TaxTMI 
TaxTMI 
2008 (3) TMI 350
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....d to counter tax evasion. It was felt by the Government that the assessees claim expenditure incurred in cash which frustrate proper investigation by the department as to identity of payee and reasonableness of payment. Section 40A(3) was designed to counter tax evasion through such claims of expenditure in cash. Therefore, obviously the provisions of section 40A(3) are attracted only in cases where the genuineness of the expenditure incurred in cash is in doubt. He stated that right at the time of insertion of section 40A(3) in the Act, there was apprehension that the provisions may cause undue hardship and inconvenience to certain assessees in respect of cases where payment by cheque is not feasible due to some genuine reasons. So powers were given to the CBDT to notify in the Income-tax Rules exceptions to the provisions of section 40A(3) having regard to the nature and extent of banking facilities available, consideration of business expediency and other relevant factors. Accordingly, the nature and circumstances under which provisions of section 40A(3) will not be operative were specified in the Income-tax Rules vide rule 6DD under Notification No. SO 624, dated 14-2-1969. Apa....
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.... factors. Therefore, the moot question is whether by omission of Rule 6DD(j) the intention of the Legislature is to disallow 20 per cent of the genuine and legitimate claim of bona fide business expenditure merely because the payment is made in cash exceeding Rs. 20,000? Whether the business necessity or commercial expediency recognized all along for the purpose of allowance of any expenditure now no longer to be a recognized reason while considering the disallowance of such expenditure? He submitted that if the interpretation made by the Assessing Officer is accepted, it would amount that 20 per cent of the genuine and bona fide expenditure incurred by an honest taxpayer would be disallowed merely because the payment was made in cash exceeding Rs. 20,000 even if there was business necessity or commercial expediency making the payment by account payee cheque/draft impracticable. At the same time, 80 per cent of the bogus expenditure by unscrupulous taxpayer would be allowed because of disallowance of just 20 per cent provided in section 40A(3). He, therefore, submitted that section 40A(3) and rules framed thereunder should be interpreted keeping in view the object of introduction o....
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....ued so that absurdity and mischief may be avoided. 2.5 He fairly pointed out that Hon'ble Andhra Pradesh High Court in the case of Smt. Ch. Mangayamma v. Union of India [1999] 239 ITR 687 and the Kerala High Court in the case of Kamath Marbles v. ITO [2003] 260 ITR 470 have upheld the constitutional validity of section 40A(3) and of Rule 6DD after amendment by the Finance Act, 1995 and the Income-tax Fourth Amendment Rules, 1995 respectively. 2.6 He further submitted that while upholding the constitutional validity of amendment in section 40A(3), the Andhra Pradesh High Court in the case of Smt. Ch. Mangayamma mentioned the exceptions provided in the second proviso of section 40A(3). Therefore, even after the deletion of clause (j) of Rule 6DD, the exceptions mentioned in second proviso of section 40A(3) would still continue to apply in view of the substantive provisions, i.e., second proviso to section 40A(3). He also relied upon the decision of Hon'ble Apex Court in the case of Union of India v. A. Sanyasi Rao [1996] 219 ITR 330 in support of his argument that the heads of legislation in the lists should not be construed in a narrow and pedantic sense, but should be given a....
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....ssued to the assessee for supply of kerosene oil to the specified M.R. dealers in specified quantities. The purchase price to be paid to the agent as also the sale price to be charged from M.R. dealer is periodically determined by the Department of Food and Supplies. As per the allotment memo issued to the assessee by the Department of Food and Supplies for the purchase of kerosene oil, the assessee is required to make the payment in cash. In support of this contention, he produced before us the copies of allotment letters issued by Sub-Divisional Controller, Food and Supply, Jangipur. He stated that the assessee has only given a few allotment letters as an example and in all other allotment letters similar directions are given. In the allotment letter, there is clear direction to the agent to deliver the specified quantity of kerosene oil to the assessee on cash payment. He, therefore, stated that when the assessee is working as a licensee being a part of the public distribution system of the Government of West Bengal, it is bound to make the payment as directed by the Government of West Bengal. The assessee cannot unilaterally decide the mode of payment to the agent. He, therefor....
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....ee very badly. He submitted that the CIT(A) has rightly appreciated the facts of the case and allowed relief to the assessee. The order of the CIT(A) should be sustained. 2.12 Sri Tulsiyan speaking on behalf of the assessees who are engaged in the business of manufacture and export of leather goods submitted that such assessees purchase hides from the producers thereof. Hides and skins obtained from slaughtered and dead animals would easily rot and decay unless proper precautions are taken. Tanneries are not often located very near to the source of raw hides and skins. So preservation of these articles assumes great importance. The sellers process these raw hides with wet or dry salting or drying, which process is called 'curing'. So the sellers actually 'cure' the raw hides for converting them into saleable commodities. In that view, the sellers are not mere merchants, but at the same time producers of saleable hides. He referred to definition of 'producer' from the Bakshi's The Law Lexicon, Volume-2 and submitted that the word 'producer' has a very wide meaning and will include the person who trades or deals in such production. He, therefore, submitted that the purchase of hid....
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....ground. After hearing the parties, we agree with the contention of the learned counsel that the ground raised by the assessee is purely a legal ground. Accordingly, we admit the same. 3.2 Coming to the merits of the additional ground it is stated by the learned counsel that the Assessing Officer has computed the income of the assessee on the basis of the returned income by making certain disallowances under section 40A(3) and other expenses. He has not recomputed the deduction under section 80HHC on the basis of business income determined by him. The assessee has computed the deduction under section 80HHC on the basis of profits and gains disclosed by the assessee. However, due to disallowances made by the Assessing Officer when the income assessed under the head 'Profits and gains of business' has increased, the Assessing Officer should have recomputed deduction under section 80HHC on the basis of income assessed under the head 'Profits and gains of business'. He, therefore, requested that a suitable direction may be given to the Assessing Officer for recomputation of deduction under section 80HHC. 4. In the case of Sri Shyamal Kr. Dey [IT Appeal No. 1772 (Kol.) of 2007], Sr....
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....he learned counsel that the disallowance made by the Assessing Officer may be directed to be deleted. 7. The ld. Departmental Representative, on the other hand, stated that section 40A(3) is a computation provision for determination of profits and gains of business. Section 40A overrides the other provisions for computing the profits and gains of business. Therefore, sub-section (3) of section 40A would also be applicable while determining profits and gains of business in supersession to other provisions. The constitutional validity of section 40A(3) has been upheld by the Hon'ble Apex Court in the case of Attar Singh Gurmukh Singh. After the amendment by Finance Act, 1995, again the validity of section 40A(3) was challenged and the Hon'ble High Courts have upheld its constitutional validity in the following cases:- (a) Kamath Marbles case. (b) Smt. Ch. Mangayamma's case. He also stated that the ITAT cannot adjudicate upon the constitutional validity of any provisions of the Income-tax Act or Rules. 7.1 As per second proviso to section 40A(3), the exception has been provided in such cases and under such circumstances as may be prescribed. Section 295 of the Income-tax A....
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.... person who is not his agent. He may be agent of the Government of West Bengal, but Rule 6DD(l) would be applicable where assessee makes payment to his agent who is required to make payment in cash for goods or services rendered, on behalf of the assessee. The assessee has not proved that the person to whom the payment is made is the assessee's agent and he has also not proved that such person in turn is required to make the payment in cash. With regard to the assessee's claim that its case also falls under Rule 6DD(b), he stated that this claim was not made earlier and the relevant facts are also not on record. He also referred to the copies of allotment memos issued by the Sub-Divisional Controller, Food and Supplies, Government of West Bengal, which is enclosed by the assessee's learned counsel with his written submission, and contended that such allotment letters are of 2007 and, therefore, not relevant to the year under appeal. In view of the above, it is submitted by the ld. Departmental Representative that the order of the CIT(A) should be reversed and that of Assessing Officer should be restored. 7.4 Coming to the cases where the assessee derives income from tanning of l....
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....v. CIT [2001] 251 ITR 640 (Cal.). (e) Hari Chand Virendra Paul v. CIT [1983] 140 ITR 148 (Punj. & Har.) (f) Nahgi Lal v. CIT [1987] 167 ITR 139 (Raj.). 7.5 He also referred to the order of the CIT(A) in the case of L.I. Chong Tannery [IT Appeal No. 1996 (Kol.) of 2007] and pointed out that the CIT(A) at page 4 of the order has recorded the finding that the assessee had regular dealing with the suppliers. The materials were purchased in credit and the payment was made after a long gap from the purchase of material. Therefore, the assessee had enough time to make the payment by cheque/draft. He, therefore, submitted that the assessee not only was unable to prove that its case falls within any particular clause of Rule 6DD but also could not prove the business expediency for his inability to make the payment by account payee cheque/draft. 7.6 Referring to the facts of Nadeem Iqbal's case, it is stated by the ld. Departmental Representative that the CIT(A) has allowed relief to the assessee based upon extraneous considerations. The CIT(A) has allowed relief considering the fact that the addition made by the Assessing Officer is more than 300 per cent of the returned income ....
