TaxTMI 
TaxTMI 
2023 (1) TMI 200
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....the assessment year 2014-15 the assessee had filed return of income on 30/09/2014 declaring total income of RS. 11, 52, 200. The return was processed u/s.143 (1) on 03/01/2015 in nil demand. The case was selected for limited scrutiny through CASS reason being cash deposit in savings account is more than the turnover. Notice u/s. 143(2) was served on the assessee's. During the course of assessment proceedings the assessing officer (AO) noticed that the assessee has made several payments exceeding Rs. 20,000 in cash to M/s. Arihant irrigation and M/s. Spectra pipes Private Limited Mysore for purchase of stock. The AO made disallowance u/s. 40 A (3) stating that assessee could not reduce any compelling reason for making cash payment. Aggrieved....
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....ficer year in converting the case from limited scrutiny to complete scrutiny 6B. The assessing officer has violated the instruction number 7/2014, 20/2015 and 5/2016 issued by government of India Ministry of Finance New Delhi. 6C. The disallowance of expenditure for cash payment to suppliers of stock-intrade u/s.40A(3) of Rs.99,99,194 being 48.17% on turnover ofRs.2,31,66,322 is unjustified. 5. During the course of the hearing the learned AR did not press for additional grounds and argued only based on merits. The learned AR submitted that (i) The assessee made payment in cash for supply of goods as insisted by the suppliers by way of adjustment of accounts thereby lawfully discharging his liability for purchase of goods. (ii) ....
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.... affidavit before the CIT in this regard. The provisions of section 40A(3) reads as under - 40A. (1) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head "Profits and gains of business or profession". ****** (3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed], exceeds ten thousand rupees, no deduction shall be allowed in ....
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....g collected by the sales executive/sales officer. (iv) The assessee is an agricultural and used to stay on every Sunday in his house which is in a village, where there is no banking facility and the sales executive used to collect cash on Sundays from the village (v) The observations in paragraph 8 of the assessment order as during the course of hearing the assessee himself has submitted that there was no compelling reason or insistence from the supplier for making payment in cash were untrue, false and contrary to the facts. 9. The proviso to section 40A(3) states that for the purpose of making disallowance under the said section should be done having regard to the considerations of business expediency and other relevant factors. T....