M/s. Rajmoti Industries, RAJKOT-GUJARAT V. The Assistant Commissioner of Income Tax, Central Circle-2, RAJKOT-GUJARAT

ITA 433/RJT/2011

• Counselvise Citation: 43324914 RSA 2011
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 04-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT B JHAVERI
• Assessee Lawyers: RD LALCHANDANI
• Keywords: Reasonable cause; Commercial expediency
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH: RAJKOT BEFORE SHRI T K SHARMA, JM AND SHRI D K SRIVASTAVA, AM ITA NOS. 1315/RJT/2010 & 433/RJT/2011 ASSESSMENT YEAR: 2007-08 & 2008-09 M/S RAJMOTI INDUSTRIES, BHAVNAGAR ROAD, RAJKOT PAN : AAHFS 6930 M V. ACIT, CENTRAL CIRCLE-2, RAJKOT DATE OF HEARING : 13.09.2013 DATE OF PRONOUNCEMENT : 30.09.2013 ASSESSEE BY : SHRI R D LALCHANDANI, ADV OCATE REVENUE BY : DR. JAYANT B JHAVERI, SR. DR ORDER D K SRIVASTAVA: THE APPEAL BEARING ITA NO.1315/RJT/2010 FILED BY TH E ASSESSEE RELATING TO ASSESSMENT YEAR 2007-08 ARISES OUT OF THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-III, RAJKO T ON 26.06.2010 WHILE THE OTHER APPEAL BEARING ITA NO.433/RJT/2011 FILED BY THE ASS ESSEE ARISES OUT OF ANOTHER ORDER PASSED BY THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-IV, AHMEDABAD ON 05.09.2011 RELATING TO ASSESSMENT YEAR 2008-09. FAC TS, ISSUES AND THE GROUNDS OF APPEAL IN BOTH THE APPEALS ARE COMMON. IT IS THEREF ORE CONVENIENT TO DISPOSE OF BOTH THE APPEALS BY A CONSOLIDATED ORDER. 2. IN ITA NO.1315/RJT/2010, THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1. THE COMMISSIONER OF INCOME TAX [APPEALS] ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2672198/- UNDER THE PROVISIONS O F SECTION 40[A]3 OF THE ACT. THE DISALLOWANCE IS NOT JUSTIFIED. 3. IN ITA NO.433/RJT/2011, THE ASSESSEE HAS TAKEN T HE FOLLOWING GROUNDS OF APPEAL:- 1. THE COMMISSIONER OF INCOME TAX [APPEALS] ERRED IN CONFIRMING THE DISALLOWANCE OF RS.80,00,384/- UNDER THE PROVISIONS OF SECTION 40[A]3 OF THE ACT. THE CONFIRMATION OF THE DISALLOWANCE IS NOT JUSTIFI ED. 4. THE ASSESSEE IS A FIRM. IT IS ENGAGED IN THE BUS INESS OF MANUFACTURING AND TRADING OF EDIBLE OIL. RETURN OF INCOME WAS FILED B Y THE ASSESSEE FOR THE ASSESSMENT 2 1315 & 433-RJT-2011- RAJMOTI INDUSTREIS YEAR 2007-08 ON 31.10.2007 RETURNING TOTAL INCOME A T RS.83,28,780/-. PERUSAL OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2007-08 SHOWS THAT THE INVESTIGATION WING OF THE INCOME-TAX DEPARTMENT HAD CARRIED OUT INVEST IGATIONS IN THE CASE OF M/S. SHREE SWARAJ OIL MILL, JAM-KHAMBHALIA, DURING WHICH IT WAS NOTICED THAT THE ASSESSEE-FIRM HAD PURCHASED OIL FOR WHICH PAYMENTS EXCEEDING RS. 20,000/- WERE MADE BY THE ASSESSEE OTHERWISE THAN BY AN ACCOUNT P AYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT. THE ASSESSING OFF ICER INVOKED SECTION 40A(3) AND CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY A SUM OF RS.26,72,198/- SHOULD NOT BE DISALLOWED U/S 40A(3). