Commissioner of Income Tax v. Dalip Chand and Sons; Dalip Chand and Sons v. Commissioner of Income Tax

1. FACTS OF THE CASE

The Shamshi firm paid outside suppliers in cash and claimed that separate entries were each below Rs.10,000 although daily payments to a party exceeded that amount. It relied on supplier insistence and absence of local bank accounts. The Tribunal found deliberate splitting. The common references concern the stated surviving disallowance of Rs.3,08,503.

Source: PDF pp.1–4

2. DISCUSSION BY THE COURT

The Court disagreed with the per-payment approach in Aloo Supply and required proof of special circumstances for separate same-day payments. Applying Attar Singh Gurmukh Singh, it read section 40A(3) with Rule 6DD. Here, prior credit purchases made the total payable known; repeated split entries, no stock register and evidence that other buyers paid the same suppliers by crossed drafts undermined the explanation. Factual findings also cast doubt on the transactions themselves.

Source: PDF pp.5–10

3. JUDICIAL DECISION

The common reference question was answered for Revenue and against the assessee. Normally payments could not be split within one day; the assessee had to show that, at the first payment, it was unaware of the second. The adverse factual conclusions on exception eligibility were not reopened in reference jurisdiction.

Source: PDF pp.10–11

4. OUTCOME

The stated Rs.3,08,503 disallowance survived. Both ITR 7/1996 and ITR 8/1996 are covered by this common judgment; it did not grant fresh relief or remand.

Source: PDF pp.1–3 and 11

5. Expert Comments

AKHB editorial analysis, distinct from the Court’s findings.

Separate cash-book entries were not separate commercial necessities

The taxpayer already knew the debt from earlier credit purchases when the supplier came to collect it. That fact defeated the explanation for multiple payments. The Court left room for proven special circumstances, but routine fragmentation of a known liability did not meet that standard.

Source: PDF p.5 · PDF p.8 · PDF p.11

An exception requires evidence addressing the actual obstacle

Supplier insistence and missing local accounts were tested against other buyers paying those suppliers by drafts. The absence of stock records and doubtful transactions further weakened the claim. A general assertion of commercial convenience therefore could not substitute for proof explaining why the prescribed payment mode was impracticable in these transactions.

Source: PDF p.6 · PDF p.8 · PDF p.9 · PDF p.10

Read the historical rule and the adverse facts together

The decision addresses the then-quoted Rs.10,000 rule and expressly disagrees with Aloo Supply. Its factual exception analysis is not a current-law clearance for splitting payments. The source itself contains inconsistent circular numbering and arithmetic, so the referred amount and the actual reasoning must be distinguished from a fresh computation or unverified statutory quotation.

Source: PDF p.2 · PDF p.3 · PDF p.4 · PDF p.5 · PDF p.11