1985 (9) TMI 30

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.... the Income-tax Act, 1961 (hereinafter called "the Act"), to Messrs Manubhai and Company, Bombay, towards the price of cotton waste purchased from that company. The Income-tax Officer for reasons stated in paragraphs 5(A) to 5(E) of his order came to the conclusion that these payments fell within the mischief of sub-section (3) of section 40A of the Act. On appeal, the Appellate Assistant Commissioner confirmed the view of the Income-tax Officer so far as this question is concerned for reasons stated in paragraphs 4 to 6 of his order. The matter was carried in appeal to the Tribunal but in vain. Thereupon the assessee sought reference under subsection (1) of section 256 of the Act on four questions. The Tribunal by its order dated July 29, ....

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....herwise than by a crossed cheque drawn on a bank or by a crossed bank draft, such expenditure shall not be allowed as deduction. The second proviso to that sub-section lays down that no disallowance shall be made where any payment in a sum exceeding two thousand five hundred rupees is made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors. "Prescribed" means, prescribed by rules made under the Act, vide section 2(33) of the Act. In pursuance of the provision in the said second proviso, rule 6DD came to be introduc....

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....t would be possible for the Department to cross-check if the payment in question was actually made in cash to the seller from whom goods were purchased. In paragraph 5 of the circular it is stated that the requirements of rule 6DD(j) would stand satisfied if a letter is produced in respect of each transaction falling within the categories illustrated in paragraph 4 from the seller giving full particulars of his address, Sales Tax No./Permanent Account No. if any, for the purposes of proper identification to enable the Income-tax Officer to satisfy himself about the genuineness of the transaction. The cases indicated in paragraph 4 are merely illustrative and not exhaustive but the underlying idea is that if the seller's identity can be esta....