Case Details: Shashikala Ram Kumar vs. ASST CIT - [2023] 156 taxmann.com 204 (Hyderabad-Trib.)
Judiciary and Counsel Details
- Rama Kanta Panda, Vice President & K Narasimha Chary, Judicial Member
- A. Srinivas, AR for the Appellant.
- Ms Sheetal Sarin, DR for the Respondent.
Facts of the Case
The assessee, carrying on the business of tours and travels, filed its return of income for the relevant assessment year. During the assessment proceedings, the Assessing Officer (AO) noticed that the assessee had made cash payments exceeding Rs. 20,000.
In response to notice by AO, assessee furnished a certificate issued by the party stating that they refused to entertain the cheques issued by the assessee since cheques issued by the assessee were bounced on account of attachment of the bank accounts by various Governmental agencies. Unsatisfied, the AO continued to make disallowance under section 40A(3) for making excess cash payments.
On appeal, CIT(A) confirmed the disallowance made by AO, and the matter reached the Hyderabad Tribunal.
ITAT Held
The Tribunal held that the assessee produced the copies of attachments issued by the Income-tax Department through notice under section 226(3) and prohibitory order by the Employee Provident Fund Organization.
The terms of section 40A(3) are not absolute, and though certain circumstances are contemplated under rule 6DD of the Rules, they are not exhaustive. Further, one of the exceptions approved by the Madras High Court in the case of PCIT vs Sumukha Synthetics [2020] 119 taxmann.com 234 (Madras) was the incapacity of the assessee to make the payment through the banking channel due to the freezing of the bank account by order of Governmental agency.
Therefore, if any payment is made in cash on account of the company’s bank account being frozen by order of attachment passed by the government department, the assessee is entitled to exemption under rule 6DD of the rules, no disallowance under section 40A(3) was called for.
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