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED THE SAID SUM U/S 4 0A(3) WITH THE FOLLOWING OBSERVATIONS:- 4.5 I HAVE CAREFULLY CONSIDERED THE REPLY OF THE A SSESSEE AND THE SUBMISSIONS MADE BY THEM EARLIER. THE REPLY AND THE ARGUMENTS PLACED BEFORE ME DURING THE ASSESSMENT PROCEEDINGS ARE NOT ACCEPTABLE. THE ASSESSEES ARGUMENT THAT THE CHEQUES ISSUED TO M/S. SWARAJA OIL MILL (SELLER) WERE A/C PAYEE, WHICH WERE DEPOSITED IN A/ C OF SELLER. HOWEVER, ONE OF THE PARTNER OF M/S. SWARAJA OIL MILL ADMITTED BE FORE THE ADIT (INV) THAT THEY HAVE ENCASHED THE ENTIRE PAYMENT RECEIVED FROM M/S. SHREE RAJMOTI INDUSTRIES THROUGH DIFFERENT SHROFFS. SINCE M/S. SW ARAJ OIL MILL HAS RECEIVED THE PAYMENT, ENCASHING THE CHEQUES THROUGH SHROFF C LEARLY SHOWS THAT CHEQUES WERE NOT A/C PAYEE CHEQUES BECAUSE THE A/C PAYEE CHEQUES CAN NOT BE ENCASHED THROUGH SHROFFS. ALSO THE CHEQUES A LLEGEDLY ISSUED BY THE ASSESSEE HAVE NOT BEEN CREDITED IN THE ACCOUNT OF M /S. SHREE SWARAJ OIL MILL. 4.6 AS PER THE PROVISIONS OF SECTION 40A(3)(A) AS A PPLICABLE BEFORE 13.07.2006; WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPE CT OF WHICH PAYMENT IS MADE IN A SUM EXCEEDING TWENTY THOUSAND RUPEES OTHERWISE THAN BY A CROSSED CHEQUES DRAWN ON A BANK OR BY A 3 1315 & 433-RJT-2011- RAJMOTI INDUSTREIS CROSSED PAYEE BANK DRAFT, TWENTY PERCENT OF SUCH EX PENDITURE SHALL NOT BE ALLOWED AS AN EXPENDITURE. AS PER THE PROVISIONS OF SECTION 40A(3)(A) AS APPLI CABLE AFTER 13.07.2006; WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPE CT OF WHICH PAYMENT IS MADE IN A SUM EXCEEDING TWENTY THOUSAND RUPEES OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR BY A ACCOUNT PAYEE BANK DRAFT, TWENTY PERCENT OF SUCH EX PENDITURE SHALL NOT BE ALLOWED AS AN EXPENDITURE. 4.7 ANALYSING THE ABOVE SECTIONS BEFORE AND AFTER 1 3.07.2006, I FIND THAT THE ASSESSEE FIRM HAS VIOLATED THE PROVISIONS OF SE CTION 40A(3)(A) BY MAKING PAYMENT OTHERWISE THAN BY A/C. PAYEE CHEQUE AFTER 1 3.07.2006. THE DETAILS SUBMITTED BY THE ASSESSEE DO NOT CONCLUSIVELY SUBST ANTIATE THE CLAIM OF THE ASSESSEE THAT THE PAYMENTS WERE MADE BY AN A/C PAYE E CHEQUES. THE REPORT OF THE ADIT(INV) ALSO SUPPORT THE STAND OF T HE DEPARTMENT. 