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TMI Blog1984 (11) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... ower authorities have not followed the provision of the law correctly. Sec. 40A(3), no doubt, requires the disallowance of expenditure which is incurred by payment in cash in excess of Rs. 2,500, but the provision has also some built in relief measure. Thus where an assessee shows that insisted payments by cheque or draft would have caused hardship or inconvenience, the assessee is permitted to make such payments and claim deduction by pointing out the circumstances under which the payment had to be made in cash. Such circumstances are detailed in r. 6DD and also in CBDT circular No. 220 dt. 31st May, 1977. This circular itself makes it clear that the circumstances under which such payments are to be allowed cannot be mentioned exhaustively. Shri Gujarathi then submitted that the lower authorities erred in interpreting correct ratio arising from Hosanand Pinjomal vs. CIT, Gujarat 1977 CTR (Guj) 486 : (1978) 112 ITR 134 (Guj). It would depend upon the facts of each case. The assessee had pointed out to the lower authorities in respect of each case how the assessee had no alternative but to make payments in cash. Shri Gujarathi further submitted that in all these cases the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not challenge these transactions. Regarding the supply of goods against bill No. 8/80 to the tune of Rs. 7,020 although the supply itself was made on 3rd July 1980, the party insisted on cash payment much earlier on 12th April, 1980 to the tune of Rs. 7,020. The party has confirmed the transaction and as per the certificate dt. 17th May, 1982 it has admitted having not insisted on taking cash. It has also confirmed the reality of the payment. On a much later date the party also gave its G. I. Number, etc. 5. Regarding Ramchandra Vithaldas who is a legal party of Jalgaon, Shri Gujarathi gave detailed copy of the account of this party in the books of the assessee, here there is only one payment of Rs. 3,000 paid on 11th Oct., 1980 by self cheque withdrawal. This payment had to be made because the day was Saturday and the party insisted on cash payment as cheque payment would have delayed encashment till Monday or perhaps later. These were the exceptional circumstances. Regarding Dalichand, another local party of Jalgaon, Shri Gujarathi showed from copy of the account of that party how one solitary payment of Rs. 4,000 had to be made on 30th Aug., 1980 again on Saturday. 6. As to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proposed that the order of the authorities below should be confirmed. 9. On an examination of the various facts and the arguments we hold that the amounts are allowable. Sec. 40A(3) does not put a blanket ban on allowance on all cash payments over Rs. 2,500. The assessee can show the exact circumstances under which he was compelled to make the cash payment. If from the facts presented by the assessee it is noticed that insistance on cheque payment would have resulted in hardship or inconvenience, the matter has to be examined sympathetically from a commercial point of view and not on the basis of subjective decision as to whether the assessee could have insisted a cheque payment. The case law relief upon by both side show that in every case the assessee has to first show that the condition of allowance are fulfilled and that his version regarding actual payment is correct. It is for the ITO to show how the conditions are not fulfilled and that the evidence produced is insufficient or unreliable. Form this point of view we find that in all the cases the assessee had genuine reason to depart from the practice of cheque payment. It is possible that in some cases there was a nominal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded in the books it was not possible to give details to ITO at the time of hearing. He, however, submitted that the CIT(A) has admitted that the work is of technical type which can be done only by the partners. As the amounts are reasonable the same should be allowed. 12. In reply Shri Walvekar submitted that past history is not quite relevant in view of the failure of the assessee to produce adequate proof regarding the business necessity and actually incurring of the impugned expenditure. Referring to p. 21 of the paperbook Shri Walvekar highlighted the fact that most of the expenditure is incurred buy the partners and not by the employees. He further submitted that the question of allowance has to be examined with reference to the character of the expenditure and not with reference to the place at which the expenditure is incurred. The lodging and boarding expenses of the partners which are not allowable when incurred at the headquarters, do not become allowable merely because they are incurred away from headquarters. In support reliance was placed in the cases of Ramkrishan Sunderlal vs. CIT (1951) 19 ITR 324 (All) and in Sri Ram Mahadeo Prasad vs. CIT (1953) 24 ITR 176 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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