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2019 (5) TMI 1692 - AT - Income TaxAddition u/s 40A(3) - AO observed that certain payments exceeding ₹ 20,000/- were made in cash to certain parties from whom the assessee purchased his trading goods - HELD THAT:- Assessee’s claim is not covered by any of the exceptions provided under Rule 6DD. However, the first proviso below Section 40A(3) clearly takes into consideration the nature of expenses, banking facilities, consideration of business expediency and other relevant factors. Rule 6DD in intent and purpose takes into consideration all these aspects for prescribing various exceptional circumstances. Therefore, Rule 6DD cannot be mechanically applied and I have to consider the overall explanation of the assessee having regard to the business consideration. The assessee’s explanation is that assessee had to make payment in business exigency as during the month of February, 2012, generally marriages takes place and during odd hours, the assessee made transactions and in some cases seller was insisting for cash payments. The payments had been made to the seller because of that reason. The genuineness of purchases had not been doubted by the AO. In this case, there is no dispute to the fact that the genuineness of the transaction and the payment and identity of the receiver are established. This view is supported by the decision of in the case of Gurdas Garg [2015 (8) TMI 569 - PUNJAB & HARYANA HIGH COURT] and also the decision of Hon’ble Supreme Court in the case of Attar Singh Gurmukh Singh [1991 (8) TMI 5 - SUPREME COURT]. Under such circumstances, disallowance of these expenses by applying to section 40A(3) would not be justified. Accordingly, set aside the order of ld CIT(A) on this count and allow the grounds of appeal of the assessee. Appeal of the assessee is allowed.
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