Judgment:
Ritu Raj Awasthi, J.
1. The present income-tax appeal filed under Section 260A of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') was admitted, vide order dated September 4, 2000 on the following substantial question of law:
(i) Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the case of the assessee is covered under Rule 6DD of the Income-tax Rules, 1962, in deleting the additions made by the Assessing Officer by applying the provisions of Section 40A(3) of the Income-tax Act, 1961?
2. The brief facts giving rise to the present appeal are as follows:
3. The present appeal relates to the assessment year 1987-88.
4. The respondent-assessee is a firm and was engaged in transport business of plying buses.
5. As per the assessment order dated February 6, 1989, notice under Sections 143(2) and 142(1) and detailed notice under Section 143(3) (consolidated for the assessment years 1986-87 and 1987-88) were issued to the assessee-respondent and the assessment was made, wherein an amount of Rs. 37,847 was added to the income of the assessee-respondent under Section 40A(3) as the payments were made by the assessee otherwise than by crossed cheque or crossed bank drafts and the assessee had allegedly not given any exceptional circumstances under which such payments were made in cash.
6. In addition to that the assessing authority and also added the deposits amounting to Rs. 40,500 as the income of the assessee.
7. Against the assessment order, the respondent-assessee has filed the Departmental appeal before the Commissioner of Income-tax (Appeals), Allahabad. So far as the amount of Rs. 38,760 is concerned, the appellate authority had confirmed the finding of the assessing authority.
8. The respondent-assessee thereafter had filed an appeal before the learned Income-tax Appellate Tribunal, wherein the findings of the assessing authority as well as the appellate authority were reversed and the Appellate Tribunal has held that the assessee has fully explained the details of payment made in cash. The entire evidence in the form of bills, cash memos, etc., has also been furnished by the assessee. Looking into the business of the assessee and also the nature of items purchased, it cannot be disputed that the assessee had to make the payments in cash under unavoidable and exceptional circumstances. The Departmental authorities have not disputed the genuineness of the transactions nor the identity of the person/seller to whom the payments had been made. In such circumstances, if the payments are made in cash, the same shall fall within the exception provided under Rule 6DD of the Income-tax Rules and such transactions could not be disallowed.
9. The present appeal arises out of the aforesaid Tribunal's order dated January, 1999.
10. We have heard Sri A.N. Mahajan, learned standing Counsel for the Revenue and Sri Krishna Agrawal for the respondent-assessee and perused the order passed by the Income-tax Appellate Tribunal against which the present appeal has been filed.
11. We find that the Tribunal has considered the relevant material facts relating to various transactions made in cash by the respondent-assessee and has come to the conclusion that under exceptional circumstances, the respondent-assessee had made the said cash transactions, which are covered within the exception provided in Rule 6DD of the Income-tax Rules and the same cannot said to be covered under Section 40A(3) of the Act. The hon'ble apex court in the case of Attar Singh Gurmukh Singh v. ITO : [1991] 191 ITR 667 has observed that (page 673): 'The terms of Section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in Section 40A(3) was not practicable or would have caused genuine difficulty to the payee.'
12. Relying on the aforesaid judgment, the Division Bench of this court in the case of CIT v. Chaudhary and Co. : [1996] 217 ITR 431 has held that the object of Section 40A(3) of the Income-tax Act, 1961, is that a fictitious amount should not be claimed as revenue expenditure. The intention of Section 40A(3) was not that cash payment can never be allowed as a deduction. The terms of Section 40A(3) are not absolute.
13. The learned Tribunal looking into the exceptional circumstances has rightly allowed the cash payments to be included within the purview of Rule 6DD of the Income-tax Rules. In the present case, the nature of business of the respondent-assessee and the cash transactions made with respect to the expenditure incurred during the said business as well as the evidence adduced before the learned Tribunal with regard to the cash transactions clearly go to show that the case of the assessee-respondent is covered under Rule 6DD of the Income-tax Rules.
14. In view of the aforesaid discussion, we are of the view that the order of the Tribunal does not involve any substantial question of law.
15. The appeal fails and is dismissed.