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2011 (11) TMI 98 - AT - Income TaxApplicability of 40A(3) - payment otherwise than by a/c. payee cheques - it is stated by him (the supplier) that the assessee had purchased dupattas and sarees through him and for the same, he had obtained crossed cheques from the assessee to make cash payments to various suppliers after discounting the crossed cheques received from the assessee. Admittedly, this contention was raised for the first time before Ld. CIT(A) and this aspect was never raised before the A.O. However, this argument of the assessee was rejected by the Ld. CIT(A) - Held that:- in the interest of justice, one more opportunity should be provided to the assessee to bring the required evidence on record and hence, we set aside the order of Ld. CIT(A) on both the issues i.e. regarding disallowance under Section 40A(3) for the expenses incurred during the present year and also of the expense incurred during earlier year or years to the file of the A.O. for a fresh decision. Opening balance of creditors for expenses - payment made by the assessee during the current year - disallowed by the AO u/s Section 40A(3) - Held That:- The amended provisions are applicable in respect of those expenditure for which, liability has been incurred in assessment year 2008-09 or in any subsequent year but it cannot be made applicable to the liability incurred up to the assessment year 2007-08. If the liability is incurred up to 2007-08 but the payment made is in a subsequent year i.e. in assessment year 2008-09 or any subsequent year, the provisions of Section 40A(3) as applicable in that year in which liability was incurred should be so applied. The provisions of Section 154 for the purpose of reckoning the limitation period of four years, shall be reckoned from the end of the assessment year following the previous year in which the payment was so made. - Decided in favor of assessee for statistical purposes.
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