TaxTMI 
TaxTMI 
2022 (3) TMI 1126
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....A(3) of the Income Tax Act, 1961 from various agencies on different dates, as reproduced by the Assessing Officer (hereinafter in short as "the AO") vide Page Nos. 2 & 3 of the Assessment Order dated 26.12.2017, as under: Sl. No. Date Description Amount Rs. (1) 20.04.2014 Purchase of petrol from Velavan Agencies 1,10,000/- (2) 30.04.2014 Purchase of petrol from Velavan Agencies 1,10,000/- (3) 31.05.2014 Purchase of petrol from Velavan Agencies 3,20,000/- (4) 30.06.2014 Purchase of petrol from Sri Satya Agencies 2,90,000/- (5) 30.09.2014 Purchase of petrol from Sri Satya Agencies 5,20,000/- (6) 31.10.2014 Purchase of petrol from Velavan Agencies 9,60,000/- (7) 30.11.2014 Purchase of petrol from Sri Satya Agencies 7,40,000/- (8) 31.12.2014 Purchase of petrol from Velavan Agencies 12,10,000/- (9) 31.01.2015 Purchase of ....
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....,000/- to two dealers. The entire amount has been paid in cash. There are no extraordinary circumstances that forced the Appellant to make payment in cash. The case laws relied on by the Appellant are in the context of cash payments which had to be made on emergency situations, where Bank transactions were not possible. These dealers are the regular vendors for the Appellant. There is a running account with each one of them. In order to circumvent the provisions of Section 40A(3), the Appellant has obtained receipts of amounts below Rs. 20,000/-. Even in the books of accounts, the relevant ledger was captioned as "Credit purchase statement of accounts of the supplier". It is clear from the facts that the Appellant was in the habit of purchasing the petrol regularly and was subsequently making lump-sum payments in cash periodically. Accordingly, the transactions are entered in the account books. It is not a case of making payment below Rs. 20,000/- and accounting it in the books as such on the date of transaction Disallowance of Rs. 76,50,000/- has been rightly made and the same is confirmed." 5. Before us, the ld. Counsel for the assessee reiterated the submission made before th....
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....(3) of the Act. 9. On identical facts, the Madras Jurisdictional High Court in the case of "N. Mohammed Ali Vs. Income Tax Officer, Ward - VII (2), Chennai reported in [2016] 65 taxmann.com 189 (Madras) has held as under: "16. If the assessee is not entitled to a deduction under section 40A(3), the income chargeable to tax will go up and the tax payable by him will naturally go up. If it is not, the benefit goes to the assessee. Therefore, it is clear that this is a case which satisfies the twin requirements under section 263(1). Consequently, questions 1 and 2 are answered against the assessee. 17. Question No. 3:- As we have stated earlier, the third question relates to the applicability of the provisions of section 40A(3). Section 40A deals with expenses or payments not deductible in certain circumstances. Under sub-section (3) of section 40A, any expenditure incurred by an assessee, if made to a person in a day, otherwise than by way of an account payee cheque drawn on a bank or account payee in excess of Rs. 20,000/-, no deduction can be allowed. The details furnished in the show cause notice dated 18.2.2005 by the Commissioner show that the assessee had a....
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....20,000/- to a single person on a single day, he is not entitled to any deduction in respect of such expenditure. The rule under sub-section (3) is not very rigid. It admits of three exceptions, which are narrated in the proviso. If an assessee could prove that having regard to the nature and extent of banking facilities, or having regard to the consideration regarding business expediency or having regard to the other relevant factors, it would not be possible for him to make payments by way of cheque or demand draft, the assessee would, still, be entitled to deduction. Therefore, it is for the assessee to prove the existence of (1) nature and extent of banking facility that compelled him to make payment in cash (2) consideration of business expediency that compelled him to make payments in cash and (3) any other relevant factors that would justify such a payment. 21. In the case on hand, the books of accounts maintained by the assessee reflected that payments were made to three different suppliers. One was Standard Fireworks, the second was Indira Prints Pack and the third supplier was Sivakasi Fireworks. But, insofar as, Indira Prints Pack is concerned, payment was less t....
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.... which we have extracted above shows the consolidation of payments made on every day to everyone of those suppliers. Sub-section (3) uses even the expression "aggregate of payment made to a person in a day" Therefore, any amount of explanation that the assessee gave in response to the show cause notice, could not have gone against the very entries made in the books of accounts. 24. We are not for a moment to be understood to suggest that the books of accounts should have been more carefully drawn. All that we are suggesting is that atleast the names of the agencies or agents or retailers to whom payments were made on a day to day basis, on behalf of the original manufacturers should have been mentioned. In the absence of any specific detail, the vague statements made in response to the show cause notice, cannot offset the entries made in the books of accounts. Therefore, we cannot find fault with the conclusion reached either by the Commissioner or by the Tribunal in this regard Hence, the fourth question of law is answered against the assessee." 10. In view of the above, we do not find any merit in the submissions of the learned Counsel for the Assessee on the issue of....