TaxTMI 
TaxTMI 
2017 (9) TMI 1512
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....O. to judge the complexity and nature of accounts or interest of revenue. It is prayed assessment order may be cancelled. 3. The learned Commissioner of Income Tax(Appeals) erred in confirming addition of Rs. 1,16,02,500 without appreciating the fact that appellant purchased capital asset which was converted in stock in trade at subsequent date and all the sellers had declared before the registering Authority that payment was received by them in advance at places which were not served by banks and in some cases on Sundays. (Bank holiday) 4. The appellant craves leave to amend any ground (s) of appeal or add any new ground(s) of appeal before the appeal is finally heard. It is prayed that addition may be deleted." Whereas the following grounds taken by Revenue as under. "1. Whether Ld. CIT(A) is correct in Law and facts in deleting the addition of Rs. 85,50,009/- out of total addition made of Rs. 2,33,16,310/- by admitting the additional evidence produced by the assessee when there was no reasonable cause which were not produced during the course of assessment proceedings and also during special audit. 2. Whether on the facts and circumstances of the case Ld. CIT (A) w....
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....filed by Revenue, Ld. DR submitted that before Assessing Officer vouchers were not produced and therefore, the action of Ld. CIT(A) in not confronting the said vouchers to the Assessing Officer and allowing relief to the to the assessee is not justified. The Ld. DR further submitted that the Ld. CIT(A) has also restricted the disallowance of Rs. 1,22,23,250/- to Rs. 1,16,02,500/- for making cash payments for purchase of land is also not justified. 9.The Ld. AR, on the other hand, submitted that complete books and vouchers were furnished before the Assessing Officer. The Ld. AR in this respect invited our attention to the order of Ld. CIT(A) at page 12, wherein the Ld. CIT(A) has mentioned that after verification of order sheet eateries in the assessment record he has held that Ld. AR had attended the proceedings and had produced the books of accounts and the case was discussed on 16.08.2012 without recording any issue regarding disallowance U/s 40A(3) of the Act. The Ld. AR further submitted that there was no payment exceeding Rs. 20,000/- in cash and it was only bunching of vouchers and Accountant had passed consolidated entries which fact has been verified by Ld. CIT(A) himself ....
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....housand rupees, no deduction shall be allowed in respect of such expenditure. " It is important to note the following proviso to the Section:- "Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section(3) and this sub-section where a payment or aggregate of payment made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft exceeds twenty thousand rupees, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors. " 4. It is important to note some of the findings of fact by the CIT (Appeals). The identity of the payees i.e. the vendors in respect of the lands purchased by the appellant, was established. The sale deeds were produced. The genuineness thereof was accepted. The amount paid in respect of each of these agreements was certified by the Stamp Registration Authority. The CIT (Appeals) held the transactions to be genuine. Accordingly, the CIT held that the bar against the grant of deducti....
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....oresaid Circular shows very clearly that all the circumstances in which the conditions laid down in Rule 6DD(j) could be applicable cannot be spelt out. However, some of them which will seem to meet the requirements of the said rule are as follows: a. the purchaser is new to the seller; or b. the transactions are made at a place whether 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 paument bu way of crossed cheque/draft and the purchaser's business interest would su ffer due to non-availabilitu o f 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 purchase the goods; or f. specific discount is given by the seller for payment to be made by way of cash. 15. It was further clarified in paragraph 6 that the above circumstances are not exhaustive but illustrative. 16. Therefore, in our opinion, the Tribunal was clearly in error in not travelling beyond the circumstances referred to in paragraph 4 of the Circular and. to consider ....
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....he exclusion of Rule 6-DD. The section must be read along with the rule. If read together, it will be clear that the provisions are not intended to restrict the business activities. There is no restriction on the assessee in his trading activities. Section 40-A (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 on to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of the income from disclosed sources. The terms of Section 40-A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. The 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 assessing officer the circumstances under which the payment in the manner prescribed in Section 40-A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. Rule 6-DD prov....
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....er. In the present case the assessee was engaged in the activities as developer of land. Therefore, keeping in view the entire facts and respectfully following the judgment of Hon'ble Punjab & Haryana High Court in the case of Gurdas Garg (supra), we hold that disallowance u/s 40A(3) cannot be made in the present case. 11. In view of the above ground No.3 & 4 of the assessee are allowed whereas ground No.1 & 2 are dismissed as not pressed. 12. In nutshell, the appeal of the assessee is partly allowed. 13. Now coming to the appeal filed by the Revenue, we find that the assessee filed detail submissions before the Ld. CIT(A). It was submitted to the Ld. CIT(A) that vouchers had been prepared by Accountant and entered into in the books of accounts in bunches leading to the impression that amount exceeded Rs. 20,000/- whereas individual payments were not exceeding Rs. 20,000/-. On receipt of written submissions from assessee the Ld. CIT(A) asked Assessing Officer to produce the assessments records for verification of claim regarding production/non production of vouchers/cash payments and also submitted a copy of written submissions to Assessing Officer for his comments. The Assessin....
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....f Rs. 20,000/- in cash had been made and it was only bunching of various vouchers that led to impression of spending in excess of Rs. 20,000/- in cash in a day. The Assessing Officer was required to verify the claim of the appellant during the appellate proceedings and despite opportunity given in this regard no verification report had been submitted. The vouchers produced by the assessee before the undersigned had been examined and it becomes quite apparent that the contention of the assessee in this regard is factually correct. For eg., Voucher No.35 dated 16.04.2008 contains the payment made to following persons amounting to Rs. 1,50,000/- in total. It means that payment of Rs. 1,50,000/- dated 16.04.2008 has been taken up as violation of Section 40A(3) by the Special Auditor as well as by the Assessing Officer but in effect this payment of Rs. 1,50,000/- comprises of nine different separate payments each less than Rs. 20,000/. Similarly, Voucher no.32 dated 15.04.2008 contains the payment made to following persons amounting to Rs. 72009/- in total. It means that payment of Rs. 72009/- has been taken up as violation of section 40A(3) by the Special Auditor as well as by the AO b....