TMI Blog1988 (3) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... t years 1977-78 and 1978-79, the assessee claimed deduction of certain payments made to its constituents at Madras. During the previous year relevant to the assessment year 1977-78, payments were made to different parties aggregating in all to Rs. 1,48,472. In the previous year relevant to the assessment year 1978-79, payments were made to third parties aggregating to Rs. 1,82,515. These payments represented publicity and advertisement charges and packing charges. During the course of the examination of the accounts, the Income-tax Officer called upon the assessee to prove the genuineness of the payments as all these payments were made in cash. The assessee produced receipts and other available evidence. The Income-tax Officer investigated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional or unavoidable circumstances or because the payment by crossed cheque or crossed demand draft was not practicable or would have caused genuine difficulty to the payee. The learned Commissioner referred to rule 6DD of the Income-tax Rules, 1962, which prescribed the circumstances in which a payment by cash could still be allowed as deduction. The assessee was relying on clause (j) of rule 6DD to claim that the payments in question should be allowed because they were made under exceptional or unavoidable circumstances or payment by crossed cheques or crossed demand drafts was not practicable and would have caused genuine difficulty. The learned Commissioner, after scrutiny of the assessee's explanation, accepted some payments as falling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1978-79 and to M/s. A. Jacquiline towards packing charges amounting to Rs. 15,930 and Rs. 24,215, respectively, for the assessment years 1977-78 and 1978-79 on the ground that they were hit by the provisions of section 40A(3) of the Income-tax Act, 1961 ? " Learned counsel for the assessee, Sri. S. Parvatha Rao, contends that eventually, after the matter was considered by the Tribunal, the genuineness of the payments was accepted and the identity of the parties who received the amounts was also established. The disallowance was made only on the technical plea that the payments in question were made in cash in contravention of the provisions contained in section 40A(3) which required that payments in excess of Rs. 2,500 should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had stated in the letter "...In the above cases, the parties have insisted on payments in cash. They have also expressed that unless the payment is made in cash, the services cannot be extended to Jaypee Electronics. Under these exceptional and unavoidable circumstances, Jaypee Electronics made the payments through bearer cheques. The payments are genuine and the Department had identified the parties. Therefore, the case also falls under rule 6DD (j)(1) and (2) and no disallowance under section 40A(3) can be made." Sri S. Parvatha Rao refers to the above explanation and states that the assessee's explanation, that the parties insisted on payment in cash and it was not possible to finalise the transaction otherwise, should have been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuinely made and accommodation payments are not claimed as deductions. In the present case, the payments made are fairly considerable. The assessee is not new either to the business or to the provisions of the Income-tax Act, It is not possible to accept that an assessee like the one in the present case accepted the risk and responsibility to make payments in cash by contravening the provisions contained in the Income-tax Act that payments in excess of Rs. 2,500 ought to be made by crossed cheques or crossed demand drafts. The Revenue cannot be found fault with for insisting on the strict compliance with a requirement directed to check tax evasion. In the circumstances, we feel that even on the basis of the assessee's explanation filed on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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