Case Law Details
Rajesh Kumar Vs ITO (ITAT Delhi)
ITAT Delhi held that violation of section 40A(3) sustained as the reply provided by the assessee is hypothetical and non-satisfying.
Facts- It was found by Ld. AO that during the financial year in respect of purchases, aggregate payments of Rs. 2,77,13,513/- was made otherwise than by an account payee cheque. Thus, considering it to be violation of Section 40A(3) of the Income Tax Act, 1961 r.w.s 40A(3A) of the Act show cause notice was issued for which the assessee had replied that the bearer cheques were issued to the supplier parties on demand as assessee was new in the business so the assessee had to accept the demand of the suppliers. The Ld. AO found that in regard to one of the parties Dolphine Sales Corporation amount of Rs. 24,25,000/- were also transferred by RTGS/NEFT and thus, considering the reply of assessee to be hypothetical made addition of Rs. 2,77,13,513/- and Ld. CIT(A) has sustained that same.
Conclusion- Held that Ld. CIT(A) has rightly observed that a bearer cheque can bounce as well, for insufficient balances therefore giving bearer cheque to parties as the surety of being encashed is not sustainable explanation of business expediency. The bench finds no error in the findings of the Ld. CIT(A) because if the intention was to secure the payments to the parties by bearer cheques to be as good as cash then there are other banking instruments like Banker’s cheque or RTGS/NEFT facilities which would have ensured prompt and secured payments. It is admitted case of assessee that to one of the parties even payments were made by RTGS/NEFT. So there is no question of lack of banking facilities available with the assessee or that when the payments were made such facility was not accessible.
FULL TEXT OF THE ORDER OF ITAT DELHI
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