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TMI Blog2010 (4) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... “no disallowance shall be made where the payment is made by bill of exchange made payable only to a bank”. From a reading of the definition of bill of exchange u/s 5 and cheque under section 6 of the Negotiable Instrument Act, 1881, it is clear that the banker’s cheques/pay orders/ call deposit receipts are instruments which fall within the definition of bill of exchange. The Assessing Officer has not doubted the genuineness of the transactions. The payment could not be disallowed. - 24 of 2001 - - - Dated:- 22-4-2010 - DHIRENDRA MISHRA, PRASHANT KUMAR MISHRA JJ JUDGMENT The judgment of the court was delivered by 1. Dhirendra Mishra J .-This income-tax appeal under section 260A of the Income-tax Act, 1961 (for short "the Act") ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were made by the assessee for stock otherwise than by crossed cheque drawn on a bank or crossed demand draft and added the aforesaid payment to the total income of the assessee. 3. The Commissioner of Income-tax (Appeals) allowing the appeal of the assessee on this count held that the Assessing Officer has made addition by taking a very narrow interpretation of the provisions of section 40A(3), restricting the interpretation only to payments by crossed cheques or DDs. The payments through pay orders, banker's cheques or CDRs are also through the accounts of the concerned parties and such pay orders, banker's cheques or CDRs are issued by the bank at the request of the account holders. As these payments are through regular banking channe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) is illegal. 5. On the other hand, Shri Shashank Dubey, learned senior advocate with Shri Neelabh Dubey, advocate for the respondent/assessee argued that the proviso to section 40A(3) provides that no disallowance under this section shall be made in such cases and under such circumstances as may be prescribed. Sub-rule (d) clause (iv) of rule 6DD of the Income-tax Rules, 1962 (for short "the Rules, 1962") provides that where the payment is made by a bill of exchange payable only to a bank, deduction under sub-section (3) of section 40A is permissible. The purpose of section 40A(3) is to ensure that the payments are made through banking channels and the menace of unaccounted transactions is curbed. In the instant case, the payments have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Act, 1881, it is evident that banker's cheques/pay orders/CDRs are bill of exchange are mentioned in sub-clause (iv) of clause (d) of rule 6DD as amended vide the Income-tax (Amendment) Rules, 1969. 7. We have heard learned counsel for the parties. We have perused the impugned order as well as relevant provisions of law. 8. Indisputably, the Assessing Officer has disallowed the payments made by the assessee to the Steel Authority of India to the tune of Rs. 61,51,028 on the ground that the same were made otherwise than through account payee cheque or account payee draft in contravention of section 40A(3) of the Act. The assessee has made payments through banker's cheque/pay order/call deposit receipt issued by the bank in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 295 of the Act amended the Income-tax Rules, 1962 and rule 6DD after rule 6D was inserted describing the cases and circumstances in which payment in a sum exceeding two thousand five hundred rupees may be made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft. Sub-clause (iv) of clause (d) of the amended rule 6DD provides that "no disallowance shall be made where the payment is made by a bill of exchange made payable only to a bank." From a reading of the definition of bill of exchange under section 5 and cheque under section 6 of the Act of 1881, it is clear that the banker's cheques/pay orders/call deposit receipts are instruments which fall within the definition of bill of exchange. 12. In the matter o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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