Payment in cash

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SUBHASH MISHRA (Querist)

22 March 2009 Respected sir,
It's for your kind notice that I am a wholesaler of electronic items. Some of my customers directly deposits the cash in my current account exceeding Rs. 20,000/- in a day.
My question is that even this is a bank transaction but whether the AO can disallow these type of transaction?

Manmohan ACA, CS

Manmohan ACA, CS (Expert)

23 March 2009 Section 40A(3) applies to all categories of expenditure involving payments for goods or services, which is deductible in computing the taxable income

it does not applies to any receipt, or income
it only applies to expenses

regards.....................!

K V Subba Rao

K V Subba Rao (Expert)

23 March 2009 In the interest of maintaining harmonious relations with your Customers, better advice them to deposit by Cheques. This may no doubt cause some inconvience to you in the form of non-availability of for use during the clearance period, your Customers will appreciate your "concern" for their interest.

A practical solution acceptable to both would be as follows:

(1) Ask your atleast regular Customer to open Account with the Branch where you have account.

(2) Let him first deposit cash to the credit of his own account

(3) Then he has to deposit Cheque for transfer of amount to your account

(4) The above may be slightly improved in case of customers having at par cheque facility

CA JAIMIN TRIVEDI

CA JAIMIN TRIVEDI (Expert)

23 March 2009 Sec 40A(3) disallowance is in respect of expenses above Rs.20000/- and not receipts. So there is no question of disallowance in your case. But surely the income will be taxable.

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