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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 ..... ition on account of low withdrawal by the assessee - CIT(A) upheld the order of Ld. AO by holding that the assessee has made sufficient withdrawal and also the fact that the assessee has made withdrawals for payment of LIC premium separately which were duly shown in the capital account of the assessee - HELKD THAT:- We find that though the assessee has made withdrawals of Rs. 75,000/- only and paid the LIC premium to the tune of Rs. 1,77,225/- however, we note that both the authorities below have failed to appreciate the facts in correct perspectives. We observe from the copy of balance 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 for the backup of the family. Ld. CIT(A) confirmed the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12-13. 2. Ground no. 1 is against 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 not complied with and consequently Ld. AO added the aggregate of Rs. 1,11,200/- to the total income of the assessee stating the sum as payments in violation of Section 40A(3) of the Act. In the appellate proceedings also Ld. CIT(A) uphold the order of the AO on the ground that the assessee has made payment exceeding Rs. 20,000/- in violation of provisions of Section 40A(3) of the Act. 4. After hearing rival conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him could not be denied. The Hon'ble High Court of held that the object of the provision of section 40A(3) is to check evasion of taxes so that the payment is made from the disclosed sources. Both the payer and the payee would be showing in the respective accounts the payments made and received. It presupposes that the transactions must be genuine transactions. The Hon'ble Court has further held as under: The Income-tax Officer should take a practical approach to problems and strike a balance between the direction of law and hardship to the assessee. He should not enmesh himself in technicalities. After all the object of section 40A(3) is not to deprive the assessee of the deduction which he is otherwise entitled to claim. Where the amount was paid in cash or received in cash, the Assessing Officer has to find out whether the transaction is genuine or not and if he finds that the transaction 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 Traders, his business would have been stopped or restricted to that extent. The purpose of section 40A(3) is not to restrict the assessee's genuine business activity. 7. Thus, in view of the facts of the case and the ratio laid down in the above decisions, we are inclined to set aside the order of Ld. CIT(A) and direct Ld. AO to delete the disallowance. 8. The issue raised in ground no. 2 is against the confirmation of addition of Rs. 80,000/- by Ld. CIT(A) as made by Ld. AO on account of low withdrawal by the assessee. 9. The facts in brief are that Ld. AO during the course of assessment proceedings observed that the assessee has shown drawings for personal expenses at Rs. 75,000/- whereas the premium paid for LIC was to the tune of Rs. 1,77,225/- and accordingly, Ld. AO added Rs. 80,000/- to the income of the assessee on account of low withdrawal. In the appellate proceedings Ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion that the wife of the assessee could have gifted maximum of Rs. 5,50,000/- and consequently added Rs. 4,50,000/- to the income of the assessee. In the appellate proceedings Ld. CIT(A) dismissed the appeal of the assessee by giving a very big finding. 14. After hearing rival contentions and perusing the material on record, balance sheet and profit and loss account for financial year 2011-12, declaration of gift by Smt. Jana, cash 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 to arriv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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