TMI Blog2022 (9) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Section 40A(3) are not intended to restrict the business activities and insistence of payment by crossed cheque or crossed bank draft is insisted so as to enable the assessing authority to ascertain whether the payment is genuine or whether it is out of the income from disclosed sources. As further held that the terms of Section 40A(3) are 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 and it is open to the assessee to furnish to the satisfaction of AO the circumstances under which the payment in the manner prescribed u/s 40A(3) was not practicable or would have caused genuine difficulty to the paye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93,127/- u/s 40A(3) of the Act although as per records submitted to AO and during the course of hearing of appeal, all payments are less than Rs.20,000/- and as such addition needs deletion. 4. During the course of assessment proceedings, on perusing the details of Grit purchases and carriage, AO noticed that assessee on the aforesaid account had made payment of cash aggregating to Rs.45,63,767/-. The assessee was asked to show cause as to why the entire amount of Rs.45,63,767/- not be disallowed and added to the income u/s 40A(3) of the Act, in view of the fact that payments have been made in cash. AO noted that though assessee was asked to produce the books of accounts, bills and vouchers to substantiate the claim but assessee did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Chief Executive Engineer, Jaisalmer and Superintending Engineer, Jaisalmer. With respect to the nature of payment, Learned AR submitted that most of the payments were made to petty persons for supply of grit who make their living by breaking stones from hand tools, they are illiterate and do not possess PAN Cards. He therefore submitted that if the nature of work undertaken by assessee, the location where the work is undertaken and the parties to whom the assessee has made the payment, is taken into consideration the disallowance u/s 40A(3) is not called for. He further pointed to Page 19 of the paper book, which is a part of the tax audit report and from there he pointed to the Gross Profit and Net Profit ratio for the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the fact that entire business activity of the contract undertaken by assessee was on behalf of Govt. agencies, at remote locate and desert of Rajasthan namely; Bikaner and Jaisalmer. The impugned payments has been done for the aforesaid contract work at remote desert location of Rajasthan. Further, the contention of the assessee that Grit has been purchased by assessee from petty persons who are illiterate and who make their living by breaking stones by hand tools and they do not possess PAN Cards has not been proved to be false or untrue. Further, the Gross Profit ratio and the Net Profit ratio after taking into account the impugned expenditure shown by the assessee during the year under consideration as compared to that of immediate pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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