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Issues: (i) Whether cash payments made on Sundays or bank holidays were entitled to the benefit of Rule 6DD(j) notwithstanding the absence of corresponding entries in the head office books. (ii) Whether Section 40A(3) applied to cash payments said to be not exceeding Rs. 20,000, and whether the aggregate payment in a day required verification.
Issue (i): Whether cash payments made on Sundays or bank holidays were entitled to the benefit of Rule 6DD(j) notwithstanding the absence of corresponding entries in the head office books.
Analysis: The remand reports recorded that the cash payments were made on Sundays or bank holidays and were duly accounted for in the books maintained at the depot by the depot-in-charge. The crucial fact was that the assessee had made payment to the depot and the depot books reflected the transactions on the relevant closed days. The absence of entries in the head office books on those dates did not by itself negate the factual position established in the depot records. The benefit of the exception could not be denied merely because the head office recorded the payments later or differently.
Conclusion: The assessee was entitled to the benefit of Rule 6DD(j) for the payments made on bank holidays.
Issue (ii): Whether Section 40A(3) applied to cash payments said to be not exceeding Rs. 20,000, and whether the aggregate payment in a day required verification.
Analysis: Section 40A(3) applies only where the payment, or the aggregate of payments made to a person in a day, exceeds the prescribed limit and is otherwise than by account payee cheque or bank draft. The material before the Tribunal showed only that the individual payments were said to be below Rs. 20,000, but the decisive question was whether the aggregate payment to the same person on a particular day exceeded that limit. Since that aspect had not been properly examined, the issue required factual verification by the Assessing Officer.
Conclusion: The matter was restored to the Assessing Officer to verify the aggregate payments in a day and apply Section 40A(3) accordingly.
Final Conclusion: The assessee succeeded on the bank-holiday payments and obtained a remand on the remaining cash-payment issue, so the appeal was disposed of with partial relief.
Ratio Decidendi: A cash-payment disallowance under Section 40A(3) cannot be sustained where the assessee establishes payment on bank holidays through the depot records, and the provision is attracted only when the aggregate payment to a person in a day exceeds the statutory limit.
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