TaxTMI 
TaxTMI 
2014 (10) TMI 1039
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....ar declaring income of Rs. 6,61,140. During scrutiny proceedings, assessee had produced books of accounts, documents, evidence and other details. Assessing Officer has mentioned in the assessment order that assessee had filed copies of bank account statements, bills and vouchers, list of sundry debtors and creditors, details of investments and deposits. Thereafter, assessment was completed u/s. 143(3) on 26.3.2013 wherein certain additions were made to the returned income viz., for difference in closing stock, difference in sundry creditors, disallowance of certain expenses, difference in capital account and disallowance for non-compliance of TDS provisions. 3. Thereafter, on 7.8.2013, CIT issued notice u/s. 263 of the Act. According to hi....
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....f certain quasi-judicial powers, and decisions of the appellate forums, in general, do not prevent him from raising demands on those issues, unless these decisions are accepted by the revenue. No doubt, the Assessing Officer should follow the judicial decisions as long as he can do so without sacrificing the legitimate interests of the revenue, but we cannot visualize a situation in which his not raising demands on those issues will not affect the interests of revenue. In case the Assessing Officer does not raise the demands on the issues which have been decided in favour of the assessee by jurisdictional High Court, even though the income tax department is in appeal against the same, interests of the revenue will be clearly prejudiced and ....
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....13) 17 taxman.com 71 (Mad), which had held that provisions of section 40A(3) were attracted to cash deposits made directly to the accounts of suppliers. According to him, the view, even if there was one taken by the AO, was not in accordance with law, and this rendered the assessment erroneous and prejudicial to the interests of revenue. He thus invoked the powers vested on him u/s. 263 of the Act and set aside the assessment order with a direction to the AO to recompute the income by disallowing payments to creditors to the tune of Rs. 41,85,020 u/s. 40A(3) of the Act. 7. Now before us, the ld. AR submitted that ld. CIT was trying to substitute a lawful view taken by the AO. According to him, the same issue was considered by the AO and as....
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....he paperbook filed by the assessee. In the letter dated 8.3.2013 sent by the assessee to the AO, this aspect has been elaborately dealt with. The said letter is reproduced verbatim hereunder:- "Sub: Scrutiny proceedings AY 2010-11 - Calling for information - Clarifications - Regarding. In the course of our case hearing your goodself have raised the issue of cash payments to our suppliers through their [suppliers] Bank Accounts. These payments are made as the parties are wide spread in the villages and towns of Karnataka and where they are in remote places and not connected with net banking system. The payments are also otherwise made to our parties who are not operating net banking system. On their pressure we are forced to make these p....
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....s are genuine and are done mainly for business necessity. Cash payments directly into bank account of the suppliers enables verification of the transaction from origin to the conclusion and ensures that the payee alone receives the payment and also as there is no case of any unaccounted money that could be said to have been employed to make the payments. Ours is a covered matter by the Hon'ble Income Tax Appellate Tribunal which is based on the judgment of Supreme Court. Hon'ble ITAT Bangalore Bench 'A' in the case of The Dy. CIT Vs M/s Sandur Sales and Services Pvt. Ltd, ITA No.872(BNG)/2011 A.Y.2005-06 has allowed the appeal of the Assessee in similar circumstances. The extract of the Decision is enclosed to this letter for your kin....
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....the payee alone receives the payment and the origin and conclusion of transaction is traceable Thus, payment of sum directly in the bank account of payee fulfils the criteria for ensuring the object of introduction of Sec 40A(3). This is not a direct payment to the payee but only to the credit of this bank account without the payee actually receiving the cash. We accordingly, hold that such payment is not in violation of provisions of sec.40A(3) and hence no disallowance is called for." The above Tribunal case and the principle held in Apex Court Decision is squarely applicable in our case. From the above it is evident that the transactions are, not in violation of provisions of Section 40A(3) of the Income Tax Act, 1961 and accordingly....