TMI Blog1984 (2) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case, the Tribunal was justified in sustaining the disallowance of the motor car expenses to the extent of Rs. 15,621 ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in vacating the orders of the authorities below with reference to the addition of Rs. 50,000 and in issuing a direction to the Income-tax Officer as detailed in para. 12 of the Tribunal's order?" The assessee, M/s. Bhilai Motors, is a partnership firm dealing in Tata Mercedez Benz chassis vehicles and spare parts having its head office at Tatibandi, Raipur, and a spare parts shop at K. K. Road, Raipur. It has also a branch at Jagdalpur dealing in spare parts and a petrol pump at Tatibandi. The assessee showed inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing register and the original order forms. The Incometax Officer found that in some cases the office copy of sale memos did not tally with the sale memos to the customers pertaining to a particular sale. It was also noticed that some of the vehicles were registered with the Regional Transport Authority before the date of their sale, no account books were maintained for the branches in the assessee's cash books and balances were not drawn daily but on alternate days and in pencil which has been finalised sometimes in ink. The Income-tax Officer assessed the income at Rs. 1,89,237. The assessee preferred an appeal before the Commissioner of Incometax (Appeals). The Commissioner found that out of Rs. 34,396 disallowed under section 40A(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s-objection was preferred by the department regarding deletion of income of Rs. 50,000 by the Commissioner on account of on money received by sale of chassis out of turn to the customers. The addition of Rs. 24,110 under section 40A(3) of the Act was held to be justified. Though some of the bills on cash payments were less than Rs. 2,500 each, it was evident that the bills were split up in order to avoid the rigour of section 40A(3) of the Act because the bills bore consecutive numbers, being purchases of the same date. Regarding disallowance of Rs. 15,621 in the matter of car expenses account, it has been found that the motor car was also used for the personal use of the partners and there was no material to controvert this finding. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a customer over the previous customer, the Income-tax Officer would be justified in estimating suppressed profits. In the result, the appeal filed by the assessee was dismissed and the cross-objection of the Department was allowed. On an application being made for reference, the aforesaid questions have been referred to this court by the Tribunal. Regarding the first question, section 40A(3) of the Act provides that where the assessee incurs any expenditure in respect of which payment is made in a sum exceeding Rs. 2,500 otherwise than by a crossed cheque, such expenditure shall not be allowed as a deduction. However, the second proviso provides that no disallowance under this sub-section shall be made where any payment in a sum excee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents were made. The Commissioner has allowed two purchases made on December 31, 1974, which were made on a bank holiday, which is covered by the circular. Regarding the other purchases, the only explanation of the assessee was that the sellers were insisting on cash payments. No evidence was produced to substantiate this contention. It was not the case of the assessee that these purchases were covered under any exceptional or unavoidable circumstances or by any of the circulars issued by the Central Board of Direct Taxes. The Allahabad High Court in CIT v. Satish Chandra [1983] 143 ITR 330 has held that primarily the question whether payment in cash exceeding Rs. 2,500 was made in exceptional circumstances was a question of fact. So the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 775 (SC)] and a criminal practice of selling at prices in excess of the controlled price cannot be attributed to the assessee in the absence of any evidence to show that the assessee followed such a practice A. S. Sivan Pillai v. CIT [1958] 34 ITR 328.] He further contended that the observations already made in this regard by the Tribunal left no scope to the Income-tax Officer to come to his own conclusion after the reconsideration of the matter and the Tribunal has made too sweeping a statement by concluding that if the assessee has shown one day's favour to a customer, the Income-tax Officer would be justified in estimating suppressed profits. We are unable to accept the contentions. The finding of the income-tax Officer was based neit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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