40A(3) IT ACT HAS A VIRUS
VINAYAK MUNGI
(Querist) 19 April 2009
This query is : Resolved
THE DISALLOWED AMOUNT IN 40A(3) GENERATES BLACK MONEY IF THE CASH HAS BEEN ENTERED IN THE BOOKS OF ACCOUNT OF THE PAYEE WHO IS IT ASSESSE
NO LAW IS THERE TO STATE THAT THE DISALLOWED AMOUNT SHOULD NOT BE ADDEDTO THE PROFITS OF THE FIRM/PARTNER/PROPRIETOR
B.B.R.Goud.
(Expert) 20 May 2009
need to be elucidate the issue.
VINAYAK MUNGI
(Querist) 21 May 2009
IF A FIRM X HAS INCURED AN EXPENDITURE OF MORE THAN THE LIMIT SPECIFIED AT A UNDER 40A(3) OF ANY PERIOD AFTER THE ACT WAS ENACTED . THE EXPENDITURE IS INCURED FOR PURCHASE OFF RAW MATERIAL FOR PRODUCTION.
THE PAYMENT IS MADE TO A FIRM Y WHO IS AN INCOME TAX ASSESSEE. ENTERS THE CASH
IN HIS BOOKS OF ACCOUNT
THE ASSESING OFFICIER DIALLOWS THE EXPENDITURE AND ADD TO THE INCOME OF THE
FIRM AFTER PAYMENT OF THE ADDED INCOME TAX . ADDS THE PROFIT AFTER TAX TO THE
PARTNER/PROPRIEETOR
NOW THE PROFIT OF THE PARTNER/PROP
IS A BLACK MONEY BECAUSE FIRM Y HAS ENTERED THE MONEY IN THE BOOKS OF ACCOUNT
AND WHICH IS THE SOURCE THE A.O HAS GRANTED THE MONEY(IN THE FORM OF DIALLOWANCE)
IF FIRM Y HAD NOT ENTERED IN THE BOOKS OF ACCOUNT THEN THERE IS NO BLACK MONEY GENERATED
AS THE DISALLOWNCE IS MADE ONE SIDED
WITHOUT VERIFICATION ON THE OTHER SIDE THAT IS THE PAYEE .BLACK MONEY (THE MONEY NOT ENTERED IN BOOKS OF ACCOUNT)IS GENERATED
THE PURPOSE OF THE LAW IS TO BLOCK THE BLACK MONEY GENERATED HOWEVER THE WRONG IMPLEMENTATION CREATES THE BLACK MONEY HENCE THE VIRUS
THE GENERATION OF BLACK MONEY CAN BE BLOCKED IF THE IMPLEMENTATION OF DISSALLOWNCE UNDER 40A(3) IS GURANTEED IF AND AND ONLY IF THE A.O HAS THE PROOF FROM THE PAYEE
THE ABOVE SAID CAN BE IMPLEMENTED IF POINT NO 5 IN CBDT CICULAR 22O OF 1977 IS
MANDATERY TO THE ASSESSE IN CASE IF HE WANTS THE ALLOWANCE MADE BY THE A.O FOR THE EXPENTITURE HE HAS PAID IN CASH
ALSO
iF THE DISSALLOWED AMMOUNT IS NOT ENTERED IN THE BOOKS OF ACCOUNT FIRM Y
THEN THE FIRM X WHICH HAD FALSE CLAIM FOR THE EXPENDITURE ( SET ASIDE BLACK MONEY) CASH IS BROUGHT BACK TO THE BOOKS
ACCOUNTS .THIS INCREASES THE PROFIT OF FIRM X . THE INCREASE IN PROFIT IS TAXED THUS AND THE BLACK MONEY IS BROUGHT BACK AS ACCOUNTED MONEY AND TAXED .THUS IMPLEMENTING THE 40A(3) IN TOTO
WE HAVE ENQUIRED AT VARIOUS LEVELS OF INTELLECTUALS AND PRACTICED PROCEDURERS
FOR ACCOUNTING OF DISALLOWED EXPENDITURE
HOWEVER THE ANSWERS ARE DIFFERENT AND NOT
IN THE SPIRIT TO IMPLEMENT THE LAW 40A(3)
FOR WHICH IT WAS ENACTED BY THE LEGILATURE
AND APEX COURT JUDGEMENT FOR THE VALIDITY OF THE LAW
VINAYAK MUNGI
meson_services@yahoo.com
