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TMI Blog1985 (5) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... epers refuse to accept the cheque in respect of such purchases and the assessee in the business interests had to pay cash. 3. The ITO was of opinion that the cash payments would be hit by the provisions of section 40A(3). According to him, the assessee has not proved the existence of exceptional or unavoidable circumstances as required by the provisions of rule 6DD(j) of the Income-tax Rules, 1962 ('the Rules'). He, therefore, held that the amount could not be allowed as a deduction. 4. On appeal, the Commissioner (Appeals) agreed with the ITO. Before him, the assessee produced a certificate from one of the parties, i.e., Deccan Brush Co. The certificate stated that the party had insisted upon cash payments. The Commissioner (Appeals) found that the payments for the purchases had been made in round sums like Rs. 7,500 and Rs. 2,700. Even though the claim is made that the purchases were made in cash on account of urgent need of the goods, the assessee had not, according to the Commissioner, produced any evidence to show that the purchases were such that they had to be made on the spot in cash. For this purpose, according to him, it was not enough that a certificate is filed from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of rule 6DD(j), if a letter to the above effect is produced in respect of each transaction falling within the categories listed above from the seller giving full particulars of his address, sales tax number/permanent account number, if any, for the purposes of proper identification to enable the Income-tax Officer to satisfy himself about the genuineness of the transaction. The Income-tax Officer will, however, record his satisfaction before allowing the benefit of rule 6DD(j). 6. It is further clarified that the above circumstances are not exhaustive but illustrative. There could be cases other than those falling within the above categories which would also meet the requirements of rule 6DD(j)." 8. We have to see whether the payments made by the assessee would come within the above parameters. If so, then the assessee is entitled to the deduction. In our opinion, the provisions of rule 6DD, as explained by the circular, would be applicable to the facts of the case. As noted above, there are two alternatives considered in clause (j). One is that the payment should be due to exceptional or unavoidable circumstances. This is the condition which the ITO and the Commissioner ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court also recorded the factual position of the assessee therein, i.e., the assessee was often pressed for goods after banking hours and on holidays and the sellers invariably demanded cash for release of further goods. The tenor of the decision of the Kerala High Court seems to consider such a position to be governed by rule 6DD(j). 11. The ITO and the IAC had referred to the decision of the Punjab and Haryana High Court in the case of Hari Chand Virender Paul v. CIT [1983] 140 ITR 148. That case can be easily distinguished. In that case, the goods were purchased on credit basis a number of days earlier to the date on which the alleged payment was made. The assessee had, therefore, ample opportunity to make payments by crossed cheque and need not have waited till the demand was made for payment in cash. The High Court held, therefore, that no exceptional or unavoidable circumstances had been made out. In this case, the purchase and the payment are simultaneous. So, the decision is easily distinguishable on facts. 12. The Gujarat High Court in the case of Hasanand Pinjomal v. CIT [1978] 112 ITR 134 had construed the expression 'payment not practicable' occurring in rule 6DD(j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that the stock of gunny bags was less by 14,100. He found that this was more than 12 per cent of the total purchase of gunny bags. In the prior assessment years, the shortage or wastage was around 8 per cent only. He, therefore, restricted the shortage to 8 per cent and made a disallowance of the excess which amounted to Rs. 13,481. 16. The assessee appealed. The Commissioner (Appeals), while agreeing with the ITO that the claim for the wastage was excessive, however, reduced the addition roundly to Rs. 10,000. The assessee is on further appeal before us. It was submitted that most of the gunny bags received by the assessee are from FCI. The quantity of gunny bags came from FCI would vary depending upon how old the stock was. He submitted that during this year the assessee must have been supplied wheat from old consignments with the result that the gunny bags coming with them were of poor quality. It was because of this reason that there was excess shortage. He, therefore, submitted that whatever shortage was found in the books of account should have been accepted and no addition should have been made. 17. We are unable to accept this submission. In the earlier years als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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