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....not in dispute, because the rate is fixed by the Government of West Bengal. Can on such facts section 40A(3) should be applied merely because the assessee made the payment in cash in obedience to the orders of the State Government? In view of the above, it is reiterated by him that the provisions of section 40A(3) and Rule 6DD should be interpreted in a manner so as to fulfil the objects for which section 40A(3) was introduced in the year 1968. 9. Sri S. Bandyopadhyay, advocate, in the rejoinder also stated that the rule should be liberally construed. A common parlance meaning should be given to the word "producer" and not a very narrow meaning be given to it, as given by the revenue. 10. Sri Gautam Banerjee in the rejoinder stated that the Assessing Officer has raised the issue of applicability of section 40A(3) at the fag end of March when the assessment was becoming barred by limitation. Therefore, there was no time left so as to bring on record the material to prove that the suppliers are producers. He, therefore, stated that if the assessee's legal submissions are not accepted, then in alternate the matter can be set aside to the file of the Assessing Officer for examini....
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.... later than the 31-3-1969) as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding twenty thousand rupees otherwise than by [an account payee cheque drawn on a bank or account payee bank draft], [twenty per cent of such expenditure shall not be allowed as a deduction]: Provided that where an allowance has been made in the assessment for any year not being an assessment year commencing prior to 1-4-1969, in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year the assessee makes any payment in respect thereof in a sum exceeding twenty thousand rupees otherwise than by [an account payee cheque drawn on a bank or account payee bank draft], the allowance originally made shall be deemed to have been wrongly made and the [Assessing] Officer may recompute the total income of the assessee for the previous year in which such liability was incurred and make the necessary amendment, and the provisions of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the assessment....
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....er it was out of income from undisclosed sources. The terms of section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section it is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in section 40A (3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of section 40A(3) and rule 6DD that they are intended to regulate business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions." 12. After the amendment in section 40A(3) by Finance Act, 1995 with effect from 1-4-1996 and the amendment in Rule 6DD of the Income-tax Rules by the Income-tax (Fourteenth Amendment) Rules, 1995....
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....es 14 and 19(1)(g) of the Constitution. Any restriction in the Income-tax Act on expenditure cannot be said to be violative of the right to carryon business and, therefore, there is no violation of articles 14 and 19(1)(g) of the Constitution. Even after the amendment there is a provision for complete deduction of expenditure over Rs. 20,000 incurred in cash. Clause (h) of rule 6DD read with clause (k) itself provides sufficient liberalization of the rigor of section 40A(3) which entitles the parties to claim full deduction on cash payments over Rs. 20,000 where banking services are not available in the place where the expenditure is incurred or on the day the expenditure is incurred. In other words, the statute and the rules insist on payment through account payee cheques or demand drafts only in cases where banking services are available to the parties. It cannot be said that insistence on money transaction being carried out through the bank where the facilities are available which is to ensure transparency in transactions any way affects the rights of the parties to carry on any trade or business, the amendment to the rule does not affect the validity of the statute sustained by....
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....ase of CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1 held as under:- "The exercise of purposive interpretation by looking into the object and scheme of the Act and legislative intendment would arise only if the language of the statute is either ambiguous or conflicting or gives a meaning leading to absurdity." 13.3 In the light of the above guidelines laid down by Hon'ble Apex Court, let us examine the provisions of section 40A(3). From the plain reading of the section itself it is evident that, it would be applicable where the assessee incurs any expenditure exceeding Rs. 20,000 otherwise than by a crossed cheque or by a crossed bank draft. In such circumstances, 20 per cent of such expenditure shall be disallowed. In our opinion, there is no ambiguity in the language of section 40A(3) and, therefore, relying upon the above referred decisions of Hon'ble Apex Court in the cases of Tara Agencies and Anjum M.H. Ghaswala, we hold that the section is to be interpreted by giving literal meaning to the language used in the section itself. In view of the above, the purpose behind the enactment of section 40A(3) is not relevant. What is relevant is the enactment itself, i.e., section 4....
