Cash payment exception under tax disallowance upheld where share transactions were documented, identifiable, and genuinely supported.

Cash payments by a sub-broker for share transactions were treated as falling within the exception to disallowance under section 40A(3) read with rule 6DD(j) because the cash book recorded the payments, the counterparties were identifiable, and confirmations were on record. The transactions were not disputed and their genuineness was not challenged, so the material supported the assessee's claim that the payments were made due to the peculiar nature of the business. The Tribunal's view that no evidence existed to invoke the exception was contrary to the record, and the disallowance under section 40A(3) could not be sustained.

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Issues: Whether cash payments made by a sub-broker in the course of share transactions were protected by the exception to disallowance under section 40A(3) read with rule 6DD(j), and whether the Tribunal erred in holding that no material supported the assessee's claim.

Analysis: The payments were reflected in the cash book, the counterparties were identifiable, and confirmations from the concerned parties were on record. The transactions themselves were not disputed, nor was there any challenge to their genuineness. In these circumstances, the material before the assessing authorities supported the assessee's case that the cash payments were made in the peculiar nature of the business and fell within the relevant exception under rule 6DD(j). The Tribunal's view that no evidence or material existed to bring the case within the exception was contrary to the record.

Conclusion: The addition under section 40A(3) could not be sustained, and the assessee was entitled to relief.

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