Exceptional circumstances can justify cash payments exceeding Rs.2,500 under Rule 6dd (j) of the Income-tax Rules.

, J.

1. The assessee-firm owns a rice huller and is engaged in husking of paddy. During the course of the examination of accounts for the assessment year 1972-73, relevant to the accounting period ending on September 30, 1971, the ITO found that the assessee made purchases of bardana and new gunny bags from M/s. Mehar Singh Jaswant Singh, Kanak Mandi, Amritsar. The assessee had a running account, with the said firm and dealings were in cash as well as by cheques. Their records showed that the following payments each exceeding Rs.2,500 were made in cash : Date Amount paid in cash Rs.3-11-1970 10,000 4-11-1970 15,000 10-11-1970 5,000 20-11-1970 20,000 30-11-1970 17,000 8-12-1970 13,000 Total 80,000

2. The ITO required the assesses to state as to why the above cash payments, each being in excess of Rs.2,500, should not be disallowed as required under the provisions of Sec.40a (3) read with Rule 6dd of the I. T. Rules. The assessee pleaded that cash payments were made due to exceptional and unavoidable circumstances as it was impracticable to cope with the supply of rice as ordered by the District Food and Supplies Controller. It further pointed out that the payments were genuine and the identity of the payee was not doubted. The ITO did not agree with the explanation furnished by the assessee and disallowed the amount.

3. The assessee went up in appeal and the AAC held that the ingredients of Rule 6dd (j) of the I. T. Rules, 1962, stood fully satisfied, as it was in view of the exceptional circumstances that the assessee had to make cash payments in order to get bardana and new gunny bags. This finding was affirmed by the learned Tribunal on an appeal filed by the revenue. The revenue approached the Tribunal for referring the following question of law to this court for opinion : "whether, on the facts and in the circumstances of the case, on a proper interpretation of Sec.40a (3) of the Income-tax Act, 1961, and Rule 6dd of the Income-tax Rules, 1962, the Appellate Tribunal was justified in law in endorsing the view of the AAC that the case fell under Rule 6dd (j) thus deleting the addition of Rs.80,000 made by the ITO ?"

4. The learned Tribunal having declined the prayer of the revenue, the latter has approached this court under Sec.256 (2) of the Act for necessary direction being issued to the Tribunal for referring the above question to this court for opinion.

5. After hearing the learned counsel for the revenue we are of the view that there is no merit in this petition. As is clear from the facts and circumstances of the case, the AAC as well as the Appellate Tribunal, after having placed reliance on the affidavit of Jaswant Singh and also on the statement made by him before the AAC, came to the conclusion that the ingredients of Rule 6dd (j) of the said rules stood fully complied with and it was because of exceptional circumstances that the assessee had to make payments in cash beyond the amount of Rs.2,500. Nothing could be pointed out to show that the Tribunal did not take into consideration, the relevant evidence or relied upon irrelevant evidence while arriving at the said finding.

6. The learned counsel for the revenue contends that the affidavit of Jaswant Singh should not have been accepted as the agreement to make payments in cash was an oral one. We are unable to agree with this contention. It is open to an authority to place reliance on an affidavit if it is found to be truthful.

7. For the reasons recorded above, there is no merit in this petition which is hereby dismissed with no order as to costs.