1983 (6) TMI 44

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....Bhatinda (Punjab). In the Bhatinda set, the first ground of appeal relates to the disallowance of Rs. 16,000 under section 40A(3) of the Income-tax Act, 1961 ('the Act'). The addition comprises of the following payments : (i) Rs. 5,000 paid to Union Timber Stores in three amounts of Rs. 2,000, Rs. 1,500 and Rs. 1,500 on the same day, i.e., 3-3-1972. (ii) Rs. 4,000 in two amounts of Rs. 2,000 each on 8-3-1972 to Union Timber Stores. (iii) Rs. 4,000 on 13-12-1972 again to Union Timber Stores in one lump sum. (iv) Rs. 3,000 on 31-5-1972 in two amounts of Rs. 1,000 and Rs. 2,000 for purchase of Tibri sand to Din Dayal Raj Kumar. The explanation furnished by the assessee not having been accepted by the ITO, addition was made under section 4....

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....loo Supply Co. [1980] 121 ITR 680, he pointed out that since the amounts were paid on different occasions on the same day, the assessee could not be subjected to the statutory restriction contained in section 40A(3) unless any one payment was above Rs. 2,500. He pointed out that the word 'sum' in section 40A(3), second proviso of the Act, is used only to indicate an amount of money and does not refer to the totality of the expenditure. So far as the payment of more than one sum of less than Rs. 2,500 at one time on the same day is concerned, Shri Bhargava pointed out that law permitted tax avoidance to the assessee. He pointed out that there were different vouchers and different entries. Referring to the orders of the income-tax authorities....

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....pient party insisted that the payments should be made in cash and that too in three segments on that day. The second payment made on 8-3-1972 also consisted of two sums of Rs. 2,000 each. In reply to a query from the learned counsel for the assessee, we were told that their voucher Nos. 438 and 439, i.e., they were again continuous showing that the payments were made at the same time though shown as two payments. The third payment of Rs. 4,000 was made in one lump sum on 13-12-1972 and in that connection the contention raised on behalf of the assessee before the learned Commissioner (Appeals) was that Union Timber Stores desired money urgently. However, there was no evidence to that effect. The learned Commissioner (Appeals) has also observ....

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....sa High Court upheld the view that the assessee could not be subjected to the statutory restriction contained in section 40A(3), unless any one payment was above Rs. 2,500. In the present case, the amounts were not paid on different occasions on the same day. In fact, the continuity of the voucher Nos. clearly shows that the payment was one and only the vouchers and receipts passed were more than one in order to escape the provisions of section 40A(3). No doubt tax avoidance and tax planning are permissible, but not tax evasion. The learned Commissioner (Appeals), was, therefore, justified in holding that the application of section 40A(3) could not be circumvented by breaking the payment to a particular party in amounts which were less than....