TaxTMI 
TaxTMI 
2016 (10) TMI 1355
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....,72,769/- and for freight Inward Expense for Rs. 27,18,197/-. 3. The assessee filed E-return of income for the year under consideration on 26/09/2009 declaring total income at Rs. 44,98,960/-. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. 4. During the course of the scrutiny assessment proceedings, the A.O. noticed that the assessee has made payments in cash exceeding Rs. 20,000/- in contravention to the provisions of section 40A(3) of the Act which can be understood by the following chart:- FREIGHT (OUTWARD) S. No. NAME OF THE PARTY AGGREGATE OF CASH PAYMENT DISALLOWABLE U/S 40A(3) OF THE ACT 1 Asian Paints Rs. 2,21,40,205/- 2 AVI Addi Rs. 36,266/-....
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....nd 1,30,10,312/-. 8. Assessee carried the matter before the ld. CIT(A) and reiterated what has been stated during the course of the assessment proceedings. 9. After considering the facts and the submissions, the ld. CIT(A) admitted that the A.O. has not doubted the genuineness of the expenditure incurred by the assessee but at the same time observed that it does not mean that disallowance u/s. 40A(3) cannot be made. The ld. CIT(A) accordingly confirmed the assessment. 10. Aggrieved by this, the assessee is before us. The ld. counsel for the assessee reiterated what has been stated before the lower authorities. The ld. D.R. strongly supported the findings of the revenue authorities. 11. We have carefully considered the orders of the auth....
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....the addition on ground that transaction were genuine and payments were also made. * On appeal by the revenue, the Tribunal allowed same. 12. On the above given facts, the Hon'ble Jurisdictional High Court held as under:- * In the present case, neither the genuineness of the payment nor the identity of the payee were in any case doubted. These were the conclusions on facts drawn by the Appellate Commissioner. The Tribunal also did not disturb such facts but relied solely on Rule 6DD (j) of the Rules to hold that since the case of the assessee did not fall under the said exclusion clause nor was covered under any of the clauses of rule 6DD, consequences envisaged in section 40A(3) must follow. * Thus, the Tribunal committed an error....
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....rs of section 40A(3) must be lifted. * The Division Bench of the Rajasthan High Court in case of Smt. Harshila Chordia v. Income Tax Officer [20081 298 ITR 349 had observed that the exceptions contained in rule 6DD are not exhaustive and that the said rule must be interpreted liberally. * In the result, the question is answered in favour of the appellant assessee. 13. It would also be pertinent to refer to the relevant observations made by the Hon'ble Jurisdictional High Court which reads as under:- 18. It could be appreciated that Section 40A and in particular sub-clause (3) thereof aims at curbing the possibility of on-money transactions by insisting that all payments where expenditure in excess of a certain sum [in the present ....
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....es that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of section 40A(3) and rule 6DD that they are intended to regulate business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions." 19. It was because of these considerations that this Court in case of Hynoup Foods (P.) Ltd. (supra) observed that the genuineness of the payment and the identity of the payee are the first and foremost requirements to invoke the exceptions carved out in rule 6DD(j) of the Income-tax Rules, 1962. 20. In the present case, neither the genuineness of....
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.... (v) if the assessee had not made cash payment and relied on cheque payments alone, it would have received the recharge vouchers delayed by 4/5 days and thereby severely affecting its business operations. 22. We would find that the payments between the assessee and the Tata Teleservices Limited were genuine. The Tata Teleservices Limited had insisted that such payments be made in cash, which Tata Teleservices Limited in turn assured and deposited the amount in a bank account. In the facts of the present case, rigors of section 40A(3) of the Act must be lifted. 23. We notice that the Division Bench of the Rajasthan High Court in case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 (raj) had observed that the exceptions contained ....