- R. N. Mittal, J. - The Income-tax Appellate Tribunal (Chandigarh Bench) referred the following question u/s 256(1) of the Income-tax Act, 1961 (hereinafter to be referred to as the Act), to this Court : - 'Whether, on 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 assessment year 1970-71, the accounting year is the financial year 1969-70. The assessee filed a return of income declaring income of Rs. 20,377/-. While making the assessment, the Income-tax Officer noticed that the assessee had made the following payments in cash for purchases :-
Rs. 2529/- paid to wheat M/s. Ganga Ram Nathu Ram, Mukastar
Rs. 4149/84 paid Grams to M/s. Johri Lal Dip Chand, Mukastar
Rs. 6,000/- paid to Narma. M/s. Fateh Chand Ram Chand, Jallalabad
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 required not allowed as a deduction. Consequently, he computed the total income as Rs. 33,430/-. The assessee had pleaded before the Income-tax Officer that the payments were genuine and had to be made on account of unavoidable circumstances as provided under sub-rule (j) of Rule 6DD of the Income-tax Rules, 1962. This contention was not accepted by the Income-tax Officer.
The assessee went up in appeal against the order of the Income-tax Officer to the Appellate Assistant Commissioner 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 and the order of the Appellate Assistant Commissioner was reversed by the Tribunal. At the instance of the Commissioner of Income-tax 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 (M/s. Grewal Group of Industries, Ludhiana v. The ITO) decided on 29th September, 1973, wherein a similar question was raised. At the instance of the Commissioner of Income-tax a reference was made to this Court and the reference has been decided in CIT, Patiala-I v. Grewal Group of Industries. 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.
3. For the abovesaid reason, we decide the question in the negative i.e. in favour of the Revenue.
No order as to costs.