NAGHI LAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this reference under s. 256(1) of the IT Act, 1961 (hereinafter referred to as the "Act"), the following question of law has been referred to this Court for its opinion, pertaining to the asst. yr. 1971-72, at the instance of the assessee:

(2.) THE facts which are admitted and/or have been found by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as the "Tribunal"), are stated hereinafter: THE applicant is a firm. THE assessee deals in agricultural commodities at Kota. During the accounting year 1971-72, which ended on Diwali, 1970, it made payments to various parties for the purchase of goods in sums exceeding Rs. 2,500, aggregating Rs. 46,203. THE ITO pointed out to the assessee that the said payments contravened the mandatory provisions of sub-s. (3) of s. 40A of the Act and, therefore, the ITO added the sum of Rs. 46,203 to the total income of the assessee. THE case of the Revenue was that all the payments in question were not made by crossed cheques and, therefore, there was contravention of sub-s. (3) of s. 40A of the Act. THE assessee submitted that its case is covered under r. 6DD(j). THE order of assessment dt. 6th March, 1974, passed by the ITO was assailed in an appeal before the AAC, Kota Range, Kota. THE learned AAC did not accept the said contention and held that the assessee had not been able to show any exceptional or unavoidable circumstances under which it had made the payments in cash exceeding Rs. 2,500. Aggrieved by the order of the learned AAC dt. 1st Aug., 1974, the matter was further carried in appeal to the Tribunal, Jaipur Bench, Jaipur. THE case before the Tribunal was that the word "expenditure" as used in sub-s. (3) of s. 40A of the Act does not include "purchases" and, therefore, the payments made for purchases were not hit by the aforesaid provisions. THE learned Tribunal rejected the contention and dismissed the appeal, vide its order dt. 29th Dec., 1975.

(3.) WE have given our thoughtful consideration to the submissions made by learned counsel for the assessee as well as learned counsel for the Revenue and have perused the record of the case. The case of Kantilal (supra), is distinguishable. In that case, the learned Division Bench of this Court held as under: