9911796707
TMI Blog1979 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... pliance with the abovementioned notice, the petitioner produced the account books before the ITO. The notice, annex. P-1, pertains to the assessment years 1970-71 and 1971-72. Thereafter, the ITO issued another notice dated March 7, 1974 (annex. P-2), under s. 143(3) of the I.T. Act, 1961 (hereinafter referred to as " the Act "), stating therein that the assessee having been requested to file the details of items of cash purchases above Rs. 2,500 as per his ledgers and the said details having not been filed, it was pointed out that purchases to the tune of Rs. 3,70,344 representing items above Rs. 2,500 were effected during that year which are also unvouched. He expressed the opinion that the said purchases were inadmissible items of deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee for the previous year in which such liability was incurred and make the necessary amendment, and the provisions of section. 154 shall, so far as may be., apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the assessment year next following the previous year in which the payment was so made: Provided further that no disallowance under this sub-section shall be made where any payment in a sum exceeding two thousand five hundred rupees is made otherwise than by a crossed cheque drawn on bank or by a crossed bank draft, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion ; (v) the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956); (vi) the Industrial Finance Corporation of India established under section 3 of the Industrial Finance Corporation Act, 1948 (15 of 1948); (vii) the Industrial Credit and Investment Corporation of India Ltd. ; (viii) the Industrial Development Bank of India established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964); (ix) the Unit Trust of India established under section 3 of the Unit Trust of India Act 1963 (52 of 1963); (x) the Madras Industrial Investment Corporation Ltd., Madras; (xi) the Andhra Pradesh Industrial Development Corporation Ltd., Hyderab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Act, 1949 (10 of 1949)], whether incorporated or not, which is established outside India; (e) where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee; (f) where the payment is made for the purchase of (i) agricultural or forest produce or (ii) the produce of animal husbandry (including bides and skins) or dairy or poultry farming; or (iii) fish or fish products; or (iv) the products of horticulture or apiculture, to the cultivator, grower or producer of such articles, produce or products; (g) where the payment is made for the purchase of the products manufactured or processed without the aid o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of s. 40A(3) of the Act are ultra vires as the same are arbitrary. It has been contended that the assessee is engaged in the business of buying and selling electroplating material. In the course of business he has to purchase certain material. The income of the assessee will be the difference between the price of the purchased material and the price at which the same is sold. It has been contended that if the price of the purchased material is not adjusted as against the sale price of the material so sold, in that case the income-tax levied will not be on the income, rather it will be arbitrarily levied on an assumed income. We are unable to agree with this contention of the learned counsel. Taking into consideration the langua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been prescribed with a view to avoid evasion of tax to which the revenue legitimately is entitled. The provision, therefore, cannot be in any manner termed to be arbitrary. The vires of this provision were upheld by the Andhra Pradesh High Court in Mudiam Oil CO. v.ITO [1973] 92 ITR 519. No other ground has been pressed. For the reasons recorded above, we are clearly of the opinion that the provisions of s. 40A(3) of the Act are not ultra vires. As regards the notice dated March 7, 1974 (annex. P-2), it is for the assessee to go and satisfy the authority concerned that he is entitled to claim any of the exceptions as provided for in r. 6DD of the Rules, referred to above. It, of course, goes without saying that the assesses will b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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