1. This reference application under Section 256(2) of the I.T. Act, 1961, has been filed against the order of the Income-tax Appellate Tribunal dated 19th November, 1981.
2. The petitioner-assessee, M/s. Registhan Pvt. Ltd. (hereinafter referred to as ' the assessee-company '), was a partnerin the firm of M/s. Registhan, Jaipur. The ITO disallowed the claim of the assessee-company for an amount of Rs. 62,270 which was paid in cash and was in violation of the provisions of Section 40A(3) of the. Act.
3. The assessee-company filed an appeal and the learned Commissioner of Income-tax (Appeals), Rajasthan, held that cash payments in this case were covered by exceptions given Clause (j) of Rule 6DD of the I.T. Rules and the clarification issued by the Board as per instructions dated 31st May, 1977. The Commissioner took the view that the appellant-company had taken over all the assets and liabilities of the firm and the firm was in the process of closing down its business. In these circumstances, the Commissioner held that it would have not been practicable for the appellant to make payments by cheque to the firm which was in the process of closing down its business. Reliance was placed on Hasanand Pinjomal v. CIT : 112ITR134(Guj) . In the result, the Commissioner allowed the appeal and granted relief for an amount of Rs. 62,270. He also allowed an appeal for an amount of Rs. 3,944 with which we are not concerned. The Revenue, aggrieved against the order of the Commissioner, filed an appeal before the Income-tax Appellate Tribunal. Learned Appellate Tribunal held that a general statement had been made on behalf of the assessee that the payment in cash was made as the payee was in the process of being wound up. Learned Members did not consider it as an exceptional circumstance in view of the fact that only a day earlier, the payee had accepted payments in cheque. They further held that there was no evidence on record that the payee-firm insisted on the payment in cash because of its legitimate business needs. Neither any such evidence had been produced before them that the payee firm insisted on cash payment for its legitimate business needs. They also noticed that the assessee andthe payee-firm were stationed at the same station, i.e., Jaipur. If the payments were made by cheque it would have normally been cleared within two/three days and receipt of payment through cheques would not have caused any hardship to the payee unless it was spelt out by the payee in clear terms which have not been spelt out even at the time of hearing of appeal before them. As regards the circular of the Board, the learned Members of the Tribunal pointed out that one of the essential conditions was that an exceptional circumstance should exist before the payment was permitted to be made in cash. Thus, the learned Members of the Tribunal held that the payments were in contravention of Section 40A(3) of the Act and had rightly been disallowed by the ITO. Learned Members of the Appellate Tribunal also distinguished the case of the Gujarat High Court in Hasanand Pinjomal's case : 112ITR134(Guj) . The assessee-company then submitted an application under Section 256(1) of the I.T. Act for drawing up a statement of the case and to refer the following questions of law to the Hon'ble High Court:
'1. Whether, the Tribunal was right in holding that the cash payments in question relating to the acquisition of goods from the firm, on dissolution, in which the assessee-company was a partner, fell within the mischief of Section 40A(3) of the Income-tax Act, 1961 ?
2. If the answer to question No. 1 is in the affirmative, whether the Tribunal was right in holding that the said payments were not covered by the exemption granted under Rule 6DD(j) of the Income-tax Rules, 1962 ?'
4. The learned Appellate Tribunal held that the question decided by them, vide its order dated 19th November, 1981, was purely a finding of fact and as such there was no question of law for being referred to the High Court, The application was accordingly dismissed by order dated 27th May, 1982. In these circumstances, the assessee-company have now filed this application for giving direction to the Income-tax Appellate Tribunal for referring the following questions for decision by this court:
'1. Whether, the Tribunal was right in holding that the cash payments in question relating to the acquisition of goods from the firm, on dissolution; in which the assessee-company was a partner, fell within the mischief of Section 40A(3) of the Income-tax Act, 1961 ?
2. If the answer to question No. 1 is in the affirmative, whether the Tribunal was right in holding that the said payments were not covered by the exemption granted under Rule 6DD(j) of the Income-tax Rules, 1962 ?
3. Whether the payments in cash made by the assessee-company to the partnership firm being payments made in respect of goods purchased are included in the word ' expenditure ' under Section 40A(3) of the Income-tax Act, 1961 ?'
5. It may be mentioned at the outset that an application was submitted by the assessee-company under Section 256(1) of the I.T. Act for referring only questions Nos. 1 and 2 and the same was dismissed by the Appellate Tribunal holding that the said questions were purely questions of fact. In the application before us, the assessee-company has added one more question as question No. 3 mentioned above.
6. Mr. Gupta, learned counsel appearing for the assessee-company, was unable to convince us that questions No. 1 and 2 were questions of law in the facts and circumstances of this case. The question 'Whether the payment of Rs. 62,270 made in cash was covered by the exceptions given in Clause (j) of Rule 6DD of the I.T. Rules, is a question of fact ?' The Appellate Tribunal in its judgment dated 19th November, 1981, had considered the circumstances of this case and had held that no exceptional circumstance had been made out on behalf of the assessee-company to make payments in cash. Such payments were thus in contravention of Section 40A(3) of the I.T. Act. The Tribunal in this regard found that a general statement has been made on behalf of the assessee-company that the payments in cash were made as the payee was in the process of being wound up and in their view this could not be treated as an exceptional circumstance. They also took note of the fact in this regard that only a day earlier the payee had accepted payments in cheque and there was no evidence on record to show that the payee firm insisted on payment in cash because of its legitimate business needs. If the Appellate Tribunal took into consideration these circumstances and found that there was no exceptional circumstance for making payments in cash, there hardly arises any question of law for being decided by this court.
7. Mr. Gupta laid great stress on question No. 3 only and cited Janta Metal Supply v. CIT : 110ITR672(SC) and CIT v. Avtar Singh and Sons in support of his contention. There can be no manner of doubt that question No. 3, framed by the assessee-company for the first time in the reference application under Section 256(2) of the Act, is a question of law as held by their Lordships of the Supreme Court in Janta Metal Supply's case : 110ITR672(SC) . However, this question does not arise in the facts and circumstances of this case. Firstly, as already mentioned above, this question was not mentioned in the application submitted under Section 256(1) of the Act before the Appellate Tribunal. That apart, we asked Mr. Gupta, learned counsel for the assessee-company, to show anywhere from the record right from the order of the ITO to the Appellate Tribunal that such question was ever raised or argued before these authorities. Mr. Gupta was unable to show from any material on record or from any of the orders of the ITO or the Commissioner of Income-tax (Appeals) or the Income-tax Appellate Tribunal that suchquestion was ever raised before these authorities. Unless the question was ever raised by the assessee-company that it had made payments in cash in respect of goods for the purpose of resale or otherwise as an expenditure within the meaning of Section 40A(3) of the Act, there is no question of asking the Tribunal to make a reference about such question. This court is not a court of appeal over the order of the Appellate Tribunal and can only give a direction for making a reference if any question of law arises out of the order of the Tribunal. We are clearly of the opinion that, in the facts and circumstances of this case, question No. 3 mentioned above does not arise out of the order of the Tribunal dated 19th November, 1981, and no direction can be given for making a reference of this question. The authorities cited by Mr. Gupta are thus of no assistance to the assessee-company in the facts and circumstances of this case.
8. In the result, we find no force in this petition and the same is dismissed summarily.