A.R. Tiwari, J.

1. The applicant (Commissioner of Income Tax, Bhopal), has filed this application under Section 256(2) of the Income Tax Act, 1961 (for short " the"), seeking a direction to the Tribunal to state the case and to refer the question, as extracted below, arising out of the order passed on June 14, 1993, in I. T. A. No. 115/Ind of 1989 on rejection of the application presented under Section 256(1) of theregistered as R. A. No. 109/Ind of 1993 on March 18, 1994, for the assessment year 1987-88, for our consideration and opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the addition of Rs. 1,56,253 made by the Assessing Officer under Section 40A(3), as the assessee failed to prove the exceptional or unavoidable circumstances under which cash payments were made and also tried to defeat the provisions of Section 40A(3) by splitting up the payments on a single day into two or more of Rs. 2,500 or less "

2. Briefly stated, the facts of the case are that on examination of the books of account, the Assessing Officer took the view that the assessee had split the items of payment exceeding Rs. 2,500 and made payment in cash two or three times. He, therefore, disallowed such payments totalling Rs. 1,56,253 under Section 40A(3). On appeal, the Commissioner of Income Tax (Appeals), confirmed this disallowance. The Tribunal, however, deleted the disallowance holding that the provisions of Section 40A(3) were not applicable. Aggrieved, the applicant filed an application under Section 256(1) of the. That application was rejected on March 18, 1994. Thereafter, the applicant has filed this application under Section 256(2) of theproposing the aforesaid question for direction.

3. We have heard Shri D.D. Vyas, learned counsel for the applicant/ Department. None appeared for the non-applicant/assessee despite service of notice in compliance with the order dated November 8, 1994, to the effect that the non-applicant may show cause as to why this application be not admitted and disposed of finally at the initial stage. In spite of this direction, the non-applicant has not chosen to appear.

4. Section 40A(3) of theprovides as under :

"(3) Where the assessee incurs any expenditure in respect of which payment is made, after such date (not being later than the 31st day of March, 1969), as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding ten thousand rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, such expenditure shall not be allowed as a deduction."

5. March 31, 1969, is the date specified, vide Notification No. S.O. 623, dated February 14, 1969 (see [1969] 71 ITR 93) (see Taxmans Direct Taxes Circulars, 1994 edn., vol. I, page 1,739).

6. The Assessing Officer disallowed the deduction and the Commissioner of Income Tax (Appeals) confirmed the same. The Tribunal, however, deleted the disallowance with the undernoted observations :

"The mode of payment reflected in the books of account do show -that the assessee took care of not committing breach of Section 40A(3). Therefrom, it cannot be said that it was an intentional act of splitting up the payments into the items below Rs. 2,500. Unless there is positive proof that the assessee at one time made payment in excess of Rs. 2,500 and later split it into the smaller items, no such inference of breach of Section 40A(3) can be drawn. It is needless to say that the Revenue officers should not expect compliance of Section 40A(3) rigorously. There is no allegation that the transactions entered into by the assessee were not real or that the payees were not identifiable persons. The addition of Rs. 1,56,250 is deleted."

7. Counsel for the applicant on being asked, realised that the question proposed is unnecessarily lengthy and proposed the reformulated question as under :

"Whether, in the facts and circumstances of the case, the Tribunal is justified in deleting the addition of Rs. 1,56,253 contrary to Section 40A(3) of the Income Tax Act, 1961 "

8. As noted above, the Tribunal held that the Revenue officers should not expect compliance with Section 40A(3) rigorously.

9. Considering the facts and features as also submissions, we are satisfied that the reformulated question, as noted above, does arise out of the order passed by the Tribunal and that the refusal to state the case is unsustainable in law.

10. We, therefore, do not express any opinion on the merits but deem it proper to call upon the Tribunal to state the case and refer the aforesaid question of law, as noted in para 7 above, for our consideration and opinion as expeditiously as possible.

11. The application is accordingly allowed but with no orders as to costs.

12. Counsel fee for the applicant is, however, fixed at Rs. 750, if certified.

13. Transmit a copy of this order to the Tribunal for compliance.