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TMI Blog2022 (3) TMI 1126X X X X Extracts X X X X X X X X Extracts X X X X ..... tional circumstance as provided in Rule 6DD of the Income Tax Rules, 1962 is rebuttal to the findings of the learned CIT(A) towards the disputed purchases being added to the income of the Assessee by invoking the provision of Section 40A(3) We do not find any merit in the submissions of the learned Counsel for the Assessee on the issue of addition made u/s. 40A(3) of the Act, on account of the cash purchases by the Assessee. Accordingly, the order of the CIT(A) on this issue is confirmed. Addition on account of business promotion - HELD THAT:- CIT(A) has categorically held that this expenditure was disallowed for the reason that no documentary evidences was submitted during the appeal proceedings, before him - AR has failed to submit any documentary evidences before us, except stating that the same has been incurred as cheque and through credit card. Since, the Authorized Representative has failed to explain the reason for incurring the disputed business promotion expenses and also the nature of the disputed business promotion activity, we hold that the learned CIT(A) was justified in confirming the said addition claimed to be incurred towards business promotion expenses, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 9,60,000/- (7) 30.11.2014 Purchase of petrol from Sri Satya Agencies 7,40,000/- (8) 31.12.2014 Purchase of petrol from Velavan Agencies 12,10,000/- (9) 31.01.2015 Purchase of petrol from Sri Satya Agencies 18,70,000/- (10) 31.03.2015 Purchase of petrol from Velavan Agencies 15,20,000/- TOTAL 76,50,000/- The Assessing Officer contended that the Assessee failed to explain any business expediency for the payment made in cash for all the disputed purchases nor had given reasonable cause that stopped him in issuing cheques towards these purchases. Thus, the Assessing Officer issued a show-cause notice vide letter dated 13.12.2017 and as not being satisfied with the reply of the Assessee, confirmed the addition by observing, as under: Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t purchase statement of accounts of the supplier . It is clear from the facts that the Appellant was in the habit of purchasing the petrol regularly and was subsequently making lump-sum payments in cash periodically. Accordingly, the transactions are entered in the account books. It is not a case of making payment below ₹ 20,000/- and accounting it in the books as such on the date of transaction Disallowance of ₹ 76,50,000/- has been rightly made and the same is confirmed. 5. Before us, the ld. Counsel for the assessee reiterated the submission made before the lower authorities. He contended that he does not rely on rule 6DD(j).He contended that the payments are of different times within the date for which the assessee has no idea that he has to pay to the same person on more than one occasion. Under the circumstances, in principle, the Assessee cannot be statutorily restricted as contended in the statutory provisions. Per contra, the learned Departmental Representative, Shri AR.V. Sreenivasan, Additional CIT stands by the impugned order. 6. We have heard the rival contentions and perused the materials available on record and gone through the orders of the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. Question No. 3:- As we have stated earlier, the third question relates to the applicability of the provisions of section 40A(3). Section 40A deals with expenses or payments not deductible in certain circumstances. Under sub-section (3) of section 40A, any expenditure incurred by an assessee, if made to a person in a day, otherwise than by way of an account payee cheque drawn on a bank or account payee in excess of ₹ 20,000/-, no deduction can be allowed. The details furnished in the show cause notice dated 18.2.2005 by the Commissioner show that the assessee had admittedly made payments of ₹ 1,00,000/- on three different dates viz., 1.10.1999, 14.10.1999 and 20.10.1999. The assessee had made payments of ₹ 2,00,000 on 31.10.1999, 2.11.1999 and 3.11.1999. All those payments are indicated in the books of accounts of the assessee to have been made to a supplier by name Standard Fireworks . Similarly payments have been made to another supplier by name Sivakasi Fireworks . Since the name of one supplier mentioned in the books of accounts of the assessee himself to whom a payment of more than ₹ 20,000/- had been made on everyone of those days, the contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existence of (1) nature and extent of banking facility that compelled him to make payment in cash (2) consideration of business expediency that compelled him to make payments in cash and (3) any other relevant factors that would justify such a payment. 21. In the case on hand, the books of accounts maintained by the assessee reflected that payments were made to three different suppliers. One was Standard Fireworks, the second was Indira Prints Pack and the third supplier was Sivakasi Fireworks. But, insofar as, Indira Prints Pack is concerned, payment was less than ₹ 20,000/-. Therefore, that has not led to any problem. But, insofar as the other two suppliers are concerned, the books of accounts reflect that payments in excess of ₹ 20,000/- to each one of those two suppliers was made on a day to day basis. This is seen from the tabulation given in the show cause notice under section 263, which reads as follows:- Name of supplier Date of payment by cash Amount Remarks Standard Fire Works 27.07.1999 1,200.25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue valid receipts. This happens, normally and mainly everyday evening upto night 1 pm. 23. But, unfortunately, the books of accounts do not disclose (1) either that payments were made to agents of those suppliers or (2) that such payments were made in bits and pieces. The table which we have extracted above shows the consolidation of payments made on every day to everyone of those suppliers. Sub-section (3) uses even the expression aggregate of payment made to a person in a day Therefore, any amount of explanation that the assessee gave in response to the show cause notice, could not have gone against the very entries made in the books of accounts. 24. We are not for a moment to be understood to suggest that the books of accounts should have been more carefully drawn. All that we are suggesting is that atleast the names of the agencies or agents or retailers to whom payments were made on a day to day basis, on behalf of the original manufacturers should have been mentioned. In the absence of any specific detail, the vague statements made in response to the show cause notice, cannot offset the entries made in the books of accounts. Therefore, we cannot find fault wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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