- (1.) This order shall dispose of ITA No. 65 of 1999 filed by the revenue and ITR No. 173 of 1998 filed by the assessee-respondent. In both the cases, the following common question of law has been raised: Whether on facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is right in holding that the payments made to Ludhiana Foundry Small Industries Association Regd. are to be disallowed under Section 40A(3) particularly when the identity of the party and genuineness of the transactions stands established.
(2.) The brief facts of the case may first be noticed which are being referred from ITR No. 173 of 1998. The assessing officer made addition of Rs. 98,460 under Section 40A(3) of the Income Tax Act. The assessee filed an appeal before the Appellate Assistant Commissioner and the addition made by the assessing officer were deleted. The operative part of the order dated 29-4-1991 is as under: I have considered the submissions of the AR and find that before the Income Tax Officer the appellant has filed a certificate from M/s. Ludhiana Foundry & Small Industries Association (Regd.) to the fact that the cash payments were insisted by the Association and the appellant also filed receipts for payments of the amounts. Similarly receipts have been filed before me also and I find that it is a case where the appellant has produced sufficient evidence (including identity of the payee) before the Income Tax Officer to suggest that the appellant was not having any alternative but to make the payment in cash. It is further seen that this is the first year of the business and as the appellant was new to the above association, I am of the view that the Income Tax Officer was not right in making the addition to the extent of the amount and therefore, the addition made by the Income Tax Officer under Section 40A(3) is deleted. In the result, the set-aside appeal is allowed.
(3.) The revenue challenged the order of the Appellate Assistant Commissioner before the Tribunal which held that the instant case did not fall within the exceptions as contained in rule 6DD(J) and Circular No. dated 31-3-1977 issued in this regard. Accordingly, the addition made by the Appellate Assistant Commissioner was set aside. The assessee sought a reference under Section 256(1) which has been accepted by the Tribunal and the question has been referred for the opinion of this Court.;