TMI Blog2012 (10) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) of the Act - Order of CIT(Appeals)is set aside and order to reinstate the addition made by the A.O. under Section 40A(3) of the Act has been passed - in favour of Revenue. - I.T.A. No. 133/Mds/2012 - - - Dated:- 11-7-2012 - SHRI ABRAHAM P. GEORGE AND SHRI VIKAS AWASTHY, JJ. Appellant by : Dr. S. Moharana, CIT-DR Respondent by : Shri G. Baskar, Advocate ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : In this appeal filed by the Revenue, its grievance is that the CIT(Appeals) deleted an addition of Rs. 29,02,509, made by the Assessing Officer under Section 40A(3) of Income-tax Act, 1961 (in short 'the Act'). As per the Revenue, Hon ble Apex Court in the case of Attar Singh Gurmukh Singh v. ITO [1991] 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nning accounts with these concerns and there were payments by cheques as well as cash. Assessee also filed copies of accounts of these entities in its books. Contention of the assessee was that the cash payments were marginal when compared to the cheque payments. Further, as per the assessee, all these concerns were its sister concerns and it was having both sale and purchases of goods / services, as also other monetary transactions with them. CIT(Appeals), after verifying running accounts, came to a conclusion that application of Section 40A(3) was not warranted since the payments could not be linked to any specific expenditure. He, therefore, deleted the disallowance made by the A.O. 4. Now before us, learned D.R., strongly assailing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. 6. We have perused the orders and heard the rival submissions. No doubt, CIT(Appeals) has given as annexures to his order copies of the accounts of M/s Kaleeswari Oil Stores, M/s Kalleesuwari Refinery Pvt. Ltd. and M/s GMS Traders, in the books of the assessee. But, what we find is that these are all summarized sums and do not show the detailed transactions. Assessee has filed before us copies of ledger pages of all the three parties as appearing in its books. Though it has been signed by assessee s authorized representative, there is no certificate to the effect that these were part of records produced before the Assessing Officer in the course of original assessment proceedings. Assessing Officer himself has annexed to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of the section. The expenditure for purchasing the stock-in-trade is one of such outgoings. The value of the stock-in-trade has to be taken into account while determining the gross profits under section 28 of the Act on principles of commercial accounting. The payments made for purchases would also be covered by the word expenditure and such payments can be disallowed if they are made in cash in the sums exceeding the amount specified under section 40A(3). We have earlier observed that rule 6DD has to be read along with section 40A(3). The rule also contemplates payments made for stock-intrade and raw materials. This rule is in accordance with the terms of section 40A(3). The rule provides that an assessee can be exempted from the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade cannot be termed as expenditure incurred since money does not go irretrievably in such cases. We are unable to agree with the view taken by the Gauhati High Court. 7. Hon ble jurisdictional High Court has also clearly held in the case of A.D. Jayaveerapandia Nadar Sons (supra) that payments being made to an associate concern was not a justifiable reason for deleting the disallowance under Section 40A(3) of the Act. In these circumstances, we are of the opinion that the CIT(Appeals) fell in error in deleting the disallowance merely on the submission of the assessee, ignoring the ledger copies annexed to the assessment order by the Assessing Officer himself. The payments were all effected in cash and each of such payment exceeded ..... X X X X Extracts X X X X X X X X Extracts X X X X
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