4.8 THEREFORE, THE PAYMENTS MADE BY THE ASSESSEE TO M/S. SHREE SWARAJ OIL MILL, JAM-KHAMBHALIA AFTER 13.07.2006 AMOUNTING TO RS.1,33,60,988/- ARE OTHERWISE THAN BY A A/C. PAYEE CHEQUE AND THEREBY V IOLATE THE PROVISIONS OF SECTION 40A(3)(A) OF THE ACT. SINCE THE SUBMISSION MADE BY THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE DTD. 18.12.2009 I S NOT ACCEPTABLE AND CONSIDERING THE FINDINGS MADE BY THE ADIT(INVSTIGAT IONS)-2, RAJKOT, I, THEREFORE, DISALLOW 20% OF THE PAYMENTS MADE, WHICH COMES TO RS.26,72,198/- AND ADD TO THE TOTAL INCOME OF THE A SSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS / CONCEALMENT OF INCOME ARE INITIATED. 5. RETURN FOR ASSESSMENT YEAR 2008-09 WAS FILED BY THE ASSESSEE ON 30.09.2008 RETURNING TOTAL INCOME AT RS.84,49,900/- THE INVESTIGATIONS CARRIED OUT BY THE INVESTIGATION WING OF THE INCOME-TAX DEPARTM ENT IN THE CASE OF M/S SHREE SWARAJ OIL MILL REVEALED THAT A SUM OF RS.80,00,384 /- WAS PAID BY THE ASSESSEE TO 4 1315 & 433-RJT-2011- RAJMOTI INDUSTREIS THE SAID FIRM, NAMELY, M/S. SHREE SWARAJ OIL MILL O N ACCOUNT OF PURCHASES MADE FROM THE SAID FIRM, OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT. THE IMPUGNED SUM WAS THER EFORE DISALLOWED BY THE ASSESSING OFFICER U/S 40A(3) IN ASSESSMENT YEAR 200 8-09 ALSO WITH THE FOLLOWING OBSERVATIONS:- 5.4 ON THE BASIS OF ALL ABOVE FACTS AND IN THE CIR CUMSTANCES, THERE IS ENOUGH EVIDENCE TO POINT OUT THAT THERE IS A VIOLAT ION OF PROVISIONS OF SECTION 40A(3)(A) OF THE ACT AND THEREFORE THE PAYMENT MADE TO M/S. SHREE SWARAJ OIL MILL, JAM KHAMBHALIA AMOUNTING THE RS.80,00,384 /- ARE OTHERWISE THAN BY ACCOUNT PAYEE CHEQUES, AND THEREBY, THERE IS A V IOLATION OF PROVISONS OF SECTION 40A(3)(A) OF THE ACT. IT IS ALSO NOTICED TH AT THE LEGISLATURE IN TERMS HAS REMOVED THE PROVISONS OF RULE 6DD(J) KEEPING IN VIE W THE INTENTION THAT MAIN PURPOSE OF INTRODUCING PROVISONS OF SECTION 40A(3) WAS TO CURB PROLIFERATION OF BLACK MONEY. THE PAYMENT FOR PURCHASE OF GOODS I S COVERED BY SECTION 40A(3) OF THE ACT AS HAS BEEN HELD BY THE HONBLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF HARI CHAND VIRENDRA PAUL VS. C IT 140 ITR. THE PROVISONS OF SECTION 40A(3) ARE CONSTRUED STRICTLY AS HAS BEEN HELD BY VARIOUS COURTS. THE HONBLE SUPREME COURT IN THE CA SE OF ATTAR SINGH GURMUKH SINGH ETC. VS. ITO (SC) 191 ITR 667 (PP. 67 3) HAS HELD AS UNDER:- IN INTERPRETING A TAXING STATUTE, THE COURT CANNOT BE OBLIVIOUS OF THE PROLIFERATION OF BLACK MONEY WHICH IS UNDER CIRCULA TION IN OUR COUNTRY. ANY RESTRAINT INTENDED TO CURB THE CHANCES AND OPPO RTUNITIES TO USE OR CREATE BLACK MONEY SHOULD NOT BE REGARDED AS CURTAI LING THE FREEDOM OF TRADE OR BUSINESS. FURTHER, THE HONBLE ITAT, PUNE BENCH IN T G MUTHA VS. ITO (ITAT, PUNE) 54 ITD 460 