Cash payment exception under Rule 6DD upheld where supplier certificates showed cheque or draft payments were not feasible.

Cash payments exceeding the prescribed limit were examined under Section 40A(3), but the Tribunal accepted supplier certificates showing that payment by crossed cheque or bank draft was not feasible in the transactions. The Court treated the matter as chiefly factual, found no legal error in the Tribunal's appreciation of the evidence, and accepted that the surrounding circumstances brought the payments within Rule 6DD. The disallowance was therefore correctly deleted and the assessee obtained the benefit of the exception.

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Issues: Whether cash payments made in excess of the prescribed limit were disallowable under Section 40A(3) of the Income-tax Act, 1961, or whether the assessee's case fell within the exception under Rule 6DD of the Income-tax Rules, 1962.

Analysis: The assessee produced certificates from suppliers to show that payment by crossed cheque or bank draft was not acceptable or feasible in the given transactions. The Tribunal examined each certificate and accepted the explanation as establishing exceptional circumstances covered by Rule 6DD. The Court treated the issue as primarily factual and found no legal error in the Tribunal's appreciation of the evidence. The Court also found the certificate relied upon in respect of one transaction sufficient to support the conclusion that cash payment was compelled by the surrounding circumstances.

Conclusion: The addition made under Section 40A(3) was correctly deleted, and the assessee was entitled to the benefit of Rule 6DD.

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