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TMI Blog2014 (4) TMI 566X X X X Extracts X X X X X X X X Extracts X X X X ..... tor, Shri D. Sunil Reddy. 3. Facts of the case in brief leading to the filing of the present appeal before us are that assessee is engaged in the business of processing and sale of milk and milk products. For the assessment year 2008-09, assessee filed return on 28.9.2008, admitting an income of Rs. 6,25,70,736. As against this, the Assessing Officer completed the assessment under S.143(3) of the Act on 31.1.22009, determining the total income at Rs.8,45,83,198, after making various additions and disallowances. One such item of disallowance made by the Assessing Officer, which is the subject matter of present appeal before us, is of an amount of Rs. 79,67,910, representing the payments made to Shri D. Sunil Reddy, M.D. of the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollected by Shri Sunil Reddy for converting and returning the same in currency of higher denominations. This amount paid to Sunil Reddy, according to the assessee, did not represent the expenditure, and the same should not have been considered by the Assessing Officer for disallowance under S. 40A(3) of the Act. As for the balance amount paid to Sunil Reddy, it was submitted that the same represented advance for expenses, which he must have spent either for incurring expenditure on behalf of the assessee company. He either incurred the expenditure on his own or incurred such expenditure through others. Balance of unspent amounts have been deposited with the bank. Furnishing account copy of such amounts, it was submitted the expenditure incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cash. As such, large amounts of advances given by the assessee, themselves, do not represent the expenditure incurred by the assessee, but they represent only the aggregate of expenses incurred by them and the balances returned by them. The balance amounts in the process were all incurred by various persons in charge of the units, to whom it was passed on by Sunil Reddy, and are debited to the respective accounts. Thus, the provisions of S. 40A(3) are to be considered at the time of incurring the expenditure. In so far as payments are concerned, they are less than 20,000 and therefore, provisions of S.40A(3) were not applied to any of the expenditure incurred by the assessee and consequently the Assessing Officer was not justified in app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds of the assessee, inasmuch as whatever amount is paid to the MD, Sunil Reddy, is returned by him, with the only difference being in the size of denomination of the currency given and returned. The payment made was for a definite purpose, viz. return after due conversion into currency of higher denomination, so as to facilitate depositing of the same into bank account. That being so, the provisions of S. 40A(3) are not attracted to this amount of Rs. 57,91,111. 8. As for the second component of balance amount of Rs. 20,70140 is concerned, it is, again, in the form of an advance to facilitate the expenditure to be incurred on behalf of the assessee company either by Sunil Reddy himself or through others. At the point of making the advan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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