In the present case, neither the genuineness of the payment nor the identity of the payee were in any case doubted. These were the conclusions on facts drawn by the Appellate Commissioner. The Tribunal also did not disturb such facts but relied solely on Rule 6DD (j) of the Rules to hold that since the case of the assessee did not fall under the said exclusion clause nor was covered under any of the clauses of Rule 6DD, consequences envisaged in Section 40A(3) of the Act must follow.
In our opinion, the Tribunal committed an error in coming to such a conclusion. We would base our conclusions on the following reasons :
[a] The paramount consideration of Section 40A(3) is to curb and reduce the possibilities of black money transactions. As held by the Supreme Court in Attar Singh Gurmukh Singh [Supra], section 40A(3) of the Act does not eliminate considerations of business expediencies.
[b] In the present case, the appellant assessee was compelled to make cash payments on account of peculiar situation. Such situation was as follow
[i] the principal company, to which the assessee was a distributor, insisted that cheque payment from a cooperative bank would not do, since the realization takes a longer time;
[ii] the assessee was, therefore, required to make cash payments only;
[iii] Tata Teleservices Limited assured the assessee that such amount shall be deposited in their bank account on behalf of the assessee;
[iv] It is not disputed that the Tata Teleservices Limited did not act on such promise;
[v] if the assessee had not made cash payment and relied on cheque payments alone, it would have received the recharge vouchers delayed by 4/5 days and thereby severely affecting its business operations.
We would find that the payments between the assessee and the Tata Teleservices Limited were genuine. The Tata Teleservices Limited had insisted that such payments be made in cash, which Tata Teleservices Limited in turn assured and deposited the amount in a bank account. In the facts of the present case, rigors of section 40A(3) of the Act must be lifted.
We notice that the Division Bench of the Rajasthan High Court in case of Smt. Harshila Chordia vs. Income Tax Officer, reported in [2008] 298 ITR 349 (Raj) had observed that the exceptions contained in Rule 6DD are not exhaustive and that the said rule must be interpreted liberally.
Before closing, we may clarify that the above observations would apply only to the cash payments made by the assessee to the Tata Teleservices Limited. No such peculiar facts arise in case of payments made to the other two agencies viz., Rajvi Enterprise and R.D Infocom. Learned counsel for the appellant also clarified that this appeal is confined to only the payments made to Tata Teleservices Limited and no others. In the result, the question is answered in favour of the appellant assessee and against the Revenue. Judgment of the Tribunal is reversed. Tax Appeal is allowed. Order accordingly.
