CH MANGAYAMMA Vs. UNION OF INDIA

JUDGEMENT

(1.) writ petition is filed challenging the validity of Section 40 A(3) of the Income Tax Act, 1961 (for short "the Act") which disallows 20% of cash payments in excess of Rs.20,000.00in the computation of business expenditure as being arbitrary and violative of Articles 14 and 19(1)(g) of the Constitution of India and for a direction to delete the addition of Rs.6,83,258.00 in the income tax assessment of the petitioner.

(2.) Skeletal facts which prompted the filing of the writ petition are: The petitioner is an assessee under the Act. Originally her husband was carrying on the business of purchase and sale of cool drinks and he died in the year 1991. Later on, the petitioner continued the same business. Claiming herself as an illiterate woman, she alleged that she simply purchases cool drinks from bottles and sells the same to customers. During the year ending 31-3-1996, she was appointed as dealer by Sarvaraya Sugars Pvt. Ltd., which was a bottles on behalf of Coca. According to the petitioner, the business being a petty business, the payments were being made in cash as per the bills issued from time to time.

(3.) In the return filed for the year 1996-97, she declared income at Rs.43,368.00 and total sales at Rs.43,17,213.00 out of which an amount of Rs.3 7,22,399.00 was paid to M/s. Sarvaray Sugars Pvt. Ltd., which includes payment of Rs.34,16,291.00 in cash. Since the cash payments exceeded Rs.20,000.00 at a time. The assessing officer under Section 40-A(3) of the Act added 20% of the amount paid in cash i.e., Rs.6,83,258.00 as the income of the assessee and assessed her tax on a total income of Rs.7,26,630.00 and determined the tax with interest under Section 234-B of the Act at Rs.4,39,288.00 minus the prepaid tax of Rs.245.00. The assessee unsuccessfully claimed that the cash transactions are genuine and are allowable expenditure under the Act.