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TMI Blog2019 (10) TMI 1409X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions contained u/s 40A(3) is not permissible. Moreover, all the payments in question have been duly recorded in the books of account and there is no question of claiming for any expenditure. So, following the decision rendered in Smt. Harshila Chordia [ 2006 (11) TMI 117 - RAJASTHAN HIGH COURT] and coordinate Bench of the Tribunal in Lord Krishna Dwellers (P) Ltd. [ 2019 (2) TMI 1053 - ITAT DELHI] , we are of the considered view that ld. CIT (A) has erred in disallowing the purchases from M/s. Sumit Enterprises and M/s. Paras Enterprises respectively and as such, the disallowance made is not sustainable, hence ordered to be deleted. - Decided in favour of assessee. - ITA No. 275/Del./2012 - - - Dated:- 1-10-2019 - SHRI R.K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounts were shown by cheque and in case of M/s. Sumit Enterprises, the payment shown by cheque was at ₹ 19,10,000/- in advance as against opening balance account of ₹ 1,52,070/- and as such shown a sum of ₹ 17,97,930/- on 11.10.2007 as receivable from M/s. Sumit Enterprises. On failure of the assessee to prove the genuineness of the purchases, the AO proceeded to hold that the assessee did not make any purchases of goods form these parties nor such parties are in existence, thus shown the bogus purchases vouchers and thereby made an addition of ₹ 39,04,809/- as unexplained expenditure under section 69 of the Income-tax Act, 1961 (for short the Act ). 4. Assessee carried the matter by way of an appeal bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Rajasthan High Court in Smt. Harshila Chordia vs. ITO (2008) 298 ITR 349 (Rajasthan). 8. However, on the other hand, ld. DR for the Revenue in order to reply the arguments addressed by the ld. AR for the assessee contended that when the assessee has failed to demonstrate the facts which compelled him to make payment in cash, disallowance u/s 40A (3) is sustainable and relied upon the judgments of Hon ble High Court of Madras in Natesan Krishnamurthy vs. ITO (2019) 103 taxmann.com 342 (Madras), Hon ble High Court of Bombay in Madhav Govind Dhulshete vs. ITO (2018) 99 taxmann.com 56 (Bombay) Hon ble High Court of Kerala in MRS Roadways vs. CIT (2014) 367 ITR 62 and decisions of coordinate Benches of the Tribunal in Prathamik Kris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was required to deposit every receipt from his customers and then draw a cheque and send it to the principal dealer. The one significant factor which was not disputed and which was found to be correct was that the assessee was to receive his supplies from the principal dealer who was situated at Udaipur and the dealing was from buyer to buyer. Therefore, making the prompt payments to dealer, the cash consideration received from end purchaser and getting delivery of vehicles for such purchaser by payment of consideration received from him to principal dealer, was a modus operandi. Additions should not be sustained on technical ground if the principal dealer had retained cash payment with him without routing it through assessee's b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. There is also no dispute that the payees were identified from the sale deeds itself and the transactions have been held to be genuine. In our understanding, since the genuineness of the payments and identity of the payees is not doubted by the Revenue, the provisions of section 40A(3) of the Act could not be made mechanically. In our considered opinion, the intention behind introduction of provisions of section 40A(3) of the Act has to be looked into. 22. This provision was inserted by the Finance Act, 1968 with the object of curbing the expenditure in cash and to counter tax evasion. The CBDT Circular No 6P dated 6.7.1968 reiterates this view that this provision is designed to counter evasion of a tax through claims for expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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