2016 (3) TMI 1303 - HC - Income Tax

Disallowance u/s 40A(3) for payments made in cash exceeding 20,000/- - payment in cash was out of business compulsion and not optional - Held that - Cash payments above 20,000/- rupees could be accepted if the conditions prescribed in the Rule 6DD(g) were fulfilled to the satisfaction of the authority concerned. The reasoning of the Tribunal and the interpretation by it of Section 40A(3) and Rule 6DD(g) supported by judicial precedents have not been assailed in this appeal and no submission has been made before us with regard to the same - appeal raises no substantial question of law for determination u/s 260A - Hence the appeal is dismissed.

Summary

Issues:
- Appeal against order allowing I.T.A. No. 173/BLPR/2011 for assessment year 2008-09.
- Imposition of tax liability under Section 40A(3) of the Income Tax Act for cash payments exceeding prescribed limit.
- Interpretation of Section 40A(3) and Rule 6DD(g) & (j) for cash payments.
- Tribunal's decision regarding cash payments above Rs. 20,000 and compliance with rules.

Analysis:
1. The appeal was filed against the order allowing I.T.A. No. 173/BLPR/2011 for the assessment year 2008-09. The Assessing Officer imposed a tax liability of Rs. 61,06,000 under Section 40A(3) of the Income Tax Act for cash payments exceeding the prescribed limit. The appellant, engaged in real estate dealings, made cash payments to four different persons for land purchase, which was acknowledged. The Assessing Officer found no satisfactory explanation for the cash payments, leading to the imposition of tax.

2. The Commissioner Income Tax (Appeals) reviewed the case and concluded that the payments were genuine, made to identified landowners through registered purchase deeds. The purpose of Section 40A(3) was discussed, emphasizing prevention of tax evasion and unaccounted money flow. The Appellate Authority referred to judicial precedents to support the view that genuine business transactions should not be penalized under Section 40A(3). It was noted that the Assessing Officer had not applied statutory provisions properly.

3. The Tribunal, in the subsequent appeal, reiterated the genuineness of payments and the necessity of cash transactions due to business compulsion. Reference was made to Rule 6DD(g) & (j) allowing cash payments in specific circumstances, such as in villages without bank services or on bank holidays. The Tribunal's interpretation of Section 40A(3) and Rule 6DD(g) was upheld, emphasizing compliance with the prescribed conditions for accepting cash payments above Rs. 20,000.

4. The Tribunal's decision regarding cash payments above Rs. 20,000, supported by judicial precedents, was considered valid. The appellate judges found no substantial question of law for determination under Section 260A of the Act. Citing a CBDT circular, it was clarified that appeals should not be filed solely based on exceeding monetary limits, but on the merits of the case. Ultimately, the appeal was dismissed as lacking merit.