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TMI Blog2007 (6) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... em number of days after purchase of goods and that no exceptional circumstances compelled the assessee to make the payment in violation of provisions of s. 40A(3) of the IT Act, 1961. 4. On appeal, the CIT(A) confirmed the addition stating that in my view no exceptional circumstances have been brought out for payment by cash/bearer cheques. Hence, the assessee is in appeal before this Bench of the Tribunal. 5. Shri Yogesh Agarwal, learned counsel for the assessee, submitted that s. 40(A3) of the Act provides for disallowance of expenditure incurred in cash exceeding the limits prescribed therein. But, certain exceptions have been provided in the Act. The proviso to s. 40A(3) as well as r. 6DD were such exceptions to such normal rules. According to learned counsel for the assessee, the exceptions provided that if the payment has been made under exceptional circumstances, the provision of s. 40A(3) will not be applicable. The Board, vide Circular No. 220, dt. 31st May, 1997 has clarified that if the transactions are made at a place where either the purchaser or seller does not have a bank account, the payment will be deemed to have been made under exceptional circumstances. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his particular seller; or (e) the seller, acting as a commission agent; is required to pay cash in turn to persons from whom he has purchased the goods; or (f) specific discount is given by the seller for payment to be made by way of cash. It is further clarified that the above circumstances are not exhaustive but illustrative. There could be cases other than those falling within the above categories which would also meet the requirements of r. 6DD(j)." In the instant case, the parties mentioned at Sl. Nos. 1 to 4 belong to different places and the AO has nowhere doubted the genuineness of the transactions of these parties. It is relevant to state that the payments to parties at Sl. Nos. 1 to 3, as mentioned above, were made by the assessee by cash whereas payment to party No. 4 i.e. Radhey Shyam Praveen Kumar was made by bearer cheque. Learned counsel for the assessee submitted that the parties at Sl. Nos. 1 to 4 mentioned above did not have bank account at Baheri and had insisted payment either by cash or bearer cheque as the outstation cheques would have taken almost 20 to 30 days for clearing. In support of the above contention, the assessee had filed certificates/lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant factors is not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the AO the circumstances under which the payment in the manner prescribed in s. 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of s. 40A(3) and r. 66DD that they are intended to regulate business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions." 9. In the above judgement, Hon'ble Supreme Court has categorically held that consideration of business expediency and other relevant factors are not excluded. The Hon'ble Supreme Court further observed that genuine and bona fide transactions are not taken out of the sweep of the section. From the above, it is clear that the AO has not doubted the genuineness of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11-90 14,651 (3) Insaf Trading Co., Bareilly 28-11-90 12,000 -------- Total 68,631 -------- (4) Janta Food Grain Agency, Baheri 28-11-90 40,000 30-12-90 15,000 6-12-90 50,000 -------- Total 1,05,000 -------- All the parties mentioned at point Nos. 1 to 3 belong to different places as mentioned above and learned AO has nowhere doubted the genuineness of the transactions with these parties. The payments aggregating Rs. 68,631 to parties at point Nos. 1 to 3 as mentioned above were made by the assessee concern (Janta Rice Mill) through bearer cheques. All these parties at point Nos. 1 to 3 mentioned. above do not have bank accounts at Baheri and had insisted payments either vide cash or bearer cheques as the outstation cheques would have taken almost 20 to 30 days ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " Learned counsel for the assessee reiterated the submissions made before the lower authorities and, on the other hand, learned Departmental Representative relied on the orders of the authorities below. It is apparent from the record that all the parties mentioned at Sl. Nos. 1 to 3 belong to different places and the AO nowhere doubted the genuineness of the transactions with these parties. There is no dispute that the payments aggregating to Rs. 68,631 to parties mentioned at Sl. Nos. 1 to 3 above were made by the assessee concern through bearer cheques. All three parties did not have bank accounts at Baheri and had insisted payments either by cash or bearer cheque as the outstation cheques would have taken almost 20 to 30 days for clearing. In support of the above contention, the assessee had tiled certificates/letters from the above parties mentioning the fact that they did not have their bank accounts at the place of the assessee concerned. As regards payment made to party No. 4 i.e. M/s Janta Food Grain Agency, Baheri, it is submitted that this party is the sister concern of the assessee firm with same partners. Thus, all the payments made to this party are cash transfers to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the assessee, reiterated the submissions made before the lower authorities. It is seen that the assessee had submitted written submissions before the CIT(A) which are reproduced hereinbelow: Party-wise position with reference to r. 6DD(j) (1) Cheda Lal Sita Ram, Shahjahanpur 27-11-90 26,980 (2) Jai Bajrang Wali Trading Co., Badaun 28-11-90 15,000 29-11-90 14,651 (3) Insaf Trading Co., Bareilly 28-11-90 12,000 -------- Total 68,631 -------- (4) Janta Food Grain Agency, Baheri 28-11-90 40,000 30-12-90 15,000 6-12-90 50,000 -------- Total 1,05,000 -------- All the parties mentioned above belong to different places as mentioned above and the learned AO has nowhere doubted the genuineness of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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