Cash payment exception under rule 6DD(j) sustained where no banking facility existed and genuineness of payments was accepted.

Cash payments were treated as falling within the exception in rule 6DD(j) where the assessee showed that the village had no banking facility and payment by cheque was not practicable. The appellate authority and the Tribunal recorded concurrent findings that banking facilities were unavailable and the payments were genuine, so the disallowance under section 40A(3) was deleted. The Gujarat High Court upheld that deletion and did not entertain the appeal.

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Issues: Whether the disallowance under section 40A(3) was rightly deleted on the ground that the cash payments were covered by rule 6DD(j) because there was no banking facility in the village where the transactions took place.

Analysis: The assessee's case rested on the factual position that the village had no banking facility and that payment by cheque was not practicable. Both the appellate authority and the Tribunal recorded concurrent findings that banking facilities were unavailable and that the payments were genuine. In such circumstances, the exception under rule 6DD(j) was applied to treat the cash payments as falling within the permissible category.

Conclusion: The deletion of the disallowance was upheld, and the appeal was not entertained.

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