COMMISSIONER OF INCOME TAX Vs. BHERWA FERTILIZERS

JUDGEMENT

(1.) BHERWA Fertilizers, Pali (hereinafter called "the assessee"), entered into various purchase transactions of fertilizers with Kisan Agro Service Centre, Pali, from November 20, 1979, to December 23, 1979. All these purchases were of more than Rs. 2,500 and their payments were made in cash. The total purchase transactions were to the tune of Rs. 2,21,578 and the assessee sold that fertilizer for the total sum of Rs. 2,38,563 and as per the profit and loss account of that firm, the net profit earned by that firm came to Rs. 11,525.

(2.) WHEN this matter came up for consideration before the Income-tax Officer, he noticed that payments of all these purchase transactions were exceeding Rs. 2,500 and, therefore, he called upon the assessee to give his explanation. The assessee explained that the seller was not prepared to accept cheques or bank drafts and insisted on cash payment and that is how the cash payment was made. The Income-tax Officer applied Section 40A(3) of the Income-tax Act, 1961 (for short, "the Act"), read with rule 6DD(j) of the Income-tax Rules, 1962 (hereinafter to be referred as "the Rules"), and came to the conclusion that the assessee was not entitled to the deductions of the amount of Rs. 2,18,678, which was paid to the seller at different times in cash exceeding Rs. 2,500 and thus disallowed the deductions of Rs. 2,18,678 and added this towards the income of the assessee.

(3.) THE above answer given by us does not solve the problem whether the assessee should be allowed the deduction of Rs. 2,18,678. In doing so, as already observed, besides giving a finding that the payment was genuine, as required by Rule 6DD(j) of the Rules, a further finding has also to be given that (i) either due to exceptional or unavoidable circumstances ; or (ii) because payment by a crossed cheque drawn on a bank or by a crossed bank draft was not practicable, or would have caused genuine difficulty to the payee, having regard to the nature of the transaction and the necessity for expeditious settlement thereof. Since no finding in this behalf has been given by the Tribunal, learned counsel for the parties stated that it is not appropriate for this court to give finding in a reference and the matter be remitted to the Tribunal to give findings on those matters.