TaxTMI 
TaxTMI 
2020 (4) TMI 299
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....ance so made is clearly unjustified and contrary to settled law. 2) That on the facts and in the circumstances of the case as well as in law, the ld. CIT (A) has erred in upholding that the judicial pronouncements relied upon by the Appellant including the judgement of Hon'ble Gujarat High Court in the case of Anupam Tele Services v. ITO [2014] 366 ITR 122 (Gujarat) are not directly applicable to the facts of appellant`s case, whereas the law (Ratio) laid down in the same is clearly applicable in appellant`s case and the appeal of the appellant`s is squarely covered by the above judgement of Hon'ble Gujarat High Court. 3. Succinct facts are that the assessee has claimed an amount of Rs. 2, 63, 51, 228 under the head transportation expenses. In order to ascertain genuineness of the expenditure, to the AO issued notice under section 133(6) of the Act and obtained the Ledger copy of account of certain parties, in which five parties reflected that they had received cash payment in excess of Rs. 20 000, in a day aggregating to Rs. 81,47,100. Therefore, the assessee was asked to show cause as to why the same should not be disallowed under section 40A(3) of the Act. It was exp....
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....ed these lorries for assessee to reconcile the payments and to settle the accounts. The assessee has relied in the case of Attar Singh Gurmukh Singh v. ITO [1991] 59 Taxman 11 (SC), CIT v. Suresh Kumar Agarwal [2001] 117 Taxman 2 (All), Anupam Tele Services v. ITO [2014] 366 ITR 122 (Gujarat) and others as per discussion in the appellate order. However, CIT (A) observed that transportation charges are not just journey expenses of the driver. In journey, expenses could be Rs. 1000 to Rs. 1500, whereas payments shown in ledger account are in the range of 11,000 to Rs. 19,500. Hence, the claim the assessee has refuted. It was further observed that lorries are regularly hired from only 5 transport provider. Therefore, exception provided under rule 6DD(j) is not applicable and also judicial decision do not apply. The decision of Hon'ble Gujarat High Court is not directly applicable to the facts of the case, as in the case of Anupam Tele Services v. ITO [2014] 366 ITR 122 (Gujarat) in that case, the assessee was agent of Tata Tele Services, a monopoly and who had issued a Circular requiring the assessee to deposit cash. Hence, decision of Gujarat High Court is not applicable. In....
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.... exigency and payments to them could have been made by account payee cheques or cross cheques. Further, the genuineness of payments is nothing to do with provisions of section 40A(3) as the same is applicable, if the payments in cash is made in excess of the prescribed limit. The CIT (A) has duly distinguished the case laws relied by the assessee in his appellate order. 7. In rejoinder to above, the learned counsel for the assessee submitted that the CIT (A) has wrongly interpreted the decision in the case of Anupam Tele Services v. ITO [2014] 366 ITR 122 (Gujarat). In Tata Tele Services the appellant was not an agent but was a distributor of Tata tele services. Therefore, where the genuineness of payment is not doubted, nor the identity of the payee and payments have been made due to business exigency, then disallowance under section 40A(3) are not justified. The learned counsel for the assessee further supported his view by placing reliance on the judgement of Hon`ble Punjab & Haryana High Court in the case of Gurdas Garg v. CIT Bathinda [2015] 63 taxmann.com 289 (Punjab & Haryana) wherein it was held that where genuineness of transactions made in cash in excess of Rs. 20,0....
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.... 7. In our opinion, there is little merit in this contention. Section 40A(3) must not be read in isolation or to the exclusion of rule 6DD. The section must be read along with the rule. If read together, it will be clear that the provisions are not intended to restrict the 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 on to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of the income from disclosed sources. The terms of section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. The 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 di....
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....anking facility. Section 40A(3) is, therefore, attracted to payments made for acquiring stock-in-trade and other materials. This is also the view taken by several High Courts. - Sajowanlal Jaiswal v. CIT [1976] 103 ITR 706 (Ori.), U.P. Hardware Store v. CIT [1976] 104 ITR 664 (All.), Raton Udyog v. 1TO [1977] 109 ITR 1 (AIl), PH. Textiles v. CIT [1980] 121 ITR 237 (Ker.), CIT v. Kishan Chand Maheshwari Dass [1980] 121 ITR 232 (Punj. & Har.), Kanti Lal Purshottam & Co. v. CIT [1985] 155 ITR 519 (Raj.), CIT v. New Light Tin Mfg. Co. [1980] 121 ITR 229 (Punj. & Har.), Fakri Automobiles v. CIT [1986] 160 ITR 504 (Raj.), Venkata Satyanarayana Timber Depot v. CIT [1987] 165 ITR 253 (AP), and Akash Films v. CIT [1991] 190 ITR 32 (Kar.). The decisions of the High Courts of Andhra Pradesh, Orissa, Allahabad, Kerala, Karnataka, Punjab & Haryana, Rajasthan and Patna are to the effect that the payments made for purchasing stock-intrade or raw materials should also be regarded as expenditure for the purpose of section 40A(3). The only discordant note struck on this aspect is by the Gauhati High Court in CIT v. Hardware Exchange [1991] 190 ITR 61. The Gauhati High Court has observed that section....
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....) thereof aims at curbing the possibility of onmoney transactions by insisting that all payments where expenditure in excess of a certain sum [in the present case twenty thousand rupees] must be made by way of account payee cheque drawn on a bank or account payee bank draft. As held by the Apex Court in case of Attar Singh Gurmukh Singh (supra), "..In our opinion, there is little merit in this contention. Section 40A(3) must not be read in isolation or to the exclusion of rule 6DD. The section must be read along with the rule. If read together, it will be clear that the provisions are not intended to restrict the 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 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. Considerations of business expediency and other....