TMI Blog2012 (12) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Commissioner of Income-tax (Appeals), Aurangabad was correct in relying the appeal by considering the decision of the CIT(A) for the immediately preceding year, as even if the Rule of re judicate has not application for tax proceedings in respect of the same assessee for different years. 3. Whether on the facts and in the circumstance of the case, the learned Commissioner of Income-tax (Appeals), Aurangabad was correct in holding that payments made by the assessee are made to same parties despite the fact that the parties were not traceable on the given address. 3. The facts which reveal from the record are as under. The assessee in his Individual capacity is engaged in the business of trading in all kinds of scrap material under the name and style as M/s. Jafri Steel Traders. The assessee filed the return of income for the A.Y. 2008-09 declaring total income of ₹ 5,18,000/-. The assessment of the assessee was completed by the A.O u/s. 143(3) determining total income at ₹ 1,43,44,200/-, making major addition of ₹ 1,38,26,200/- for alleged violation of Sec. 40A(3) of the Act. It was noticed by the A.O that the assessee had made payments thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Vs. Himachal Terepene Products (P) Ltd. 269 ITR 538 (CAL.): In this case the issue decided is that in absence of any evidence that their existed exceptional circumstances, cash payments are to be disallowed u/s 40A(3). (ii) CIT Vs. A.D. Jayaveerapandia Nadar Cons (2007) 207 CTR 428 (Md-HC): In this case, the issue decided is that in the cases where cash payments were made to associate concerns, disallowance u/s 40A(3) is to be upheld. (iii) Mungi Brothers Vs. Asst. CIT (2007) 207 CTR 216(Karn-HC): In this case, the issue decided is that where explanation furnished for making cash payment is not found satisfactory such payments are to be disallowed u/s 40A(3). (iv) ITO Vs. Evershine Platers (2004) 90 TTJ 929 (Agra-trib): In this case, the issue decided is that the cash payments made to illiterate contractors are covered by disallowance u/s 40A(3). In the following cases, the issue decided is that the payment made in cash for purchase of stock in trade is covered by the provisions of section 40A(3) of the I.T. Act. (i) Ratan Udyog Vs. ITO Circle 1(1), Kanpur and another 109 ITR 1 (Ann) (1977) (ii) U.P. Hotels and Restaurent Limited Vs. CIT U.P. 104 ITR 664 (All) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PN/2002 A.Y. 1985-86 dated 11/09/2009 is on distinguishable facts. The contention and the additional ground raised by the appellant is, therefore, dismissed. 8.1. The second contention raised by the appellant is that the payment by bearer cheques amounts to payment by bill of exchange and hence are outside the purview of provisions of section 40A(3) of the Act and is supported by the decision in the case of CIT Vs. Vijaykumar Goyal(2010) 235 CTR 516 (Chhatisgarh). This contention of the appellant is not acceptable as the language of section 40A(3) is clear and not ambiguous. The section clearly states that where the assessee incurs any expenditure in respect of which payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds 20,000 Rupees, no deduction shall be allowed in respect of such expenditure. Further, in the case decided by Hon ble High Court of Chhatisgarh relied on by the appellant, the payments were made by pay orders, banker s cheques and CDRs and not by bearer cheques. It is worth nothing here that the said pay orders, bankers cheques and CDRs were credited in the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant has also contended that in view of the above facts the disallowance is not covered by provisions of section 40A(3) in view of ratio laid down by the decision in the case of Sri. Renukeshwara Rice Mills Vs. Income Tax Officer (2005) 93 ITD 263(Bangalore). The Hon ble ITAT, Bangalore has held that the effect of issue of crossed cheque/DD is that the payee named therein receives the payment through banking channels. The purpose is dual. In the first instance, it is to see that the payee and payee alone receives the payment and to ensure that the payment is routed through banking channel so as to trace the origin and conclusion of the transaction. In the instant case, instead of issuing cheque/DD, the assessee prepared a challan and along with the cash the challan was presented to the bank of the payee for the credit of the same in the account of payee. In the result, it was ensured that the payee and payee alone received the payment and the origin and conclusion of transaction was traceable. Thus, payment of sum directly in the bank account of payee fulfilled the criteria for ensuring the object of introduction of section 40A(3). That was not a direct payment to the payee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.7 In view of the above facts and discussion and respectfully following the ratio laid down by the Hon ble ITAT, Bangalore in the case of Sri. Renukeshwara Rice Mills Vs. Income Tax Officer (2005) 93 ITD 263, the disallowance u/s 40A(3) amounting to ₹ 1,38,26,200/- is not justified and hence deleted. The A.O. is directed accordingly. Ground Nos. 1 2 are allowed. Now the Revenue is in appeal before us. 5. We have heard the rival submissions of the parties and perused the record. The Ld. Counsel placed his heavy reliance on the decision of the ITAT Bangalore Bench in the case of Sri. Renukeshwara Rice Mills v. ITO, 93 ITD 263 (Bang.). Rules 6DD has undergone amendment from the A.Y. 2009-10. So far as the decision in the case of Sri. Renukeshwara Rice Mills (Supra) is concerned, the said assessee was in the business of Rice Mills. The assessee purchased the rice from the Agriculture Produce Committee and deposited the amounts by preparing the challan cash was deposited in Bank Account of the seller namely M/s. K. Parameshwarappa Co. The A.O. made the disallowance for the violation of the Sec. 40A(3). When the matter reached before the Tribunal, the Tribunal reli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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