TaxTMI 
TaxTMI 
2020 (11) TMI 607
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....o the impugned order of the Ld CIT (A) on the grounds 1. That the impugned order of the Ld CIT(A) is opposed to facts and law of the case insofar as it is prejudicial to the interest of the Appellant. 2. That the Ld CIT(A) erred in confirming the order of rectification which is invalid and bad in law inasmuch as the rectification is carried out on the basis of a mere change in opinion by the Ld AO in respect of issues that were already scrutinized in the order passed under section 143(3) and the same could not have been a subject matter of rectification under section 154. 3. That without prejudice to Ground no 2, the Appellant also objects to the impugned order for the following reasons that. a)The Ld CIT....
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....ccount of the assessee firm was not active. It was stated that the assessee had some business orders in the meanwhile and for purchase of raw material out of commercial expediency had to make cash payments, since the assessee was new in the field. The objections raised by the assessee was rejected and the A.O. passed an order u/s 154 of the I.T.Act (order dated 17.07.2018) by adding a sum of Rs. 1,25,738 to the total income by invoking the provisions of section 40A(3) of the I.T.Act. 4. Aggrieved by the order passed by the A.O. u/s 154 of the I.T.Act, the assessee filed an appeal to the first appellate authority. The CIT(A) confirmed the order of the Assessing Officer passed u/s 154 of the I.T.Act. The relevant finding of the CIT(A) read....
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.....CIT in ITA No.83 of 2010 (judgment dated 29th November, 2018) and the order of Co-ordinate Bench of the Jaipur Tribunal in the case of M/s.A.Daga Royal Arts v. ITO [ITA No.1065/JP/2016 - order dated 15.05.2018] for the proposition that when assessee proves business / commercial expediency, disallowance u/s 40A(3) is unwarranted. 6. The learned Standing Counsel submitted that the assessee's case does not come in any of the exceptions mentioned under Rule 6DD of the I.T.Rules. Further, it was submitted that the issue raised is not a debatable issue and hence, the 154 order is correct and no interference is called for. 7. I have heard the rival submissions and perused the material on record. The assessee is a partnership firm running a ....
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.... provisions of section 40A(3) of the I.T.Act (unlike the residuary rule which was in vogue from 01.04.1970 to 27.07.1995). However, the jurisdictional High Court for assessment year 2005-2006 in case of M/s.M.K.Agrotech Private Limited v. Addl.CIT (supra) had held that if the assessee proves the genuineness of the business expediency, it can still claim the expenditure, as an allowable deduction. The Coordinate Bench of Jaipur Tribunal in the case of M/s.A.Daga Royal Arts v. ITO (supra) had noticed the omission of the residuary Rule 6DD(j) of the I.T.Rules w.e.f. 27.07.1995 and inspite of omission of residuary rule w.e.f. 27.07.1995, the Co-ordinate Bench of Jaipur Tribunal had held that no disallowance u/s 40A(3) is warranted when assessee....
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................. 27. We do not believe that by virtue of these amendments, the legal proposition so laid down by the Hon'ble Supreme court regarding consideration of business expediency and other relevant factors has been diluted in any way. At the same time, we also believe that Rule 6DD as amended are not exhaustive enough and which visualizes all kinds and nature of business expediency in all possible situations and it is for the appropriate authority to examine and provide for a mechanism as originally envisaged which provides for exceptional or unavoidable circumstances to the satisfaction of the Assessing officer whereby genuine business expenditure should not suffer disallowance. ............ 43. In the entire....