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2016 (3) TMI 1233 - AT - Income TaxAddition u/s 40A(3) - purchase of land by making cash payment to the Sellers - Held that:- From the perusal of accounts filed before us, we see that no claim of any expenditure or even purchases have been made during the year. The lands purchased have been transferred to ‘project in progress’ account. The language of the section is very clear that in cases of expenditure incurred by the assessee in cash, no deduction on account of that expenditure is allowed under this provision. We are aware of the proposition that even if the expenditure is in the nature of purchases, the same is prone to disallowance under section 40A(3) of the Act. However, when no claimed of any such expenditure or purchases has been made, how can a disallowance be made. In view of this, we direct the Assessing Officer to delete the disallowance. - Decided in favour of assessee Disallowance u/s 40A(3) - proof of genuineness of the transaction being carried out of business exigency. - Held that:- Even if the assessee does not fall in any of the clauses of Rule 6DD, being the exceptions provided invoking the provisions of section 40A(3) of the Act can be dispensed with if the assessee is able to prove the business expediency out of which it had to make the cash payments and the genuineness of the transaction has also to be proved. We observe that none of the lower authorities have questioned the genuineness of the transaction. The only reason for disallowance is the provisions of section 40A(3) of the Act. The assessee had all along stated the reason of business exigency out of which he had to make cash payments, which were also not doubted by any of the lower authorities. Further, we see that the facts of the case are exactly same as that of Gurdas Garg (2015 (8) TMI 569 - PUNJAB & HARYANA HIGH COURT ). Therefore, we are inclined to hold that the said cash payments cannot be disallowed to the assessee. The addition is hereby deleted.- Decided in favour of assessee
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