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2012 (6) TMI 594 - AT - Income TaxDisallowance u/s 40A(3)- trade creditors outstanding - revenue appeal amended provisions of section 40(A)(3) w.e.f. 01.4.2008 are to be considered for disallowance - assessee contested the purchases were made in year 2004, and as the transactions related to that year, only 20% of disallowance should be made of the amounts paid otherwise than by a/c. payee cheques or drafts, as per provisions of section 40A(3) - Held that:- Considering the provisions applicable in assessment year 2004-05 and year 2008-09, there are three major differences:- (i)as per the provisions of assessment year 2004-05, the assessee is required to make payment by way of crossed cheque/crossed bank draft whereas as per the provisions of assessment year 2008-09, the assessee is required to make payment by way of a/c payee cheque / a/c payee bank draft. (ii)as per the provisions applicable in assessment year 2004-05, the disallowance was to be made to the extent of 20% of payments made in contravention to the prescribed mode whereas, as per the provisions applicable in assessment year 2008-09, such disallowance is to the extent of 100% of such payment in contravention to the prescribed mode - disallowance made by the A.O. cannot be sustained (iii) As per the provisions applicable in assessment year 2004-05, the disallowance was to be made in the relevant year in which the expenditure was incurred whereas as per the provisions of assessment year 2008-09, addition is to be made in the year in which payment in contravention to prescribed mode was made by the assessee irrespective of the fact as to whether the expenditure was incurred in an earlier year. if we apply the provisions of Section 40A(3) as applicable in assessment year 2004-05, we find that no addition in the present year is justified and no disallowance can be made in assessment year 2004-05 also because as per the provision of Section 40A(3) as applicable in assessment year 2004-05, the payments are required to be made by a crossed cheque/crossed bank draft and the assessee has made the payment by way of crossed cheque and, therefore, no disallowance is called for in the present case as per the provisions of Section 40A(3) as applicable in the assessment year 2004-05 - in favour of assessee.
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