1993 (12) TMI 46 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Income-tax Appellate Tribunal was justified in law in deleting the addition made u/s 40A(3) of the Income-tax Act, 1961.

Summary:

Issue 1: Justification of Deletion by the Tribunal u/s 40A(3)
The petition was filed u/s 256(2) of the Income-tax Act, 1961, to direct the Income-tax Appellate Tribunal, Amritsar Bench, to refer a question of law regarding the deletion of an addition of Rs. 12,70,683 made u/s 40A(3) by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals). The Tribunal had earlier declined to refer this question to the court.

The assessing authority had made the addition on the grounds that payments were made in cash and not by cheques or drafts, thus not to be treated as expenditure. The Tribunal, however, allowed the deduction as expenditure, which led to the present petition.

Legal Precedents and Interpretations
The court referred to CIT v. Surinder Sugar Store [1989] 177 ITR 511 (P & H) but noted that the detailed facts of that case were not provided, making it difficult to form an opinion on its similarity to the present case. It was emphasized that the order of the Tribunal is crucial in determining if a question of law arises u/s 256(2).

The court cited the Supreme Court's interpretation in CIT v. Managing Trustee, Jalakhabai Trust [1967] 66 ITR 619, which stated that the High Court only needs to consider if a question of law arises from the Tribunal's order, not whether it may ultimately favor the assessee.

Section 40A(3) and Rule 6DD
The provisions of section 40A(3) must be read along with rule 6DD, which provides exceptions for payments made in cash. The Supreme Court in Attar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667 clarified that section 40A(3) is not intended to restrict business activities but to ensure the genuineness of payments and curb black money. Genuine and bona fide transactions are exempted from the section's sweep.

Tribunal's Findings
The Tribunal found that the assessee did not have a bank account at the place of purchase, which was not contested by the Revenue authorities. This brought the case within the exception provided by rule 6DD(j). The Tribunal concluded that the assessee's transactions were genuine and complied with the conditions of the circular issued by the Central Board of Direct Taxes.

Conclusion
The court held that the Tribunal's decision was based on factual findings and did not raise a question of law. The petition was dismissed, affirming that no referable question of law arises from the Tribunal's order.