COMMISSIONER OF INCOME TAX Vs. AMARJIT ARORA

JUDGEMENT

(1.) THE Revenue has filed this appeal under s. 260A of the IT Act, 1961 (for short "the Act"), against the order of the whereby its appeal against the order of the CIT(A) for the asst. yr. 1993 -94 has been dismissed.

(2.) DURING the course of assessment proceedings, the AO noticed that the assessee had made purchases against cash payments from one M/s Sawan Plastics to the tune of Rs. 3,55,490 vide nine bills of different dates. This, according to the AO, was in violation of the provisions of s. 40A(3) of the Act for which explanation of the assessee was sought. The assessee explained that the payments had been made in cash at the insistence of the seller who had issued certain cheques to its supplier and needed the cash for depositing in the bank so that the cheques may be passed. It was also explained that the goods were supplied at lower rates against cash payments than credit purchase. Confirmation from the supplier was filed to the effect that it had insisted for cash payment since the assessee on earlier occasions had failed to make payment in time.

(3.) THE AO rejected this explanation by observing that M/s Sawan Plastics was having a number of other customers and as such it could have got the payments from some other parties. Accordingly, he made the addition of Rs. 3,55,490 to the income of the assessee on account of violation of the provisions of s. 40A(3) of the Act. the CIT(A) that the assessee's case fell under the exceptions provided in r. 6DD(j) of the IT Rules as the cash payments had been made on the insistence of the seller and this claim of the assessee was supported by the confirmatory letter issued by the seller. These findings have been confirmed by the Tribunal in the Revenue's appeal against the order of