deducted only if made by a crossed cheque or crossed bank draft (except in specified cases) is not arbitrary and does not amount to a restriction on the fundamental right to carry on business. If read together with Rule 6DD of the Income-tax 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. Section 40A(3) only empowers the Assessing Officer 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 section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken o....
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.... appears from the order so passed by the learned Tribunal. It further appears from the assessment order that neither the Assessing Officer nor the CIT(Appeal) has disbelieved the genuineness of the transaction. There was no dispute that the purchases were genuine." Anupam Tele Services vs ITO in (2014) 43 taxmann.com 199 (Guj) "Section 40A(3) of the Income-tax Act, 1961, read with rule 6DD of the Income-tax Rules, 1962 - Business disallowance - Cash payment exceeding prescribed limits (Rule 6DD(j)-Assessment year 2006-07 - Assessee was working as an agent of Tata Tele Services Limited for distributing mobile cards and recharge vouchers - Principal company Tata insisted that cheque payment from assessee's co-operative bank would not do, since realization took longer time and such payments should be made only in cash in their bank account - If assessee would not make cash payment and make cheque payments alone, it would have received recharge vouchers delayed by 4/5 days which would severely affect its business operation - Assessee, therefore, made cash payment - Whether in view of above, no disallowance under section 40A (3) was to be made in respect of payment mad....