S.40a(3) cash transactions

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Querist : Anonymous

Querist : Anonymous (Querist)

10 February 2015 For Example: A is a manufacturing Company.
B is wholesaler and C is retailer.

C directly contacted A and ordered 50,000 worth of goods and deposited the cash in Company bank account. But the companies procedure is goods will send to wholesaler and then it will reach retailer.

Because of VAT the wholesaler will show in his vat return. In this case in Income tax whether he will get disallowance.

How to treat in books of account this transaction?

Amol S Joglekar

Amol S Joglekar (Expert)

10 February 2015 Such types of transactions are very COMMON in India. What is your difficulty in such? Can you please elaborate.
Passing JV for such transactions is used in books of accounts. No any question of dis-allowance.
Can you please elaborate your fear of dis-allowance?

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Rupesh Jain

Rupesh Jain (Expert)

10 February 2015 this type of cash purchase not possible to trace by the deptt.
but its is catch when they demand the vendor a/c in C books.

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Querist : Anonymous

Querist : Anonymous (Querist)

10 February 2015 My fear is will the wholesaler will get any disallowance under S.40A(3) and who has to prove that the cash is deposited by retailer and not wholesaler if dept asks wholesaler.

Can he adjust Debtor account and Creditor account?

Like Creditor a/c Dr
To Debtor a/c.

Amol S Joglekar

Amol S Joglekar (Expert)

11 February 2015 Deposit slip is with the Bank, In case of need, the same can be verified by the Income Tax Dept.

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