AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 777
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....d to the assessee as to why disallowance should not be made U/s 40A(3) of the Act. The various contentions of the assessee so raised were not found acceptable by the Assessing Officer and the relevant findings of the Assessing officer are contained at paras 2.1 to 2.3 which are reproduced as under:- "2.1 The explanation so made by the AR of the assessee has been duly considered and found to be self explanatory that the earlier RSEB which was Government body has been unbundled into five private companies out of which one is JDVVNL. The same explanation made by the assessee cannot be accepted as the JDVVN ltd is an individual entity incepted in the form of limited company and the transactions made to such company do not fall under the clauses (a) to (1) of Rule 6DD of the IT Rules, 1962. It is pertinent to mention that the payments made to Government under the rules requiring that such payment be made in legal tender. The CBDT vide Circular No. 34 dated 05/03/1970 has clarified that payments made to the Railways on account of freight charges or for booking of wagons and payment towards sales tax/excise duty are only to be considered under this clause. 2.2 On this issue, reliance ....
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....open to the assessee to furnish to the satisfaction of the AO, the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulties to the payee. Hence even without considering rule 6DD if a payment is genuinely made and the circumstances are such that the payment can't be made by cheque, provisions of section 40A(3) would not be attracted but in this case the appellant failed to established that which factors prevent him to make the payment by cheque and in which circumstance he had made payment in cash therefore the facts of this care are totally different from the cited cases. Considering the above facts and observation I am of the view that the payment made to JdVVNL in cash more than Rs. 20,000/- are violation of 40A(3) of the I.T. Act. The Assessing officer made the disallowance u/s 40A(3) of the I.T. Act of Rs. 14,09,082/- . On verification of records, it is found that cash payment was made only Rs. 12,31,292/- and balance amount of Rs. 1,67,790/- is shown as liability in the books of accounts. Therefore the appellant made the violation of 40A(3) of the I.T. Act of Rs. 12,31,292/-. Accordingl....
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....ectricity charges is made to the Government on which section 40A(3) do not apply. Thus, there is a reasonable cause in making payment of some bills of electricity of JdVVNL in cash. Further, cash payment was made on last due date/just a day before to avoid late fees/disconnection. 4.4 It was further submitted that the object of Section 40A(3) is to check evasion of taxes so that the payment is made from disclosed sources and not to deprive the assessee of the deduction, which is otherwise entitled to. Where the amount was paid in cash or received in cash, AO has to find out whether the transaction is genuine or not and if he finds that the transaction is genuine, he should allow the deduction. The AO has to take into account the surrounding circumstances, consideration of business expediency and the facts of each particular case in exercising his discretion [Giridharlal Goenka v. CIT (1989) 179 ITR 122, 127 (Cal.)]. In other words, object of enacting section 40A(3) is to ensure that the payment in respect of which deductions are claimed by the taxpayers are genuinely made and accommodation payments are not claimed as deduction [173 ITR 358, 363(AP)]. The Supreme Court in case of A....
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....those admitted in emergency cases by not operating these machines for want of electricity. Therefore, we find force in the contention of the ld AR that there was business expediency of making cash payments so that there is no disruption in supply of electricity required to operate the MRI and CT scan machines. Further, we note that it is not in all cases that the payments have been made in cash, rather the assessee has made cheque payments as well during the year. Therefore, it is in only those cases where the cheque payments couldn't be arranged nearing the due date of payment that the payments have been made in cash. In case of ACIT vs. Sh. Rahul Pancholi (ITA No. 949/JP/2013 order dated 30.09.2015), the Coordinate Bench has deleted the disallowance under similar circumstances and held as under: "We find from the records that the assessee has paid in cash electricity bill of Rs. 80,092/- for the month of Nov. 2008 to Rajasthan State Electricity Board under the bona fide belief that the payment is made to the Government because of the business expediency and to avoid electricity connection. The ld. CIT(A) has taken into consideration the decision of Hon'ble Delhi High Court ....
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....d by law and have to follow the law passed by legislator. If such view is considered, it would make proviso to section 40A(3) redundant. The ld. Counsel for the assessee, however, given an undertaking during the course of hearing that assessee, in future has made alternate arrangement to make payment for electricity bill as per provisions of law so that there is no violation of provisions of section 40A(3) of Income Tax Act. 6. Considering the totality of the facts and circumstances in the light of the above discussion, I agree with the view of the learned Accountant Member in allowing the appeal of the assessee holding that no disallowance should be made under section 40A(3) of the Act, in facts and circumstances of the case. I, therefore, agree with the view of learned Accountant Member. Let the file be placed before the regular Division Bench for passing a consequential order." 8. In the entirety of facts and circumstances of the case and respectfully following the legal proposition laid down by the various Courts and Coordinate Benches referred supra, we are of the view that there is no dispute regarding the identity of state electricity distribution company, the genuineness....