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TMI Blog2013 (6) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... to ₹ 4,96,438/- made on account of cash payments in violation of section 40A(3) by not properly giving weightage to the vital observations of the AO both at the stage of assessment proceedings and remand proceedings. 2. The ld. CIT(Appeals) has erred both in law and on facts of the case in deleting the addition of ₹ 7,30,170/- made on account of disallowance of income tax paid u/s 40(a) by not appreciating the materials brought on record by the AO in the course of assessment proceedings and without appreciating the fact that assessee has not explained the source of payment of income tax of ₹ 7,30,170/-. 3. The appellant craves leave to add or amend the grounds of appeal on or before the appeal is heard and disposed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the provisions of section 40A(3) of the Act and made an addition of ₹ 9,67,438/-. 5. Before the CIT(Appeals), the assessee filed the evidence of the payments being made to the said persons in villages which were not serviced by the bank. The said evidences by way of certificate of the Sarpanch were examined by the AO and in his remand report, he admitted to the same but was of the view that since the adjoining village had a bank branch, then the villagers living nearby would have access to the banking facility. The CIT(Appeals) vide para 6 allowed the claim of the assessee in respect of the payments made in cash totaling ₹ 24,82,190/-. However, in view of the balance payment of ₹ 23,55,000/- paid by way of bearer c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed 20% of the said payment of ₹ 48,37,190/-. The AO , in view of the comments of the auditor in the audit report and also because of the provisions of the law, disallowed a sum of ₹ 9,67,438/- i.e. 20% of ₹ 48,37,190/- under the provisions of section 40A(3) of the Act. The claim of the assessee before the authorities below was that the aforesaid payment was made to the sellers in their respective villages wherein no banking facilities were available. The assessee further claimed that such payments were covered by the exception provided under rule 6DD(h) of IT Rules. Hence, no disallowance. The reply of the assessee was forwarded to the AO alongwith the certificates issued by the sarpanches and panches confirming t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date of payment was not served by any bank, then such payment made to any person ordinarily residing in the village or town or colony, or to any person carrying on any business, profession or vocation, in any such village or town, then no disallowance would be made u/s 40A(3) of the Act. 11. In the facts of the present case before us, the assessee had made the payment to the persons residing in the village, which was not served by any bank. Consequently, we are in conformity with the order of the CIT(Appeals) in allowing the claim of the assessee to the extent of payment of ₹ 24,82,190/- being not covered under provisions of section 40A(3) of the Act. However, in view of the admission of the ld. AR for the assessee before the AO in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(Appeals) was that the AO should have allowed credit for the amount surrendered at ₹ 30 lacs and not at ₹ 22,69,830/-. Before the CIT(Appeals), further claim of the assessee was that the AO had allowed partial credit of surrendered amount without specifying any reason at all. The CIT(Appeals) noted that "I have considered the issue and it is seen that assessee has not claimed any expenses in its profit and loss account warranting disallowance as done by the AO. Further the lesser credit to the extent of ₹ 7,30,170/- for the amount disclosed u/s 132(4) has no basis at all. The AO is therefore directed to give credit for full amount of disclosure to the tune of ₹ 30 lacs." 15. We are in conformity with the directi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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