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2016 (1) TMI 941 - MADRAS HIGH COURTAssumption of jurisdiction under section 263 - disallow the cash purchases in terms of Section 40A(3) - Held that:- Without examining the details of the expenditure involved, the assessing officer accepted the sales turnover reported by the assessee and allowed the benefit of deduction under section 40A(3). The question as to whether the assessee had made payments in excess of ₹ 20,000/- on a single day to a single person was not examined by the assessing officer. This is an error that led the Commissioner to initiate proceedings under section 263. The fact that this aspect was not gone into by the assessing officer in his scrutiny assessment order dated 31.3.2003 is borne out from para 3 of the said order. Once it is seen that such an error was committed, the next question is as to whether the same was prejudicial to the interest of the Revenue or not. The answer to this question is too obvious for any elaborate detail.If the assessee is not entitled to a deduction under section 40A(3), the income chargeable to tax will go up and the tax payable by him will naturally go up. If it is not, the benefit goes to the assessee. Therefore, it is clear that this is a case which satisfies the twin requirements under section 263(1). - Decided against assessee Applicability of the provisions of section 40A(3) - Held that:- The details furnished in the show cause notice dated 18.2.2005 by the Commissioner show that the assessee had admittedly made payments of ₹ 1,00,000/- on three different dates viz., 1.10.1999, 14.10.1999 and 20.10.1999. The assessee had made payments of ₹ 2,00,000 on 31.10.1999, 2.11.1999 and 3.11.1999. All those payments are indicated in the books of accounts of the assessee to have been made to a supplier by name "Standard Fireworks". Similarly payments have been made to another supplier by name "Sivakasi Fireworks". Since the name of one supplier mentioned in the books of accounts of the assessee himself to whom a payment of more than ₹ 20,000/- had been made on everyone of those days, the contingencies stipulated in sub-section (3) of section 40A have arisen. - Decided against the assessee. Business compulsions and expediency in making the cash purchases - Held that:- We are not for a moment to be understood to suggest that the books of accounts should have been more carefully drawn. All that we are suggesting is that atleast the names of the agencies or agents or retailers to whom payments were made on a day to day basis, on behalf of the original manufacturers should have been mentioned. In the absence of any specific detail, the vague statements made in response to the show cause notice, cannot offset the entries made in the books of accounts. Therefore, we cannot find fault with the conclusion reached either by the Commissioner or by the Tribunal in this regard. Hence, question of law is answered against the assessee. Applicability of Rule 6DD of the Income Tax Rules, 1969 - Held that:- Unfortunately, the assessee neither pleaded nor proved the existence of any one of those circumstances indicated in Rule 6DD. Therefore, Rule 6DD cannot also go to the rescue of the appellant/assessee. - Decided against the assessee.
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