HAS HELD AS UNDER: IT WOULD AMOUNT TO DEFEATING OBJECTIVE OF ENACTMEN T, IF CLAIM ALLOWED ON THE BASIS OF TRANSACTION IS GENUINE, IDENTITY OF PARTY ESTABLISHED ETC. 5 1315 & 433-RJT-2011- RAJMOTI INDUSTREIS THE DECISION OF HONBLE ITAT PUNE BENCH MAKES IT CL EAR THAT ONLY BECAUSE OF TRANSACTION IS GENUINE, AND IDENTITY OF PARTY IS ESTABLISHED, IF CLAIM IS ALLOWED, IT WOULD AMOUNT TO DEFEATING THE OBJECT IVE OF ENACTMENT. KEEPING IN VIEW THE OBJECTIVES OF THE ENACTMENT AS DISCUSSE D ABOVE, WHICH IS TO CURB PROLIFERATION OF BLACK MONEY, NO CONCESSION CAN BE GRANTED TO THE APPELLANT ON THE GROUNDS OF COMMERCIAL EXPEDIENCY. TO HIGHLIGHT THE ISSUE, FURTHER OBSERVATIONS OF TH E HONBLE SUPREME COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH ARE RE-PRODUCED HEREUNDER:- THE TRIBUNAL IN SRI RENUKESWARA RICE MILLS VS. ITO (2005) 93 TTJ (BANG) 912 REFERRING TO THE DECISION OF THE SUPREME COURT IN ATTARSINGH GURMUKH SINGH V. ITO (1991) ITR 667 (SC) , OBSERVED:- THE HONBLE SUPREME COURT NOTED THAT THE INTENTION TO MAKE PAYMENT BY CROSSED CHEQUE OR CROSSED DD IS TO ENABLE THE AS SESSING AUTHORITY TO ASCERTAIN THAT THE PAYMENT IS GENUINE AND NOT OU T OF THE UNDISCLOSED SOURCE. IT IS ALSO NOTED THAT SECTION 4 0A(3) IS INTENDED TO REGULATE BUSINESS TRANSACTIONS AND TO PREVENT THE U SE OF UNACCOUNTED MONIES OR TO REDUCE THE CHANCES OF USE OF BLACK MON EY FOR BUSINESS TRANSACTIONS. IN THE PRESENT CASE, IT IS SEEN THAT THE ASSESSEE FOR PURCHASE OF RICE, PAID THE AMOUNT DIRECTLY TO THE B ANK ACCOUNT OF THE PAYEE. THE EFFECT OF ISSUE OF CROSSED CHEQUES/DD IS THAT THE PAYEE NAMED THEREIN RECEIVES THE PAYMENT ;THROUGH BANKING CHANNELS. THE PURPOSE IS DUAL. IN THE FIRST INSTANCE, IT IS TO SE E THAT THE PAYEE AND PAYEE ALONE RECEIVES THE PAYMENT AND TO ENSURE THAT THE PAYMENT IS ROUTED THROUGH BANK CHANNEL SO AS TO TRACE THE ORIG IN AND CONCLUSION OF THE TRANSACTION. 6. IN VIEW OF THE ABOVE, 100% OF THE PURCHASES MADE OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE, TO THE TUNE OF RS.80,00,384/- IS DISALLOWED AND ADDED TO THE ASSESSEES TOTAL INCOME. 6. AGGRIEVED BY THE IMPUGNED DISALLOWANCES/ADDITION S MADE BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT(A). THE LD 6 1315 & 433-RJT-2011- RAJMOTI INDUSTREIS CIT(A) HOWEVER CONFIRMED THE IMPUGNED DISALLOWANCES /ADDITIONS MADE BY THE ASSESSING OFFICER FOR THE DETAILED REASONS GIVEN BY HIM IN HIS APPELLATE ORDERS SEPARATELY PASSED FOR BOTH THE ASSESSMENT YEARS UND ER APPEAL. 7. AGGRIEVED BY THE ORDERS PASSED BY THE LD. CIT(A) , THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. 8. