Law:

Section:

Section 40A(3) of the Income-tax Act, 1961 - Business disallowance - Cash payments in excess of prescribed limit - Whether payments made for purchases would also be covered by word "expenditure" occurring in section 40A(3), and such payments can be disallowed if they are made in cash in sums exceeding prescribed limit - Held, yes Section 256 of the Income-tax Act, 1961 - Reference to High Court - General - Whether while hearing an application for reference filed by one party, Tribunal has no jurisdiction to refer a question at instance of other party which has not made an application for reference - Held, yes HELD The assessee made a player for reference at the hearing of the application filed by the Commissioner without making any application under section 256(1). The Tribunal has no jurisdiction to refer a question at the instance of a party which has not applied for it. Therefore, the question referred at the instance of the assessee was returned unanswered. In U.P. Hardware Store v. CIT [1976] 104 ITR 664, it was held that the word "expenditure" occurring in section 40A(3) was of wide import. It would cover the expenses to be taken into account while determining the gross profit. The gross profit it determined by the difference between the opening stock and the purchases on the one hand and the closing stock and the sales on the other. The payments made for purchases would also be covered by the word "expenditure" and such payments could be disallowed if they were made in cash in sums exceeding the prescribed limit. Note : The decision was in favour of revenue. CASE REFERRED TO U.P. Hardware Store v. CIT [1976] 104 ITR 664 (All.). JUDGMENT Satish Chandra, CJ.-The Tribunal has referred to us two questions, one at the instance of the…

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