TaxTMI 
TaxTMI 
2018 (10) TMI 1437
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....ted 05. 12. 2011 for the Assessment Year 2009-10. 2. The first issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the disallowance made in the sum of Rs. 9,08,882/- u/s 40A(3) of the Act in the facts and circumstances of the case. 3. The brief facts of this issue are that the assesee is a civil contractor and had filed his return of income for the Asst Year 2009-10 on 27. 9. 2009 declaring total income of Rs. 26,74,450/-. The ld AO during the course of assessment proceedings observed that the assessee had made payments frequently for purchase of building materials for the purpose of construction. He purchased sand, morrom and boulders from the agents of the suppliers. The payments were made to the a....
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...., which were to fall on account of non-observation of Section 40A(3) must have nexus to the failure of such object. Therefore, the genuineness of the transactions being free from vice of assessment any device of evasion of tax is relevant consideration. In this regard, it is pertinent to through light on the following decisions on the impugned subject: * Attar Singh Gurumukh 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 fu....
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....se of unaccounted money or reduce the chances to use black money for business transactions. " * CIT vs Crescent Export Syndicate, reported in [2013] 216 Taxman 258, Calcutta High Court: "It also appears that the purchases have been held to be genuine by the learned CIT(Appeal) but the learned CIT(Appeal) has invoked Section 40A(3) for payment exceeding Rs. 20,000/- since it is not made by crossed cheque or bank draft but by hearer cheques and has computed the payments falling under provisions to Section 40A(3) for Rs. 78,45,580/- and disallowed @ 20% thereon Rs. 15,69,116/-. It is also made clear that without the payment being made by bearer cheque these goods could not have been procured and it would have hampered the supply of goods ....
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....ctfully following the judicial precedents relied upon hereinabove, we direct the ld AO to delete the disallowance made u/s 40A(3) of the Act in the sum of Rs. 9,08,882/-. Accordingly, the Revised Grounds 2(a) and 2(b) raised by the assessee are allowed. 5. The last issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the disallowance made u/s 40(a)(ia) of the Act in the sum of Rs. 3,84,922/- on account of carriage inwards, in the facts and circumstances of the case. 6. The brief facts of this issue are that the assessee had paid total amount of Rs. 17,14,620/- as carriage inwards. The ld AO observed that in respect of the following parties, the payments made were more than Rs. 50,000/- in a whole year....