Cash payment exception under rule 6DD(j) bars disallowance where uncontroverted evidence shows unavoidable circumstances.

Cash payments for raw-material purchases were found to fall within the exceptional and unavoidable circumstances contemplated by rule 6DD(j), because the commission agent demanded cash, the supporting affidavit and account copy were accepted as true, and the deponent was not cross-examined. On that uncontroverted evidence, the Tribunal's factual finding was held not to suffer from illegality and could not be disturbed in reference jurisdiction. The payments therefore were not disallowable under section 40A(3), and the assessee remained entitled to the deduction.

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Issues: Whether cash payments made for purchases of raw materials could be disallowed under section 40A(3) of the Income-tax Act, 1961, or were protected by rule 6DD(j) of the Income-tax Rules, 1962 as having been made in exceptional and unavoidable circumstances.

Analysis: The payments were made through a commission agent for the first time, and the Tribunal accepted the evidence that the agent had insisted upon cash payment. The supporting affidavit and account copy were accepted as true and correct, and the deponent was not cross-examined. On that material, the Tribunal recorded a factual finding that the payments fell within the exceptional and unavoidable circumstances contemplated by rule 6DD(j). Such a finding, when supported by evidence, was not shown to suffer from any illegality.

Conclusion: The cash payments could not be disallowed under section 40A(3), and the assessee was entitled to the deduction.

Ratio Decidendi: A factual finding that cash payments were made in exceptional and unavoidable circumstances under rule 6DD(j), when based on uncontroverted evidence, cannot be disturbed in reference jurisdiction and prevents disallowance under section 40A(3).

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