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TMI Blog2023 (8) TMI 1516X X X X Extracts X X X X X X X X Extracts X X X X ..... the confirmation of disallowance of Rs. 1,11,200/- by Ld. CIT(A), NFAC, Delhi thereby upholding the disallowance made by the Assessing Officer (in short ld. 'AO') u/s 40A(3) of the Act in respect of cash payments exceeding the ceiling of Rs. 20,000/-. 3. The facts in brief are that the assessee filed its return of income on 31.03.2012 which was selected for scrutiny under CASS. Statutory notices were issued and duly served upon the assessee. During the course of assessment proceedings Ld. AO observed that the assessee has made payments exceeding Rs. 20,000/- against purchase of goods from Visaka Industries Ltd. which was in violation of provisions of Section 40A(3) of the Act. Accordingly, Ld. AO issued show cause notice which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the cashier of the company. It is not possible to record in our cash book on this day party was made payment cash to our collection personnel. 5. A perusal of the above certificate of payment reveals that the payments made by the assessee on various dates were below Rs. 20,000/- and it was also stated that the assessee has made payments to the collection personnel of the company and the said personnel has made lumpsum deposit in the supplier's account. In the present case the genuineness of the expenditure has not been doubted by the authorities below. In our opinion even were the payments exceeding Rs. 20,000/- are made and the genuineness of the expenses are not doubted, in that case the provisions of Section 40A(3) of the Act are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is genuine, he should allow the deduction. The circular of the Board is not exhaustive; it is only illustrative and the Assessing Officer has to take into account the surrounding circumstances, considerations of business expediency and the facts of each particular case in exercising his discretion either in favour or against the assessee. There may be an oral agreement between the assessee and the seller for payment in cash. A seller may not be willing to accept cheques; cash payment may be made at the request of the payee who is also an assessee and a certificate to that effect filed; absence of banking facilities in places where cash payments are made. All such cases would come within the purview of exceptional or unavoidable circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he banking habits amongst the business community. Apparently, this provision was directly related to curb the evasion of tax and inculcating the banking habits. Therefore, the consequence, which were to befall on account of non-observation of section 40A(3) must have nexus to the failure of such object. Therefore, the genuineness of the transactions it being free from vice of any device of evasion of tax is relevant consideration. In the instant case, the assessee made bank draft of Rs. 5,00,000/- to pay to M/s Mahima Alekha Coal Traders, but he refused to take bank draft therefore in order to run the business the assessee did not have any option but to make payment in cash. Had the assessee not been paid cash to M/s Mahima Alekha Coal Trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheet produced before us which was also furnished before the lower authorities that drawing for personal expenses were Rs. 75,000/- whereas the other drawings were mentioned separately namely repayment of house building loan of Rs. 76,354/-, LIC premium of Rs. 1,77,225/-. We also take note of the fact that the family is situated in Midnapore, West Bengal which a very remote place, where the expenses of the family are also that not much. We also note that the assessee's wife also withdrawals from her capital account, a copy of which is filed at page no. 5 of the paper book, to the tune of Rs. 60,000/- for the backup of the family. Ld. CIT(A) confirmed the addition made by the AO without appreciating the facts on records. Accordingly, the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flow statement of Smt. Jana, we find that the donor has sufficient sources to explain the gift of Rs. 10,00,000/- made to her husband. We note that the donor in response to the notice issued u/s 133(6) of the Act has duly replied and also furnished the details of the gift with source, mode of gift and purpose for which the gift was made. We note that Smt. Baisakhi Jana was doing independent business and has made a gift out of her own income. We note that the total cash flow as per cash flow statement of Rs. 13,55,086/- and therefore, Mrs. Jana was having sufficient sources available for making the said gift. We have also perused the observations of Ld. AO given in the assessment order and observe that the AO simply took up the balance sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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