INCOME TAX OFFICER Vs. SOM DUTT

JUDGEMENT

(1.) THIS order shall dispose of ITA No. 65 of 1999 filed by the Revenue and ITR No. 173 of 1998 filed by the assessee respondent. In both the cases, the following common question of law has been raised : "Whether on facts and circumstances of the case, the Hon'ble Tribunal is right in holding that the payments made to Ludhiana Foundry & Small Industries Association (Regd.) are to be disallowed under s. 40A(3), particularly when the identity of the party and genuineness of the transactions stand established."

(2.) THE brief facts of the case may first be noticed which are being referred from ITR No. 173 of 1998. The AO made addition of Rs. 98,460 under s. 40A(3) of the IT Act. The assessee filed an appeal before the AAC and the additions "I have considered the submissions of the Authorised Representative and find that before the ITO the appellant has filed a certificate from M/s Ludhiana Foundry & Small Industries Association (Regd.) to the fact that the cash payments were insisted by the association and the appellant also filed receipts for payments of the amounts. Similarly receipts have been filed before me also and I find that it is a case where the appellant has produced sufficient evidence (including identity of the payee) before the ITO to suggest that the appellant was not having any alternative but to make the payment in cash. It is further seen that this is the first year of the business and as the appellant was new to the above association, I am of the view that the ITO was not right in making the addition to the extent of the amount and therefore, the addition made by the ITO under s. 40A(3) is deleted. In the result, the set aside appeal is allowed."

(3.) THE Revenue challenged the order of the AAC before the Tribunal which held that the instant case did not fall within addition (sic) made by the AAC was set aside. The assessee sought a reference under s. 256(1) which has been accepted by the Tribunal and the question has been referred for the opinion of this Court.