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TMI Blog2012 (12) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... following disallowances : i) Under section 40A(3) Rs. 10,31,977 and ii) Disallowance of claim for deduction under section 80C Rs. 35,000 2.2 The assessee carried these issues in appeal before the CIT(A) who by order dt.21.2.2011 allowed the assessee's claim partially as under : i) The assessee's claim for deduction under section 80C of the Act of Rs. 50,000 was allowed in full. ii) The disallowance under section 40A(3) was confirmed to the extent of Rs. 9,20,569. 3.1 Aggrieved the assessee is now in appeal before us. The grounds raised by the assessee in this appeal are as under : " 1. The Appellate order dated 21-02-2011 is opposed to law and facts of the case in so far as it is opposed to the interest of the Appellant. 2. The Learned Commissioner of Income-tax (Appeals)-II, Bangalore ought to have provided sufficient opportunity to the Appellant of being heard before passing the Appellant Order to meet the ends of natural justice. 3. The Learned Commissioner of Income-tax (Appeals)-II, Bangalore ought to have not held that the decisions relied upon by the Appellate were not applicable in view of the amended provisions of Section 40A(3) of the Act and Rule 6DD of the I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) passed the appellate order dt.21.2.2011 without giving the assessee proper or adequate opportunity for making any effective representation of his case. it is contended that the order of the learned CIT(A) dt.21.2.2011 was passed in violation of the principles of natural justice, was not justifiable in law and is liable to be set aside. 5.3 In respect of grounds of appeal at S.Nos. 3 and 4, ti was submitted by the learned counsel for the assessee that the learned CIT(A) in para 3.2 of his order has held that the case laws relied upon by the assessee relate to the period prior to the amendment of section 40A(3) of the Act and Rule 6DD of the IT Rules, 1962 and therefore those cases are not applicable for the Assessment Year 2008-09. It is contended by the learned counsel for the assessee that section 40A(3) was amended only to a limited extent as regards the percentage of deduction to be allowed. Prior to the amendment applicable for Assessment Year 2008-09, the quantum of disallowance was at the rate of 20% of the total expenditure incurred for payments in cash which was in excess of Rs. 20,000 otherwise than by an Account Payee cheque drawn on a Bank or an Account Payee Dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,177/- 2. M/s. Sujala Pipes Pvt Ltd BH Road, Gowribidanur, Rs. 54,885/- 3. M/s. Nataraja Fertizers 2nd Main Road, Mandipet,Tumkur Rs. 4,03,380/- 4. Others Rs. 72,555/- Total : Rs. 10,31,997/- The Learned CIT(A)-II, Bangalore has deleted the addition of Rs. 1,11,428/-, out of the total cash payment of Rs. 10,31,997/- and confirmed the balance of Rs. 9,20,569/-. The Learned CIT(A)-II, Bangalore has not adduced any reasons except holding that the case laws relied upon by the Appellant relate prior to the amendment of Section 40A(3) of the Act and Rule 6DD of the I.T. Rules, 1962 and hence, those cases are not applicable for the Asst Year 2008-09. The Appellant submits that the amendment of Section 40A(3) of the Act is only related to the percentage of quantum disallowance and it has not altered the situations considered in the following cases. 1. Smt. Harshila Chordia V/s. ITO (2008) 298 ITR 349 (RAJ) 2. CIT V.s, Rhydburg Pharmaceuticals Ltd (2004) 269 ITR 561 (DEL) 3. Goenka Agencies V/s. CIT (2003) 263 ITR 145 (CAL) 4. CIT V/s. Nikko Auto Ltd (2002) 256 ITR 476 (P&H) 5. Ramaditya Investments V/s. CIT (2003) 262 ITR 491 (DEL) 6. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s could not be disallowed. 6. CIT V/s. Eastern Condiments Pvt Ltd (2003) 261 ITR 76 (KER) :- The Hon'ble Kerala High Court in the above case has held that the Assessee has clearly stated that the suppliers were not inclined to received payments by cheque and the further fact that the Assessing Officer had observed that all the purchases were genuine, the two Appellant Authorities were justified in holding that the Assessee had satisfied the provision of Rule 6DD(j) of the Rules and in allowing the claim for deduction of expenditure. 7. Shri Mahabir Industries V/s. CIT (1996) 220 ITR 459 (GAU) :- The Hon'ble Gauhati High Court in the above case has held that the Incometax Officer and the Commissioner of Income-tax (Appeals) had not taken into consideration the Circular No. 220, dated May 31 1977. The Tribunal reached the conclusion without giving any reason whatsoever as to the non-existence of exceptional and unavoidable circumstances. The Tribunal was justified in law in holding that the disallowances by the Income-tax Officer in respect of cash payments of Rs. 61,200/- made on various dates to S was proper. 8. Aggarwal Steel Traders V/s. CIT (2001) 250 ITR 738 (P&H) :- The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules 1962, R. 6DD(j) - CBDT Circular No. 220 dated 31-05-1977. 15. Attar Singh Gurmukh Singh V/s. ITO (1991) 191 ITR 667 (SC) :- The Hon'ble Supreme Court in the above case has held that the terms of section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken our of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officers the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of Section 40A(3) and Rule 6DD that they are intended to regulate business transaction and to prevent the use of unaccounted money or reduce the chances to use back money for business transactions." 5.4 The learned counsel for the assessee further contend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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