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TMI Blog2016 (2) TMI 1098X X X X Extracts X X X X X X X X Extracts X X X X ..... 'the Act'). 2. Briefly, the facts of the case are that the assessee has purchased a land worth Rs. 20,92,000/- and claimed total expenses of Rs. 22,71,000/- in purchase account including stamp duty and other expenses. Rs. 20,92,000/- have been paid to seller in cash. The Assessing Officer added the amount under section 40A(3) of the Act as the expenses on purchase of land has been claimed as business expenses. 3. Before the learned CIT (Appeals), the assessee submitted that the seller of the land refused to accept the amount in cheque as it was his first dealing with the assessee and seller being an illiterate agriculturist without having any bank account. An affidavit of the purchaser in this regard was submitted before the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant for the purchase of land by applying provisions of section 40A (3) of the Income Tax Act, 1961. 2. That the Worthy CIT (A) has erred in not considering that the case of the appellant is well covered under exception given in Rule 6DD of the Income Tax Rules to which provisions of section 40A(3) are not applicable. 3. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off." 6. The learned counsel for the assessee reiterated the submissions made before the lower authorities. It was stated that the genuineness of the transactions has not been questioned by any lower authorities. Even the affidavit filed by the payee has not been controverted. Reliance was placed on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such circumstances as may be prescribed , having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors :] 9. Since reliance was placed on a latest judgment of the Hon'ble Jurisdictional Punjab & Haryana High Court in the case of Gurdas Garg (supra), after perusing the said judgment we find that a very apt guidance is provided by the Hon'ble High Court in deciding the issue in question. Therefore, at the very first instance, we would analyze the said judgment of the Hon'ble Jurisdictional High Court. In this case, the assessee was engaged in the business of trading in properties. Admittedly, certain payments were made in cash in excess of Rs. 20,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neness of the transaction and the payment and identity of the receiver being disclosed, the disallowance under section 40A(3) of the Act cannot be made. The Hon'ble Rajasthan High Court relied upon a Circular of the CBDT dated 31.5.1977 reported in (1977) 108 (St.) 8. Further the Hon'ble Punjab & Haryana High Court also made a reference to a judgment of the Hon'ble Apex Court in the case of Attar Singh Gurmukh Singh Vs. ITO (1991) 4SCC 385, whereby it was held that the provisions of section 40A(3) of the Act and Rule 6DD of the Income Tax Rules were intended to regulate the business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions. After analyzing all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pediency because of which the payments have to be made in cash. This is an undisputed fact. The payee has given an affidavit which was filed before the Assessing Officer as well whereby he affirmed the fact that he does not have any bank account. These facts have not been conroverted by the Assessing Officer nor the learned CIT (Appeals) and the party was identifiable. He was of the view that the assessee is required to prove that due to exceptional and unavoidable circumstances as provided under the Rules, the payments were made in cash. Therefore, it is not a case of the Department that the payments so made in cash were not genuine. The reasons given by the assessee at every stage have not been disbelieved. Since these reasons are correct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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