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2022 (9) TMI 713 - AT - Income TaxDisallowance u/s 40A(3) - payment in excess of 20,000/- - HELD THAT:- Gross Profit ratio and the Net Profit ratio after taking into account the impugned expenditure shown by the assessee during the year under consideration as compared to that of immediate preceding year shows that there is substantial increase in those margins. It is not the case of the Revenue that the expenses are not genuine or are bogus and have been booked for the purpose of inflating expenditure and thereby reducing the profits. We further find that Hon’ble Apex Court in the case of Attar Singh Gurmukh Singh [1991 (8) TMI 5 - SUPREME COURT] has held that provision of Section 40A(3) are not intended to restrict the business activities and insistence of payment by crossed cheque or crossed bank draft is insisted so as to enable the assessing authority to ascertain whether the payment is genuine or whether it is out of the income from disclosed sources. As further held that the terms of Section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. The genuine and bona fide transactions are not taken out of the sweep of the Section and it is open to the assessee to furnish to the satisfaction of AO the circumstances under which the payment in the manner prescribed u/s 40A(3) was not practicable or would have caused genuine difficulty to the payee. Disallowance u/s 40A(3) of the Act is not justified in present case. We therefore direct the deletion of addition made by AO and upheld by CIT(A). Thus, the ground of assessee is allowed.
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