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2023 (10) TMI 1285 - HC - Income TaxAddition u/s 40A(3) - purchases made otherwise than by account payee cheque - HELD THAT:- There are undated confirmations that bear identical language. This brought the genuineness of the transactions into serious doubt. According to us, even if we were to accept that the reason given in the confirmation letters was correct, that is, the appellant/assessee was a new entrant in the business, we believe, to allay concerns of the suppliers i.e., the above-mentioned concerns, payments could have been made through bank drafts or other modes, whereby, banking channels were used for the subject payments. We find that the Tribunal has returned with a finding of fact that these confirmations were produced for the first time before the CIT(A). The grounds of appeal preferred before us show that there is nothing stated that would indicate that the appellant/assessee has averred that the said observation was perverse. However, as indicated hereinabove, even if we were to assume that these confirmation letters were produced before the AO, it would still not help the cause of the assessee. Clearly, payments made by the assessee to the concerns violated Section 40A(3) as they were not made through an account payee cheque drawn on a bank, account payee bank draft or through the use of electronic clearing system through a bank account, and therefore, to fall within the ambit of the 1977 circular, the appellant/assessee was required to establish the genuineness of the transactions. The appellant/assessee having failed to do so, led to the deduction being rightly disallowed for the subject payments. Even if the petitioner’s/assessee’s case fell within the ambit of the 1977 circular, the petitioner/assessee could not have been allowed deductions on the subject payments made by the petitioner/assessee as the rule under which leeway was claimed did not exist for the AY in question. Decided against assessee.
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