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE FAIRLY SUBMITTED THAT THE IMPUGNED SUMS IN BOTH THE ASSESSMENT YEARS WERE PAID BY THE ASSESSEE-FIRM OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE DRAWN ON A B ANK OR ACCOUNT PAYEE BANK DRAFT. HE HOWEVER SUBMITTED THAT THE PROVISIONS OF SECTION 40A(3) AS THEY EXISTED IMMEDIATELY BEFORE THE ASSESSMENT YEAR 2007-08 REQU IRED PAYMENTS TO BE MADE BY CROSSED-CHEQUE AND NOT BY ACCOUNT PAYEE CHEQUE. HE CONTENDED THAT ACCOUNT PAYEE CHEQUES HAVE NOT BEEN DEFINED IN THE INCOME-T AX ACT OR IN THE NEGOTIABLE INSTRUMENTS ACT. HE ALSO SUBMITTED THAT THE GENUINE NESS OF PURCHASES, FOR WHICH IMPUGNED PAYMENTS HAVE BEEN MADE, HAS NOT BEEN DOUB TED BY THE ASSESSING OFFICER OR BY THE LD. CIT(A). ACCORDING TO HIM, THE PURCHASES WERE GENUINE FOR WHICH PAYMENTS WERE MADE THROUGH CROSSED-CHEQUES AND THER EFORE THE IMPUGNED DISALLOWANCE OUGHT TO BE DELETED. 9. IN REPLY, THE LD. DEPARTMENTAL REPRESENTATIVE SU PPORTED THE ORDER PASSED BY THE ASSESSING OFFICER AND THE LD. CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CO NSIDERED THEIR SUBMISSIONS. SECTION 40A(3) DEALS WITH EXPENSES NOT DEDUCTIBLE I N CERTAIN CIRCUMSTANCES. PRIOR TO ASSESSMENT YEAR UNDER APPEAL, I.E., AY 2007-08, SEC TION 40A(3)/(4) MANDATED DISALLOWANCE OF 20% OF ANY EXPENDITURE IF PAYMENT E XCEEDING TWENTY THOUSAND RUPEES WAS MADE, AGAINST SUCH EXPENDITURE, OTHERWIS E THAN BY A CROSSED CHEQUE DRAWN ON BANK OR BY A CROSSED BANK DRAFT. THE AFOR ESAID PROVISIONS WERE AMENDED WITH EFFECT FROM 13 TH JULY 2006 TO SUBSTITUTE THE EXPRESSION A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT IN SUB-SECTIO NS (3) AND (4) OF SECTION 40A, BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT. THE REASONS FOR AMENDMENTS MADE IN SECTION 40A(3) AND T HE PURPOSE THAT THEY SEEK TO 7 1315 & 433-RJT-2011- RAJMOTI INDUSTREIS ACHIEVE HAVE BEEN EXPLAINED IN CIRCULAR NO. 1/2007 DATED 27.4.2007 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES AS UNDER: 14. EXPENSES OR PAYMENTS NOT DEDUCTIBLE IN CERTAIN CIRCUMSTANCES SECTION 40A(3) 14.1 THE EXISTING PROVISIONS CONTAINED IN SUB-SECTI ON (3) AND SUB-SECTION (4) OF SECTION 40A PROVIDE THAT TWENTY PER CENT. OF THE EXPENDITURE SHALL NOT BE ALLOWED AS A DEDUCTION IF PAYMENT IN A SUM EXCEEDIN G TWENTY THOUSAND RUPEES IS MADE, AGAINST SUCH EXPENDITURE, OTHERWISE THAN BY A CROSSED CHEQUE OR CROSSED BANK DRAFT. 