The ITO, Ward-9(1), Surat V. Shri Ishwarbhai Hirabhai Patel, Surat

ITA 477/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6671 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 13-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources
• Section: 40A(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL, VP AND BHAVNESH SAINI , JM) ITA NO.477/AHD/2009 A. Y.: 2005-06 THE INCOME TAX OFFICER, WARD 9(1), ROOM NO.422, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS SHRI ISHWARBHAI HIRABHAI PATEL, 3, UGAM NAGAR SOCIETY, HIRA KALI NI WADI, L. H. ROAD, SURAT PA NO. AEDPP 0779 E (APPELLANT) (RESPONDENT) C. O. NO. 45/A/2009 (IN ITA NO.477/AHD/2009:A.Y.: 2005-06) SHRI ISHWARBHAI HIRABHAI PATEL, 3, UGAM NAGAR SOCIETY, HIRA KALI NI WADI, L. H. ROAD, SURAT VS THE INCOME TAX OFFICER, WARD 9(1), ROOM NO.422, AAYAKAR BHAVAN, MAJURA GATE, SURAT PA NO. AEDPP 0779 E (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY SHRI MAHESH KUMAR, SR. DR ASSESSEE BY SHRI JAIMIN GANDHI, AR O R D E R PER BHAVNESH SAINI: THE DEPARTMENTAL APPEAL IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-V, SURAT DA TED 26-11-2008 FOR ASSESSMENT YEAR 2005-06 CHALLENGING THE ORDER OF TH E LEARNED CIT(A) IN DELETING THE ADDITION OF RS.10,38,500/- MADE BY THE AO U/S 40A (3) OF THE IT ACT. THE CROSS OBJECTION IS FILED BY THE ASSESSEE IN SUPPORT OF THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION. ITA NO.477/AHD/2009 AND C. O. NO.45/AHD/2009 SHRI ISHWARBHAI HIRABHAI PATEL 2 2. BRIEF FACTS OF THE CASE ARE, DURING THE ASSESSME NT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE WAS IN THE BUSINE SS OF CIVIL CONTRACTS AND THAT DURING THE YEAR UNDER CONSIDERAT ION TOTAL CONTRACT RECEIPTS RECEIVED BY THE ASSESSEE AMOUNTED TO RS.59 ,44,000/- AS AGAINST THE SAME THE ASSESSEE HAD SUBCONTRACTED THE WORK TO FIVE SUB CONTRACTORS DETAILS OF WHICH IS GIVEN IN ORDER OF THE AO. IT WAS ALSO OBSERVED THAT THOSE SUB CONTRACTORS WERE PARTL Y PAID IN CASH, AND PARTLY BY CHEQUE AND THROUGH JOURNAL VOUCHERS. AS REGARDS PAYMENTS MADE TO THOSE PARTY IN CASH THE AO HAS OBS ERVED THAT THE ASSESSEE HAD MANAGED ITS AFFAIRS IN SUCH A MANNER T HAT EACH PAYMENT DID NOT EXCEED RS.20,000/- WHICH IS MANDATO RY LIMIT OF CASH PAYMENT U/S 40A(3). IT WAS FURTHER OBSERVED THAT AS AND WHEN SUCH PAYMENTS WERE MADE TO THE SUBCONTRACTOR THE ASSESSE E WAS HAVING MORE THAN RS.20,000/- AS CASH BALANCE AND THEREFORE ACCORDING TO THE AO THE PAYMENT SHOWN IN THE ACCOUNTS AS LESS TH AN RS.20,000/- EACH WAS NOTHING BUT AN EYE WASH AND THAT THE ENTIR E CASH PAYMENT WAS LIABLE TO BE DISALLOWED IN TERMS OF PROVISIONS OF SECTION 40A(3)OF THE IT ACT. THUS CONSIDERING THESE FACTS THE AO HAS DISALLOWED THE ASSESSEE'S CLAIM OF DEDUCTION TO THE EXTENT OF RS.1 0,38,500/- DETAILS OF WHICH IS ALREADY GIVEN IN THE ASSESSMENT ORDER. DURING THE APPELLATE PROCEEDINGS IT WAS SUBMITTED THAT SINCE N ONE OF THE PAYMENT EXCEED SUM OF RS.20,000/- EACH