K. ABDU AND CO. Vs. ITO

JUDGEMENT

(1.) Petitioner is challenging Exhibit P6 order issued by the Commissioner of Income Tax under Sec. 264 of the Income Tax Act confirming disallowance of addition made under Sec. 40A(3) for the payments made in cash in excess of Rs. 10,000. During the previous year, relevant to the assessment year 1996 -97, petitioner made payments of Rs. 19,05,964 in cash against requirement of payment through account payee cheque or DD which attracts addition of 20 per cent under Sec. 40A(3) of the Income Tax Act. Out of this amount, petitioner claimed that an amount of Rs. 3,52,943 and Rs. 4,74,971 were paid by the petitioner to the bank account of the suppliers who supplied goods to the petitioner who is a grocery merchant. Even though initially the claim was allowed by the assessing officer, he rectified it under Sec. 154 and made addition under Sec. 40A(3) for the payments made in cash in excess of Rs. 10,000. Against this, petitioner filed revision before the Commissioner, who rejected the same vide Exhibit P6 order, which is under challenge in this Original Petition.

(2.) Heard counsel for the petitioner and standing counsel for the Income Tax Department. The claim put forward by the petitioner is that payments fall specifically within the exception clause, Rule 6DD(a) of the Income Tax Rules, 1962. For easy reference the said Rule is extracted hereunder:

(3.) The next contention raised by the petitioner is that cash remittances in the account of the suppliers were made by entrusting the cash to the truck drivers and, therefore, the same is covered by Clause (i) of Rule 6DD. This contention is seen not pressed before the Commissioner.