14.2 A CROSSED CHEQUE OR CROSSED BANK DRAFT IS NOT A NON-NEGOTIABLE INSTRUMENT. THIS HAS, AT TIMES, RESULTED IN CROSSE D CHEQUES BEING ENDORSED MAKING IT DIFFICULT TO TRACE FINAL PAYEE AND THUS D EFEATING THE PROVISIONS OF SECTION 40A(3). HOWEVER, AS PER THE RBIS INSTRUCT IONS TO COMMERCIAL BANKS, AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT CANNOT BE CREDITED TO ANY ACCOUNT OTHER THAN THE ACCOUNT OF THE PAYEE. TH E ACT HAS ACCORDINGLY AMENDED THE AFOREMENTIONED SUB-SECTION (3) AND SUB- SECTION (4) TO SUBSTITUTE THE EXPRESSION A CROSSED CHEQUE DRAWN O N A BANK OR BY A CROSSED BANK DRAFT, IN BOTH THE SUB-SECTIONS, BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT. 14.3 THESE AMENDMENTS TAKE EFFECT FROM 13 TH JULY, 2006. 11. THE AMENDMENTS MADE IN SECTION 40A(3) ARE INTEN DED TO ENABLE THE INCOME- TAX AUTHORITIES TO TRACK THE TRANSACTIONS BETWEEN T HE ASSESSEE AND THE PAYEE IN ORDER TO ENSURE THAT THEY ARE PROPERLY RECORDED AND ACCOUNTED FOR NOT ONLY BY THE ASSESSEE BUT BY THE PAYEE ALSO. THE AFORESAID OBJEC T WOULD BE COMPLETELY FRUSTRATED IF AN ASSESSEE CLAIMING DEDUCTION OF EXP ENDITURE WAS ALLOWED TO MAKE PAYMENTS IN RESPECT THEREOF IN A MANNER DIFFERENT F ROM THE ONE PRESCRIBED IN SECTION 40A(3). THE LEGISLATIVE POLICY, WHICH IS SO CLEARLY AND UNAMBIGUOUSLY EXPRESSED IN SECTION 40A(3), CANNOT BE ALLOWED TO BE DILUTED SO AS TO FRUSTRATE THE OBJECT THAT IT SEEKS TO ACHIEVE. UNQUESTIONABLY, THE AMENDMENTS HA VE BEEN CARRIED OUT IN SECTION 40A(3) FOR STRICT ENFORCEMENT AND COMPLIANC E. THE FACT THAT THEY ARE 8 1315 & 433-RJT-2011- RAJMOTI INDUSTREIS INTENDED FOR STRICT COMPLIANCE IS ALSO EVIDENT FROM THE FACT THAT THEY ARE NOT SUBJECT TO ANY REASONABLE CAUSE OR EXCEPTION. IF AN ASSESSE E SEEKS TO CLAIM DEDUCTION OF ANY EXPENDITURE INVOLVING PAYMENTS EXCEEDING RS. 20 ,000/-, HE MUST ENSURE THAT SUCH PAYMENTS ARE MADE AS PER PRESCRIPTION OF SECTI ON 40A(3) ELSE THE AMOUNT CLAIMED AS DEDUCTION WOULD NOT QUALIFY FOR DEDUCTIO N. IT IS WELL-ESTABLISHED THAT WHEN LAW REQUIRES A PARTICULAR THING TO BE DONE IN A PARTICULAR MANNER, IT SHOULD THEN BE DONE IN THAT MANNER ELSE IT SHOULD BE IGNORED. 12. AT THE TIME OF HEARING, IT WAS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE TERM ACCOUNT PAYEE CHEQUE USED IN SECTIO N 40A(3) HAS NEITHER BEEN DEFINED IN THE INCOME-TAX ACT NOR IN THE NEGOTIABLE INSTRUMENTS ACT AND HENCE CROSSED CHEQUES ISSUED BY THE ASSESSEE IN THE NAM E OF M/S SHREE SWARAJ OIL MILL SHOULD BE TAKEN AS SUFFICIENT COMPLIANCE OF THE REQ UIREMENT OF SECTION 40A(3). WE ARE UNABLE TO AGREE WITH THE AFORESAID SUBMISSIONS. CIRCULAR ISSUED BY THE CBDT (SUPRA) REFERS TO THE INSTRUCTIONS ISSUED BY THE RE SERVE BANK OF INDIA TO THE BANKS IN WHICH THE DIFFERENCE BETWEEN A CROSSED CHEQUE AND A CCOUNT PAYEE CHEQUE HAS BEEN BROUGHT OUT. WHILE ACCOUNT PAYEE CHEQUE IS CRE DITED BY THE DRAWEE BANK TO THE BANK ACCOUNT OF THE PAYEE