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TMI Blog1975 (12) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the Income-tax Act, 1961?" The assessee is a firm carrying on business in grocery articles on wholesale basis at Jharsuguda in the district of Sambalpur. In the assessment year 1970-71, corresponding to the accounting year ending on March 31, 1970, the assessee returned a net income of Rs. 34,412. The Income-tax Officer while examining the books of account found that there were two payments in cash being on January 21, 1970 for a sum of Rs. 2,734 and on 30th of March, 1970 for a sum of Rs. 6,000. The Income-tax Officer called upon the assessee to explain why payments of these amounts had been made in cash and not by crossed cheque or a crossed bank draft as required by section 40A(3) of the Act. The assessee in his explanation dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain circumstances Sub-section (3) which is relevant provides: "Where the assessee incurs any expenditure in respect of which payment is made, after such date (not being later than the 31st day of March, 1969) as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding two thousand five hundred rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, such expenditure shall not be allowed as a deduction :...... 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 a bank or by a crossed bank draft, in such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the payment could not be made by a crossed cheque drawn on a bank or by a crossed bank draft-- (1) due to exceptional or unavoidable circumstances; or (2) because payment in the manner aforesaid was not practicable, or would have caused genuine difficulty to the payee, having regard to the nature of the transaction and the necessity for expeditious settlement thereof, and also furnishing evidence to the satisfaction of the Income-tax Officer as to the genuineness of the payment and the identity of the payee." Assessee's counsel has claimed that for the mischief under section 40A to apply, three conditions are necessary, namely, (i) the assessee must have incurred expenditure in respect of which payment is made after the prescr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the legislative purpose in incorporating subsection (3) is clear. The provision is designed to counter evasion of tax through claims of expenditure shown to have been incurred in cash with a view to frustrating proper investigation by the department as to the identity of the payee and the reasonableness of the payment. In our view, the Tribunal came to the correct conclusion in not accepting the assessee's contention. "Expenditure" has no definition in the statute. All outgoings could broadly come under this head. In fact the Chambers' Twentieth Century Dictionary gives the following meaning to the words: "act of expending or laying out; that which is expended; the process of using up; money spent." if this be the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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