Ito, W-2, Barnala vs The Truck Operator Union, Barnala on 14 October, 2022
4. The reply so filed by the assessee was considered but the same was not found
acceptable to the AO. As per the AO, the ratio of the judgment of Hon'ble Punjab &
Haryana decision in case of Truck Operator Union does not apply in the instant case as
the same relates to provisions contained in Section 40(a)(ia) of the Act wherein it was
held that there was no separate contract between the Union and its members for
performance of the work as required for applicability of section 194C(2) of the Act
where as in the present case, the matter relates to cash payment made in
contravention of section 40A(3) of the Act. Thereafter referring to the provision of
section 40A(3) as well as the exceptional circumstances provided under Rule 6DD, it
was held by the AO that no circumstances have been narrated by the assessee under
which the payment in the manner prescribed under section 40(A)(3) was not
practicable or would have caused genuine difficulty to the assessee. It was held by the
AO that the list as provided in Rule 6DD is exhaustive and a person can be exempted
from the requirement of payment by a crossed cheque or crossed bank draft only in
the circumstances specified under the Rule 6DD. It was held by the AO that the
assessee offered no argument which may prove that the cash payments were made
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due to exceptional / unavoidable circumstances covered under rule 6DD. It was held
that the provision of section 40A(3) are not merely a formality but they were introduced
to discourage payment other than through the banking channel. It was held by the
AO that where the payment has been made to members of the Union, it cannot be
presumed by any stretch of imagination that the assessee is at liberty to violate the
provision of section 40A(3) of the Act and in support the reliance was placed on the
decision of Hon'ble Kolkata High Court in the case of CIT Vs. Tirupati Trading Co.
wherein it was observed that where the assessee was unable to explain any
unavoidable / exceptional circumstances covered under Rule 6DD, addition made
under section 60A(3) were justified. Accordingly, an amount of Rs. 3,81,18,083/- paid in
cash by the assessee union in contravention of section 40A(3) was disallowed and
added to the returned income of the assessee.