NO DISALLOWA NCE WAS CALLED FOR. IT WAS FURTHER SUBMITTED THAT ITS CASE WAS FUL LY COVERED BY THE DECISION OF ORISSA HIGH COURT IN CASE OF ALLOO SUPP LY CO. REPORTED IN 121 ITR 688 WHERE IT IS HELD THAT SINCE THE PAYMENT DID NOT EXCEED SUM OF RS.2,500/- (AMOUNT SPECIFIED THEN) EACH TIME THE PROVISIONS OF SECTION 40A(3) OF THE IT ACT WOULD NOT BE APPLICABL E. IT WAS ALSO ITA NO.477/AHD/2009 AND C. O. NO.45/AHD/2009 SHRI ISHWARBHAI HIRABHAI PATEL 3 SUBMITTED THAT SPECIAL LEAVE PETITION AGAINST THE S AID JUDGMENT WAS REJECTED BY THE APEX COURT AND HENCE DISALLOWANCE M ADE BY THE AO SHOULD BE DELETED. AS REGARD VARIOUS JUDGMENTS RELI ED UPON BY THE AO TO SUPPORT ITS CLAIM IT WAS SUBMITTED THAT THE A O IN HIS ORDER HAS TRIED TO TAKE SUPPORT TO HIS OWN INTERPRETATION AS TO THE PROVISIONS IN THE RELEVANT SECTION 40A(3) AND LEGISLATIVE INTENTI ON IN INTRODUCING THE RELEVANT PROVISIONS IN THE ACT; BY MAKING CITATIONS OF FOLLOWING CASES/JUDGMENTS. SMT. JYOTI CHELLARAM VS. CIT (1988) 173 ITR 358 (AP ) : THE OBJECT OF ENACTING SECTION 40A(3) WAS TO ENSU RE THAT PAYMENTS IN RESPECT OF WHICH DEDUCTIONS WERE CLAIME D BY THE TAX PAYERS WERE GENUINELY MADE AND ACCOMMODATIO N PAYMENTS WERE NOT CLAIMED. GIRDHARLAL GOENKA V. CIT (1989) 179 ITR 122 (CAL): THE OBJECT OF SEC. 40A(3) IS TO CHECK EVASION OF TA XES SO THAT THE PAYMENT IS MADE FROM DISCLOSED SOURCES. KANTILAL PURSHOTTAM & CO. VS. CIT (1985) 155 ITR 51 9 (RAJ) : THE PURPOSE OF INTRODUCING SEC. 40 A (3) WA S TO BLOCK THE LOOPHOLES OF MAKING CASH PAYMENTS AND CLAIMING DEDUCTIONS WITH A VIEW TO FRUSTRATE INVEST IGATION AS TO THE IDENTITY OF THE RECIPIENTS AND THE GENUIN ENESS OF THE CLAIM. SIR, ALL THE ABOVE CASES AS CITED BY LEARNED ASSESS ING OFFICER HAS NO RELEVANCE TO THE APPELLANT'S CASE, A S THE COMMON FACTS OF THOSE CASES WERE THE PAYMENTS MADE BY THE ASSESSEE EXCEEDED THE PRESCRIBED LIMIT OF CA SH PAYMENT PROVIDED IN THE RELEVANT SECTION; WHILE IN THE APPELLANT'S CASE NO SINGLE PAYMENT IN EXCESS OF THE LIMIT PRESCRIBED UNDER THE RELEVANT PROVISIONS HAVE BEEN MADE. FURTHER ALL THOSE CASES WERE DECIDED IN FAVOR OF THE ASSESSEE GIVING EFFECT TO THE LEGISLATIVE INTEN TION; OF NON DISALLOWANCE UNDER CERTAIN SITUATIONS CONSIDERI NG THE ITA NO.477/AHD/2009 AND C. O. NO.45/AHD/2009 SHRI ISHWARBHAI HIRABHAI PATEL 4 EXEMPTIONS AND RELIEF PROVIDED UNDER THE RELEVANT PROVISIONS AND APPRAISAL BY THE RELEVANT COURTS, TH AT IDENTITY OF THE PAYEE AND GENUINENESS OF TRANSACTIO NS WERE PROVED. IT IS WORTH NOTING THAT IN ABOVE CASES, COURTS NOT ONLY DECIDED IN FAVOR OF THE ASSESSEE, BUT PROVIDED GOOD GUIDELINES IN INTERPRETATION OF THE RELEVANT PROVIS IONS INCASE OF DISALLOWANCE OF PAYMENTS EXCEEDING THE LI MIT PRESCRIBED BY THE STATUTE. SOME OF WHICH ARE REPROD UCED FOR YOUR KIND CONSIDERATION: THAT THE PROVISIONS OF SECTION 40A(3) REGARDIN G ALLOW ABILITY OF DEDUCTION OF AMOUNT EXCEEDING THE PRESCR IBED LIMITS HAS BEEN LIBERALIZED. IN THIS CASE THE