Case Law Details
Basu Distributor Pvt. Ltd. Vs. ACIT (Delhi High Court)
In the present case, the appellant assessee had filed before the Tribunal a copy of their bank account statements as well as ledger account of the parties to whom the payment was required to be made. It is apparent that the appellant-assessee was not doing well in its business and was facing liquidity and financial crunch. An examination of the bank account statement shows that whenever cash deposit was made in the bank account, it was immediately thereafter utilized to issue cheques towards the expenditure.
The explanation of the appellant- assessee was that payments were made in cash, as preparation of a bank instrument or issue of cheque would have resulted in a missed opportunity or failure of a favorable or good business deal with the third parties. The provisions of Section 40A (3) and Rule 6 DD (j) have been incorporated in the Act in order to check the incurring of bogus and fictitious expenses to non existing parties. In the present case, the appellant- assessee had furnished explanations on the basis of the bank statements as well as the ledger accounts of the payees to show that the appellant- assessee did not have sufficient cash balance. This position is clear and cannot be doubted. The appellant- assessee had submitted that if they had failed to make cash payments, they would have breached terms of the agreements entered into with the third parties or would have missed out on the business opportunity. In cases of earlier bounced cheques and when a party is facing liquidity problem, it can get difficult as third parties are reluctant to accept cheques and insist on cash payments. Arranging funds is also a problem and not easy. It is submitted that the Assessing Officer did not doubt the funds and no addition on this ground and reason was made. The stand of the appellant was that the cash was made available since M/s. Ritz Theaters (P) Ltd. was holding the cash collection out of the hire charges. On the said aspect an order of remit was passed by the tribunal and no addition or adverse observation was made by the Assessing Officer. These were relevant and material aspects which were required to be considered and examined by the tribunal but have been overlooked. Keeping in view the quantum of the total amount, we were initially inclined to remit the matter. However, looking at the averments made, the assessment years in question and explanation given, we refrain from issuing the said direction and accept the contention of the appellant.
HIGH COURT OF DELHI
Date of decision: 6th February, 2012
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