K. C. Agrawal, J. - By the assessment order dated 28th January, 1971 the Income Tax Officer added Rs. 24,712/- on the ground that the payment of the aforesaid amount was made with respect to certain purchases by the assessee from M/s. Meerut Straw Board Mills, Agra, in cash and as the assessee could not make the payment in cash, as provided by S. 40-A(3) of the Income Tax Act, the same could not be recognised. The assessee went up in appeal to the Appellate Assistant Commissioner. The appellate authority accepted the appeal and deleted the addition. The matter was, thereafter, taken up by the Income Tax Officer to the Income Tax Appellate Tribunal. The appeal was dismissed by the Tribunal, and the findings given by the Appellate Assistant Commissioner were endorsed. Consequent upon the dismissal of the appeal, the Revenue filed an application under sub-S. (1) of S. 256 of the Income Tax Act for referring the case to this Court. As the Income Tax Appellate Tribunal was satisfied that the case involved questions of law, it referred the same to this Court for opinion. It, however, appears that the assessee also made a prayer for referring the question relating to applicability of Rule 6DD. At the instance of the assessee, the Tribunal referred the following question :
'Whether on the facts and in the circumstances of the case the amount of Rs. 24,712/- was allowable in view of Rule 6DD'
2. So far as the question referred at the instance of the Department are concerned, it may be mentioned that the points involved are covered by a decision of this Court in U.P. Hardware Store vs. Commissioner of Income Tax, Uttar Pradesh. In this case, the Bench held that the word 'expenditure' was of wide import. It would also cover the expenses to be taken into account while determining the gross profit. Consequently, the payments made for purchases were also covered by the word expenditure. Therefore, it appears that the Tribunal was wrong in holding that the Income Tax Officer was not justified in making the addition of the amount mentioned above to the return filed by the assessee.
3. So far as the question referred at the instance of the assessee is concerned, it may be mentioned that the Tribunal found that the circumstances required to be established for invoking Rule 6DD did not exist in the present case. The finding recorded was that the assessee failed to establish that the circumstances under which the payments were made in cash were exceptional. The finding, in our opinion, is one of fact. It does not suffer from any error of law.
4. Consequently, we answer the first three questions in favour of the Department and against the assessee. The fourth question is answered against the assessee and in favour of the Department.
5. The Department will be entitled to get costs of this Reference, which we assess at Rs. 200/-.