TaxTMI 
TaxTMI 
2019 (9) TMI 721
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.... "Act") dated 04-09-2014, fixing the date of hearing for 12-09-2014 was issued which was served upon the assessee. Thereafter, notice under section 142(1) of the Act was issued to the assessee on 01-12-2014, 21-05- 2015, 29-05-2015, 28-08-2015 and 08-12-2015. In response to these notices, AR of the assessee attended the proceedings and filed written reply explaining details, acknowledgment of ITR, audited accounts, tax audit report, details of bank accounts. Detailed questionnaire with notices under section 142(1) of the Act were issued on 23-02-2016, 04-03-2016 and 15-03-2016. The assessee carried the business of builder in the status of Private Limited company. The books of accounts were not produced which were called for and the assessee field letter dated 02-03-2016, the contents of the same are mentioned at page no. 2 of the assessment order. After considering the same, the AO observed that Assessee has failed to submit any evidence that there was bank holiday on 19.9.2012. AO also observed that assessee is changing its stand at every step and claiming exemption for cash payment of sum exceeding Rs. 20,000/- either at one count or other count. There was no exceptional circumst....
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...../2014 for the A.Y. 2006-2007 wherein the in Revenue's appeal similar addition was deleted. He further stated that the above decision of the ITAT, Delhi delivered in the case of ACIT vs. Marigold Mercahndise (P) Ltd. (Supra) on identical facts and circumstances of the case has also been followed by the ITAT, 'D' Bench in the case of M/s KGL Network (P) Ltd. Vs. ACIT which was decided on 02.7.2018 in ITA No. 301/Del/2018 (AY 2014-15) wherein, the appeal of the assessee was allowed on the similar issue and addition in dispute was deleted. 4. On the contrary, Ld. DR draw our attention towards the amendment of Rule 6DD(j) and stated that the amended section now provides that 20 percent of cash expenditure made in violation of section 40A(3) will be disallowed in computing the total income of an assessee irrespective of cash payments made under exceptional or unavoidable circumstances or in case of genuine difficulty to the payee or such other circumstances where cash payment is inevitable. 5. We have considered the rival submissions as well as considered the decision relied upon by the Ld. Counsel for the assessee. We find considerable cogency in the contention of the Ld. Counsel of ....
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....payment is established then provision of section 40A(3) cannot be applied. The Hon'ble Rajasthan High Court while interpreting the provisions of Sec. 40A(3) in the case of Harshila Chordia vs, ITO supra has clearly held that when the genuineness of the transaction/payment is not disputed and the identity of the payee / received is established then such case will fall under the exceptional circumstances covered under-rule 6DD of IT Rules. The decision of the Hon'ble Jurisdictional ITAT in the case of the M/s Ace India Abodes Ltd. vs. ACIT CC-2, Jaipur in ITA no. 79/JP/20110rder dated 12.2.2011 and in the case of the M/s Shree Salaaar Overseas Pvt. Ltd.: vs. DCIT, Circ1e-2 in ITA no. 56/JP/2 10, order dated 21.2.2011 also supported the assessee's contention. The decision of the Jurisdictional High Court and the Jurisdictional ITAT are also of binding nature. Therefore respectfully following the ratios of judgment of the Jurisdictional High Court as well as ITAT decisions, Ld. CIT(A) has rightly held that the assessee's case is found to be covered under the exceptional circumstances under rule 6DD of IT Rules. Accordingly, the addition made by the AO amounting to Rs. 60 lacs was r....
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....ct 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 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 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It wil....
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.... 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 made to principal- Held, yes [ Paras 21 to 23] [in favour of the assesse]" Sri Laxmi Satvanaravana Oil Mill vs CIT reported in (2014) 49 taxmann.com 363 (Andhrapradesh High Court) "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 limit (Rule 6DD) - Assessee made certain payment of purchase of ground nut in cash exceeding prescribed limit - Assessee submitted that her made payment in cash because seller insisted on that and also gave incentives and discounts - Further, s....
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....ue involved is not with regard to the levy of penalty, but the requirement of law to be followed by the assessee was of as technical nature as was in the case of Swastik Roadways (3 SCC 640) and the consequence to fall for failure to observe such norms in the present case are much higher than which were prescribed under the Madhya Pradesh Sales Tax Act. Apparently, it is a relevant consideration for the assessing authority under the Income Tax Act that before invoking the provisions of section 40A(3) in the light of Rule 6DD as clarified by the Circular of the CBDT that whether the failure on the part of the assessee in adhering to requirement of provisions of section 40A(3) has any such nexus which defeats the object of provision so as to invite such a consequence. We hold that the purpose of section 40A(3) is only preventive and to check evasion of tax and flow of unaccounted money or to check transactions which are not genuine and may be put as camouflage to evade tax by showing fictitious or false transaction. Admittedly, this is not the case in the facts of the assessee herein. The payments made in cash to Shri. Amit Dutta had been duly acknowledged by him in an independent de....
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....tta would not fall under the exception clause of Rule 6DD(k). 4.9. We find that one of the grounds raised by the assessee is violation of principles of natural justice on the part of the Learned CIT(A) to enhance the assessment without giving enhancement notice to the assessee. But from the order of the Learned CITA, it is specifically mentioned that the assessee was given due opportunity and show cause notice for enhancement of assessment by Rs. 54,01,473/- for making further additions on account of section 40A(3) of the Act. We find that the assessee had not come on any affidavit before us refuting this finding. Hence the enhancement made by the Learned AO cannot be faulted with on violation of principles of natural justice. 4.10. In view of the aforesaid facts and circumstances and respectfully following the judicial precedents relied upon hereinabove, we have no hesitation in deleting the addition made in the sum of Rs. 60,50,8901- and 54,01,473/- u/s 40A(3) of the Act. Accordingly, the grounds raised by the assesee in this regard are allowed. 5. In the result, the appeal of the assessee is allowed." 7. After perusing the aforesaid decision of the ITAT, Kolkata, we are ....