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2019 (1) TMI 607 - HC - Income TaxAddition of cash transactions u/s 40A(3) - assessee had purchased gold jewellery worth ₹ 34.68 Crores by way of cash in the auction - Held that:- The nature of transaction as propounded by the assessee before the AO is that several persons joined together and formed a syndicate and on behalf of the syndicate, the assessee bids in the auction conducted by the Finance Company which sells the old gold ornaments. Case of the assessee that as soon as the auction is confirmed, the highest bidder has to remit part of the amount in cash and the amount which has to be paid is not known to the assessee earlier and therefore, the payments cannot be made through banking channel. In our considered view, the Assessing Officer rightly examined the nature of transaction done by the assessee and on facts was not convinced that the assessee would fall under any one of the exceptional clauses under Rule 6DD of the Rules. CIT-A examined the nature of transaction and found that Section 40A(3) applies with full force to the facts of the assessee's case. Once again before the Tribunal, the facts were re-examined and the Tribunal pointed out that the assessee failed to demonstrate that the conditions of the bid required the assessee to effect payments in cash then and there and payments could not have been made by cheque or Demand Draft or any other mode. The Tribunal pointed out that there is no explanation as to what stopped the assessee from effecting payments through banking channel. Tribunal found that the agreement with syndicate members, if any, was not produced by the assessee before the lower authorities or before the Tribunal. Further the Tribunal held that the assessee could not demonstrate that he was representing any syndicate nor he could demonstrate that he was collecting cash from such syndicate members for making payments to the Finance Company. The Tribunal correctly held that the assessee was unable to demonstrate a situation which compelled him to make payment in cash which would have exempted him from application of recourse of Section 40A(3) of the Act. - Decided against the assessee
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