TMI Blog1986 (1) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ew ground not mentioned by the Income-tax Officer in his order ? (ii) Whether, on the facts and in the circumstances of this case, the Tribunal was right in holding that the purchases of the goods were covered by the word 'expenditure' used in sub-section (3) of section 40A, of the Income-tax Act, 1961 ? (iii) Was the Tribunal right, on the facts and in the circumstances of this Case, to hold that the payments made by the assessee firm to M/s. Amar Singh Sons were payments made in respect of the purchase of the goods and as such were covered by the word ' expenditure ' as used in sub-section (3) of section 40A?" M/s. Kejriwal Iron Stores, Neem-ka-thana, is assessed to income-tax is a registered firm. While scrutinising the return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dates of receipts shown by the sellers, who were residents of Delhi. Thus, it appeared that the cash balances in hand on these, dates were carried forward as the opening balance to the next date without showing any withdrawal corresponding to the payments alleged to have been received by the sellers. The Appellate Assistant Commissioner, in these circumstances, held that the books of account of the assessee were completely unreliable as , incorrect cash balances were shown therein and the withdrawals made for making payments to the sellers were not shown. Thus, the Appellate Assistant Commissioner held that the addition of Rs. 16,250 in the total income of the assessee was justified on two counts, viz., as disallowed under section 40A(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure disallowed on account of infringement of the provisions of section 40A(3) of the Act because the amounts, although paid towards the price of goods purchased by the assessee in the course of his business, were not made by crossed cheques or bank drafts, although they were for sums exceeding Rs. 2,500 each. In view of the finding of fact arrived at by the Appellate Assistant Commissioner which was affirmed by the Appellate Tribunal in appeal in respect of the non-compliance of the provisions of section 40A(3) of the Act by the assessee along with the find in that no exceptional or unavoidable circumstances were disclosed to exist by the assessee on account of which payments could not be made in respect of the purchases in questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Will not be allowed as a deduction unless the payment is made by a crossed cheque or by a crossed bank draft. In case payment is made in cash of a sum of Rs. 2,500 or above in respect of an expenditure incurred by the assessee, the same shall not be allowed as deduction. The purpose of enacting section 40A(3) was clearly to prevent use of unaccounted money in carrying on business by purchases of stock-in-trade or raw materials or any payment of overhead expenses. We are of the view that payments made for purchases would be covered by the word " expenditure " occurring in section 40A(3) and such pay-merits would be disallowed if they are made in cash, if the sum so paid exceeds Rs. 2,500 or more. There is no reason Why the Word " expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The word " expenditure " has been interpreted by their Lordships of the Supreme Court with reference to the provisions of section 10(2)(xv) of the Indian Income-tax Act, 1922, in Indian Molasses Co. (Private) Ltd. v. CIT [1959] 37 ITR 66. In the aforesaid case, their Lordships observed that the idea of " spending " in the sense of " paying out or away " of money is the primary meaning of " expenditure ". Thus " expenditure is what is paid out or away and is something which is gone irretrievably. There appears to us no reason why any restriction should be placed while interpreting the term " expenditure " occurring in section 40A(3) and money paid towards price of purchases made should necessarily fall within the term " expenditure ". We a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered as expenditure incurred by the assessee for the purchase of goods. The third question, therefore, has also to be answered in the affirmative. In view of the fact that the addition of Rs. 16,250 to the total income of the assessee has been made by disallowing the expenditure incurred by the assessee to that extent on account of the infringement of the provisions of section 40A(3), it is not necessary to consider as to whether the same amount could be added as unexplained investment applying the provisions of section 69 of the Act. In our view, it would be merely academic to consider the question in the circumstances of the present case as to whether the Appellate Assistant Commissioner could confirm the addition of the sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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