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TMI Blog2012 (7) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... no banking facility in the villages where lands have been purchased. However, we find that the payments are not by cash but are by bearer cheques which had to be encashed in the banks only and, therefore, the argument of the assessee that the payment had to be made in cash to the agriculturists is not acceptable.Thus, the applicability of sec. 40A(3) and its constitutional validity has been upheld irrespective of whether the transaction is genuine or otherwise. The assessee’s reliance on clause (k) of Rule 6DD is also not acceptable for the reason that the payments were directly made to the agriculturists and not to its agents i.e the directors. Even if it is accepted that the payments are made by the assessee to its directors, it is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) were not applicable and hence the disallowance to the extent of Rs.1,98,54,348/-. 2) The Hon ble CIT(A) erred in holding that the sum of Rs.27,19,425/- represented payments made by way of commission to various parties calling for disallowance u/s 40(a)(ia) on the ground that no TDS was deducted and paid on such payments without appreciating that sec. 40a(ia) is applicable only to sums payable and not paid as held in Jaipur Mitharam Nigam Lid and in similar cases. 3) The Hon ble CIT(A) further erred in not appreciating that the out of the sum of Rs.27,19,425/- paid a sum of Rs.11,22,300/- represented facilitation charges and further that a sum of Rs.15,64,375/- represented expenditure relating to cancellation to agreement to sell i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he financial year 2005-06 from which AO observed that the assessee has made an aggregate payment of Rs.59,09,625/- in the form of bearer cheques contravening the provisions of sec. 40A(3) and also that the assessee agreed for disallowance of the same u/s 40A(3) of the Act. However, while investigating the bank accounts of the assessee maintained with Canara Bank and MNC Bank, the AO further observed that banking cash transaction tax has been debited to the assessee s accounts on various dates on account of withdrawals made by self cheques and name cheques and that self cheques transactions are properly reflected in the cash book of the assessee while the name cheque transactions are not accounted. When enquiries were made with the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheques were encashed in the banks and, therefore, the facility of banks were utilized. Therefore, according to him, the assessee has not proved the necessity of making the payments in cash other than by account payee cheques. As regards assessee s contention that the genuineness of the transaction has not been doubted and, therefore, the provision of sec. 40A(3) cannot be applied to, the learned CIT(A) held that where the genuineness of the transactions was not proved, then the entire amount is not to be allowed and even if the transactions are genuine, the disallowance u/s 40A(3) is to be made if the payment is not made by account payee cheque except in the circumstances mentioned in sec. 40A(3) r.w Rule 6DD of Income-tax Rules. He, thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is caused to the payees if the payments are made by the account payee cheques. One of the pleas of the assessee is that the lands are purchased from the agriculturists who are suspicious of receiving the amounts in cheques and are usually demanding payment in cash before parting with the possession of their lands. It is no doubt that (as observed by the CIT(A) that there is no banking facility in the villages where lands have been purchased. However, we find that the payments are not by cash but are by bearer cheques. As rightly pointed out by the learned CIT(A), the bearer cheques had to be encashed in the banks only and, therefore, the argument of the assessee that the payment had to be made in cash to the agriculturists is not accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he disallowance of commission payment and interest on vehicle finance u/s 40a(ia) on the ground that the assessee has failed to make deduction of tax at source on these payments. 10. Aggrieved, the assessee preferred an appeal before the CIT(A), who confirmed the order of the AO and the assessee is in second appeal before us. 11. The learned counsel for the assessee submitted that this issue of disallowance u/s 40a(ia) on the ground that no TDS was deducted and paid on such payment is covered by the decision of Special Bench of the Tribunal in the case of M/s Merilyn Shipping Transports Visakhapatnam Vs. ACIT in ITO No.477/Vizag/2008 , wherein it has been held that disallowance u/s 40a(ia) is to be made only in respect of the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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