ANUPAM TELE SERVICES Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) Appeal is admitted for consideration of following substantial question of law :

(2.) We have heard learned counsel for final disposal of the appeal. Brief facts are as under :

(3.) In response to such notice, the assessee contended that it was purchasing recharge vouchers from Tata Teleservices Limited. The said company issued a Circular dated 22nd August 2005 and instructed the assessee to deposit cash at its office at Surat. Yet another letter was written on 1st September 2005 instructing the assessee to deposit cash and not make payments by cheque or demand draft. The reason why Tata Teleservices Limited were not accepting payment by Banker's cheque or Demand Draft was that the assessee had an account with a Cooperative Bank. It was assured that the cash payment would be deposited in the Bank on behalf of the assessee. It was pointed out that not only the present assessee but all the channel partners/distributors of Tata Teleservices Limited in Gujarat were required to make such cash payments. It was pointed out that if the assessee continued to make payment through Cheque or Demand Draft, they would get the recharge vouchers only after 45 days which would effect their business. It was contended that the intention of Section 40A(3) is to prevent deduction on bogus payments. The assessee had made cash deposits with a reputed public limited company, which they were liable to do as per the terms and condition of agreement with the company which they had followed. The Assessing Officer, however, was not convinced by such reply and held that the payments in cash exceeding Rs. 20,000/= violate the provision of Section 40A(3) of the Act and disallowed 20% of Rs. 34,78,912/= and thus, added back a sum of Rs. 6,95,782/= to the total income of the assessee. The assessee carried the matter in appeal. CIT [A], by his order dated 12th November 2009, reversed the decision of the Assessing Officer. He held and observed as under :