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Issues Involved:
The main issue in controversy is the avoidance of the rigour of section 40A(3) of the Income-tax Act, 1961, in terms of rule 6DD of the Income-tax Rules, 1962, regarding cash payments made by the assessee. Assessment Year 1972-73: - The assessee, a registered firm dealing in ghee, sugar, and maida, purchased ghee worth Rs. 55,00,000 from Messrs. Amrit Banaspati Company, with Rs. 4,47,000 paid in cash on 15 occasions exceeding Rs. 2,500 each. - Explanation for cash payments was urgent demands by the supplier, not accepted by the Income-tax Officer, leading to inclusion of Rs. 4,47,000 in taxable income. Appellate Proceedings: - Appellate Assistant Commissioner agreed with the assessee, citing exceptional circumstances for cash payments due to urgent demands and non-charging of interest by the supplier. - Income-tax Appellate Tribunal reversed the Appellate Assistant Commissioner's findings, supporting the Income-tax Officer's view. Question Referred: - Whether the Tribunal was correct in holding that the respondent's case did not fall under the exception provided in clause (j) of rule 6DD of the Income-tax Rules, 1962. Rule 6DD and Circular No. 220: - Clause (j) of rule 6DD provides relief from section 40A(3) for payments not made by crossed cheque or bank draft due to exceptional circumstances. - Circular No. 220 outlines illustrative circumstances where rule 6DD(j) could apply, emphasizing the need for genuine transactions and identification of payees. Judicial Precedents: - Precedents like Navsari Waste Cotton Products v. CIT and Giridharilal Goenka v. CIT emphasize the importance of establishing the seller's identity and considering business expediency in applying rule 6DD(j). - Hasanand Pinjomal v. CIT highlights that practicability under rule 6DD(j) should be viewed from a businessman's perspective, considering business expediency. Conclusion: - The payments made in cash to Amrit Banaspati Company were found to fall within the exemption provided in clause (j) of rule 6DD, supported by the genuine nature of transactions and business expediency. - Distinction drawn from the precedent Hari Chand Virender Paul v. CIT, where different circumstances led to a different outcome, supports the assessee's position in this case. - Considering the settled legal position and the specific circumstances, the reference was answered in favor of the assessee, with no costs awarded.
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