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2017 (6) TMI 728 - AT - Income TaxViolation of Section 40A(3) - assessee has incurred huge expenses in cash for the payment or an aggregate payment made to one party in a day which exceeded ₹ 20,000/- - Held that:- AO has not disputed either the genuineness of the transaction or has not disputed the person to whom payment in cash was made by the assessee. The AO has only disallowed the deduction in view of Section 40A(3) of the Act Rule 6DD of the IT Rules. In our view, once the AO has not disputed the identity of the person to whom the payment was made and has also not disputed the business exigency, the disallowances made by the AO is not sustainable in the eyes of law. In the light of the above, we therefore, deem it appropriate to remand back the matter to the file of the CIT (A) so as to examine the business exigency. If on examining the documents and after seeking the remand report from the assessing officer, the authorities comes to the conclusion that there was business exigencies for making the payment in cash then the authority shall allow the deduction of such payment. The CIT(A) is also directed to examine the claim of the assessee in respect of a cash payment made on holidays for an amount of ₹ 29,38,968/-. in terms of Rule 6 DD of Income Tax Rules. Appeal of the assessee is allowed for statistical purpose.
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