TaxTMI 
TaxTMI 
2006 (7) TMI 134
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....ot the decision of the Tribunal rendered without affording the assessee an opportunity to furnish the confirmation letters from the dealers in question illegal and opposed to the principles of natural justice?" The facts leading to the impugned proceedings can be summarised as follows: For the assessment year 1988-89 the assessee filed his return of income on July 17, 1989, declaring a net taxable income of Rs. 3,77,340. The said return was selected for scrutiny and a final assessment order for the assessment year 1988-89 was passed on March 31, 1988, fixing the assessee's total income at Rs. 7,64,722. While completing the said assessment, the Assessing Officer, namely, the Assistant Commissioner of Income-tax, Cirde-I, Division II, Ernakulam, inter alia made disallowance of a sum of Rs. 88,209 under section 40A(3) of the Act being 50 per cent, of the total amount paid otherwise than by cheques. The said disallowance comprised payments made for purchase of high-speed diesel oil (Rs. 88,260) purchase of stores and spares (Rs. 80,832), and purchase of oil (Rs. 7,326) making up a total of Rs. 1,76,418. Accordingly, as per annexure A order dated January 25, 1991, the Assessing Of....
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....nity to produce the same. We are afraid that we find ourselves unable to accept the above submissions. Admittedly, the purchases made by the assessee for a sum of Rs. 88,209 were all by way of cash payments. By making payments for a sum exceeding Rs. 10,000 otherwise than by crossed cheque or crossed bank draft, the assessee incurred the penalty of disallowance of such expenditure as a deduction under section 40A(3) of the Act. Section 40A(3) together with the two provisos thereto, as was applicable at the relevant time, read as follows: "40A(3) Where the assessee incurs any expenditure in respect of which payment is made, after such date (not being later than the 31st day of March, 1969) as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding ten thousand rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, twenty per cent, of such expenditure shall not be allowed as a deduction: Provided that where an allowance has been made in the assessment for any year not being an assessment year commencing prior to the 1st day of April, 1969, in respect of any liability incurred by the ....
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....y as defined in clause (civ) of that section; (v) the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956); (vi) the Industrial Finance Corporation of India established under section 3 of the Industrial Finance Corporation Act, 1948 (15 of 1948); (vii) the Industrial Credit and Investment Corporation of India Ltd.; (viii) the Industrial Development Bank of India established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964); (ix) the Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963); (x) the Madras Industrial Investment Corporation Ltd., Madras; (xi) the Andhra Pradesh Industrial Development Corporation Ltd., Hyderabad; (xii) the Kerala State Industrial Development Corporation Ltd., Trivandrum; (xiii) the State Industrial and Investment Corporation of Maharashtra Ltd., Bombay; (xiv) the Punjab State Industrial Development Corporation Ltd., Chandigarh; (xv) the National Industrial Development Corporation Ltd., New Delhi; (xvi) the Mysore State Industrial Investment and Development Corporation Ltd., Ban....
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....h of such employee, if the income chargeable under the head 'Salaries' of the employee in respect of the financial year in which such retirement, resignation, discharge or death took place or the immediately preceding financial year did not exceed Rs. 7,500; (j) in any other case, where the assessee satisfies the Income-tax Officer that the payment could not be made by a crossed cheque drawn on a bank or by a crossed bank draft- (1) due to exceptional or unavoidable circumstances, or (2) because payment in the manner aforesaid was not practicable, or would have caused genuine difficulty to the payee, having regard to the nature of the transaction and the necessity for expeditious settlement thereof, and also furnishes evidence to the satisfaction of the Income-tax Officer as to the genuineness of the payment and the identity of the payee." Thus, under the second proviso to section 40A(3) of the Act regard should be had to the nature and extent of the banking facilities available, considerations of business expediency and other relevant factors. It also envisages such other cases and circumstances as may be prescribed. It was for specifying these cases and circumstances ....