Commissioner of Income Tax vs Ashoka Steel Industries and Flour Mills

Rajesh Bindal, J.—The Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (hereinafter referred to as, "the Tribunal"), has referred u/s 256(1) of the Income Tax Act, 1961, the following question of law which emerges from its order dated August 22, 1988, in I. T. A. No. 924/Chandi/ 84 for the assessment year 1980-81 :

Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in upholding the order of the Commissioner (Appeals) with regard to the holding that the provisions of Section 40A(3) were not applicable to the said addition of Rs. 35,800.

The facts as noticed by the Tribunal in the statement of case are that the assessee has claimed expenditure of Rs. 35,800 on account of purchase made in cash, which were disallowed by the assessing officer u/s 40A(3) of the Income Tax Act, 1961 (hereinafter referred to as"the Act"), as the assessing officer was not satisfied with the reasons given by the assessee for non-compliance of the provisions of Section 40A(3) of the Act. In appeal the assessee succeeded in persuading the Commissioner (Appeals) (for short "the Commissioner (Appeals)"), to accept its explanation furnished. The order of the Commissioner (Appeals) was upheld by the Tribunal in further appeal by the revenue.

We have heard Mr. Yogesh Putney, learned counsel for the revenue, and with his assistance have perused the paper book.

Mr. Putney has vehemently argued that the findings recorded by the Commissioner (Appeals) as confirmed by the Tribunal are perverse in so far the explanation furnished by the assessee for explaining the cash payment was not sufficient and acceptable. He further submitted that there being a clear violation of the provisions of Section 40A(3) of the Act, the assessee was not entitled to deduction of the amounts so spent by him.

On a perusal of the order passed by the Tribunal, we find that the clear finding has been recorded that the assessee purchased coal from truck owners, who supplied the same at their factory premises on F. O. R. cash basis. It has been concluded that the assessee used to pay to the truck owners in cash for the goods as truck owners generally did not have any bank accounts and that the amount was paid after banking hours because coal had been in very short supply those days. It was under such special circumstances that the assessee had to make payment in cash. The genuineness of the transactions was not in dispute. Referring to Rule 6DD of the Income Tax Rules, 1962, which relaxes the rigours of Section 40A(3) of the Act, the Tribunal accepted the explanation submitted by the assessee. Even if there is a second opinion possible on reappreciation of the facts as found and accepted by the Commissioner (Appeals) and the Tribunal, this Court would not substitute its own opinion simply for the reason that the other view is also a possible view.

Accordingly, the question referred is answered against the revenue and in favour of the assessee.

Reference is disposed of accordingly.