TMI Blog1994 (4) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... nd as per the profit and loss account of that firm, the net profit earned by that firm came to Rs. 11,525. When this matter came up for consideration before the Income-tax Officer, he noticed that payments of all these purchase transactions were exceeding Rs. 2,500 and, therefore, he called upon the assessee to give his explanation. The assessee explained that the seller was not prepared to accept cheques or bank drafts and insisted on cash payment and that is how the cash payment was made. The Income-tax Officer applied section 40A(3) of the Income-tax Act, 1961 (for short, "the Act"), read with rule 6DD(j)of the Income-tax Rules, 1962 (hereinafter to be referred as "the Rules"), and came to the conclusion that the assessee was not entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertilizers in Pali, whereas there were better demands from other areas where there were better irrigation facilities. Although the Punjab and Haryana High Court in CIT v. Kishan Chand Maheshwari Dass [1980] 121 ITR 232 has held that the payment for goods given within the expression 'expenditure' is to fall within the mischief of section 40A(3), the Rajasthan High Court has taken a comparatively lenient view in Kanti Lal Purshottam and Co. v. CIT [1985] 155 ITR 519 in D. B. Income-tax Reference No. 8 of 1975, dated January 29, 1985, reported in Tax World VIII, Part IV, page 50. Keeping in view the exceptional circumstances of the case and the view taken by the Rajasthan High Court, we are of the opinion that it would be too harsh a penalty t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, rule 6DD(j) of the Rules and section 40A(3) of the Act would be applicable or not ? No question has been referred to us as to whether, on the facts and in the circumstances of this case, this deduction should be allowed or not ? Accordingly, we proceed to answer the question referred to us that on the facts and in the circumstances of this case, rule 6DD(j) of the Rules and section 40A(3) of the Act would be applicable and attracted. Even counsel for the assessee conceded the applicability of both the provisions of this case. The above answer given by us does not solve the problem whether the assessee should be allowed the deduction of Rs. 2,18,678. In doing so, as already observed, besides giving a finding that the payment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that are being experienced by taxpayers due to lack of uniformity in the interpretation of the provisions of rule 6DD(j) of the Rules by the Income-tax Officers and after considering the said representations, the Board has decided to lay down certain guidelines to ensure uniformity of approach among the Income-tax Officers in this behalf. After stating that all the circumstances in which the conditions laid down in rule 6DD(j) would be applicable cannot be spelt out, the Board has enumerated some of those circumstances which would meet the requirements of the said rule and the same are as follows ' (i) the purchaser is new to the seller ; or (ii) the transactions are made at a place where either the purchaser or the seller does not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be shown by the assessee on the peculiar facts of his case. On behalf of the assessee, Nahgi Lal's case [1987] 167 ITR 139 (Raj) CIT v. Mahendra and Co. Ltd. [1987] 163 ITR 316 (Raj) and Kanti Lal Purshottam and Co. v. CIT [1985] 155 ITR 519 (Raj) were cited. Since we have come to the conclusion that the Tribunal has not given findings about the two ingredients of rule 6DD(j), we remit the case back to the learned Tribunal to decide the matter afresh in the light of the aforesaid observations made in Badrilal Phool Chand Rodawat,s case [1987] 167 ITR 404 (Raj) and the observations made by us. Both the parties would be at liberty to cite whatever judgments they want to cite but what the Income-tax Appellate Tribunal has to decide is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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