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of <h1>Income-Tax Act: Clarifying Exceptions for Cash Payments Over Rs. 2,500 u/s 40A(3) and Rule 6DD(j.</h1> Section 40A(3) of the Income-tax Act, 1961, and Rule 6DD(j) of the Income-tax Rules, 1962, provide that no disallowance will be made if payments exceeding Rs. 2,500 are not made by crossed cheque/draft due to exceptional circumstances or impracticality. The assessee must prove the genuineness of the payment and the payee's identity. Due to inconsistent interpretations by officers, guidelines have been issued to ensure uniformity. Situations like new purchaser-seller relationships, lack of bank accounts, bank holidays, seller refusal, commission agent payments, and cash discounts are considered valid exceptions. These examples are illustrative, not exhaustive.
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