TMI Blog2017 (10) TMI 1492X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2. In Ground Nos.1 2 of the appeal, the grievance of the assessee is that the CIT(A) erred in confirming the action of the Assessing Officer in making addition of ₹ 1,67,69,200/- u/s.40A(3) of the Act. 3. The brief facts of the case are that during the year, the assessee has purchased land making payments in excess of ₹ 20,000/- to each seller and that the total of such payment is ₹ 1,67,69,200/-, which is in violation of section 40A(3) of the Act and, therefore, the Assessing Officer added the same to the income of the assessee. 4. On appeal before the CIT(A), it was argued by the assessee that payments were made in cash are reflected in cash book recorded in the books of account and are genuine and also the identity of the payees are verifiable and payments have been made out of business expediency and are paid on dates on which banks were closed on account of holidays and, therefore, the payments are covered by exceptions as per Rule 6DD(j) of I.T.Rules. Since the farmers and land owners have insisted on cash payments, the assessee had no option but to make payments in cash. 5. The CIT(A) was not convi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 . 15 .. 16. Regarding disallowance u/s.40A(3) of the Act, we find that the Amritsar Bench of the Tribunal in the case of Rakesh Kumar vs ACIT in ITA No.102/Asr/2014 for the assessment year 2010-2011 order dated 9.3.2016 has held as under: 7. At the outset, the learned AR submitted that the case of the assessee was covered in favour of assessee by the order of Hon'ble Punjab Haryana High Court in the case of Gurdas Garg Vs. CIT, Bathinda, 63 taxman. 289 and in this respect filed a copy of the order. The learned AR submitted that the Hon'ble Punjab Haryan High Court under similar circumstances has held that where genuineness of transactions in excess of ₹ 20,000/- was not disbelieved by authorities Asst. Year:2010-11 then the payments in excess of ₹ 20,000/- cannot be disallowed u/s 40A(3). 8. The learned DR, however, supported the order of authorities below. 9. We have heard the rival parties and have gone through the material placed on record. We find that the Hon'ble Punjab Haryana High Court in the case of Gurdas Garg vs. CIT(supra), under similar facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a place whether either the purchaser or the seller does not have a bank account; or (c) the transactions and payments are made on a bank holiday; or (d) the seller is refusing to accept the payment by way of crossed cheque/draft and the purchaser's business interest would suffer due to non-availability of goods otherwise than from this particular seller ; or (e) the seller, acting as a commission agent, is required to pay cash in turn to persons from whom he has purchase the goods; or (f) specific discount is given by the seller for payment to be made by way of cash. 15. It was further clarified in paragraph 6 that the above circumstances are not exhaustive but illustrative. 16. Therefore, in our opinion, the Tribunal was clearly in error in not travelling beyond the circumstances referred to in paragraph 4 of the Circular and to consider the explanation submitted by the assessee on its own merit. 17. Significantly paragraph 5 reproduced herein below gives a clear indication that Rule 6DD(i) has to be liberally construed and ordinarily where the genuineness of the transaction and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss activities. There is no restriction on the assessee in his trading activities. Section 40-A (3) only empowers the assessing officer to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The payment by crossed cheque or crossed bank draft is insisted on to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of the income from disclosed sources. The terms of Section 40-A(3) arc not absolute. Consideration of business expediency and other relevant factors are not excluded. The genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the assessing officer the circumstances under which the payment in the manner prescribed in Section 40-A(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 6-DD 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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