TMI Blog2018 (10) TMI 1437X X X X Extracts X X X X X X X X Extracts X X X X ..... ilure of such object. Therefore, the genuineness of the transactions being free from vice of assessment any device of evasion of tax is relevant consideration. The assessee being a contractor frequently purchased building materials from various suppliers through their agents. The agents have flexibility to the assessee to make payments in installments. However, for giving such facility they required payments to be made in cash only. The assessee was compelled to make cash payments in excess of ₹ 20,000/-. In the instant case, the assessee had also established the circumstances under which the payment in the manner prescribed in section 40A(3) of the Act was not practicable or would have caused genuine problems and hence the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olkata [in short the ld CIT(A)] in Appeal No. 84/CIT(A)- 11/ACIT, Range-1/MID/14-15/Kol dated 16. 11. 2016 against the order passed by the DCIT, Circle-1, Midnapore [ in short the ld AO] under section 144(3) of the Income Tax Act, 1961 (in short the Act ) dated 05. 12. 2011 for the Assessment Year 2009-10. 2. The first issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the disallowance made in the sum of ₹ 9,08,882/- u/s 40A(3) of the Act in the facts and circumstances of the case. 3. The brief facts of this issue are that the assesee is a civil contractor and had filed his return of income for the Asst Year 2009-10 on 27. 9. 2009 declaring total income of ₹ 26,74,450/-. The ld AO d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evade the liability to tax on income earned out of such transaction and, secondly, to inculcate the banking habits amongst the business community. Apparently, this provision was directly related to curb the evasion of tax and inculcating the banking habits. Therefore, the consequence, which were to fall on account of non-observation of Section 40A(3) must have nexus to the failure of such object. Therefore, the genuineness of the transactions being free from vice of assessment any device of evasion of tax is relevant consideration. In this regard, it is pertinent to through light on the following decisions on the impugned subject: Attar Singh Gurumukh Singh vs. ITO reported in [1991] 191 ITR 667 (SC): Section 40A(3) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions. CIT vs Crescent Export Syndicate, reported in [2013] 216 Taxman 258, Calcutta High Court: It also appears that the purchases have been held to be genuine by the learned CIT(Appeal) but the learned CIT(Appeal) has invoked Section 40A(3) for payment exceeding ₹ 20,000/- since it is not made by crossed cheque or bank draft but by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the manner prescribed in section 40A(3) of the Act was not practicable or would have caused genuine problems and hence the business expediency is proved beyond doubt. This has not been controverted by the ld DR before us. 4. 1. In view of the aforesaid observations in these peculiar facts and circumstances of the case and respectfully following the judicial precedents relied upon hereinabove, we direct the ld AO to delete the disallowance made u/s 40A(3) of the Act in the sum of ₹ 9,08,882/-. Accordingly, the Revised Grounds 2(a) and 2(b) raised by the assessee are allowed. 5. The last issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the disallowance made u/s 40(a)(ia) of the Act in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Finance Act 2012 w. e. f. 1. 4. 2013 had been held to be retrospective in operation by the Hon ble Jurisdictional High Court in the case of Principal CIT vs Tirupati Construction GA No. 2146 of 2016 with ITAT No. 287 of 2016 dated 23. 8. 2016. Hence in the interest of justice and fairplay, we deem it fit and appropriate, to remand this issue to the file of the ld AO for denovo adjudication of the issue in the light of second proviso to section 40(a)(ia) of the Act. The assessee is also given liberty to adduce fresh evidences in support of its claim before the ld AO. Accordingly, the Revised Grounds 3(a) and 3(b) raised by the assessee are allowed for statistical purposes. 8. The Revised Grounds 1 4 raised by the assessee are gener ..... X X X X Extracts X X X X X X X X Extracts X X X X
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