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2007 (2) TMI 197 - MADRAS HIGH COURTAddition made u/s 40A(3) towards purchase of raw materials - Genuineness of the payments made to shandy persons in cash - benefit of rule 6DD - valuation of the closing stock - HELD THAT:- We do not find any justification to accept the said plea of the Revenue. As a matter of fact, the Tribunal noted that a large quantity of sale of wet blue was stated to be out of previous year's closing stock and current year's purchases. Further, verification of the regular accounts could not be considered as additional evidence to be called as violation under rule 46A(3). Considering the finding of fact by the Tribunal, we do not find any question of law for interference. On the question of addition made in respect of payment at shandies to be held as violative of section 40A(3) read with rule 6DD, the assessee has produced necessary grounds for making cash payment, considering the nature of trade carried on by the assessee, the Tribunal noted that these payments were made to small time vendors, who come from surrounding villages to sell the skin and the process of dressing the skin done without the aid of power. The Tribunal also noted from the order of the Commissioner, that considering the fact that the purchases were made from the unorganized sector, cash payments were indispensable. In the above circumstances, the Tribunal rightly came to the conclusion, giving the relief to the assessee. This court, in the decision in CIT v. Chrome Leather Company P. Ltd.[1997 (3) TMI 36 - MADRAS HIGH COURT], held that rule 6DD provides that an assessee can be exempted from the payment by a crossed cheque or crossed bank draft in the circumstances specified in the rule. The CBDT has issued certain guidelines giving certain circumstances, and those circumstances are illustrative and not exhaustive and the underlying idea of the circular is that if the identity of the payee is known, it would be possible for the Income-tax Officer to cross-check, whether the transaction had in fact taken place. Taking note of the fact that under similar circumstances this court had accepted the plea of the assessee, having regard to the nature of trade, we do not find any justification to take it a reason to interfere. Thus, these appeals are dismissed, in limine.
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