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2023 (5) TMI 782 - AT - Income TaxAddition u/s 40A - Payments made otherwise than by an account payee cheque - as submitted bearer cheques were issued to the supplier parties on demand as assessee was new in the business so the assessee had to accept the demand of the suppliers - HELD THAT:- CIT(A) has rightly observed that a bearer cheque can bounce as well, for insufficient balances therefore giving bearer cheque to parties as the surety of being encashed is not sustainable explanation of business expediency. The bench finds no error in the findings of the Ld. CIT(A) because if the intention was to secure the payments to the parties by bearer cheques to be as good as cash then there are other banking instruments like Banker’s cheque or RTGS/NEFT facilities which would have ensured prompt and secured payments. It is admitted case of assessee that to one of the parties even payments were made by RTGS/NEFT. So there is no question of lack of banking facilities available with the assessee or that when the payments were made such facility was not accessible. When the provision of Section 40A(3) is made in the Act with specific intention to discourage colourable payments then the Ld. Tax Authorities below cannot be expected to accept such casual explanations. There should be a justification in the refusal of a party to not accept payment by way of a crossed cheque/draft to defeat a provision made under Act to discourage cash payments. There is nothing on record to show that the nature of purchases was such that the parties were having decisive role to lay the terms and conditions of mode of payment to be with cash or bearer cheques only and that the assessee's business interest would have suffered due to non-availability of goods otherwise than from this particular party. The law relied, including the Boards’s circular, is thus not applicable on facts and evidence. Decided against assessee.
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