Dissallowance u/s 40A(3) of Income Tax Act 1961

This query is : Resolved

vidyasagar kallappa bastawade (Querist)
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01 May 2009 We have a trading firm in rural area, trading in fetilizers & pestisides. In A.Y.2006-07, we have paid Rs.114000 to one of my creditor in a day but we took the receipts seperately of Rs.19000 each and receipts no. is also different.

Whether this amount of Rs.114000 will be dissallowed u/s 40A(3)? if not please give the specific caselaws details if any.

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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01 May 2009 On the face of it the Assessing officer can disallow the same.

To defend the same you are telling that you have obtained 19000 each receipt. Whether there is a gap between one to another and also you are telling that is a rural area, how many receipts he is making per day. And thirdly what is time required to travel from your office to rural area and whether the person can reach so many times to his office in a particular day.
I hope you cannot prove these things very easily. Therefore the assessing officer can easily disallow the same.

The other way to defend the same is find out whether banks are there in that rural area if no bank is there then you can defend. Alternatively create some dispute letters and to settle the dispute you have paid in casha and get the letters attested by village tasildar. This can save you.

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