IMPORTANT POINT
The onus of proving the necessity for cash payments and the non-escape of income assessment lies with the assessee when claiming exemptions under Section 40A(3A) proviso read with Rule 6DD(j) of the Income Tax Rules, 1962.

JUDGMENT :

Aggrieved by the order dated 25.03.2019 passed in No.CIT(A),HUBLI/10380/2015-16 by the Commissioner of Income Tax (Appeals), Hubballi vide Annexure-C to the writ petition and the order dated 20.12.2019 passed in ITA No.1812/Bang/2019, dated 20.12.2019 by the Income Tax Appellate Tribunal, SMC-C Bench, Bengaluru vide Annexure-A to the writ petition, the assessee has preferred this appeal.

2. The dispute pertains to non-acceptance of the statement of the assessee, that he has incurred an expenditure of a sum of Rs.3,47,717/- for the assessment year 2013-14.

3. The case of the assessee is that on the last day of the assessment year 2013-14 i.e., on 31.03.2013, he made the following payments in cash as follows :

4. It is his contention that he was constrained to make the said payments in cash as the same had to be made on the last date of the assessment year and it was a Sunday and Bank holiday. It is contended that the appellant is exempted under Section 40A(3A) proviso read with Rule 6DD(j) of the Income Tax Rules, 1962.

5. Section 40A(3A) first proviso of the Income Tax Act, 1961 reads as under :

“Expenses or payments not deductible in certain circumstances.

XXXXX

(3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, exceeds ten thousand rupees, no deduction shall be allowed in respect of such expenditure.

(3A) Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year (hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, the payment so made shall be deemed to be the profits and gains of business or profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or aggregate of payments made to a person in a day, exceeds ten thousand rupees:

Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3) and this sub-section where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, exceeds ten thousand rupees, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors:]”

6. Rule 6DD(j) of the Income Tax Rules, 1962 reads as under :

“6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees in the cases and circumstances specified hereunder, namely :-

(a) XXXXX

(b) XXXXX

(c) XXXXX

(d) XXXXX

(e) XXXXX

(f) XXXXX

(g) XXXXX

(h) XXXXX

(i) XXXXX

(j) Where the payme