COMMISSIONER OF INCOME-TAX VS MAHAVIR STORES, 2000 PTD-MADHYA-PRADESH-HIGH-COURT-INDIA 579 (1996)

Income-tax---

----Business expenditure---Amounts not deductible---Payments in cash for purchases of stock-in-trade on credit---Addition under S.40A(3)---C.I.T. (Appeals) and Tribunal finding justification for cash payments---Addition deleted---Question of fact---Justified---Indian Income Tax Act, 1961, S.40A(3).

The assessee was a dealer in grains, kirana, etc. Its purchases of stock-in-trade were made on credit and payments were' made in cash. Therefore, the Income-tax Officer made an addition under section 40A(3) of the Income Tax Act, 1961. The Commissioner of Income-tax (Appeals) and the Tribunal allowed the claim of the assessee on the facts. On a reference:

Held, that the Income-tax Officer found the payments in cash were unjustified in view of the provisions of section 40A(3) of the Act and rule 6DD(j) of the Income Tax Rules, 1962, on the basis of evidence led by the assessee. On the basis of the same evidence, the Commissioner of Income-tax (Appeals) concluded that all the cash payments were justified and the said finding of fact had been affirmed by the Tribunal. The question which had been referred was a question of fact. The view taken by the Tribunal was correct.

Abhay Sapre for the Commissioner.

B. L. Nema for the Assessee.

JUDGMENT

This is a reference under section 256(1) of the Income Tax Act, 1961, at the instance of the Revenue and the following question has been referred by the Tribunal for answer by this Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the disallowance of Rs.13,68,060 which had been made by Abe Income-tax. Officer under section 40A(3) of the Income Tax Act, 1961?"

The brief facts giving rise to this reference are that the assessee deals on a semi-wholesale basis in grains, kirana and edible oils. Its total purchases during the year exceeded Rs.13,50,000 and purchases were made on credit from dealers. The Income-tax Officer observed that the payments were made in cash and, therefore, he made an addition of Rs.13,68,060 under section 40A(3) of the Act of 1961. The assessee went in appeal before the Commissioner of Income-tax (Appeals) who, after considering the facts of the case, allowed the claim of the assessee and held that all the payments were made in accordance with law. Aggrieved by this order, the Department went in appeal before the Tribunal and the Tribunal also found that there is enough justification pleaded by the assessee and, therefore, the addition made under section 40A(3) of the Act of 1961 was deleted and the appeal of the Department was dismissed. Thereafter, the Department approached the Tribunal for making a reference under section 256(1) of the Income-tax Act and the aforesaid question has been referred by the Tribunal for answer by this Court.

We have gone through the judgment of the Tribunal, the Commissioner of Income-tax (Appeals) and the Income-tax Officer. The Income-tax Officer on the basis of evidence led by the assessee found the payments unjustified in accordance with the provisions of section 40A(3) of the Act read with rule 6DD(j) of the Rules. On the basis of the same evidence, the Appellate Authority reversed the finding of the Income-tax Officer and on examining the material on record came to the conclusion that all the payments made by the assessee in cash are fully justified and the said finding of fact has been affirmed by the Tribunal in further appeal by the Revenue. Thus, there are concurrent findings of fact by the Commissioner of Income-tax (Appeals) and the Tribunal and in this view of the matter, the question which has been referred is purely a question of fact and does not involve any question of law. Therefore, we are of the opinion that the view taken by the Tribunal is justified and no question of law arises. Hence, we answer this reference in favour of the assessee and against the Revenue.

M. B.A/3226/FC Reference answered.