Decided on March 29,1994



R.M.Mehta, - (1.) THIS appeal is directed against the order passed by the DC (Appeals) upholding the action of the Income-tax Officer in making a disallowance of Rs. 40,200 by resort to the provisions of Section 40A(3).
(2.) The appellant in this case is a firm treated as URF by the Income-tax Officer, but granted registration by the DC (Appeals) in his appellate order. The assessment year involved is 1985-86 and income is derived from purchase and sale of fertilizers. The Income-tax Officer in the course of the assessment proceedings noted certain payments having been made in cash above Rs. 2,500. On being asked to show cause as to why the aforesaid payments not be disallowed the assessee filed a written explanation stating therein that the payments had been made in cash in the evening after banking hours at the instance of the sellers. The further submission was that there was a scarcity of fertilizers and the assessee could not displease the distributors by refusing to pay in cash. In support of the aforesaid arguments attention was invited to Rule 6-DD(j).
(3.) THE Income-tax Officer perused the relevant copies of accounts as also the dates of the bills and the payments thereof in cash. It was noted by him that the bills pertained to earlier dates whereas the payments in cash were made after a gap of few days. In the case of M/s. Ramesh Chander Katyal & Co., Nilokheri, he noted that there was an opening credit balance of Rs. 24,904 and a further bill of Rs. 20,000 dated 25th June, 1984. As against this there was a cash payment by the assessee to the said party of Rs. 10,000 on 3rd July, 1984 and again on 10th July, 1984 amounting to Rs. 5,000. In respect of the second party, namely, M/s. Kissan Khad Bhandar the bill was dated 5-2-1985 whereas payment was made on 13-2-1985. THE Income-tax Officer rejected the arguments advanced on the ground that there was sufficient time available with the assessee to make the payment by cross-cheque/draft as there was a time-gap between the date of purchase and the date of making the actual payment in cash. According to him "it was not the case where the seller insisted on cash payment at the spot". Following the decision of the Hon'ble Punjab and Haryana High Court that being the jurisdictional High Court in the case of Hart Chand Virender Paul v. C/T [1983] 140 ITR 148, the Income-tax Officer rejected the arguments advanced on behalf of the assessee and made the impugned addition.;

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