9911796707
TMI Blog2012 (11) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... f Gold & Silver Jewellery. It filed its return of income for the relevant assessment year on 31-10-2006 declaring an income of Rs.4,54,830/-. A survey u/s 133A of the IT Act,1961 was conducted on 09-05-2006 during which the assessee admitted the additional income of Rs.1,27,482/-on account of profit on sales not reflected in the books of account and Rs.50,000/-on account of investment in furniture. Consequent to survey, the case was selected for scrutiny by issuance of notice u/s 143(2) of the IT Act, 1961. In response to the notice issued u/s 143(2) of the IT Act, 1961, the assessee produced its books of account, sale bills, purchase bills and bank account details etc. On perusal of the books of accounts of the assessee the AO noticed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed 20% of the payments made in cash exceeding Rs.20,000/- and added a sum of Rs.9,21,397/- to the total income of the assessee. 2.3 Aggrieved, the assesee preferred an appeal before the CIT(A). 3. The CIT(A) observed that the assessee has made payments exceeding Rs.20,000/- in cash to the following three parties; 1. M/s Thirumalas 2. M/s Prakash Gold Palace 3. M/s Mahaveer Bullinos 3.1 He also observed that all these parties are based in Bangalore and that there were also some more cash purchases which were worked out to Rs.46,09,685/-. The CIT(A) also considered the assessee's contention that the cash payments are made due to unavoidable circumstances and that though the parties are based in Bangalore, the assessee does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appear to be true. He therefore, did not accept the explanation of the assessee and held that the assessee's case does not fall under any of the exemptions provided under Rule 6DD of the IT Rules, 1962. He accordingly, confirmed the disallowance made by the AO. 3.2 Aggrieved the assessee is in second appeal before us. 4. The learned counsel for the assessee Shri Narendra Sharma, while reiterating the submissions made by the assessee before the authorities below submitted that there are three limbs to Sec.40A(3) of the IT Act, 1961. According to him, the disallowance u/s 40A(3) can be made, if (1) any cash payment is made to a person under such circumstances, as may be prescribed under Rule 6DD of the IT Rules; 2) having regard to the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the law at that point of time. Further, as regards the other payments also the learned counsel for the assesseee made alternate claim that the disallowance can be restricted only to the payments exceeding the limit of Rs.20,0000/- and not to the aggregate of the payments. For this purpose, the learned counsel for the assessee placed reliance upon the decision of the jurisdictional High Court in the case of Shri Shankar S Koliwad, in ITA No.5040/2009 dated 06-01-2012 wherein after taking into consideration, the provisions of the Act, prior to the amendment in 2009, it has been held that the deduction should not be allowed only in respect of the amounts which exceeds Rs.20,000/- otherwise than by a cross cheque or a bank DD. 5. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority with a direction to verify whether or not the assessee has a bank account in Bangalore City and whether the seller have insisted for cash payment. As pointed out by the learned counsel for the assessee, the AO while giving effect to the order of the ITAT, examined and found that the assessee has no accounts in any of the branches of the banks in the City of Bangalore. He further verified the confirmations filed from the sellers to the effect that they had insisted on cash payments as the assessee firm had no bank account in the City of Bangalore and also the assessee is a new customer to the parties and the dealings was in high value commodity. Only in relation to the parties from whom the confirmation has not been received, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if it is found that the assessee has been dealing with the said parties earlier also and has been making payments in cash and also by cheques, the AO is directed to verify the cash payments or the cheque payments followed by the cash payments and only if it is found that the cheque payments followed the cash payments, it can be presumed that the assessee has gained the confidence and the said parties started accepting the cheque payments by the assessee. Till such time, the payments made by the assessee in cash exceeding Rs.20.000/- ought to be accepted as having been made for the purpose of business expediency of the assessee firm. In view of the same, we deem it fit and proper to set aside the order of the CIT(A) and remand the issue to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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