9911796707
TMI Blog2016 (8) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... by cash cannot be treated as payment by your appellant and addition of Rs. 26,05,178.00 on account of cash payment is bad in law as well as on fact. 3. For that addition of Rs. 60,000.00 on account of short drawings is bad in law as well as on fact. 2. The first issue raised by the assessee in ground of appeal is that the Ld. CIT(A), erred in confirming the order of AO by disallowing the cash payment of Rs. 26,05,178.00 under the provisions of Section 40A(3) of the Act. 3. Facts of the case are that the assessee in the present case is an Individual/Proprietor and engaged in lottery business of the State Government under the name and style of M/s Gee I Paul ta. The assessee filed his return of income declaring business income of Rs. 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no movement of cash at all. It was an adjustment entry which is allowed as per clause 'd' of Rule 6DD of the Income Tax Rules. However, the AO has rejected the plea of the assessee by holding that there was no adjustment entries passed in the books of accounts. The payment acknowledgement receipts issued by the suppliers clearly establish that payment was made only in cash. The AO also observed that assessee failed to furnish the name and address of the agents, who used to collect money on behalf of the distributors. In view of the above, the AO disallowed a sum of Rs. 26,05,178/- and added to the total income of the assessee. 4. Aggrieved, assessee preferred an appeal before the ld. CIT(A), where the assessee submitted that the suppliers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quick debt realisation, the suppliers of the tickets used to send his personnel to these retailers for and on behalf of the assessee for the collection of money received from the sale of the tickets. Many of the retailers were not having bank account. The suppliers used to send the statement of such collections from the retailers to the assessee for recording the transactions in the books of account as entire collection from the debtor and also cash payment to the suppliers. As per accounting principles, the accounting entry is correct but the so-called fact i.e. cash payment by the assessee is not correct. Ld. AR further submitted that the case of the assessee is duly covered under the Rule 6DD(k) of Income Tax Rules, 1962. This payment ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bill and the payment made. The object of the provision of s. 40A(3) is to check evasion of taxes so that the payment is made from the disclosed sources. Both the payer and the payee would be showing in the respective account the payments made and received. It presupposes that the transaction must be genuine transaction. In this case, genuineness of the transactions has not been disputed by the Revenue authorities. The only ground is the delay in making payment. It is not in dispute that it is the first year of the business of the assessee which was started in December, 1973, and the accounting year ended on 22nd October, 1974, and this was the first year of assessment. The payments were made almost before the close of the accounting yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in cash. A seller may not be willing to accept cheques; cash payment may be made at the request of the payee who is also an assessee and a certificate to that effect filed; absence of banking facilities in places where cash payments are made. All such cases would come within the purview of exceptional or unavoidable circumstances. On the facts of this case, where the assessee has satisfied the Assessing Officer as to the genuineness of the payment and the identity of the payee, the circumstance that there was a delay in making payment of the bills by itself would not take the case out of the ambit of exceptional or unavoidable circumstances referred to in r. 6DD(j) and deduction of the expenditure which is otherwise allowable to him ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricity expenses, household expenses, using motor car running expenses, road tax, car insurance and maintenance, expenses towards social obligation, daughter's education expenses. Accordingly, the AO made addition of Rs. 60,000/- towards drawings of the assessee and the added to the total income of the assessee. 9. Aggrieved, assessee preferred appeal to the ld. CIT(A), who has confirmed the action of AO by observing as under :- "13. I had gone through the facts of the addition. I find that the Assessing Officer is moderate in the addition made on account of low drawings. Even the enhanced figure is moderate since we are dealing with F.Y.2007-08. Hence, I dismiss the ground." Being aggrieved by the order of ld. CIT(A), the assessee is in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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