TaxTMI 
TaxTMI 
2023 (8) TMI 1516
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....ces were issued and duly served upon the assessee. During the course of assessment proceedings Ld. AO observed that the assessee has made payments exceeding Rs. 20,000/- against purchase of goods from Visaka Industries Ltd. which was in violation of provisions of Section 40A(3) of the Act. Accordingly, Ld. AO issued show cause notice which was not complied with and consequently Ld. AO added the aggregate of Rs. 1,11,200/- to the total income of the assessee stating the sum as payments in violation of Section 40A(3) of the Act. In the appellate proceedings also Ld. CIT(A) uphold the order of the AO on the ground that the assessee has made payment exceeding Rs. 20,000/- in violation of provisions of Section 40A(3) of the Act. 4. After hearing rival contentions and perusing the material on record, we find that the assessee was regular purchaser of goods from Visaka Industries Ltd. and used to make payments in the ordinary course which were below Rs. 20,000/- and thus, there was no violation of provisions of Section 40A(3) of the Act. The assessee has also produced a confirmation certificate dated 29.03.2014 which is extracted below: Certificate of Payment This is ....
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....le Court has further held as under: "The Income-tax Officer should take a practical approach to problems and strike a balance between the direction of law and hardship to the assessee. He should not enmesh himself in technicalities. After all the object of section 40A(3) is not to deprive the assessee of the deduction which he is otherwise entitled to claim. Where the amount was paid in cash or received in cash, the Assessing Officer has to find out whether the transaction is genuine or not and if he finds that the transaction is genuine, he should allow the deduction. The circular of the Board is not exhaustive; it is only illustrative and the Assessing Officer has to take into account the surrounding circumstances, considerations of business expediency and the facts of each particular case in exercising his discretion either in favour or against the assessee. There may be an oral agreement between the assessee and the seller for payment in cash. A seller may not be willing to accept cheques; cash payment may be made at the request of the payee who is also an assessee and a certificate to that effect filed; absence of banking facilities in places where cash payments are m....
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....tricted to that extent. The purpose of section 40A(3) is not to restrict the assessee's genuine business activity." 7. Thus, in view of the facts of the case and the ratio laid down in the above decisions, we are inclined to set aside the order of Ld. CIT(A) and direct Ld. AO to delete the disallowance. 8. The issue raised in ground no. 2 is against the confirmation of addition of Rs. 80,000/- by Ld. CIT(A) as made by Ld. AO on account of low withdrawal by the assessee. 9. The facts in brief are that Ld. AO during the course of assessment proceedings observed that the assessee has shown drawings for personal expenses at Rs. 75,000/- whereas the premium paid for LIC was to the tune of Rs. 1,77,225/- and accordingly, Ld. AO added Rs. 80,000/- to the income of the assessee on account of low withdrawal. In the appellate proceedings Ld. CIT(A) upheld the order of Ld. AO by holding that the assessee has made sufficient withdrawal and also the fact that the assessee has made withdrawals for payment of LIC premium separately which were duly shown in the capital account of the assessee. 10. After hearing rival contentions and perusing the material on record, we find that tho....
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.... record, balance sheet and profit and loss account for financial year 2011-12, declaration of gift by Smt. Jana, cash flow statement of Smt. Jana, we find that the donor has sufficient sources to explain the gift of Rs. 10,00,000/- made to her husband. We note that the donor in response to the notice issued u/s 133(6) of the Act has duly replied and also furnished the details of the gift with source, mode of gift and purpose for which the gift was made. We note that Smt. Baisakhi Jana was doing independent business and has made a gift out of her own income. We note that the total cash flow as per cash flow statement of Rs. 13,55,086/- and therefore, Mrs. Jana was having sufficient sources available for making the said gift. We have also perused the observations of Ld. AO given in the assessment order and observe that the AO simply took up the balance sheet to arrive at the conclusion that the donor had source only to the tune of Rs. 5,50,000/- whereas the enough sources were available with Mrs. Jana as apparent from cash flow statement. In view of these facts, we are in a position to accept the findings given by the ld. CIT(A). Accordingly, we set aside the order of Ld. CIT(A) and ....