TaxTMI 
TaxTMI 
2019 (1) TMI 37
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....und payable of Rs. 20,60,121/-. The case was selected for scrutiny and a notice under Section 143(2) of the Income TaxAct, 1961, (for short, 'the Act') was issued. The Assessing Officer disallowed Rs. 5,31,09,701/- on the ground that the assessee contravened the provisions of Section 40A(3) of the Act with regard to payments made to the Challakere parties, wherein 20% of the payments made, was disallowed and was added back to the total income. Aggrieved by the same, an appeal was filed before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) held that there is no case for holding that the purchases are bogus. However, it upheld the payments made to Challakere parties, wherein the total purchases for all thre....
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....as not practicable or would have caused genuine difficulty to the payee. It is open for the assessee to identify the person, who has received the said payment. That the object of the Act and Rule is to check the proliferation of black money, which is under circulation. That any restraints intended to curb the chances and to give opportunities to use or create black money should not be recorded as curtailing the freedom of trade or business. Hence, he pleads that the appeal be allowed by setting aside the order passed by the Tribunal. 4. On the other hand, Mr. E. I. Sanmathi, the learned counsel for the respondent, has disputed the same. He contends that there is no satisfactory explanation offered by the assessee as to why the drafts were ....
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....the registered dealer invoice along with valid transit/receipt documents, freight charges paid, weightment slips, etc. of the supplier. The stock register is maintained to record purchase of Sunflower cake. None of these documents are disputed by the Assessing Officer. Letters have been issued by the Bankers which would indicate that the payments made to the suppliers are credited to their respective bank accounts. Therefore, all the purchases made are supported by valid dealer invoices. The Commissioner of Income Tax, having considered the said material,recorded a finding that the parties are existent. That their bank accounts are identified. Except one party, all other parties have filed sales tax returns, though the turnover disclosed is....
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....ent 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 undisclosed sources. The terms of Section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. The 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. It is also open to the assessee to identify the person who has received the cash payment. Rule ....
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....n proved. The Bank report would indicate that demand drafts were admittedly not crossed. However, the payments were credited into the accounts of the payees. Therefore, the object with which Section 40A(3) was promulgated stands satisfied with such material. 11. Further, the only objection was as to why payments have not been made through crossed demand drafts. In fact, in its order, a question was asked as to why the payments were not made in crossed demand drafts. The same is answered by the assessee, who stated that, generally, suppliers require demand drafts for quick realisation. For purchasing the demand drafts normally 'yourself cheque' will be issued to the bankers. The Bank may not have crossed the demand draft. It did not come to....