COMMISSIONER OF INCOME-TAX Vs. VIJAY KUMAR GOEL

JUDGEMENT

(1.) This income-tax appeal under Section 260A of the Income-tax Act, 1961 (for short "the Act") preferred by the Revenue against the order of the Income-tax Appellate Tribunal, Nagpur (for short "the Tribunal") has been admitted on April 13, 2009 on the following substantial questions of law:

(2.) The facts, as projected in the memo of appeal, are that the assessee in the relevant assessment year derived income from trading of steel and HDPE bags. The steel was mostly obtained from the Steel Authority of India Limited, Bhilai through certain intermediate parties. The assessee filed return declaring total income of Rs. 1,93,950. The Assessing Officer completed the assessment under Section 143(3) of the Act by making addition of Rs. 61,51,028 under Section 40A(3) of the Act, as during the assessment proceedings, it was noticed that the assessee had claimed to have made purchases through pay orders, banker's cheques and call deposit receipts to the extent of Rs. 61,51,028. The Assessing Officer disallowed the payments on the ground that the payments were made by the assessee for stock otherwise than by crossed cheque drawn on a bank or crossed demand draft and added the aforesaid payment to the total income of the assessee.

(3.) The Commissioner of Income-tax (Appeals) allowing the appeal of the assessee on this count held that the Assessing Officer has made addition by taking a very narrow interpretation of the provisions of Section 40A(3), restricting the interpretation only to payments by crossed cheques or DDs. The payments through pay orders, banker's cheques or CDRs are also through the accounts of the concerned parties and such pay orders, banker's cheques or CDRs are issued by the bank at the request of the account holders. As these payments are through regular banking channels, the transactions are fully accounted for. The Assessing Officer was, therefore, not correct in disallowing the payments made by the assessee and accordingly, the aforesaid addition was deleted. The Tribunal agreeing with the decision of the Commissioner of Income-tax (Appeals) dismissed the appeal preferred by the Revenue.