TMI Blog1976 (5) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... n Steel Co. (2) Rs. 4,547 Messrs Santi Lal Jain (3) Rs. 20,280 -Do- (4) Rs. 28,280 Messrs Daulat Ram Makhan Lal (5) Rs. 5,150 Messrs M.M. Istiaq Ahmed Sultan Ahmed The assessee was required to explain the circumstances in which these payments had been made in contravention of the provisions contained in s. 40-A(3). The assessee filed replies on 1st March, 1975 and 11th March, 1975, but on a consideration of the same the ITO was not satisfied that these payments were covered by the exception provided in r. 6DD of the IT Rules, 1962. He has also held that the assessee had not given any evidence to prove the factum of the payment and the identity of the payees and hence, he added this amount to the total income under s. 40A(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neness of the payment and the identity of the payees." It would appear that for the application of this Rule the assessee has to satisfy the ITO that the payment could not be made by crossed-cheque on a bank or by a crossed bank draft (i) due to exceptional or unavoidable circumstances or (ii) because payment in this manner was to practicable or would have caused genuine difficulty to the payee having regard to the nature of the transaction and the necessity for expenditious settlement thereof. The assessee has further to furnish evidence as to the genuineness of the payment and the identity of the payees. We agree with Shri I.J. Jain, learned Advocate for the assessee that the conditions provided are not cumulative. It would appear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious year's credit balance of RS. 40,000. The assessee further paid Rs. 7,500 in cash on 1st April, 1971 and Rs. 42.65 on 20th April, 1971. The bill was drawn on 7th April, 1971 for Rs. 48,542.65. At the end of the year the account was squired up. It was submitted that the assessee had been making cash payment to this party in the earlier year when no purchases, whatsoever, had been made from it and it could not be said that the payment of Rs. 7,500 was against any particular purchase. As for Daulat Ram Makhan Lal, the submission made was that the assessee produced a certificate from the party before the ITO with its letter dt. 15th Oct., 1976. A copy of this letter is at page 7 and it would appear that the assessee filed with it certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective submissions. As we have stated above, the word "or" occurring in between sub-cl. (1) and (2) is s. 6-DD does go to make them exclusive of each other. The conditions required in these two sub-clauses are not cumulative and this we have amply illustrated above. We do not agree that the intention of the Legislature or the speech of the speech of the Finance Minister when he introduced these provisions are not relevant factors for consideration. An extract from that speech appears at page 11 of the P.B what was stated by the Finance Minister was : "Tax liability is sometimes artificially reduced by diverting profits to relatives and associate concerns in the form of excessive payments for goods and services. Claims are also made for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptional or unavoidable circumstances, Messrs, Santilal Jain and we find that Messrs M.M. Istiaq Ahmad Sultan Ahmad for certain reasons insisted the payments to be made to them in cash and in order to maintain business relations with them the assessee complied with their desire. As for Gupta Iron Steel Co. the disputed payment was not against any particular purchase. The purchases were made by bill dt. 7th April, 1971 and amounted to Rs. 42,543.65. The assessee had already paid Rs. 40,000 in the previous year when the purchases had been made. In other words, the assessee had been making cash payments to this party but nor against any particular purchase. The payment of Rs. 7,500 made on 1st April, 1971 as well as not against any particular ..... X X X X Extracts X X X X X X X X Extracts X X X X
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