HIGH COURT OBSERVED THAT THE BOARD CIRCULAR DIRECTING THE INCO ME TAX OFFICER TO TAKE IN TO ACCOUNT CERTAIN CIRCUMSTANCES WHICH ARE NOT EXHAUSTIVE BUT ONLY ILLUSTRATIVE FOR THE GU IDANCE OF THE ITO. [CASE: GIRDHARLAL GOENKA] IT WAS FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD ALREADY SUPPLIED CONFI RMATIONS OF THOSE PARTIES AS WELL AS PAN OF THOSE PARTIES WHICH HAS NOT BEEN REBUTTED BY THE AO. THUS ACCORDING TO THE ASSESSEE SINCE THE PAYMENTS WERE MADE TO IDENTIFIED PERSONS WHOSE CONFIRMATIONS WERE ALREADY FILED NO ADVERSE VIEW CO ULD BE TAKEN. 3. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS O F THE ASSESSEE, MATERIAL ON RECORD AND IN THE LIGHT OF TH E DECISION OF THE HONBLE ORISSA HIGH COURT IN THE CASE OF ALLOO SUPP LY CO. 121 ITR 688 DELETED THE ADDITION. HIS FINDINGS ARE REPRODUC ED AS UNDER: I HAVE GONE THROUGH THE CONTENTION OF THE APPELLANT AND FIND MERIT IN ITS CASE. IT IS NOT IN DISPUTE THAT T HE PAYMENTS WERE MADE TO IDENTIFIED PERSONS AND THAT THE AO HAS NOT ITA NO.477/AHD/2009 AND C. O. NO.45/AHD/2009 SHRI ISHWARBHAI HIRABHAI PATEL 5 BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT SUCH PAYMENTS WERE NOT MADE FURTHER IT IS ALSO NOT IN DI SPUTE THAT AT NO POINT OF TIME THE PAYMENT EXCEED RS.20,0 00/- IN CASH WHICH IS THE AMOUNT PRESCRIBED U/S 40A(3) OF T HE ACT, FOR THE PURPOSE OF DISALLOWANCE TO BE SO MADE. IT WOULD BE APT TO REFER TO THE DECISION OF ORISSA HIG H COURT IN CASE OF ALLOO SUPPLY CO. WHERE IT IS HELD THAT 'THE WORD SUMS HAS NO STATUTORY DEFINITION AND MUST HAVE THE COMMON PARLANCE MEANING. RELYING UPON ITS MEANING AS GIVEN IN THE DICTIONARY, LEARNE D STANDING COUNSEL HAS CONTENDED THAT THE WORD CONVEYS A SENSE OF TOTALITY AND, THEREFORE, EVEN IF AN ASSESSEE HAS PAID A SUM EXCEEDING RS. 2,500 IN DIFFERENT INSTALLMENTS, THE TOTAL HAVING EXCEEDED T HE PRESCRIBED AMOUNT, THE SECTION OPERATED. THE ARGUMENT DOES NOT AT ALL IMPRESS US. THE WORD SUM HAS BEEN USED THERE TO CONVEY THE MEANING OF AMOUNT' AND NOT THE SUM TOTAL FIGURE. THE READER'S DIGEST GREAT ENCYCLOPEDIC DICTIONARY GIVES ONE OF THE MEANINGS OF SUM AS ' A QUANTITY OR AMOUNT OF MONEY '. THE OXFORD ENGLISH DICTIONARY GIVES ONE OF THE MEANINGS OF THE WORD TO BE A QUANTITY OF MONEY OF A SPECIFIED AMOUNT. IN BOUVIER'S LAW DICTIONARY THE MEANING OF THE WORD HAS BEEN GIVEN AS A QUANTITY OF, MONEY OR CURRENCY. THE WEBSTER'S UNIVERSAL UNABRIDGED DICTIONARY GIVES THE SAME MEANING OF THE WORD SUM ', I.E., A QUANTITY OF MONEY OR CURRENCY. AS HAS BEEN INDICATED IN WORDS AND PHRASES (PERMANENT EDN, VOL. 40) (WEST PUBLISHING CO.), SUM HAS A DEFINITE MEANING APPROPRIATE TO USE WITH REFERENCE TO AN AMOUNT OF MONEY. IN THE CASE OF COMMISSIONERS OF CUSTOMS AND EXCISE V. QUEEN'S PARK RANGERS FOOTBALL AND ATHLETIC CLUB LTD. [1952] 2 QB 918 (QB), IT HAS BEE N INDICATED THAT THE WORD ' SUM ' HAS TWO CONNOTATIONS, ONE BEING A DEFINITE AMOUNT, E.G., SO MANY POUNDS AND SHILLINGS, AND THE OTHER