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....R 669 (Mad.). In this case it was held as under:- "That the assessee had produced necessary grounds for making cash payment. The Tribunal noted that these payments were made to small time vendors, who came from surrounding villages to sell the skin and the process of dressing the skin done without the aid of power. The Tribunal also noted from the order of the Commissioner, that considering the fact that the purchases were made from the unorganized sector, cash payments were indispensable. The order of the Tribunal with regard to the cash payments was justified." In that case assessment year involved was assessment year 2001-02 and, therefore, the ratio of the above decision would be applicable to the appeals under consideration before us. However, we find that in the above case, the ITAT has found as a matter of fact that the above payments were made to small time vendors who came from the surrounding villages and carried out the process of dressing of skin without the aid of power. The Hon'ble High Court taking note of the above-mentioned finding of fact by the ITAT dismissed the revenue's appeal in limini Therefore, it would be necessary to examine the facts of the case....
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....made by the assessee were not liable to be disallowed while computing its business income." This decision is for assessment year 1974-75, i.e., prior to omission of Rule 6DD(j) and hence not applicable to the assessment years under appeal before us. (vi) Mrilani v. Sarabhai's case. In this case their Lordships of Hon'ble Gujarat High Court held as under:- "Held that the assessee had adopted a peculiar method of maintaining her books of account and having her business transactions and the entire work with regard to payment and collection of money was entrusted to the firm. In such a set of circumstances the firm made payment on behalf of the assessee by account payee cheques. Hence it could not be said that there was any cash or there was any possibility of having chances and opportunities to use or create black money. The amount, which was paid on behalf of the assessee by the firm, was paid in cash but was paid by way of account payee cheques. This factual position could not be denied on behalf of the revenue. Such transactions could not be hit by the provisions of section 40A(3) of the Act. The Income-tax Officer made a mistake in understanding the term "pay order" an....
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....of Direct Taxes (No. 220, dated 31-5-1977) is illustrative and not exhaustive 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 of against the assessee. Where the Tribunal had found that the assessee's business was new and the transactions were genuine but there was a time-lag between the dates of the bills and the dates of the payments: Held, that the disallowance of the payments in terms of section 40A(3) of the Income-tax Act, 1961, was not justified." This decision of Hon'ble Calcutta High Court is also for assessment year 1975-76, i.e., prior to omission of Rule 6DD(j) and, therefore, the same is not applicable to the assessment years involved in the appeals before us. (ix) CIT v. Sri Basudev Seth [IT Appeal No. 386 (Cal.) of 2007] In this case, their Lordships of Hon'ble Calcutta High Court held as under:- "We have heard learned counsel for the appellant. Perused the order passed by the Tribunal. We find that no substantial question of law is involved in this matter. Hence this appeal being ITA No. 386 of 2007....
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....n by the ld. Departmental Representative before us are as under:- (i) Bagmari Tea Co. Ltd.'s case. Their Lordships of Hon'ble Calcutta High Court in the aforesaid case held as under:- "That cash payment of Rs. 65,000 had been made. The Commissioner of Income-tax (Appeals) as well as the Tribunal had found that the assessee had not shown compelling circumstances under which he had made the payment in cash. Therefore, the amount had been rightly disallowed." (ii) Silk Fab Export's case. In this case, it has been held by their Lordships of Hon'ble Kerala High Court as under:- "Dismissing the appeal, that the order of the Assessing Officer and the appellate authorities showed that in many cases details of payees and transactions were not furnished and in cases where payees' addresses were furnished, notices were sent by the Department. But the notices were returned by the postal authorities stating that such parties did not exist or with endorsement that the addressees were not known. In fact there was no necessity for the Department to try to trace the addresses of the suppliers to whom payments were made. It was for the assessee to produce evidence including the add....
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....e of animal husbandry, fish or fish products are mostly residents of rural areas not used to banking systems or not having bank accounts, the requirement of sub-section (3) of section 40A would be impracticable and would lead to difficulties in its application. The idea could never have been to exempt all payments in respect of purchase of forest or other produce and products mentioned in sub-clauses (i) to (iii) of clause (f) of rule 6DD from whomsoever they are purchased. The words "cultivator, grower or producer", occurring at the end of rule 6DD(f) qualify the words occurring in all the preceding four sub-clauses and not only sub-clause (iv). The exemption is confined to payment to grower or producer of forest produce." Though this decision is also for assessment year 1970-71, however, in this case, their Lordships of Hon'ble Allahabad High Court has considered the applicability of Rule 6DD(f) which still exists and in some of the cases before us the parties have claimed that Rule 6DD(f) is squarely applicable. Therefore, this decision would be directly applicable while dealing with the cases wherein Rule 6DD(f) is claimed to be applicable. We will revert back to this decisi....
