TMI Blog2002 (3) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the payee asks for payment in cash, that by itself becomes an exceptional circumstance leading to exemption from the requirement of section 40A(3) of the Income-tax Act, 1961?" The assessee-company carries on business of manufacture of automobile parts. It filed its return of income for the assessment year 1989-90 declaring a loss of Rs. 48.94 lakhs. The assessment under section 143(3) of the Act was completed on March 26, 1991, at a loss of Rs. 41,23,126. At the time of assessment an amount of Rs. 5,59,000 was disallowed under section 40A(3) of the Act on account of 13 cash payments to a sister concern, Alpha Toyo Ltd. The assessee had taken the plea that the amount had been paid in cash on each occasion at the insistence of the paye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d question of law for our opinion. The prayer was declined vide order dated October 22, 1999, on the ground that the matter stood concluded by the judgment of this court and as such no referable question of law arose out of the order of the Tribunal. Hence, the present petition. We have heard Mr. R. P. Sawhney, learned counsel for the Revenue, and we agree with the Tribunal that the matter stands concluded by the decision of this court in Avtar Singh and Sons' case [1992] 194 ITR 80. It is evident from the facts as already noticed above that there is no dispute about the identity of the payee, Alpha Toyo Ltd. The said concern is a regular income-tax and sales tax assessee and the information about its sales tax number as well as its perma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exceptional circumstances cannot be visualised, a residuary exception has been provided in clause (j). This clause excludes from the purview of section 40A(3) such cases where the assessee establishes that the payment could not be made by a crossed cheque or a draft due to exceptional and unavoidable circumstances and also furnishes evidence as to the genuineness of the payment and the identity of the payee. What constitutes an exceptional and unavoidable circumstance ? This question became a subject-matter of controversy giving rise to protracted litigation. The courts have been consistent in their view that the exceptional circumstances are to be seen from the point of view of a businessman keeping in view the exigencies of business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to whom payments were made is beyond question nor is there any doubt with regard to the genuineness of the payments. There is also in addition, an affidavit from the chief accountant of the Amrit Banaspati Company regarding these payments having been received in cash and duly accounted for in the company's books of account and what is more that these payments were received in cash as money was urgently needed by the company after banking hours and the receipt of it by crossed cheque or draft would have delayed payment and caused unnecessary hurdles in the proper conduct of the company's business. These circumstances, seen in the context of the aspect of business expediency, which as noticed earlier, has been held to be one of the importan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubted the requirement of cash by the payee for making payments to various Government Departments and also to the labour. Thus insistence on payments by account payee cheque or account payee draft would have involved similar hazardous and cumbersome procedure. In fact, the Gauhati High Court has correctly pointed out that the Board's circular dated May 31, 1977, itself indicates that the circumstances mentioned therein are not the only circumstance which can be said to be exceptional and unavoidable. There may be other exceptional and unavoidable circumstances which may not be put in writing. Thus while considering the exceptional circumstances, the facts and circumstances of each case have to be considered. Thus, in our considered view, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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