ONE BEING AN ADDITION OF INDIVIDUAL AMOUNTS TO CREATE A SUM. IN THIS CONNECTION SEE ALSO KNEEN V. MARTIN [1935] 1 ITA NO.477/AHD/2009 AND C. O. NO.45/AHD/2009 SHRI ISHWARBHAI HIRABHAI PATEL 6 KB 499; 19 TC 33 (CA). IN THE A DICTIONARY FOR ACCOUNTS BY ERIC L. KOHLER THE MEANING OF SUM HAS BEEN GIVEN AS AN AMOUNT, AS OF MONEY '. WHILE LEGISLATING, PARLIAMENT OBVIOUSLY TRIES TO CONVEY ITS INTENTIO THROUGH EXPRESS WORDS. IT IS ON E OF THE WELL SETTLED RULES OF INTERPRETATION THAT WH ERE A WORD USED IN A STATUTE CARRIES MORE THAN ONE MEANING, THAT MEANING WHICH MAKES THE PROVISION WORKABLE AND IS NEAREST TO THE LEGISLATIVE INTENTIO N, HAS TO BE ADOPTED. WE ARE OF THE DEFINITE VIEW THAT THE WORD SUM IN THE RELEVANT PROVISION IS USED ON LY TO INDICATE AN AMOUNT OF MONEY AND DOES NOT REFER TO THE TOTALITY OF EXPENDITURE. THERE IS CONSIDERABLE FORCE IN THE STAND ACCEPTED BY THE TRIBUNAL THAT IF PAYMENTS ARE MADE AT DIFFERENT TIMES DURING THE DAY AND THE ASSESSEE HAS NO IDEA THAT HE HAS TO PAY TO THE SAME PERSON ON MORE THAN ONE OCCASION, HE CANNOT BE SUBJECTED TO THE STATUTORY RESTRICTION CONTAINED IN THE PROVISIO N IN QUESTION UNLESS ANY ONE PAYMENT IS ABOVE RS. 2,500. SECTION 40A APPEARS IN CHAP. IV OF THE ACT DEALING WITH COMPUTATION OF TOTAL INCOME AND IS CLASSIFIED UNDER THE SUB-HEADING IN GROUP D 'PROFIT S AND GAINS OF BUSINESS OR PROFESSION'. PARLIAMENT MUST HAVE INTENDED A WORKING RULE AND UNLESS BY CLEAR MEANING OF THE WORDS A DIFFERENT INTENTION APPEARS, WE MUST GIVE THE PROVISION A CONSTRUCTION WHICH WOULD MAKE THE PROVISION WORKABLE. OUR ANSWER TO THE FIRST QUESTION, THEREFORE, IS: THE STATUTORY LIMIT OF RS. 2,500 UNDER S. 40A(3) OF THE ACT APPLIES TO PAYMENTS MADE TO A PARTY AT A TIME AND NOT TO THE AGGREGATE OF PAYMENTS MADE TO A PARTY IN THE COURSE OF THE DAY AS RECORDED IN THE CASH BOOK. ITA NO.477/AHD/2009 AND C. O. NO.45/AHD/2009 SHRI ISHWARBHAI HIRABHAI PATEL 7 IN VIEW OF SUCH AN ANSWER, IN THE INSTANT CASE, THE PROVISION WAS NOT AT ALL ATTRACTED. THE SECOND QUESTION DOES NOT ARISE AND NEED NOT BE ANSWERED.' IT IS ALSO PERTINENT TO NOTE THAT SPECIAL LEAVE PET ITION AGAINST SUCH JUDGEMENT IS REJECTED BY THE APEX COURT FURTHER THERE ARE CATENA OF JUDGEMENT WHERE I T HAS BEEN HELD THAT WHERE EACH PAYMENT DOES NOT EXCEED RS.20,000/-EACH NO DISALLOWANCE IS CALLED FOR. FURTHER RELIANCE IS PLACED ON THE JUDGEMENT OF APEX COURT IN CASE OF ATTAR SINGH GURUMUKH SINGH V CIT REPORTED IN 191 ITR 522 WHERE THEIR LORDSHIP HAS HELD THAT IN OUR OPINION, THERE IS LITTLE MERIT IN THIS CONTE NTION. SECTION 40A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSION OF RULE 6DD. THE SECTION MUST BE READ ALONG WITH THE RULE. IF READ TOGETHER, IT WILL BE D EAR THAT THE PROVISIONS ARE NOT INTENDED TO RESTRICT TH E BUSINESS ACTIVITIES. THERE IS NO RESTRICTION ON THE ASSESSEE IN HIS TRADING ACTIVITIES. SECTION 40A(3) ONLY EMPOWERS THE