TMI Blog2006 (3) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... s disallowable. It further be held that disallowance so made by the taxing authorities is below are contrary to the provision of the Act and in facts and circumstances prevailing in the case. The 20 per cent disallowance of Rs. 11,36,990 is so made be deleted. 2. Without prejudice to ground No. 1 on facts and circumstances prevailing in the case, it be held that, if any disallowance is justified and warranted in terms of provision of section 40A(3). The disallowance should have been pertaining to the period subsequent to the amendment effected in rule 6DD(j) and the new amendment is substituted the period in which the new provisions were not applicable should be considered as not quality for any disallowance. Just and proper relief be granted to the appellant in this respect." 2.2 In the assessment order, it was pointed out that the assessee had made a total payment of Rs. 21,66,680 in cash exceeding Rs. 10,000 each. The assessee was required to explain why 20 per cent of such expenditure should not be disallowed. The case of the assessee was that he was primarily dealing in Indian Made Foreign Liquor. However, in order to maintain clientele, he was also supplying country liquo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the amount of Rs. 11,36,990 paid to M/s. Sanjeev Traders. His finings are furnished on pages 1 and 2 of his order, which for the sake of convenience are reproduced below:- "I have considered the submission of the assessee and found that explanation given is not satisfactory. The provision of section 40A(3) is applicable even if the purchases are fully recorded and verifiable. The payment in cash is not justified in order to ward off competition and improve clientele. 20 per cent of these expenses i.e. Rs. 4,33,336 is, therefore, not allowed as deduction. The representative of the appellant argues that the said purchases have been made only from two dealers of country liquor. His business is in the village Kolkhe. In that village, there is no bank giving any service. The total turnover of the appellant from the said dealer is Rs. 10,29,690. According to him, this was covered under rule 6DD(h). Regarding the other dealer situated at Panvel, he admitted that such person had the bank account at Panvel and he was operating such bank account. However, the representative argued that provisions/burden of rule 6DD(j) came effective from 24-7-1995 and, therefore, upto this date, whatever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, it was held that the amount had been rightly disallowed. It may be pointed out that even the decision of Hon'ble Supreme Court in the case of Attar Singh Gurmukh Singh was the same to the effect that the assessee has to show business expediency and other relevant factors. Obviously, in absence of such proof, the amount can be disallowed even in respect of genuine payments. 2.6 We have considered the facts of the case and rival submissions. The case of the assessee seems to be that for a part of the period, he was entitled to benefits of the provision contained in erstwhile rule 6DD(j), as the same was omitted with effect from 25-7-1995. This issue was discussed at length with both the parties. It has been mentioned earlier, that section 40A(3) was amended by the Finance Act, 1995, with effect from 1-4-1996. Earlier, all cash payments covered under this section, were liable to be disallowed in toto, subject to the provisions contained in rule 6DD. However, by this amendment, if the payments were genuine, only 20 per cent thereof can be disallowed. Therefore, this provision necessarily deals with computation of the income of the assessee. The matter of amendment is not w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in circular dated 4-10-1969, which was in operation during the entire accounting year corresponding to the assessment year 1972-73 and on the first date of the said assessment year, that the entire cost of acquiring the distribution rights in the accounting year corresponding to the assessment year 1972-73 in which the pictures were released had been written-off in. the books of account. The deduction was also claimed for the entire cost of the said films in the said year. On these facts, the Hon'ble Court at page 31 held that "now, it is well-settled that the Income-tax Act, as it stands amended on the first day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force. In our opinion, this principle would also govern the applicability of the beneficent circulars of the Board which confer some privileges or rights on the assessees." 2.8 Coming to the facts of the instant case, the substantive rule was omitted on 25-7-1995. The first assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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