- (1.) This is an appeal under section 260A of the Income-tax Act, 1961 against the judgment and order dated 31.7.2008 passed by Income Tax Appellate Tribunal, Lucknow Bench 'A', Lucknow in ITA No. 249 LUC/08. The dispute raised to assessment years 2004-2005. The appeal was admitted by a Division Bench vide order 20.01.2009 on the following substantial question of law, is reproduced as under: 1. Whether expenditure incurred by assessee though payment is not exceeding Rs. 20,000/- but multiple or fragmented payment is made in a day or short span of time. In case, it exceeds to Rs. 20,000/- (Twenty Thousand rupees), then whether it shall be lawful for the income tax department to disallow the benefits of section 40(3)(3A) of the Income-tax Act? 2. Whether fragmented payments made in a day more than Rs. 20,000/- will not be covered under provision of Section 40(3)(3A) of the Income-tax Act? 3. Assessee, the liquor contractor and is dealing in trading of country liquor. Assessee filed return on 30.10.2004 at Rs. 1,10,120/- (One Lakh Ten Thousand and One Hundred Twenty rupees) along with audited balance-sheet and audit report in form 3-CB. The case of the assessee was selected for Scrutiny. Notice under section 143(2) dated 11.3.2005. It was found that the assessee had made payment in excess to Rs. 20,000/- in cash on different dates but assessing authority has noted that only even on single date payment in cash was made @ Rs. 20,000/- or less to the same establishment and the total amount paid in cash at the end of the day cumulatively was more than Rs. 20,000/-. Accordingly, the assessing authority had disallowed an amount of Rs. 8,92,725/- under section 40A(3) of the Income-tax Act, 1961 and audited the same income of assessee penalty proceeding under section 271(1)(c) of the Act was also initiated. Order of the assessing authority was affirmed by the Appellate Authority. The Appellate Authority noted that Bill No. 80 and broken payment was made of Rs. 20,000/- or less to M/s. Mohan Meakin Ltd. & other Companies, which could have been done only by Cheque. Bills were supplied only up to rigours of Section 40A(3) of the Income-tax Act, 1961 (in short Act). The order passed by the Appellate Authority was also affirmed by a Tribunal. The Tribunal had made the observations as under, to reproduce:-- After hearing the learned departmental representative on the point, who has vehemently opposed it, we have perused the list given at page 3 and we are of the opinion that the decision of the Hon'ble Orissa High Court squarely covers up the case of the assessee. As no single payment was more than Rs. 2,500/-, we hold that the dis-allowance under section 40A(3) of the said amount was not justified. We, therefore, delete the said addition. Heard the learned counsel for the parties and perused the record. Sri A.N. Mahajan, learned standing counsel on behalf of the Department submits that in view of the latest amendment in Section 40A(3) of the Act, the order of the Tribunal cannot be allowed to stand. However, we find that section 40A(3) of the Act, as it then stood at the relevant point of time, provided that the amount exceeding Rs. 2,500/- should not be paid except by way of cheque drawn on bank or by a crossed bank draft and, if it exceeds that amount, then 20% of the expenditure shall not be allowed as deduction. It does not say that the aggregate of the amounts should not exceed Rs. 2,500/-. The words used are "in a sum". The said phrase has been interpreted by various High Courts and it has been held that irrespective of any number of transactions, where the amount does not exceed Rs. 2,500/-, the rigour of section 40A(3) of the Act will not apply. The said view has been taken by the Madhya Pradesh High Court in CIT v. Triveniprasad Pannalal, 1997 228 ITR 680. Identical view has been taken in CIT v. Kothari Sanitation and Tiles Pvt. Ltd., 2006 282 ITR 117. It was further pointed out that similar view was taken by the Orissa High Court in CIT v. Aloo Supply Co., 1980 121 ITR 680. The relevant portion of the said judgment is reproduced below (headnote): The word 'sum' has no statutory definition and must have the common parlance meaning. While legislating, Parliament tries to convey its intention through express words. It is one of the well settled rules of interpretation that where a word used in a Statute carries more than one meaning, that meaning which makes the provision workable and is nearest to the legislative intention, has to be adopted. The word 'sum' in section 40A(3), second proviso, of the Income-tax Act, 1961, is used only to indicate an amount of money and does not refer to the totality of the expenditure.
(2.) Against the said judgment of the Orissa High Court, a special appeal was preferred before the Apex Court and the said special appeal has been dismissed by the Apex Court as 1983 143 ITR (St.) 67.
(3.) Learned standing counsel for the Department could not place any decision contrary to the above. Only submission which he could make is that in view of the amendment in law, the view of the Tribunal cannot be allowed to stand. Obviously, the said amendment was not available during the relevant assessment year and the said amendment was not retrospective in nature.;