TMI Blog2012 (12) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... , in the retail business of cement and electrical goods, filed his return of income for Assessment Year 2008-09 on 29.8.2008 declaring a total income of Rs. 2,28,890. The case was taken up for scrutiny by issue of notice under section 143(2) on 25.8.2009. The Assessing Officer after examining the case, completed the assessment by an order under section 143(3) of the Income Tax Act, 1961 (herein after referred as 'the Act') on 29.10.2010 determining the total income of the assessee at Rs. 12,95,807. In doing so the Assessing Officer made the 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 oppose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee that on that day, the assessee s case was adjourned by the learned CIT(A) to call for a Remand Report on the written submissions furnished by the assessee. The learned counsel for the assessee submitted that thereafter the the case was not posted for hearing as can be seen form the learned CIT(A) s order. It is the submission of the learned counsel for the assessee that the assessee was not aware whether the Assessing Officer had submitted any remand report. In the meanwhile, the learned counsel for the assessee submits, the learned CIT(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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A)-II, Bangalore was not justified to hold that the case laws relied upon by the Appellant were not applicable in view of the amendment of the Section 40A(3) of the Act. The Learned CIT(A)-II, Bangalore has not appreciated the genuineness of the transaction identity of the receivers of the amount paid in cash exceeding Rupees Twenty Thousand. The Appellant is a small trader carrying on the business in Nittur, Tumkur District. He has made the payments in cash exceeding Rupees Twenty Thousand to the following concerns:- 1. M/s. Satish Agencies No. 5, Gowri Mansion, M.R.R. Road, Bangalore. Rs. 5,01,177/- 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 rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requirement of cash by the payee for making payments to various Government Departments and to the Labour. Insistence on payments by Account Payee Cheque or Account Payee Draft would have involved hazardous and cumbersome procedure. The case of the Assessee was fully covered by the exceptions provided in Section 40A(3) r.w. Rule 6DD(j) and the Board Circular. Therefore, no referable question of law across out of the order of the Tribunal. 5. Ramaditya Investments V/s. CIT (2003) 262 ITR 491 (DEL) :- The Hon ble Delhi High Court in the above case has held that the genuineness of these transactions was not doubted or called in question. The amounts 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 expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961, S.40A(3) Income-tax Rules, 1962, R. 6DD D.B.D.T Circular No. 220, dated 31-05-1977. 13. CIT V/s. Mahavir Stores (1998) 232 ITR 300 (MP) :- The Hon ble Madhya Pradesh High Court in the above case has held that the Stock-in-trade on credit Addition under Section 40A(3) CIT (Appeals) and Tribunal Finding justification for cash payments Addition deleted question of fact justified Income-tax Act, 1961, S. 40A(3). 14. Janambhumi V/s. CIT (1997) 225 ITR 517 (GAU) :- The Hon ble Gauhati High Court in the above case has held that the Genuineness of payee not doubted Exceptional circumstances Deduction to be allowed Income-tax Act, 1961, S. 40A(3) Income-tax 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 circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s without considering the totality of the facts and circumstances of the case and prayed that the disallowance made be deleted. 5.5 The learned Departmental Representative on the other hand, supported the orders of the authorities below. 5.6 We have heard both parties and have perused and carefully considered the material on record. It is seen from the order of assessment that the Assessing Officer has not exhaustively considered the mitigating circumstances as per the Proviso to section 40A(3) of the Act before making the disallowance of cash payments. We also find that the learned CIT(A) has not addressed the issue in proper perspective and in providing the assessee adequate opportunity in the matter in accordance with the principles of natural justice. We, therefore, deem it fit to remit the matter back to the file of the Assessing Officer with a direction to consider the issue relating to the disallowance of cash payments under section 40A(3) in accordance with the Proviso to section 40A(3) and also to consider and examine the judicial decisions relied upon by the assessee, after providing the assessee adequate opportunity of being heard in the matter. The assessee is also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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