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TMI Blog1979 (7) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged. 2. The assessee is a partnership firm doing business as hundy merchants at Tiruvannamalai. In the original assessment made there was no disallowance under s. 40A(3) of the Act. Since the Revenue audit party found that there were cash payments in excess of Rs. 2,500 and such payments amounted to merely Rs. 10.5 lakhs, the ITO reopened the assessment for the asst. yr. 1970-71 under s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,902 that is disputed in ITA. No 443 of 1978-79. 3. For the asst. yr. 1971-72 in reopening the assessment the ITO issued notice to the assessee as to why the disallowance should not be made in respect of Rs. 12,26,322 as it is hit by s. 40A(3) of the Act. After considering the explanations furnished by the assessee the ITO disallowed the payments in cash to the extent of Rs. 1,36,802 in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with reference to the two parties are almost similar they are taken up together. The Circular No. 220 dt. 31st March, 1977 in paragraph 4 stated that in six circumstances the conditions and requirement laid down in r. 6DD(j) was met. One of the circumstances is "the transactions and payments are made at a place where either the purchaser or the seller does not have a bank account". The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere more than seven years old and the party could not be contacted. At the same time the Madras party had sales-tax registration number and the payment to this party could not be doubted. In respect of the Bangalore party even though there is no sales tax registration number of that party it was stated to be a genuine, and because it had closed down the business the particulars could not be obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey cannot be disallowed under s. 40A(3) of the Act. We are satisfied that the two parties are genuine parties. The assessee has made the cash payment to them because the parties insisted cash payment and the purchases were made in Madras and Bangalore where the assessee had no Bank account. Considering the facts and circumstances of the case we see no reason to make any disallowance. 5. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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