TaxTMI 
TaxTMI 
2002 (10) TMI 35
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....ufacture and sale of various spices. The raw materials for the manufacture of the said products are mainly chilly, corriander, turmeric, etc. The appellant purchased those raw materials from various markets in the State of Tamil Nadu by paying the price in cash. The respondent-assessee started this business during the financial year 1990-91. For the assessment year 1992-93, the relevant accounting period ended on March 31, 1992, the assessee filed a return on December 30, 1992, disclosing a net income of Rs. 1,54,668. In the audit report accompanying the return it was recorded that certain items were listed as cash purchases exceeding Rs. 10,000. The assessing authority sought for an explanation from the assessee regarding such cash paym....
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.... that under section 40A(3) of the Act read with rule 6DD(j) of the Rules though the assessing authority has the discretion to allow such expenditure under the circumstances specified in the Rules, the assessee is bound to explain the circumstances specified in sub-rules (1) and (2) of rule 6DD(j) and it is only on being satisfied of the explanation so made, the expenditure can be allowed. The senior counsel also pointed out that the assessee had not established a case by adducing evidence to the effect that the purchasers refused to receive cheques and that the assessee was compelled to pay cash for the raw materials purchased. We have also heard Shri P. Balachandran, learned counsel appearing for the respondent-assessee. He submits that....
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....payments. The first appellate authority has observed that, on verification of the accounts, it was found that these raw materials were purchased by payment in cash to the extent of Rs. 46,32,449. The appellate authority also noted that earlier, the matter was remanded to the assessing authority for a report and the assessing authority in the report has stated that all the purchases were found to be genuine and that the items listed in annextire I to the audit report in Form No. 3CD are supported by regular bills. It is in the above circumstances, the appellate authority has directed deletion of the disallowance made under section 40A(3) of the Act. The Tribunal after referring to the provisions of rule 6DD(j) of the Rules observed that it c....
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....e like, chillies, turmeric, corriander, etc. All the items listed in the annexure are supported by regular bills. All the bills bear the stamp of the sales tax check post. All the purchases in the list are thus found to be genuine". As already noted, the assessee from the very beginning has been stating that the business was started only in 1991 and since the purchases of raw materials were being made through agents, the suppliers were not prepared to accept cash payments. As per the provisions of rule 6DD(j) where the assessee satisfies the Assessing Officer that the payment could not be made by a crossed cheque drawn on a bank or by a crossed bank draft due to exceptional or unavoidable circumstances or because payment in the manner af....