TMI Blog1996 (6) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... 0A(3) of the Act ? (2) Whether, under the facts and in the circumstances of the case, the Tribunal did not err, in facts as well as in law, in impliedly holding that if the transactions are entered in the books of account of the payee then no disallowance is to be made under section 40A(3) of the Income-tax Act ?" The respondent is an assessee under the Act. During the course of assessment proceeding, the Assessing Officer observed that the assessee made entries of cash payment exceeding Rs. 2,500 in violation of the provisions of section 40A(3) of the Act. The Assessing Officer, therefore, asked the assessee to explain the reason for making such cash payment. The assessee could produce confirmation letters from some of the parties only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Assessing Officer nor before the Commissioner of Income-tax (Appeals). Accordingly, the matter was sent to the Commissioner of Income-tax (Appeals) with a direction that if after verification, the contents of the letter particularly as to the entry in the books of account were found to be correct, he should grant necessary relief in respect of payment to those parties amounting to Rs. 1,26,111.65 after giving opportunity of hearing to both the parties. However, the Tribunal disallowed a sum of Rs. 1,01,462. Thereafter, at the instance of the Revenue, the Tribunal referred the abovequoted questions for opinion of this court. We have heard Dr. A. K. Saraf, learned special counsel appearing on behalf of the Revenue, and Mr. R. K. Joshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exist. However, in respect of an amount of Rs. 1,26,111.65, the Tribunal just directed the Commissioner of Income-tax (Appeals) to make enquiry whether the payments were entered in the books of account. In our opinion, this was not enough. It was also necessary to enquire whether there existed exceptional and unavoidable circumstances for making such payment. The Tribunal ought to have directed accordingly. In view of the above, we answer question No. 1 in the affirmative, in favour of the assessee and against the Revenue and question No. 2 in the negative, in favour of the Revenue and against the assessee. A copy of the judgment under the signature of the Registrar and the seal of the High Court shall be transmitted to the Income-tax Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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