AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 289
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.... Assessee filed return of Income on 28.11.2014 declaring total Income of Rs. 5,82,18,710/ - along with exempt incomes shown in books of account of assessee. 2. The Assessee return was processed u/s 143(1) of the Income tax Act and thereafter the case was selected for scrutiny under CASS and notice u/s 143(2) was issued on 28.08.2015. 3. Ld. A.O. made addition on account of various head and aggrieved by the order of Ld. A.O. appeal filed before CIT(A) and CIT(A) dismissed appeal in following grounds. 4. Aggrieved by the order of CIT (A), Assessee filed appeal before your Honors and raised following grounds of Appeal. 1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in confirming disallowances of Rs. 17,21,297/ - by invoking section Rule 6DD r.w.s. 40A(3). 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in confirming addition of Rs. 1,23,336/ - on account of Interest Expenditure. 3. The assessee craves leave to add, alter or amend the existing grounds of appeal on or before the date of hearing. 5. In respect of ground no. 01 in respect of Disallowance of expenses u/s 40A(3) it is submitted that....
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....s as such if one can go to Bank to withdraw money than one can also deposit the cheque in his Bank account and the payment can be drawn on the very same day as all the above persons are having Bank account in the same Branch. Merely citing a judgment of Hon'ble Supreme Court on distinguishable facts is of no help. The assessee has utterly failed in demonstrating the emergency of making payment through bearer cheques. Furthermore the assessee has not disclosed this fact to the Auditor and it has not been reported in the Tax Audit report filed u/s 44 AB in form 3 CD in relevant column as such it is a case of furnishing of inaccurate particulars which is not the intention of the law as well as of the Hon'ble Supreme Court. In view of these facts the it is held that the assessee has deliberately violated the provisions of sec. 40 A (3) and in the assessee's case a sum of Rs. 17,21,297/ - pertaining to the year under consideration is disallowed u/s 40 A (3) and for the payments which pertain to other period remedial action will be taken in relevant year. 7. It is submitted that assessee engaged in such type of business whereas urgent payment require to pay laborer as they are ....
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....hereas held as under. Section 40A(3) of the Income-tax Act, 1961 read with rule 6DD of the Income-tax Rules, 1962 Business disallowance Cash payments exceeding prescribed limit - Whether provisions of section 40A(3), read with rule 6DD, can be said to be intended to restrict business activities and are, thus, invalid - Held, no - Whether section 40A(3) is attracted to payments made for acquiring stock-in-trade and other materials - Held, yes 13. Further we would like to refer the decision of Hon'ble Allahabad High Court in case of Smt. Sangeeta Verma V/s. Commissioner of Income-tax reported in [2021] 133 taxmann.com 97 (Allahabad) held as under. INCOME TAX: Where Assessing Officer made disallowance under section 40A(3) in respect of cash payment for purchasing agricultural land, since affidavits filed by assessee during assessment proceeding contained clear recital that sellers insisted for cash payment, their identity was not in doubt, and sale deeds were also admitted to be registered document, no disallowance under section 40A(3) was called for 14. Further Hon'ble Apex court in case of Lord Chloro Alkali Ltd. reported in [2018] 97 taxmann.com 514 (SC) held as und....
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....refore It is requested to delete the addition confirmed by CIT(A). 4. On the other hand, Ld DR relied upon the orders, passed by the revenues authorities 5. We have heard the counsels for both the parties, perused the material placed on record, judgements cited before us and also the orders passed by the revenue authorities. 6. From the records, we noticed that assessee is an individual is engaged in the business of civil work in the name of "Dev Engineering" and has also possessing agricultural land and having agricultural income from its activities. In this case disallowance was made by AO by invoking section 40A(3) r.w.r 6DD of the Act, as the payments were made by the assessee through bearer cheques and not in cash in the absence of any emergency. 7. It is undisputed fact that being into civil construction work, in number of cases the assessee had made payments towards expenses and purchase through bearer cheques and the maximum payments have been made to labourer contracts and since assessee is engaged in such type of business, where urgent payments are required to be paid to the labourers as they are coming from specific background, and considering the fact that the un- o....
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....d, no - Whether section 40A(3) is attracted to payments made for acquiring stock-in-trade and other materials - Held, yes Further we would like to refer the decision of Hon'ble Allahabad High Court in case of Smt. Sangeeta Verma V/s. Commissioner of Income-tax reported in [2021] 133 taxmann.com 97 (Allahabad) wherein it was held as under. INCOME TAX: Where Assessing Officer made disallowance under section 40A(3) in respect of cash payment for purchasing agricultural land, since affidavits filed by assessee during assessment proceeding contained clear recital that sellers insisted for cash payment, their identity was not in doubt, and sale deeds were also admitted to be registered document, no disallowance under section 40A(3) was called for Further Hon'ble Apex court in case of Lord Chloro Alkali Ltd. reported in [2018] 97 taxmann.com 514 (SC) held as under. II. Section 40A(3) of the Income-tax Act, 1961, read with rule 6DD of the Income-Tax Rules, 1962 Business disallowance Cash payment exceeding prescribed limits (Exceptional Circumstances) Assessee made freight and cartage payments to drivers in excess of limits prescribed under section 40A(3) Assessing Officer, th....