TMI Blog2003 (5) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... icable in this case. 3. That the order of the learned CIT(A), Agra being erroneous in law and on facts be set aside and that of the AO be restored." 3. Briefly stated facts are that the AO found that the assessee had made cash payments to various contractors engaged for rendering service in respect of polishing and electroplating business. The total expenditure incurred on such payments amounted to Rs. 5,34,323 out of which payments made in contravention of s. 40A(3) amounted to Rs. 1,88,397.55. The said payments were made to Shri Chhotey, Shri Govind, Shri Fattey and to Shri Hari Lal. The assessee pleaded that his case was covered under the provisions of r. 6DD(j) r/w Circular No. 220, as he had duly established the identity of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's observation that affidavits filed by them contained similar language and same Notary attested them was no ground for rejecting the affidavits as all the persons were very much in existence and still working for the assessee and the AO could have examined them before brushing aside the contents of the affidavits wherein they clearly admitted that since they did not have any bank account as they were illiterate and not in a position to operate bank account and were thus accepting payments for their work in cash only. Thus, the AO wrongly cast aspersions on the conduct of the assessee that he tried to manipulate the payments by not allowing the payees to maintain bank accounts. In fact, the payments had not been held to be bogus as he had h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vasion and to ensure that the payments exceeding Rs. 10,000 are made by crossed cheque and/or bank drafts. Therefore, it is necessary to ascertain when the deduction is claimed, whether the payment was genuine. The onus is on the assessee to establish the exceptional circumstances and also genuineness of the payment and identity of payee. He also submitted that the payments have definitely not been established by the assessee. Thus, he has supported the order passed by the AO while relying upon the decisions in Narayan Bijoy Kumar vs. CIT (1986) 55 CTR (Pat) 178 : (1987) 163 ITR 695 (Pat), Hari Chand Virender Paul vs. CIT (1982) 30 CTR (P H) 325 : (1983) 140 ITR 148 (P H), Associated Engineering Enterprise vs. CIT (1998) 146 CTR (Gau) 191 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature and extent of the banking facilities available, considerations of business expediency and other relevant factors. The object of the provisions is patently and clearly discernible on the face of the provision itself. It is obviously designed to check tax evasion by claims of cash expenditure which are difficult of proper investigation by the Revenue. There should be some justifiable and acceptable reason for making payments exceeding Rs. 10,000 otherwise than by crossed cheque or bank draft in the absence of which the payment could be disallowed. With a view to avoiding genuine hardship to taxpayers certain exceptions were notified under r. 6DD(j) of IT Rules, 1962, by virtue of which payment in a sum exceeding the specified amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments to these contractors have been made in cash as they do not have bank account and they are illiterate persons. The assessee filed the affidavits of these persons and their statements were recorded by the assessee (sic-AO). They admitted having received the payments in cash from the assessee for the work done by them. The question is whether there exist exceptional circumstances under which the assessee was required to make the payments otherwise than by crossed cheque or crossed bank draft inasmuch as the genuineness of payment and identity of payee does not appear to be in dispute. It is seen that the contractors are not new to the assessee. It is seen that the assessee is engaged in this business since long and has been getting th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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