2012 (12) TMI 1106 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of Sec. 40A(3) for payments made by bearer cheques.
2. Validity of assessment order and demand notice served u/s 282.
3. Relevance of previous year's CIT(A) decision on the current year's assessment.

Summary:

1. Applicability of Sec. 40A(3) for payments made by bearer cheques:
The Revenue challenged the deletion of an addition of Rs. 1,38,26,200/- made by the A.O. u/s 40A(3) for payments made through bearer cheques. The assessee contended that the payments were genuine, supported by bank statements, ledger extracts, and VAT invoices. The CIT(A) found that the payments were traceable, made to the specified parties, and confirmed by the parties' stamps and signatures on the cheques. The CIT(A) relied on the decision in Sri. Renukeshwara Rice Mills Vs. ITO (2005) 93 ITD 263 (Bang.), which held that payments directly deposited in the payee's bank account fulfill the object of Sec. 40A(3). The ITAT upheld the CIT(A)'s decision, noting that the payments were genuine and traceable, and dismissed the Revenue's grounds.

2. Validity of assessment order and demand notice served u/s 282:
The assessee argued that the assessment order and demand notice were improperly served on the Chartered Accountant, who was not authorized to accept statutory notices. The CIT(A) found that the power of attorney authorized the Chartered Accountant to act on behalf of the assessee, including accepting notices. The CIT(A) dismissed the assessee's contention, noting that the appeal was filed promptly after the assessment order was communicated to the assessee.

3. Relevance of previous year's CIT(A) decision on the current year's assessment:
The assessee cited the deletion of a similar addition in the previous year by the CIT, Aurangabad, u/s 264. The CIT(A) considered the previous decision, noting that the object of Sec. 40A(3) is to ensure payments are made from disclosed sources. The CIT(A) found that the payments in the current year were similarly genuine and traceable, and deleted the addition. The ITAT agreed, noting that the facts were identical to the previous year, and upheld the CIT(A)'s decision.

Cross Objection and Withdrawal of Appeal:
The assessee's Cross Objection was dismissed as infructuous, as it only supported the CIT(A)'s order without raising any grievance. The assessee's appeal in ITA No. 1040/PN/2011 was dismissed as withdrawn.

Conclusion:
The ITAT dismissed both the Revenue's appeals and the assessee's Cross Objection, upholding the CIT(A)'s deletion of the addition u/s 40A(3) and finding no fault in the service of the assessment order and demand notice. The order was pronounced in the open Court on 28th December 2012.