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2020 (1) TMI 683 - AT - Income TaxDisallowances u/s 40A(3) - payment in cash exceeding prescribed threshold - HELD THAT:- Three cheque payments amounting to ₹ 21 lacs out of total disallowance of ₹ 2.38 crores are clearly outside the scope of section 40A(3) as the same have been transferred to respective payee’s account as reflected in the bank statements and the addition so made is directed to be deleted. In respect of other payments we find that the identity of the persons from whom the purchases have been made has been established and the source of cash payments is clearly identifiable in form of the withdrawals from the assessee's bank accounts and the said details were submitted before the lower authorities and have not been disputed by them. It is not the case of the Revenue either that unaccounted or undisclosed income of the assessee has been utilised in making the cash payments. The genuineness of the transaction has been established as purchase of construction material for road construction and lastly, the test of business expediency has been met as it is the admitted position that the mining activities had been banned in the State of Haryana and the assessee had no other option but to buy construction material from State of Rajasthan where the suppliers and stone crushing units had insisted on cash payments at the time of delivery of material. Further, as held by the Hon'ble Rajasthan High Court in case of Smt. Harshila Chordia [2006 (11) TMI 117 - RAJASTHAN HIGH COURT] the consequences, which were to befall on account of non-observation of sub-section (3) of section 40A must have nexus to the failure of such object. Therefore the genuineness of the transactions and it being free from vice of any device of evasion of tax is relevant consideration for which section 40A(3) has been brought on the statute books and which has been satisfied in the instant case. Addition u/s 68 - addition for the reason that the creditworthiness of creditors have not been established and hence, he has confirmed the additions so made by the AO - HELD THAT:- We find that these three persons have appeared before the Assessing officer and have confirmed the transaction of advancing the money to the assessee and during the appellate proceedings, their confirmations along with PAN details have also been filed. The transactions have happened through the banking channel and in support of creditworthiness, agricultural land ownerships records and the bank accounts reflect regular transactions of deposits and withdrawals have been submitted, the assessee has thus discharged the initial onus cast on it and in absence of any contrary findings and any material on record by the Revenue, no addition is called for by invoking provisions of section 68. In the result, the addition so made is directed to be deleted and ground of appeal is allowed.
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