TMI Blog1978 (9) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the amount under s. 40A(3) of the I.T. Act, 1961. He, however, rejected the assessee's application to summon the concerned parties at his expense for examination under s. 133 of the Act. On appeal, the AAC reduced the disallowance to a sum of Rs. 22,258. For the assessment year 1971-72, the AAC struck out the entire disallowance of Rs. 90,000. Aggrieved by the orders of the AAC, the revenue as well as the assessee went up in appeal to the Tribunal. The Tribunal held that s. 40A(1) and (3) confine their operation only to items of expenditure which can be claimed as deductions in determining the profits of business. Purchases do not constitute an expenditure. Moreover, the ITO failed to issue summons to the concerned parties and in so doin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 133 of the present Act. In the present case, the position is that the assessee wanted to examine the concerned parties in order to justify the impugned cash payments. He asked the ITO to summon them and offered to bear the necessary expenses. The ITO refused to oblige, observing : " In spite of repeated opportunities given to the assessee, the assessee has not been able to prove the inconvenience and difficulty it should have involved to the payee if the payment had been made by crossed cheques or crossed bank drafts. Summoning that party might have at the most proved the genuineness of the party and the genuineness of the payment. But that should have not helped the assessee in discharging his onus of proving the inconvenience or di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and vitiated the assessment. Learned counsel for the revenue, however, argued that the effect was cured as the AAC had permitted the assessee to produce the evidence. We are unable to accept this argument. Before the AAC, confirmatory letters of some and not all the payees were produced. He did not summon the payees whose confirmatory letters were not produced. On the other hand, he justified the action of the ITO observing that " the request of the appellant to issue summons under s. 131 to all the parties from all over amounted to setting an impossible task for the Income-tax Officer ". We cannot see any such impossibility. The assessee was prepared to pay the expenses. All that the ITO had to do was to sign and issue the summons. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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