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2012 (7) TMI 173 - AT - Income TaxApplicability of provisions of sec. 40A(3) - cash payments exceeding Rs.20,000 - assessee claimed the exceptions provided under Rule 6DD (g) & (k) - Held that:- Applicability of exceptions provided under Rule 6DD of ITR, the assessee has to establish the hardship or inconvenience that is caused to the payees if the payments are made by the account payee cheques - pleas of the assessee that the lands are purchased from the agriculturists who are suspicious of and are usually demanding payment in cash before parting with the possession of their lands is not acceptable as it is observed by the CIT(A) that there is no banking facility in the villages where lands have been purchased. However, we find that the payments are not by cash but are by bearer cheques which had to be encashed in the banks only and, therefore, the argument of the assessee that the payment had to be made in cash to the agriculturists is not acceptable.Thus, the applicability of sec. 40A(3) and its constitutional validity has been upheld irrespective of whether the transaction is genuine or otherwise. The assessee’s reliance on clause (k) of Rule 6DD is also not acceptable for the reason that the payments were directly made to the agriculturists and not to its agents i.e the directors. Even if it is accepted that the payments are made by the assessee to its directors, it is the duty of the assessee to demonstrate that the directors were supposed to make the payment for the goods or services in cash. The onus still lies on the assessee to prove - against assessee. Disallowance u/s 40(a)(ia) - Held that:- As decided in Merilyn Shipping & Transports Versus Assistant Commissioner of Income-tax, Range-1, Visakhapatnam [2012 (4) TMI 290 (Tri)]that disallowance u/s 40a(ia) is to be made only in respect of the amount payable and not on the amount paid, therefore, as submitted that the disallowance made by the AO was with regard to the amount paid by the assessee and not on the amount payable by the assessee, therefore, the disallowance has to be deleted - in favour of assessee.
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