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2014 (4) TMI 677 - GUJARAT HIGH COURTDisallowance u/s 40A(3)(a) of the Act – Payment made otherwise than by account payee cheque - endorsement of crossed cheques - Held that:- It is indisputable that the term “an account payee cheque” is well understood and signifies cheque which carries a mandate to have the amount mentioned in the cheque to be paid to the drawee of the cheque. In common parlance and as per RBI directives, it would, thereafter, not be open to the drawee of the cheque to endorse the cheque in favour of another person. RBI directions in no uncertain terms mandate the banks to credit the amount of an account payee cheque only in the account of the payee and no other person and conversely not to accept any cheque from any source other than the person named in the account payee cheque except after requiring the drawer of the cheque to withdraw the mandate in this respect. When RBI directives command the banks not to deposit the cheque amount in favour of any person other than the drawee of the cheque and correspondingly prohibit the banks from accepting any cheque, which is account payee cheque from a source other than the drawee, lack of any distinction between a crossed cheque and an account payee cheque without a further endorsement “ not negotiable” would be of no further relevance. Genuineness of the payments and receipts of the amounts by the payee was one of the factors, however by no means a sole factor - Several other peculiar facts went into the Court taking a decision that it had taken - no such additional facts emerge - CIT(Appeals) noted a futile attempt on part of the assessee to show that the cheques were A/c payee - Assessee relied on documents which were not genuine - there was no other additional ground, compelling reason or commercial expediency, which would have left no choice, would have compelled the assessee to make payment other than by account payee cheques - It was this overwhelming consideration of impossibility of making the payments through the mode other than by account payee cheque - the Tribunal has correctly interpreted the provisions of section 40A(3) of the Act – Decided against Assessee.
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