COMMISSIONER OF INCOME TAX Vs. VENKATADHRI CONSTRUCTIONS

JUDGEMENT

(1.) THE Revenue has filed the above appeals as against the order of the Income Tax Appellate Tribunal for the assessment years 1993 -94 and 1995 -96. The T.C.(A).No. 122 of 2003 was admitted on the following substantial question of law: -

(2.) THE assessee herein admittedly made cash payment exceeding Rs.10,000/ - in respect of certain business expenditure incurred by him. On the proposal to apply Section 40A(3) of the Income Tax Act, the assessee furnished the details which are extracted in the assessment order itself. The assessee contended that the payee was having regular accounts with the assessee as regards the supply of cement and that in some of the cases, cash payments were deposited by the assessee directly into the account of the supplier. Apart from this, the assessee also pointed out to the payment to labour. Thus, on a consideration of the facts, the Assessing Authority granted the relief in respect of those cases where payment in cash was made. However, as regards the payment made by way of advance for purchase of cement and credited to the account of the vendor, the Assessing Authority rejected the assessee's plea. Thus, out of cash payment of Rs.4,44,803/ -, the Assessing Authority held that a sum of Rs.64,720/ - alone would not fall for consideration under Section 40A(3) of the Act and balance sum of Rs.3,80,083/ - was liable to be disallowed under Section 40A(3) of the Act. The facts thus stated above related to assessment year 1993 -94. Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax (Appeals), who accepted the assessee's plea that since the amount of Rs.3,26,813/ - was directly paid into the account, the same was not liable to be considered as covered by Section 40A(3) for disallowance. The Commissioner of Income Tax (Appeals) also granted further relief on payment of Rs.25,000/ - and odd. Thus, partly allowed the appeal.

(3.) SECTION 40A(3) as it existed relevant to the assessment year under consideration reads thus, Section 40A(3) 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 ten thousand 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: