COMMISSIONER OF INCOME TAX Vs. MEGHDOOT SALES

JUDGEMENT

(1.) IN respect of the asst. year 1972 -73, the Tribunal, pursuant to an order passed by this Court under s. 256(2), has stated the case and referred the following question to this Court :

(2.) THE facts, which are relevant for this reference, are as follows : The assessee is a registered firm. The assessment year involved is 1972 -73, for which the previous year of the assessee ended on 31st March, 1972. During the material accounting periods, the assessee was dealing in products manufactured by M/s Meghdoot Pistons (P) Ltd. The accounts of the year of account revealed that the assessee had made payments to M/s Meghdoot Pistons (P) Ltd. to the extent of Rs. 2,11,800, in cash. The ITO disallowed the said payments on the ground that they contravened the provisions of S. 40A(3) of the IT Act, according to which payment exceeding Rs. 2,500 should be made either by crossed cheques or by crossed bank drafts.

(3.) AGGRIEVED by the order of the AAC, the Revenue filed an appeal before the Tribunal. After considering the facts, as stated above, the Tribunal observed that the assessee had placed sufficient material before the lower authorities to show that it made the cash payments under exceptional and unavoidable circumstances. The Tribunal also observed that the genuineness of the transactions was also not in dispute. In the circumstances, the Tribunal observed that the assessee's case was fully covered by Circular No. 220, dt. 31st May, 1977, issued by the CBDT, which was binding on the ITO. Accordingly, the Tribunal confirmed the order of the AAC and dismissed the Revenue's appeal.