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TMI Blog2023 (3) TMI 1516X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy and other relevant factors which compelled the assessee to make payment through bearer cheques to the parties, because as claimed by the assessee, the business of the assessee was closed down long back and the assessee was not making any purchases from the parties. Assessee has made payment through proper banking channel, but such payments have been made otherwise than account payee cheque or bank draft and the assessee could not explain as to why payment cannot be made through crossed cheque and bank draft or by electronic mode of transfer of funds. Since, the assessee could not make out a case of business exigency, we are of the considered view that no exceptions can be made out from the proviso to Sec.40A(3) of the Act, and thus, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under section 40A(3), in the circumstances of the case. 2. As payments made through bearer cheques find place in bank's account statements and serve the purpose of Section 40A(3), proving genuineness of payments and identity of payees, who sign the reverse side of the cheques, a disallowance ought not to have been made, 3. In 63 TTJ 657 and 2009 TIOL 442, the Madras Bench of Income Tax Appellate Tribunal and Madras High Court respectively have held that the Section is inapplicable, when genuine payment is made to identifiable parties out of disclosed sources, 4. The terms of Section 40A(3) are not absolute according to Allahabad High Court (217 ITR 431), which followed 191 ITR 667 SC; other decisions holding so are: i. 167 ITR 139 Raj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayments made to M/s. Srinivasa Roadlines M/s.Andhra Trans Freight. In response, the assessee submitted that although, he had paid to parties through bearer cheques, but such payments are in accordance with business exigency, because, suppliers were insisting for payment immediately as the assessee has closed down its business. The AO on the basis of information submitted by the assessee and also details collected from the Branch Manager, Axis Bank, George Town, Chennai, u/s.133(6) of the Act, opined that the assessee has made payments in excess of prescribed limit other than by way of crossed cheque or account payee and electronic mode of payment, and therefore, disallowed a sum of Rs.97,45,000/- u/s.40A(3) of the Act. The AO had also disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w cash payments u/s.40A(3) of the Act, and thus, sustained additions made by the AO. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us. 5. The Ld.AR for the assessee referring to proviso to Sec.40A(3) of the Act, submitted that no disallowance shall be made and no payment shall be deemed to be profits gains of business or profession under sub-section (3), in such cases and under such circumstances as may be prescribed having regard to nature and extent of banking facilities available, considerations of business exigency and other relevant factors. Since, there is a business exigency in making payments to creditors through bearer cheques rigors of provisions of Sec.40A(3) of the Act, cannot be invoked towards payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the fact that he had made payments to creditors through bearer cheques. Further, information supplied by the bank in response to notice u/s.133(6) of the Act, also proves payment through bearer cheques. Therefore, we are of the considered view that the assessee has made payments in excess of prescribed limit as per provisions of Sec.40A(3) of the Act, otherwise than by an account payee cheque drawn in a bank or account payee bank draft or use of Electronic Clearance System through bank account. To this extent, there is no dispute, because, the payments made by the assessee to creditors is in excess of prescribed limit as per provisions of Sec.40A(3) of the Act. Having said so, let us come back, whether the case of the assessee comes und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving regard to nature and extent of banking facilities available, considerations of business exigency and other relevant factors. In our considered view, those exceptions have been carved out by way of Rule 6DD of the IT Rules, and thus, no benefit can be given, over and above, what was stated in Rule 6DD of the IT Rules. Further, assuming for a moment, the cases and circumstances of consideration of business exigency and other relevant factors comes under exception, but in this case, the assessee could not make out a case of business exigency and other relevant factors which compelled the assessee to make payment through bearer cheques to the parties, because as claimed by the assessee, the business of the assessee was closed down long ba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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