R.N.MITTAL,J - (1.) THE Tribunal (Chandigarh Bench) referred the following question under S. 256(1) of the IT Act, 1961 (hereinafter to be referred to as the Act), to this Court :- "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the word 'expenditure' used in S. 40A(3) does not cover expenditure on purchases of goods?" Briefly the facts are that the assessee is carrying on business as Kacha Artia and is dealing in agricultural produce. For the asst. yr. 1970-71, the accounting year is the financial year 1969-70.
(2.) THE assessee filed a return of income declaring income of Rs. 20,377/-.While making the assessment, the ITO noticed that the assessee had made the following payments in cash for purchasers :- 11th June, 1969 purchase of wheat Rs. 2529/-paid to Ganga Rram Nathu Ram, As the payments had not been made by crossed cheques or crossed bank drafts, as required by s. 40A(3) of the Act, the same were not allowed as a deduction. Consequently, he computed the total income as Rs.33,430/-. The assessee had pleaded before the ITO that the payments wear genuine and had to be made on account of unavoidable circumstances as provided under sub-r. (j) of r. 6DD of the IT Rules,1962. This contention was not accepted by the ITO. the assessee went up in appeal against the order of the ITO to the AAC but the same was dismissed. It went up in second appeal before the Tribunal. It was argued before the Tribunal that the word 'expenditure' used in s. 40A(3) did not include the payments made for purchases. The contention of the assessee was accepted the order of the AAC was reversed by the Tribunal. At the instance of the CIT a reference has been made by the Tribunal for the question already mentioned above, to this Court. It will be relevant to mention that while deciding the matter, the Tribunal relied on its own decision (Grewal Group of Industries, Ludhiana vs. The ITO)1 decided on 29th Sept., 1973, wherein a similar question was raised. At the instance of the CIT a reference was made to this Court and the reference has been decided in CIT vs. Grewal Group of Industries 1977 CTR (P&G) 117 : (1977) 110 ITR 278 (P&H). The question referred to in that case was the same which is in the present case. A learned Bench, of this Court held that the payments made for the purchase of the expressions "expenditure" occurring in S. 40A(3) of the Act. Consequently, it was decided in favour of the Revenue. We are in agreement with the aforesaid view. For the abovesaid reasons, we decide the question in the negative i.e. in favour of the Revenue. No order as to costs.;