( 1 ) AS directed by this court the Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following question to us:

"whether, on the facts and in the circumstances of the case, Section 40a (3) of the Act is applicable to the facts of the present case ?"

( 2 ) THE brief facts are these. M/s. H. A. Nek Mohd. and Sons, a registered firm, was engaged in the business of purchase and sale of Banarasi sarees. During its assessment for the assessment year 1970-71, the ITO found that the assessee had made the following payments exceeding Rs. 2,500 at a time to 12 parties for purchase of resham, etc. :

Mr. Gopal Das

20-10-19 Lalta Pd. 7,150-1269

Sri Gulam Nabi

20-10-19 3,522-1969

M/s. Burma Silk

20-10-19 Centre 2,807-5069

Sri Babu Nandan

20-10-19 4,388-2269

Sri Tara Sao

14-1-197 6,060-350

Sri Parmanand

8-2-19703,841-00

M/s. Gopal Das

8-2-1970lalta Pd. 5,394-63

Sri Tara Sao

23-3-197 6,634-920

Sri Jagarnath

23-3-197 2,862-000

Sri Bismillah

23-3-197 3,335-700

M/s. Gopal Das

23-3-197 Lalta Pd. 4,880-000

M/s. Jawahar Silk

31-3-197 Centre 3,025-000

Total

3,901-63

( 3 ) SOME of the payments had been made by post-dated bearer cheques, received from the customers and s