INCOME TAX ACT, 1961

Business disallowance under section 40A(3) - Cash payment exceeding prescribed limits -Rule 6DD(j) of the Income-tax Rules, 1962

Assessee claimed was disallowed under 40A(3) on the ground of that she had made payments of sale price of scooters/mopeds, which exceeded in each case Rs. 10,000 to the principal agent in cash instead of through cross cheques or bank draft. On appeal, Tribunal upheld the disallowance. Held:Where genuineness of transaction and identity of payee were established and explanation of assessee for making cash remittances was acceptable in the light of modus operandi of assessees business, thereupon, payments made in cash could not be disallowed. Hence, the payment in question was covered by clause (j) of rule 6DD and therefore, Tribunal was not justified in disallowing the same.

Income-tax Act, 1961, Section 40A(3)

A.Y. : 1993-94
Decision: In favour of assessee.

Smt. Harshila Chordia v. ITO