I.T.R. No.31 of 1998 (1) IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.R. No.31 of 1998 DATE OF DECISION: 13.8.2009 The Commissioner of Income-tax Jalandhar ..........Applicant Versus M/s G.S. Auto Industries (P) Ltd., Sodal Road, ..........Respondent Jalandhar CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:- None for the applicant. Mr. Animesh Sharma, Advocate for the respondent. **** ADARSH KUMAR GOEL, J. (Oral) 1. The Income Tax Appellate Tribunal, Amritsar Bench, Amritsar has referred, in compliance of order of this Court, following substantial questions of law arising out of its order dated 13.9.1990 in ITA No. 1116 (ASR/1989) for assessment year 1988-89 for opinion of this Court:- “Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in deleting the addition of Rs. 81,596/- made under section 40A (3) of the Income Tax Act, 1961, under the non-existent nature of the exceptional circumstances for making the payments in case; and I.T.R. No.31 of 1998 (2) (i) Whether there can assist any exceptional and unavoidable circumstances for one single unledgerised payment to a party with whom the assessee is having a running account and making all other payments by cheques” (ii) Whether mere genuineness of payment is enough to take the case out of the perview of section 40A(3); and (iii) Whether the I.T.A.T. can substitute its own satisfaction, when the law requires the satisfaction of the Assessing Officer for allowing the amounts exceeding Rs.2,500/-?” 2. The assessee was engaged in the business of manufacturing and trading of auto parts and hardware fittings. The Assessing Officer found certain expenses incurred in excess of Rs. 2500/- without cheques and the same were disallowed under Section 40A(3). The additions were upheld by the CIT(A) except for some amount. On further appeal, the Tribunal deleted the additions by observing that payments had to be made out of necessity in cash in exceptional circumstances and in such a situation Section 40A(3) could not be invoked. 3. The Tribunal has recorded a categorical finding that cash payment had to be made in exceptional circumstances and payments were proved to be genuine. Finding of the Tribunal cannot be held to be perverse. Requirement for payment by cheque under Section 40-A(3) is not absolute and in exceptional circumstances, genuine cash transaction is permissible. 4. In view of above, the questions referred are answered against the revenue and in favour of the assessee. I.T.R. No.31 of 1998 (3) 5. Reference is disposed of accordingly. (ADARSH KUMAR GOEL) JUDGE August 13, 2009 (DAYA CHAUDHARY) pooja JUDGE Note:-Whether this case is to be referred to the Reporter .......Yes/No