TMI Blog1994 (5) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... cer in respect of the cash payments of Rs. 31,809 made on various dates to Rallis India Ltd. was proper ? " A few basic facts leading to the reference may now be noted. Certain cash payments amounting to Rs. 31,809 (as detailed below) made by the assessee to Rallis India Ltd. on different dates, were sought to be explained by the assessee who was called upon by the Income-tax Officer to explain as to what were the compelling circumstances which necessitated cash payments, in violation of section 40A(3). The assessee in response thereto, while explaining the circumstances, submitted a confirmation letter (annexure-A/2) from Rallis India Ltd. which is reproduced below for ready reference : " We, Rallis India Ltd., Engineering Division, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel appearing for the assessee, contended that Messrs. Rallis India Ltd., the payee in the instant case, is a reputed concern from whom the assessee had made purchases to the tune of Rs. 5,09,275 during the assessment year, out of which payment of Rs. 31,809 was made in cash. The cash payments having been accepted by the payee, there was no scope, nor any reasonable ground to doubt the genuineness of the transactions effected by the assessee. In such circumstances, there could be no justification for disallowing the payments under section 40A(3) of the Act. Mr. Talukdar, learned counsel appearing for the Revenue, on the other hand, tracing the legislative history and object behind section 40A(3) of the Act, and the rules 6DD(j) hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absolutely nothing on record, not even in the certificate produced by the assessee (annexure A-2) issued by Rallis India Ltd. as to what practical difficulty or unavoidable circumstance, much less an exceptional unavoidable circumstance posing genuine difficulty was there, which warranted cash payments, in violation of sub-section (3) of section 40A. Adverting to Paul Brothers' case [1990] 186 ITR 356 (Gauhati) relied upon by learned counsel for the assessee, it turns on its peculiar facts as found and noted by the court : " In the instant case, the five firms to whom payments were made, were all based at Gauhati. The assessee-firm is at Tezpur. Normally, the transactions are made 'through accounts'. But, in the above five instances, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such material it cannot be said that the aforesaid cash payments made by the assessee were due to any exceptional or unavoidable circumstances as envisaged by clause (j). Even if the certificate (annexure A-2) is ex facie taken as correct, yet it fails to fulfil the essential ingredients of clause (j) which are not spelt out therefrom. The other two cases relied upon by learned counsel for the assessee, Hasanand Pinjomal v. CIT [1978] 112 ITR 134 (Guj) and Giridharilal Goenka v. CIT [1989] 179 ITR 122 (Cal), a case of cash payments being made to two co-operative societies. Even in this case, the Gujarat High Court has pointed out : " Be it noted that even if these four conditions are satisfied, the rigour of the rule contained in sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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