40a(3) disallowance

Dear,

At the time of  Scrutiny  Assessment under section 143(3) of the Income Tax Act, 1961, in 90% cases  assessing officer disallowed the payment under section 40A(3)  without crossed cheque and Cross bank draft, without application of mind or it is matter of law point. In my opinion ,CIT(A) definitely will be delete the addition made by the assessing officer at your case.

We can discuss here following points:

Rule 6DD provided that an assessee  can be exempted from require section 40A(3).

1. The rule provides that the an assessee can be exempted from the requirement of payment by crossed cheque or a crossed bank draft.

Where the purchase from a village where there is no banking facility.

Hon'ble Supreme Court while interpreting the provision of section 40A(3) in the case of Attar Singh Gurmukh SIngh Vs ITO191 ITR 667

Held this section 40A(3) must not be read in isolation or to the exclusion of Rule 6DD. The section must be read along with the rule .

By read together it will be clear that the provisions are not intended to restrict the business activities. There is no restriction on the assessee in his trading activities. 

VIPIN RATURI

ADVOCATE

Dear,

At the time of  Scrutiny  Assessment under section 143(3) of the Income Tax Act, 1961, in 90% cases  assessing officer disallowed the payment under section 40A(3)  without crossed cheque and Cross bank draft, without application of mind or it is matter of law point. In my opinion ,CIT(A) definitely will be delete the addition made by the assessing officer at your case.

We can discuss here following points:

Rule 6DD provided that an assessee  can be exempted from require section 40A(3).

1. The rule provides that the an assessee can be exempted from the requirement of payment by crossed cheque or a crossed bank draft.

Where the purchase from a village where there is no banking facility.

Hon'ble Supreme Court while interpreting the provision of section 40A(3) in the case of Attar Singh Gurmukh SIngh Vs ITO191 ITR 667

Held this section 40A(3) must not be read in isolation or to the exclusion of Rule 6DD. The section must be read along with the rule .

By read together it will be clear that the provisions are not intended to restrict the business activities. There is no restriction on the assessee in his trading activities. 

VIPIN RATURI

ADVOCATE

Thank you for your input sir. 

A recent case M/s Abhinandana Housing Private Ltd  (ITAT Hyderabad in Feb 2014) also covers the point in question. 

Link of the case law - https://indiankanoon.org/doc/165224677/

Regards,

Muthu Abirami