2013 (12) TMI 249 - HC - Income Tax

Violation of section 40A(3) - payment in cash in excess of prescribed limit - Held that - The assessee is a scrap dealer purchasing scrap from the Railways - Railways is a concern of the Union of India. If any cash is paid towards purchase of the scrap the same cannot be disputed by the revenue since such payment has to be considered as a legal tender - Decided against Revenue.

Summary

Issues:
Challenge to the legality and correctness of the order passed by the Income Tax Appellate Tribunal for the assessment year 2008-09.

Analysis:
The appeal before the High Court pertains to the challenge raised by the Revenue against the order of the Income Tax Appellate Tribunal for the assessment year 2008-09. The Assessing Officer disallowed certain expenditure and added an amount on the grounds of violation of Section 40A(3) due to cash payments exceeding a specified limit in a single transaction. The respondent-assessee contended that the payments were made to purchase scrap from the Railways, an entity under the Union of India, and hence should be considered as legal tender. The Tribunal allowed the appeal based on this argument, leading to the current challenge by the Revenue before the High Court.

Upon hearing the arguments, the High Court observed that the revenue did not dispute that the assessee is a scrap dealer purchasing scrap from the Railways, which is a concern of the Union of India. The Court noted that if cash payments were made towards the purchase of scrap from the Railways, such payments should be considered as legal tender and cannot be disputed by the revenue. The High Court emphasized that if the revenue had claimed that no such payment was made to the Railways, they could have considered the grievance. However, since the payments were made to the Railways, the Court found no substantial question of law arising in the appeal and dismissed the appeal.

In conclusion, the High Court upheld the decision of the Income Tax Appellate Tribunal, emphasizing that payments made to the Railways for the purchase of scrap should be considered legal tender and cannot be disputed by the revenue. The Court found no merit in the Revenue's challenge and dismissed the appeal accordingly.