ITO, WARD-2(1), BEGUSARAI vs. SHRI PREM CHAND KESHRI, LAKHISARAI

The only issue raised by the Revenue is against the deletion the addition of Rs. 2,22,05,895/- by Commissioner of Income Tax (Appeals), Bhagalpur [in short Ld. 'CIT(A)'] as made by the I.T.A. No.: 99/PAT/2020 Assessment Year: 2015-16 Shri Prem Chand Keshri. Assessing Officer (in short ld. 'AO') on account of cash payments in violation of provisions of Section 40A(3) of the Act.

Facts in brief are that during the course of assessment proceedings Ld. AO observed that the assessee has made purchases amounting to Rs. 2,22,05,895/- which were mostly on cash basis. Accordingly, Ld. AO called upon the assessee to show cause as to why the said payments were not made by adhering to provisions of Section 40A(3) of the Act. The assessee submitted before Ld. AO that his place of business is located in a small town and most of the times the assessee, under compelling circumstances, has to make purchase in cash. However, plea of the assessee did not find favour with Ld. AO and he added a sum of Rs. 2,22,05,895/- u/s 40A(3) of the Act. 3. In the appellate proceedings Ld. CIT(A) allowed the appeal of the assessee by observing and holding as under: “I have gone through the assessment order as well as submission of the A.R. filed which clearly speaks that only three payments were made by the appellant during the period from 01.04.2014 to 31.03.2015 in excess of Rs. 20,000/-, which is the violation of Section 40A(3). The details of these transactions are as under: Ledger A/c of Ramchandra Mahajan Sl. No. Date of Payment Amount 1 20.06.2014 50,000/- 27.06.2014 40,000/- Ledger A/c of Maa Vaishno Devi Enterprises Sl. No. Date of Payment Amount 1 15.10.2014 60,000/- From the careful perusal of the assessment order, provisions of Section 40A(3) of the Act and submission made by AR of the assessee which revealed that the assessee has violated the provision in making the payment against the purchase of the goods only to the amount of