ASSESSING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RESPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED CHEQUE OR 'CROSSED BANK DRAFT. THE PAYMENT BY CROSSED CHEQUE OR CROSSED BANK DRAFT IS INSISTED ON TO ENABLE THE ASSESSING AUTHORITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF THE INCOME FROM UNDISCLOSED SOURCES. THE TERMS OF SECTION 40A(3) ARE NOT ABSOLUTE. CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE ASSESSING OFFICER THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS ITA NO.477/AHD/2009 AND C. O. NO.45/AHD/2009 SHRI ISHWARBHAI HIRABHAI PATEL 8 RECEIVED THE CASH PAYMENT. RULE 6DD PROVIDES THAT AN ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSSED BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISION S OF SECTION 40A(3) AND RULE 6DD THAT THEY ARE INTENDED TO REGULATE BUSINESS TRANSACTIONS AND TO PREVENT TH E USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTIONS. (MUDIAM OIL COMPANY V. ITO [1973] 92 ITR 519 (AP)). IF THE PAYMENT IS MADE BY A CROSSED CHEQUE DRAWN ON A BANK OR CROSSED BANK DRAFT, THEN IT WILL BE EASIER TO ASCERTAIN, WHEN DEDUCTION IS CLAIMED, WHETHER THE PAYMENT WAS GENUINE AND WHETHER IT WAS OUT OF THE INCOME FROM DISCLOSED SOURCES. IN INTERPRETING A TAXING STATUTE, THE COURT CANNOT BE OBLIVIOUS OF THE PROLIFERATION OF BLACK MONEY WHICH IS UNDER CIRCULATION IN OUR COUNTRY. ANY RESTRAINT INTENDED TO CURB THE CHANCES AND OPPORTUNITIES TO USE OR CREATE BLACK MONEY SHOULD NOT BE REGARDED AS CURTAILING THE FREEDOM OF TRADE OR BUSINESS.' THUS CONSIDERING THE FACTS OF THE CASE THAT PAYMENT S ARE NOT BOGUS THE EXPENSES SHOULD NOT BE DISALLOWED AND HENCE DISALLOWANCE MADE BY THE AO IS THUS DELETED. IN THE RESULT APPEAL IS ALLOWED. 4. THE LEARNED DR MERELY RELIED UPON THE ORDER OF T HE AO AND HAS NOT POINTED OUT ANY INFIRMITY IN THE ORDER OF THE L EARNED CIT(A). ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE RE ITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 5. ON CONSIDERATION OF THE RIVAL SUBMISSION WE DO N OT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL, IT IS NOT IN DISP UTE THAT PAYMENTS ITA NO.477/AHD/2009 AND C. O. NO.45/AHD/2009 SHRI ISHWARBHAI HIRABHAI PATEL 9 WERE MADE TO IDENTIFIED PERSONS AND THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT SUCH PAYMENTS WERE NOT MADE. FURTHER, IT WAS NOT IN DISPUTE THAT AT NO POINT OF TIME THE PAYMENT EXCEEDED RS.20,000/- IN CASH WHICH IS THE AMOUNT P RESCRIBED U/S 40 A (3) OF THE IT ACT FOR THE PURPOSE OF DISALLOWANCE TO BE SO MADE. THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER WOULD AL SO SHOW THAT PAYMENTS WERE MADE TO THE PARTIES BELOW RS.20,000/- AS PRESCRIBED U/S 40A (3) OF THE IT ACT. THE HONBLE MADHYA PRADE SH HIGH COURT IN THE CASE OF CIT VS TRIVENIPRASAD PANNALAL 228 ITR 6 80 HELD THAT SECTION 40A(3) OF THE INCOME-TAX ACT, 196, SAYS TH AT THE ASSESSEE SHOULD NOT INCUR ANY EXPENDITURE IN A SUM EXCEEDING RS.2,500 OTHERWISE THAN BY A CROSSED CHEQUE DRAWN O N A BANK