TMI Blog2006 (7) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... he court was delivered by V. Ramkumar J.-In this appeal filed by the assessee under section 260A of the Income-tax Act, 1961 ("the Act" for short), the appellant challenges the appellate order dated August 16, 2000, passed by the Income-tax Appellate Tribunal, Cochin Bench, in I.T.A. No. 486(Coch.)/92. Notice on the following substantial questions of law has been ordered: "1. Is not the finding of the Tribunal that the assessee is not entitled to get the benefit under rule 6DD(j) of the Income-tax Rules, 1962, perverse and illegal? 2. Is the Tribunal justified in allowing the appeal filed by the respondent, holding that the assessee had not filed any confirmation letters from the dealers, in the circumstances of the case, especially when major transactions are with one of the partners of the appellant-assessee? 3. Is not the decision of the Tribunal rendered without affording the assessee an opportunity to furnish the confirmation letters from the dealers in question illegal and opposed to the principles of natural justice?" The facts leading to the impugned proceedings can be summarised as follows: For the assessment year 1988-89 the assessee filed his return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was being done. The purchases were made from Ernakulam and if payments made by way of cheques there would have been delay in getting the cheques cleared. All these aspects have contributed to the creditors insisting on cash payments. Even the Assessing Officer had not doubted the genuineness of the transactions but was merely harping on technicalities. The above circumstances were fully appreciated by the first appellate authority which came to the conclusion that the transactions in question would fall under rule 6DD(j) of the Income-tax Rules, 1962, and hence no disallowance under sub-section (3) of section 40A of the Act should have been made by the Assessing Officer. The Tribunal was clearly in error in insisting on confirmation letters from the sellers for cash payments without affording the assessee an opportunity to produce the same. We are afraid that we find ourselves unable to accept the above submissions. Admittedly, the purchases made by the assessee for a sum of Rs. 88,209 were all by way of cash payments. By making payments for a sum exceeding Rs. 10,000 otherwise than by crossed cheque or crossed bank draft, the assessee incurred the penalty of disallowance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .- No disallowance under sub-section (3) of section 40A shall be made where any payment in a sum exceeding ten thousand rupees is made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft in the cases and circumstances specified hereunder, namely:- (a) where the payment is made to- (i) the Reserve Bank of India or any banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) ; (ii) the State Bank of India or any subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959); (iii) any co-operative bank or land mortgage bank; (iv) any primary agricultural credit society as defined in clause (cii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934), or any primary credit society as defined in clause (civ) of that section; (v) the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956); (vi) the Industrial Finance Corporation of India established under section 3 of the Industrial Finance Corporation Act, 1948 (15 of 1948); (vii) the Industrial Credit and Investment Corporation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or (iv) the products of horticulture or apiculture; to the cultivator, grower or producer of such articles, produce or products; (g) where the payment is made for the purchase of the products manufactured or processed without the aid of power in a cottage industry, to the producer of such products; (h) where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town; (i) where any payment by way of gratuity, retrenchment compensation or similar terminal benefit, is made to an employee of the assessee or the heirs of any such employee on or in connection with the retrenchment, resignation, discharge or death of such employee, if the income chargeable under the head 'Salaries' of the employee in respect of the financial year in which such retirement, resignation, discharge or death took place or the immediately preceding financial year did not exceed Rs. 7,500; (j) in any other case, where the assessee satisfies the Income-tax Officer that the payment could not be made by a crossed cheque drawn on a bank or ..... 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