Case Law Details
Mana Ram Ganpat Ram & Co. Vs ITO (ITAT Delhi)
Reading of Section 40A(3) of the Act makes it clear that any payment in excess of 20,000/- should be made by crossed cheque or crossed bank draft. On failure to do so, the said payment would be disallowed.
Admittedly, the assessee has made the payment in cash. However, it would be relevant to note that before us, Learned AR has pointed to the fact that entire business activity of the contract undertaken by assessee was on behalf of Govt. agencies, at remote locate and desert of Rajasthan namely; Bikaner and Jaisalmer. The impugned payments has been done for the aforesaid contract work at remote desert location of Rajasthan. Further, the contention of the assessee that Grit has been purchased by assessee from petty persons who are illiterate and who make their living by breaking stones by hand tools and they do not possess PAN Cards has not been proved to be false or untrue.
Further, the Gross Profit ratio and the Net Profit ratio after taking into account the impugned expenditure shown by the assessee during the year under consideration as compared to that of immediate preceding year shows that there is substantial increase in those margins. It is not the case of the Revenue that the expenses are not genuine or are bogus and have been booked for the purpose of inflating expenditure and thereby reducing the profits.
We further find that Hon’ble Apex Court in the case of Attar Singh Gurmukh Singh vs. ITO [1991] 191 ITR 667 (SC) has held that provision of Section 40A(3) of the Act are not intended to restrict the business activities and insistence of payment by crossed cheque or crossed bank draft is insisted so as to enable the assessing authority to ascertain whether the payment is genuine or whether it is out of the income from disclosed sources.
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