Mufti, J.

1. THE assessee is a registered firm carrying on business of sale and purchase of cloth. For the assessment year 1970-71, the assessee filed his return of income at Rs. 40,026. Daring the course of assessment proceedings, the ITO discovered that the assessee had made cash payments exceeding a sum of Rs. 2,500 for some of the purchases. THE aggregate amount of such payments was Rs. 42,770. THE ITO disallowed the amount under Section 40A(3) of the I.T. Act, 1961. He, however, rejected the assessee's application to summon the concerned parties at his expense for examination under Section 133 of the Act. On appeal, the AAC reduced the disallowance to a sum of Rs. 22,258. For the assessment year 1971-72, the AAC struck out the entire disallowance of Rs. 90,000. Aggrieved by the orders of the AAC, the revenue as well as the assessee went up in appeal to the Tribunal. THE Tribunal held that Section 40A(1) and (3) confine their operation only to items of expenditure whicli can be claimed as deductions in determining the profits of business. Purchases do not constitute an expenditure. Moreover, the ITO failed to issue summons to the concerned parties and in so doing denied