Case Law Details
Monika Chitrasen Patil Vs ITO (ITAT Pune)
Introduction: The case of Monika Chitrasen Patil Vs ITO (ITAT Pune) offers significant insights into the interpretation of tax laws concerning cash payments in property transactions. As the appellant challenged the disallowance of Rs.21,33,333/- u/s. 40A(3) of the Act, the case’s resolution provides vital guidance on the nuances of the tax laws in such situations.
Analysis: In this case, the assessee, engaged in the business of buying and selling agricultural lands, had made cash payments as part of the sale consideration to sellers who didn’t have bank accounts at the time. The tribunal referred to past judgements and the Supreme Court’s ruling in the case of Attar Singh Gurmukh Singh Vs. ITO, which highlighted that the terms of section 40A(3) of the Act are not absolute. The tribunal observed that the cash payment was part of the sale consideration and that no disallowance should be made under section 40A(3) of the Act when the transaction is genuine. The Tribunal agreed with the assessee’s contention that due to business exigency and specific demands of the sellers, it was not practical to make the payment via cheque or draft.
Conclusion: The verdict of this case has significant implications for business transactions, particularly those involving land and property. The decision emphasises that the provision u/s. 40A(3) of the Act should not restrict business activities and should consider the context and practicalities surrounding each transaction.
FULL TEXT OF THE ORDER OF ITAT PUNE
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