TaxTMI 
TaxTMI 
2020 (3) TMI 873
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....amounts to incorrect assumption of facts and therefore, as held by the Hon'ble Supreme Court in Malabar Industrial Co. Ltd v. CIT - (supra), , his order is erroneous. Further, such an action of the A.O. has led to loss of tax that has been treated as prejudicial to the interest of the revenue by the Hon'ble Calcutta High Court in Dawjee Dadabhoy & Co. [31 ITR 872 (Cal)]. Thus, it is held that the order passed by the A.O. u/s 143(3) dated 18/03/2016 is erroneous in so far as it is prejudicial to the interests of the revenue. 12. Under these circumstances, I am of the considered opinion that it is a fit case for invoking provisions u/s 263 of the I.T. Act. Thus, the case is being restored back to the file of A.O. u/s 263 on the issue of expenditure incurred in cash violating the provisions of Sec. 40A(3). While framing the assessment, the A.O. shall consider above mentioned issues and conduct necessary enquiries and verifications in this regard. Needless to add that the AO shall provide a reasonable opportunity of being heard to the assessee before finalising the assessment." 3. The ld. Counsel for the assessee submitted that the Tribunal may uphold the order of the Pr. CIT pass....
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....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 transactions. Admittedly, this is not the case in the facts of the assessee herein. The assessee had directly deposited cash in the bank account of the supplier M/s Pickme Feeds which fact is also acknowledged by the concerned supplier by crediting the said cash receipts in the ledger account of the assessee and the same ledger account has been obtained by the Learned AO u/s 133(6) directly from the concerned supplier M/s Pickme Feeds. It is also pertinent to note that in the case of Smt. Harshila Chordia v. ITO 2006 (11) TMI 117 - RAJASTHAN HIGH COURT had held that the exceptions contained in Rule 6DD of Income-tax ....
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....cause notice dated 20.8.2010 was issued by the Learned AO to the assessee in this regard. Detailed submissions were made before the Learned AO by the assessee on 19.10.2010 explaining the facts and the legal stand taken by the assessee on the impugned issue. Sri Amit Dutta had also deposed before the Learned AO u/s 131 of the Act confirming the receipt of monies in cash from the assessee and further stated that he had persuaded the assessee to pay only in account payee cheques to get away from the rigours of section 40A(3) of the Act, but the assessee continued to make certain payments in violation of section 40A(3) of the Act. The Learned AO relying on all these facts sought to disallow a sum of Rs. 60,50,890/- u/s 40A(3) of the Act. 4.1. On first appeal, the Learned CITA upheld the addition of Rs. 60,50,890/-made by the Learned AO and further sought to disallow another sum of Rs. 54,01,473/- towards cash payments made for purchases thereby enhancing the assessment by Rs. 54,01,473/- Aggrieved, the assessee is in appeal before us by raising the several grounds. Though the assessee had raised several grounds in his appeal, the central ground revolves only around disallowance u/s....
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.... 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 fundamental right to carry on business. If read together with Rule 6DD of the Income-tax Rules, 1962, it will be clear that the provisions are not intended to restrict 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 ....
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....ne. " Anuvam Tele Services vs ITO in (2014) 43 taxmann.com 199 (Guj) "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 limits (Rule 6DD(j)-Assessment year 2006-07 -Assessee was working as an agent of 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 assessee]" Sri Laxmi Satvanaraxana Oil Mill vs CIT reported in (2014) 49 taxmann.com 363 (Andhravradesh Hieh Court) "Section 40A(3) of the Income-tax Act, 1961, read with Rule 6DD of the Income-tax Rul....
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.... tax evasion by the owner of the goods and the failure of C & F agent to furnish information required by the Commissioner is implicit in section 57(2) and the assessing authority concerned has to necessarily record a finding to this effect before levying penalty u/s. 57(2). Though in the instant case, the issue 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 unaccoun....