TMI Blog2019 (1) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ich Section 40A(3) was promulgated stands satisfied with such material. The only objection was as to why payments have not been made through crossed demand drafts. In fact, in its order, a question was asked as to why the payments were not made in crossed demand drafts. The same is answered by the assessee, who stated that, generally, suppliers require demand drafts for quick realisation. For purchasing the demand drafts normally ‘yourself cheque’ will be issued to the bankers. The Bank may not have crossed the demand draft. It did not come to his notice. Expecting a answer for a specific question as to why the demand draft has not being crossed, would not be appropriate. The Bank report would indicate that payees have received the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that there is no case for holding that the purchases are bogus. However, it upheld the payments made to Challakere parties, wherein the total purchases for all three parties amounted to ₹ 1,36,57,416/-. Questioning the same, an appeal was filed before the Tribunal, which was dismissed. Hence, this appeal. 2. By the order dated 12-4-2010, the appeal was admitted to consider the following substantial question of law: Whether the Tribunal was justified in law in confirming the disallowance of ₹ 27,31,483/- under section 40A(3) of the Act, on the facts and circumstances of the case? 3. Sri A. Shankar, the learned senior counsel appearing for the appellants counsel, contends that the Authorities have committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4. On the other hand, Mr. E. I. Sanmathi, the learned counsel for the respondent, has disputed the same. He contends that there is no satisfactory explanation offered by the assessee as to why the drafts were not crossed. That having considered the material produced by the assessee, the same would clearly indicate that so far as the three accounts are concerned, drafts have not been crossed and there is gross violation of Section 40A(3) read with Section 6 DD of the Income Tax Rules. There is no error committed by the Authorities. Therefore, the order does not call for interference. 5. Heard the learned counsels. 6. Section 40A(3) of the Act reads as under: Where the assessee incurs any expenditure in respect of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income Tax, having considered the said material,recorded a finding that the parties are existent. That their bank accounts are identified. Except one party, all other parties have filed sales tax returns, though the turnover disclosed is very small compared to the purchases claimed by the appellant. The fact remains, that since the transactions are made through the bank account of the assessee and considering the evidence let in, in respect of purchases made by it, there was no material to hold that the purchases have not been made. However, the Commissioner of Income Tax (Appeals) applied the provisions of Section 40A(3) of the Act and disallowed the said claim of the assessee. 8. We are of the view that the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer 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 the business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions. See: Mudiam Oil Company v. ITO, [(1973) 92 ITR 519 (AP)]. If the payment is mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. The same is answered by the assessee, who stated that, generally, suppliers require demand drafts for quick realisation. For purchasing the demand drafts normally yourself cheque will be issued to the bankers. The Bank may not have crossed the demand draft. It did not come to his notice. 12. We are of the view that expecting a answer for a specific question as to why the demand draft has not being crossed, would not be appropriate. In view of the fact that the Bank report would indicate that payees have received the said amounts with the concerned drafts, the finding of the Tribunal on this issue with regard to unsatisfactory answer given by the assessee falls into insignificance. 13. For the aforesaid reasons, the subs ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
