THE ITO, WARD-3(4),, AHMEDABAD vs. M/S. AMRUT RICE & PULSE MILL,, AHMEDABAD

The only grievance of the revenue is that the ld. CIT(A) erred in deleting the addition of Rs. 58,59,377/- made u/s. 40A(3) of the Act.

During the course of the re-assessment proceedings, the A.O. found that the assessee has made various payments through cross cheques to the suppliers for the purchase of paddy and rice. The A.O. found that the suppliershas discounted the cheques through Mudra Finance. The total payments made through cross cheques were of Rs. 66,43,872/-. The A.O. was of the firm belief that the payments have been made in contravention to the provisions of Section 40A(3) of the Act and accordingly asked the assessee to explain why the same should not be disallowed.

In its reply, the assessee stated that all the payments have been made through cross chques of Nutan Nagarik Co.Op. Bank and Union Co.Op. Bank and were issued in favour of suppliers which have been paid from the bank account of the assessee. Therefore, there is not violation of the provisions of Section 40A(3) of the Act.

The contention of the assessee did not find any favour with the A.O. who was of the opinion that the mandate of Section 40A(3) is very clear in which it has been specifically mentioned that any expenditure exceeding Rs. 20,000/-

The assessee carried the matter before the ld. CIT(A) and reiterated that the payments have been made through cross cheques and the amendment brought to Section 40A(3) is with effect from 13.07.2006 whereas the impugned payments have been made prior to 13.07.2006 and therefore, the requirement that the payment should be made by account payee cheques is not applicable on the impugned payments.

After considering the facts and the submissions, the ld. CIT(A) found that payment of Rs. 58,59,377/- were made by cross cheques prior to 13.07.2006. Therefore, there is no violation to the provisions of Section 40A(3) of the Act for payment made before that date. However, on finding that Rs. 7,84,495/- was paid after 13.07.2006, the ld. CIT(A) disallowed 20% and sustained the addition of Rs. 1,56,899/-.

Before us, the ld. D.R. vehemently stated that the assessee has not furnished any evidence to demonstrate that payment of Rs. 58,59,377/- was made prior to 13.07.2006. Per contra, the ld. counsel for the assessee reiterated what has been stated before the lower authorities.

We have carefully considered the orders of the authorities below. It is true that the provisions of Section 40A(3) has been amended with effect from 13.07.2006 by which “cross cheque” was substituted by “account payee cheque”. The First Appellate Authority has given a categorical finding that Rs.

In the result, the appeal filed by the Revenue is dismissed.

The ld. counsel did not press the cross objection of the assessee and the same is dismissed as not pressed.