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.... Income-tax (Amendment) Rules, 1969 with effect from 1-4-1969. Rule 6DD prescribes the cases and the circumstances, in which payment in a sum exceeding Rs. 20,000 may be made otherwise than by crossed cheque drawn on a bank or a crossed bank draft. Thereafter this rule has been amended from time to time. Rule 6DD, as applicable to the assessment years involved in the appeals before us, reads as under:- "Cases and circumstances in which payment in a sum exceeding [twenty thousand] rupees may be made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft. 6DD. No disallowance under sub-section (3) of section 40A shall be made where any payment in a sum exceeding [twenty thousand] rupees is made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft in the cases and circumstances specified hereunder, namely:- (a) where the payment is made to- (i) the Reserve Bank of India or any banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); (ii) the State Bank of India or any subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959); ....
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....es any bank [not being a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)], whether incorporated or not, which is established outside India; (e) where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee; (f) where the payment is made for the purchase of- (i) agricultural or forest produce; or (ii) the produce of animal husbandry (including hides and skins) or dairy or poultry farming; or (iii) fish or fish products; or (iv) the products of horticulture or apiculture, to the cultivator, grower or producer of such articles, produce or products; (g) where the payment is made for the purchase of the products manufactured or processed without the aid of power in a cottage industry, to the producer of such products; (h) where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town; (i) where any payment by way of gratuity, ....
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....r Assessing Officer, the payment was in violation of the provisions of section 40A(3). He, therefore, disallowed 20 per cent of the payment made by the assessee. Accordingly, the disallowance was worked out at Rs. 26,91,680. On appeal, the CIT(A) deleted the disallowance holding that the assessee's case is covered under Rule 6DD(k) as well as Rule 6DD(l) of IT Rules. Before us the assessee's learned counsel further claimed that the case of the assessee is also covered by Rule 6DD(b). However on perusal of the orders of the authorities below we find that before the Assessing Officer the assessee did not make a specific claim under which clause of Rule 6DD its case calls. The claim was that the purchase was made from the Government. The assessee's explanation before the Assessing Officer was of general nature explaining the manner in which the business is being carried on by it. The CIT(A) has mentioned that the assessee's case falls within Rule 6DD(k) and also alternatively under Rule 6DD(l). We find that Rule 6DD(k) would be applicable where the payment was required to Be made on a date on which the banks were closed either on account of holiday or strike. Therefore, it would be a ....
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....upply order issued by Sub-Divisional. Controller, Food and Supplies, Jangipur giving direction to the assessee to make the payment in cash. However, it was pointed out by the ld. Departmental Representative that these supply orders are dated 2007 and, therefore, will not be applicable to the year under consideration. What was the exact direction of the supply order in the accounting year relevant to assessment year under consideration would require to be examined. In view of the above, we deem it proper to set aside the orders of the authorities below on this point and restore the matter back to the file of the Assessing Officer with the direction that he will examine the facts of the case afresh and will adjudicate upon the assessee's contention that its case falls under clauses (b), (k) and (l) of Rule 6DD. Needless to mention that, he will allow adequate opportunity of being heard to the assessee. 17. Cross objection, i.e. C.O. No. 58/Kol./07 filed by the assessee is only in support of the order of the CIT(A). In view of our finding while disposing of the revenue's appeal, the cross objection filed by the assessee is also simultaneously disposed of. 18. Now we will take up....
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....icer will readjudicate the matter in accordance with law and in the light of our observations/findings in this order. (1) Chong Hing Tannery's case. (2) L.I. Chong Tannery's case. 19. The facts of the case and the arguments of the parties in both these cases were identical and, therefore, they are being considered together. Both these assessees derived income from the business of tanning of raw hides to finished leather. During the accounting year relevant to assessment year under consideration, the assessees made the payments for purchase of raw hides by bearer cheques. Since as per section 40A(3) payment is required to be made by account payee cheque or account payee bank draft, the Assessing Officer treated the payment by bearer cheques to be in violation of section 40A(3) and disallowed 20 per cent of such payment. On appeal, the CIT(A) sustained the same. Hence these two appeals by the assessees. 20. At the time of hearing before us, it was claimed by the learned counsels that the payments made by the assessees are covered by Rule 6DD(f) as well as by Rule 6DD(g). Rule 6DD(f) reads as under:- "(f) where the payment is made for the purchase of- (i) agricultura....
