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2021 (12) TMI 875 - ITAT CHENNAIDisallowance of cash payments in excess of prescribed limit u/s. 40A(3) - HELD THAT:- In case of payments made for purchase of river sand in a village, it was an explanation of the assessee that said payments is made for purchase of product manufactured or processed without aid of power. Since, the processing of river sand is without aid of power and further such industry is in the nature of cottage industry, payment made for procurement of river sand comes under Clause (f) of Rule 6DD of IT Rules, 1962, and thus, same cannot be disallowed u/s. 40A(3). Remaining payments made which are not covered under any exception, we find all these payments are made to the traders which are supported by necessary evidence, and further such payments have been made at the instances of traders, that too in an emergency situation which compelled the assessee to make payments in cash - even though few payments is covered u/s. 40A(3) of the Act, because of peculiar nature of business of assessee, we find that those payments cannot be considered for disallowance u/s. 40A(3) of the Act. To sum up, all payments made by the assessee for purchase of materials in excess of prescribed limit provided u/s. 40A(3) of the Act cannot be disallowed. Hence, we direct the AO to delete the additions made towards disallowance of cash payments u/s. 40A(3) Additions towards unsecured loans received by the assessee u/s. 68 - assessee has failed to prove identity, genuineness of transaction and credit worthiness of the parties - HELD THAT:- Assessee has filed necessary evidences to prove identity, genuineness of transactions and creditworthiness of parties - once assessee discharges its burden, then the AO cannot make additions towards unsecured loans u/s. 68 of the Act as unexplained credit, unless he proves otherwise - it is a matter of fact that such unsecured loans has been treated as cessation of liability and offered to tax u/s. 41(1) of the Act for the assessment year 2014-15. This fact has not been disputed by the AO. Therefore, once a particular sum is considered for taxation in subsequent years then, said loan cannot be once again treated as income of the assessee for the impugned assessment year - AO has completely erred in making additions towards unsecured loans received from M/s. Park Field Developers & Builders Pvt. Ltd., u/s. 68 - CIT(A) without appreciating facts as simply confirmed additions made by the AO. Hence, we set aside the order passed by the Ld. CIT(A) and direct the AO to delete additions made towards unsecured loans u/s. 68 - Decided in favour of assessee.
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