OR BY A CROSSED BANK DRAFT. SUCH EXPENDITURE SHALL NOT BE ALLOWED AS DEDUCTION. THEREFORE, THE LAW ONLY SAYS THAT THE AMOUNT EXCEEDING RS.2,500 SHOULD NOT BE PAID EXCEPT BY WAY OF CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT A ND IF IT EXCEEDS THIS AMOUNT, THEN SUCH EXPENDITURE SHALL NO T BE ALLOWED AS DEDUCTION. IT DOES NOT SAY THAT THE AGGR EGATE OF THE AMOUNT SHOULD NOT EXCEED RS.2,500. THE WORDS USED A RE IN A SUM, I.E. SINGLE SUM HAS BEEN USED. THEREFORE, IRR ESPECTIVE OF ANY NUMBER OF TRANSACTIONS, WHERE THE AMOUNT DOES N OT EXCEED RS.2,500 THE RIGOURS OF SECTION 40A(3) WILL NOT APP LY. THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS ASHOK IR ON AND STEEL ROLLING MILLS 320 ITR 101 FOLLOWING THE DECISION IN THE CASE OF ALLOO SUPPLY CO. (SUPRA) AND CONFIRMED BY THE HONBLE SUP REME COURT HELD AS UNDER: ITA NO.477/AHD/2009 AND C. O. NO.45/AHD/2009 SHRI ISHWARBHAI HIRABHAI PATEL 10 SECTION 40A(3) OF THE INCOME-TAX ACT, 1961, AS IT STOOD IN THE ASSESSMENT YEAR 1986-87 PROVIDES THAT ANY AMOUNT EXCEEDING RS.2,500 SHOULD NOT BE PAID EXCEPT BY WAY OF CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT AND IF IT EXCEEDS THAT LIMIT THE N 20 PER CENT OF THE EXPENDITURE SHALL NOT BE ALLOWED AS DEDUCTION. IT DOES NOT SAY THAT THE AGGREGATE OF TH E AMOUNTS SHOULD NOT EXCEED RS.2,500. THE WORDS USED ARE IN A SUM. IRRESPECTIVE OF ANY NUMBER OF TRANSACTIONS, WHERE THE AMOUNT DOES NOT EXCEED RS.2,500, THE RIGOUR OF SECTION 40A(3) WILL NOT APP LY. DURING THE COURSE OF ASSESSMENT YEAR 1986-87, IT WAS FOUND THAT THE ASSESSEE MADE PAYMENTS IN CASH EXCEEDING RS.2,500. THE ASSESSING AUTHORITY WAS NOT SATISFIED WITH THE REPLY GIVEN BY THE ASSES SEE AND, HENCE, DISALLOWED THE AMOUNTS BY INVOKING SECTION 40A(3). THE TRIBUNAL HELD THAT THE DISALLOWANCE UNDER SECTION 40A(3) WAS NOT JUSTIFIED AS NO SINGLE PAYMENT WAS MORE THAN RS.2,500. ON A REFERENCE: HELD, THAT THE LATEST AMENDMENT POINTED OUT ON BEHALF OF THE REVENUE WAS NOT AVAILABLE DURING THE RELEVANT ASSESSMENT YEAR AND THE AMENDMENT WAS NOT RETROSPECTIVE IN NATURE. THEREFORE, THERE WAS N O INFIRMITY IN THE ORDER OF THE TRIBUNAL. 6. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). THE LEARNED DR HAS NOT POINTED OUT ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). THE DEPARTMENTAL APPEAL HAS NO MERI T AND IS DISMISSED. 7. THE CROSS OBJECTION IS FILED BY THE ASSESSEE MAI NLY IN SUPPORT OF THE ORDER OF THE LEARNED CIT(A). SINCE, WE HAVE CONFIRMED THE ITA NO.477/AHD/2009 AND C. O. NO.45/AHD/2009 SHRI ISHWARBHAI HIRABHAI PATEL 11 ORDER OF THE LEARNED CIT(A), THEREFORE, THE CROSS O BJECTION OF THE ASSESSEE HAS BECOME INFRUCTUOUS AND IS DISMISSED A S SUCH. 8. IN THE RESULT, THE DEPARTMENTAL APPEAL AS WELL A S CROSS OBJECTION OF THE ASSESSEE, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19-05-2011 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 19-05-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD