AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 1516
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1. The CIT(A) is not justified in holding that payments made through uncrossed bearer cheques are to be disallowed under section 40A(3), in the circumstances of the case. 2. As payments made through bearer cheques find place in bank's account statements and serve the purpose of Section 40A(3), proving genuineness of payments and identity of payees, who sign the reverse side of the cheques, a disallowance ought not to have been made, 3. In 63 TTJ 657 and 2009 TIOL 442, the Madras Bench of Income Tax Appellate Tribunal and Madras High Court respectively have held that the Section is inapplicable, when genuine payment is made to identifiable parties out of disclosed sources, 4. The terms of Section 40A(3) ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mination in accordance with law. In pursuant to directions of the ITAT, the AO called upon the assessee to file necessary details with regard to cash payments in excess of prescribed limit as per provisions of Sec.40A(3) of the Act, and also disallowance of payments made to M/s. Srinivasa Roadlines & M/s.Andhra Trans Freight. In response, the assessee submitted that although, he had paid to parties through bearer cheques, but such payments are in accordance with business exigency, because, suppliers were insisting for payment immediately as the assessee has closed down its business. The AO on the basis of information submitted by the assessee and also details collected from the Branch Manager, Axis Bank, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se is covered by the Rule 6DD (k) of the IT Rules, 1962. The Ld.CIT(A) further observed that the assessee could not furnish any evidences to prove that there was a business exigency in making payments through bearer cheques. Therefore, opined that there is no error in the reasons given by the AO to disallow cash payments u/s.40A(3) of the Act, and thus, sustained additions made by the AO. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us. 5. The Ld.AR for the assessee referring to proviso to Sec.40A(3) of the Act, submitted that no disallowance shall be made and no payment shall be deemed to be profits & gains of business or profession under sub-section (3), in such cases and under such circumstances as may be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rds disallowance u/s.40A(3) of the Act, and their orders should be upheld. 7. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The facts with regard to payment through bearer cheques for purchase is not disputed. In fact, the assessee admitted the fact that he had made payments to creditors through bearer cheques. Further, information supplied by the bank in response to notice u/s.133(6) of the Act, also proves payment through bearer cheques. Therefore, we are of the considered view that the assessee has made payments in excess of prescribed limit as per provisions of Sec.40A(3) of the Act, otherwise than by an account payee cheque drawn in a bank or account payee....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee does not come under Clause (k) of Rule 6DD of the IT Rules, 1962. 8. In so far as arguments of the assessee in light of proviso to sec.40A(3) of the Act, we find that as per said proviso, no disallowance shall be made u/s.40A(3) of the Act, in such cases and under such circumstances as may be prescribed having regard to nature and extent of banking facilities available, considerations of business exigency and other relevant factors. In our considered view, those exceptions have been carved out by way of Rule 6DD of the IT Rules, and thus, no benefit can be given, over and above, what was stated in Rule 6DD of the IT Rules. Further, assuming for a moment, the cases and circumstances of consideration of business exigency and ....