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2022 (8) TMI 347 - AT - Income TaxRevision u/s 263 by CIT - addition u/s 40A ignored by AO - HELD THAT:- As the expenses have been incurred in cash exceeding Rs. 20,000/- per day throughout the financial year, the Assessing officer is expected to verify these expenses not just applying the test of genuineness and whether the expense have been incurred for the purposes of assessee's activities as so claimed and purposes for which it is claimed to be incurred but also the necessity of payment been made in cash on a recurring basis and applicability of provisions of section 40A(3). As we find that more than 50% of these expenses have been incurred in cash exceeding Rs. 20,000/- per day, therefore, these are cash transactions spreading throughout the financial year and it is not a case of certain sporadic cash transactions which could have escaped the attention of the Assessing officer and have been noticed subsequently by the ld. CIT(E). We therefore find that it is a case where the Assessing officer has completely failed to examine the provisions of section 40A(3) and applicability thereof in the facts of the instant case. AO is expected to examine the provisions of section 40A(3) vis-à-vis respective transactions and determine which all these transactions are covered by the provisions of section 40A(3) and which all transactions fall under the exception as so provided in the Rule 6DD and decide accordingly. Only where the AO has examined the transactions from the perspective of section 40A(3) read with exceptions thereto and the ld. CIT(E) arrives at a different finding, the question of change of opinion arises. Where there is no examination and no formation of opinion at first place, the question of change of opinion as so contended by the ld. AR doesn't arise. Where the provisions of section 40A(3) are applicable in the facts of the case and which the AO has failed to examine and invoke at first place and the ld. CIT(E) subsequently noticed and thereafter, records his findings as to how the said provisions are applicable in the facts of the case, it is no doubt a case of reappraisal of the facts but with a view to highlight the applicability of correct law which the AO has failed to apply which is very much within the domain and jurisdiction of the ld. CIT(E) and in the process of applying the correct law, where the AO is directed to carry out further verification of individual transactions, the same is clearly permissible and necessary guidance can be drawn from the decision of the Hon'ble Supreme Court in case of Malabar Industrial Company Ltd. [2000 (2) TMI 10 - SUPREME COURT]) - Decided against assessee.
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