Law: Income Tax Act, 1961

Section: 40A(3)

Income-tax-----Business expenditure---Disallowance---Cash payment exceeding limit prescribed in S.40-A(3) made otherwise than by crossed cheque or crossed bank draft---Finding of CIT (Appeals) that assessee failed to substantiate existence of exceptional and unavoidable circumstances---Tribunal deleting addition without considering finding of CIT (Appeals)---Not justified--¬Indian Income Tax Act, 1961, S.40-A(3)---Indian Income Tax Rules, 1962, R.6-DD(j)---C.B.D.T. Circular No.220, dated 31-5-1977. The assessee made certain payments in cash exceeding the limit prescribed under section 40-A(3) of the Income Tax Act, 1961. The Income-¬tax Officer disallowed such payment. The Commissioner of Income-tax Appeals) dismissed the app-al by the assessee on the ground that the assessee failed to prove the exceptional and unavoidable circumstances prescribed in rule 6-DD(j) of the Income Tax Rules, 1962, though the genuineness of the transaction and identity of the payee were established. On further appeal, the Tribunal held that the addition was not justified having regard to the explanation offered by the assessee. On a reference: Held, that the findings of fact arrived at by the Tribunal were final. Therefore, it was the duty of the Tribunal to see that the conclusion arrived at was based on proper appreciation of facts and in accordance with law. The Commissioner of Income-tax (Appeals) held that the assessee failed to substantiate the case by cogent evidence regarding the existence of exceptional and unavoidable; circumstances that could be reversed by the Tribunal only after proper appreciation of facts. However, the Tribunal had arrived at its conclusion without considering the finding of the Commissioner of Income-tax (Appeals). The Tribunal also had not taken into consideration some of the exceptional circumstances laid down in paragraph 4 of Circular No.220, dated May 31, 1977, issued by the Central Board of Direct Taxes. Therefore, the Tribunal was not justified in deleting the disallowance of Rs.25,962 made under section 40-A(3) of the Act. JUDGMENT D. N. BARUAH, J. ---At the instance of the Revenue, the following question has been referred to this Court by…

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