AND NONE ELSE, CROSSE D CHEQUE CAN BE NEGOTIATED AND THUS CAN BE CREDITED BY THE DRAWEE BANK TO THE BANK ACCOUNT OF A PERSON OTHER THAN THE PAYEE. ACCOUNT PAYEE CHEQUE IS WELL COVERE D BY THE DEFINITION OF CHEQUE AS GIVEN IN SECTION 6 OF THE NEGOTIABLE INSTRUMENTS ACT READ WITH SECTION 5 THEREOF. IN THIS VIEW OF THE MATTER, PAYMENTS MADE BY A CROS SED CHEQUE CANNOT BE CONSIDERED AS PAYMENT BY ACCOUNT PAYEE CHEQUE. LAW REQUIRES PAYMENTS TO BE MADE BY AN ACCOUNT PAYEE CHEQUE AND NOT BY A CROSSE D CHEQUE. IN THIS VIEW OF THE MATTER, ALL THE ARGUMENTS TAKEN BY THE ASSESSEE IN THIS BEHALF ARE REJECTED. 13. ANOTHER SUBMISSION OF THE ASSESSEE AT THE TIME OF HEARING WAS THAT THE PURCHASES IN RESPECT OF WHICH IMPUGNED PAYMENTS HAV E BEEN MADE WERE GENUINE AND THEREFORE SECTION 40A(3) CANNOT BE INVOKED. SUC H A PLEA CANNOT BE ACCEPTED FOR THE DETAILED REASONS GIVEN BY A CO-ORDINATE BEN CH OF THIS TRIBUNAL IN T G MUTHA V. ITO, 54 ITD 460 AND OTHER DECISIONS REFERRED TO BY THE AO IN THE ASSESSMENT ORDER. BESIDES, SECTION 40A(3) IS NEITHER SUBJECT T O ANY REASONABLE CAUSE NOR TO ANY EXCEPTION. ONCE PAYMENT EXCEEDING RS.20,000/- IS SH OWN TO HAVE BEEN MADE 9 1315 & 433-RJT-2011- RAJMOTI INDUSTREIS OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE DRAWN ON A B ANK OR ACCOUNT PAYEE BANK DRAFT, THE EXPENDITURE IN RESPECT OF WHICH SUCH PAY MENT HAS BEEN MADE CANNOT BE ALLOWED AS DEDUCTION. 14. THE ASSESSEE-FIRM HAS MADE IMPUGNED PAYMENTS EX CEEDING RS.20,000/- IN A DAY FOR PURCHASES MADE BY IT FROM M/S SHREE SWARA J OIL MILL AND CLAIMED DEDUCTION IN RESPECT THEREOF WHILE COMPUTING ITS PR OFITS. IT IS ADMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE IMPUGNED PAYMENTS EXCEEDING RS. 20,000/- WERE MADE OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE DRAWN O N A BANK OR ACCOUNT PAYEE BANK DRAFT. THUS ALL THE CONDITIONS FOR THE APPLICA BILITY OF SECTION 40A(3) ARE FULLY SATISFIED. WE ARE THEREFORE UNABLE TO INTERFERE WIT H THE ORDER PASSED BY THE CIT(A) CONFIRMING THE IMPUGNED DISALLOWANCE IN BOTH THE AS SESSMENT YEARS UNDER APPEAL. HIS ORDERS IN THIS BEHALF ARE CONFIRMED. BOTH THE A PPEALS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON 30.09.2013 SD/- SD/- (T. K. SHARMA) ( D. K. SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT: 30.09.2013 BT COPY OF ORDER FORWARDED TO:- 1. APPELLANT M/S RAJMOTI INDUSTRIES, BHAVNAGAR ROAD , RAJKOT 2. RESPONDENT- 1) ACIT, CENTRAL CIRCLE-2, RAJKOT 3. CONCERNED CIT-II, RAJOT / CIT, CENTRAL-2, AHMEDABA D 4. CIT(A)-III, RAJKOT / CIT(A)-IV, AHMEDABAD 5. DR, ITAT, RAJKOT 6. GUARD FILE. BY ORDER TRUE COPY PRIVATE SECRETARY, ITAT, RAJKOT