Allahabad H.C : Whether, on the facts and in the circumstances of the case, the Tribunal, was correct in law in holding that the payments of Rs. 1,26,583 made by the assessee for purchases of raw materials for its business were allowable as a deduction from the assessee’s income and could not be disallowed under s. 40A(3) of the IT Act, 1961 ?

ORDER

BY THE COURT :

This Court directed the Tribunal under s. 256(2) of the IT Act, 1961 (briefly, the Act), to draw up a statement of the case and refer the following question relating to the asst. yr. 1971-72 for the opinion of this Court :

“Whether, on the facts and in the circumstances of the case, the Tribunal, was correct in law in holding that the payments of Rs. 1,26,583 made by the assessee for purchases of raw materials for its business were allowable as a deduction from the assessee’s income and could not be disallowed under s. 40A(3) of the IT Act, 1961 ?”

2. The assessee firm engaged in the business of manufacture and sale of brass utensils made certain purchases of raw materials for its business through a commission agent M/s Matha Prasad Kedar Nath, Mirzapur, for the amount aggregating to Rs. 1,26,583. The AO refused to allow the deduction of such purchases on the ground that they were made in a sum exceeding the limit of Rs. 2,500 without a cross cheque of cross bank draft. The AAC on appeal sustained the order of the AO. On further appeal, the Tribunal accepted the contention of the assessee that the purchase without cross cheque or cross bank draft were made in exceptional and unavoidable circumstances within the meaning of r. 6DD(j) of the IT Rules, 1962 (for short, the Rules). The Tribunal found that an affidavit sworn by Shri Kedar Nath one of the partners in the firm on the commission agent M/s Matha Prasad Kedar Nath was filed stating that the commission agent who had the dealing with the assessee-firm for the first time, had insisted upon the assessee-firm to make cash payment. Copy of the account of the commission agent in the books of the assessee-firm was also filed and Shri Kedar Nath categorically stated that copy of the account of the commission agent in the books of the assessee-firm was true and correct. Shri Kedar Nath who had sworn the affidavit was not cross-examined by the AO or by the AAC. The Tribunal, therefore, accepted the uncontroverted affidavit of Shri Kedar Nath, filed on behalf of the commission agent. It is in these circumstances that the Tribunal accepted the contention of the assessee-firm that payments in cash exceeding the stipulated limit had been made in unavoidable circumstances. We do not see any illegality in the inference drawn by the Tribunal on the facts and circumstances of the case. The finding of fact as recorded by the Tribunal cannot be disturbed especially when that is fully supported by the evidence available on record.

3. We, therefore, answer the aforementioned question in the affirmative, that is, in favour of the assessee and against the Revenue.

[Citation: 235 ITR 11]