KARYANA ASSOCIATION Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) KARYANA Association, Patiala (hereinafter referred to as the assessee), a registered firm, derived income from grinding of wheat and sale of Atta etc. While processing the assessment, the ITO noticed that the assessee had made purchases from different parties amounting ot Rs. 91,905 to all of whom cash payments were made in sums exceeding Rs. 2,500 each. The ITO made an addition of the said amount to the assessable income by holding that such payments were in violation of the provisions of s. 40A(3) of the IT Act, 1961 (hereinafter referred to as the Act).

(2.) ON appeal by the assessee, the AAC held that the additions made by the ITO did not cover an expenditure within the meaning of s. 40A(3) of the Act and the same was, therefore, deleted from the assessee's income.

(3.) DISSATISFIED from the decision of the Tribunal, the assessee filed an application seeking reference of a question of law. Finding that a question of law did arise, the Tribunal has referred the following question for our decision :