27-Apr-2014

The Section 40A(3) was amended by the legislature to replace the expression “crossed cheque or a crossed bank draft” by “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. Accordingly, payment by a crossed cheque is subject to disallowance u/s 40A(3) as held in the case of Rajmoti Industries vs. ACIT (Gujarat High Court).