TaxTMI 
TaxTMI 
1985 (4) TMI 121
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.... time of the original assessment for the asst. yr. 1976-77 the ITO found that the assessee made cash purchases of silver ornaments form the following 10 parties: (1) Ramzani Alimuddin 3,603 (2) Motilal Shantilal 3,701 (3) Ramesh Jhalani 3,411 (4) Sunderlal Kaluji 2,675 (5) Sobhagmal Lalchand 4,130 (6) Meena Lalchandji 3,132 (7) Mohanlal Omprakash 3,692 (8) Shankerlal 3,650 (9) Sunar Gopalji 5,858 (10) Rajeshkumar 6,240 Before the ITO the assessee filed confirmatory letters from the above persons wherein most of them admitted having sold silver to the assessee and contended that cash payment was insisted as they had either no bank account or they wer....
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....them were produced before the ITO and were examined. He submitted that out of the 10 parties only one had bank account and the other did to have any bank account and they insisted payment in cash and, therefore, the assessee was obliged to make payment in cash rather than by means of crossed cheque or crossed bank draft. The ld. consul submitted that since the sellers refused to accept and other mode of payment except cash, the assessee, in the interest of its business, was obliged to make payment in cash and, therefore, the cash was fully covered by the provisions of r. 6DD(j) of the IT Rules, 1962. In this connection, the ld. counsel referred to the instructions of the CBDT issued vide Circular No. 220 dt. 31st May, 1977. He also referred....
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....anner aforesaid was not practicable or would have caused genuine difficulty to the payees having regard to the nature of the transaction and the necessity for expeditious settlement thereof and also furnishes evidence to the satisfaction of the ITO as to the genuineness of the payment and the identity of the payee, such cash payment would not be disallowed under s. 40A(3) of the IT Act. In the light of the above provision of the Act and Rules we have to examine as to whether the assessee in the present case by making payment in cash for the purchase of silver, violated provisions of s. 40A(3) of the Act and r. 6DD of the IT Rules or not. From the records it appears that the assessee filed confirmatory letters from all the sellers to the ....
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....o meet the requirements of the said rule are: a. the purchaser is new to the sellers; or b. the transactions are made at a place where either the purchaser or the seller does not have a bank account; or c. the transactions and payments are made on a bank holiday; or d. the seller is refusing to accept the payment by way of crossed cheque/draft and the purchaser's business interest would suffer due to non-availability of goods otherwise than from this particular seller; or e. the seller, acting as a commission agent, is required to pay cash in turn to persons from whom he has purchased the goods; or f. specific discount is given by the seller for payment to be made by way of cash. 5. It can be said that it would, general....
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....if the assessee had not conformed with the requirements of r. 6DD(j) on account of insistence by the customers for payments for the goods delivered out of banking hours, or on days on which the banks were not functioning, it would certainly be a were not functioning, it would certainly be a matter for consideration by the authorities concerned as to whether the requirements of the rule would or would not stand attracted. The Allahabad High Court in CIT vs. Satish Chandra (1983) 34 CTR (All) 321 : (1983) 143 ITR 330 (All) found that the assessee made four payment in cash exceeding Rs. 2,500 to his suppliers and filed certificates from the suppliers stating that they were not willing to accept the cheque. The Tribunal went into the details an....