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TMI Blog2021 (10) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... , dated 30.12.2016. 2. Grounds of appeal raised by the assessee are as follows: "(I) Disallowance u/s.40A(3) of the Act of Rs. 23,22,676: (1) The learned CIT(A) erred in confirming disallowance u/s.40A(3), particularly when no payment in a single day exceeded the limit laid down u/s.40A(3). (2) Considering the fact the appellant demonstrably evidencing that not only were the payments below Rs. 20,000 on a single day, but its nature of business necessitated cash payments for purchase of used ornaments, the learned CIT(A) ought to have deleted the addition. (3) Without prejudice to the above, the appellant submits that it is nobody's case that bona fide or genuineness of the transactions are questioned and therefore, disallowance is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase of old ornaments from public. When people come to sell their ornaments, after examining the ornaments and negotiating the price payments are made to them in cash. The said cash payment is made because customers refused to accept the cheques as most of the customers do not have bank accounts. Therefore, assessee makes payment to them separately on two dates so that assessee does not come under the provisions of section 40A(3) of the Act. 5. However, the Assessing Officer has rejected the contention of the assessee and disallowed the sum of Rs. 23,22,676/- u/s 40A(3) of the Act being cash payments made by the assessee above Rs. 20,000/- in a single day. 6. Aggrieved by the order of the Assessing officer, the assessee carried the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty under section 40A(3) of the Act, hence it should be deleted. The ld.Counsel also submits that during the assessment stage, the assessee has submitted complete set of bills relating to purchases of old ornaments against which payments were made in cash in excess of Rs. 20,000/-. The ld.Counsel also contended that old ornaments are sold by households, in emergency to meet their emergency expenses of hospital and medicines and these old ornaments are not sold by businessman to the assessee. The cash transactions have been done in the pressing circumstances, therefore, there is no violation of provisions of section 40A(3) of the Act, hence the addition made by the Assessing Officer and confirmed by the ld.CIT(A) may be deleted. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had not made any vouchers related to cash payments on different dates. It has simply written on purchase invoices. No signature of recipients is available on the self- made bills. The Assesses itself has recorded single transaction of cash payment in excess of Rs. 20,000/- in cash book though separate recording on purchase bills is found. It is a case that seller has been paid cash in excess of Rs. 20,000/- at one time but just to come out of rigours of section 40A(3) of the Act, dates have been recorded only when the books were called by the assessing officer because cash book produced before the assessing officer contained a single entry. We note that cash book is prime part of the books of account reflecting true affairs. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also discussed in the order sheet noting. Accordingly amount of Rs. 54,000/- is added to the quantum under consideration. Finally, the total sum to be disallowed comes to Rs. 23,22,676/- (22,92,113 + 54,000 - 23,437)". 10. We note that ld.CIT(A) has confirmed the addition made by the Assessing Officer observing as follows: "Vide this ground, the appellant has challenged disallowance of Rs. 23,22,676/- u/s.40A(3) of the Act. In the assessment order, AO has given detailed findings whereby it is brought out that the payments to the extent of Rs. 23,22,676/- was made beyond the limit prescribed u/s 40A(3) of the Act and the appellant's case are not covered in the exceptions under rule 6DD. On the other hand, the appellant has contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above Rs. 20,000/- to one party on one day and the appellant has tried to explain this by mentioning the same as mistake of the accountant. This contention of the appellant is not acceptable as intake could happen in one or two bills but not in all these bills payments. The appellant has failed to controvert the AO's findings regarding payments above Rs. 20,000/- in one day to one party. However, the appellant has referred to the decisions of Supreme Court in the case of Attar Singh Gurmukh Singh 191 ITR 667, the decisions of Gujarat High Court Anupam Tele services 366 ITR 122 and the decisions of Gujarat High Court of Nathalal Jethlal 199 ITR 757, In the case of Nathalal Jethalal, the Hon'ble Gujarat High court held that sec. 40A( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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