S. 40A(3): There is a difference between “crossed cheque” and
“account payee cheque”. Payment by crossed cheque attracts s. 40A(3)
disallowance
The expression earlier used in s. 40A(3)(a) was a “crossed cheque or a
crossed bank draft”. This was amended by the legislature to be replaced
by the expression “an account payee cheque or account payee bank
draft”. This was done in the background of the experience that even
crossed cheques were
being endorsed in favour of a person other than the
drawee making it difficult to trace the constituent of the money. To
plug this possible loophole the requirement of section 40A(3) was made
more stringent. If we accept the contention of counsel for the assessee
that there was no distinction between a crossed cheque and an account
payee cheque, we would be obliterating this amendment brought in the
statute with specific purpose in mind. Accordingly, payment by a crossed
cheque is subject to disallowance u/s 40A(3) (
Anupam Tele Services vs. ITO distinguished)