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....word "producer" is to be given such a wide meaning, then there was no necessity of providing the words "to the producer of such article" after Rule 6DD(f), because when the payment is made for purchase of an article, the seller is necessarily trader thereof. He may or may not be a producer. Therefore, by providing the words "producer of such articles" in Rule 6DD(f), the application of rule is being restricted in respect of payments made only to producer and not to any other person. The ld. Departmental Representative has relied upon the decision of Hon'ble Apex Court in the case of Tara Agencies, wherein their Lordships considered the meaning of the words "manufacture", "production", "process", etc. In that case the assessee derived income from the business of export of tea. It purchased tea of diverse grades and brands and blended the same by mixing different kinds of tea. The assessee was having a small scale industrial undertaking for the above process of tea. It claimed weighted deduction under section 35 of the Income-tax Act, 1961. As per section 35B, weighted deduction was available to a small scale exporter who exports goods manufactured or produced in any small scale indu....
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....fag end of the assessment proceedings in the month of March, 2006 and he did not allow any opportunity to the assessee to produce necessary evidence that the sellers from whom the assessee purchased hides and skins are producers thereof. 20.2 It was also contended by the learned counsels for the assessees in the above-mentioned cases that the assessee's case also falls within clause (g) of Rule 6DD. Clause (g) would be applicable where the payment is made for purchase of the products manufactured or processed without the aid of power in the cottage industry to the producer of such products. 20.3 To verify the contention of the learned counsel, we reflected to the assessment orders in the cases of both the assessees. In the case of L.I. Chong Tannery the relevant finding at page 2 of the assessment order reads a under:- "In the course of hearing on 13-3-2006, the A/R Shri Sumantra Guha was requested to show cause why the payments exceeding Rs. 20,000 otherwise than crossed or a/c payee cheques shall not be disallowed under section 40A(3) of the Act. The A/R vide his written submission dated 21-3-2006 explained the nature of payments under section 40A(3) which are as follows....
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....ion. Thereafter he will readjudicate the issue in accordance with law and in the light of our observations/findings in this order. 20.5 We may further mention that the facts in the case of Chong Hing Tannery are more or less identical because in this case of the query was raised sometime in March 2006 and the assessee furnished reply on 21-3-2006 and 30-3-2006. More or less similar explanation was given by the assessee and the Assessing Officer rejected the assessee's claim without allowing opportunity to the assessee to produce necessary evidence in support of its claim. Therefore, for the detailed discussions in the case of L.I. Chong Tannery, we set aside the orders of the authorities below in the case of Chong Hing Tannery also on this point and restore the matter back to the file of the Assessing Officer to readjudicate the issue as per our direction above. 21. The learned counsel for the assessee had also raised an additional ground in both the above cases which was with regard to computation of deduction under section 80HHC. The additional ground is admitted by us vide our finding in para 3.1 above. We have carefully considered the arguments of both the sides and perus....
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....opportunity to the assessee to produce evidence in support of its contention. The facts being similar to L.I. Chong Tannery's case, for the detailed discussions in paras - 20 to 20.3 above, we are of the opinion that the matter in this case also needs to be reexamined at the end of the Assessing Officer as per our direction in the case of L.I. Chong Tannery. However, in the case of this assessee, other issues are also involved and, therefore, this departmental appeal will now be placed before the Division Bench for consideration and adjudication of the other issues. The issue with regard to disallowance under section 40A(3) is to be restored back to the file of the Assessing Officer to be readjudicated upon as per our observation/direction above. 23. Sri Somenath Ghosh appeared as an Intervener in the case of Mrinal Ghosh. According to him the assessee's case falls under Rule 6DD(k) and Rule 6DD(h). We find that during the accounting year relevant to assessment year under consideration, the assessee made two cash payments exceeding Rs. 20,000 at a time. The first payment was made on 30-4-2000 amounting to Rs. 36,000 and the second payment on 16-6-2000 amounting to Rs. 34,000. Th....