These appeals by assessee are against orders dt. 6th Nov., 2002 and 14th Nov., 2002 of learned CIT(A)-XXV, New Delhi. solitary ground raised in both these appeals is as under: ITA No. 712/Del/2002 "The learned CIT(A) erred in confirming addition of Rs. 9,45,398 under s. 40A(3)." ITA No. 713/Del/2002 "The learned CIT(A) erred in fact and circumstances of case in confirming addition of Rs. 7,00,232 under s. 40A(3)." In ITA No. 712/Del/2002 briefly facts are that assessee is AOP carrying on business of sale of country liquor, beer and Indian made foreign liquor (IMFL) in District Jodhpur under license issued by Excise Department of Government of Rajasthan. During year under consideration, assessee purchased country liquor from Rajasthan State Ganganagar Sugar Mills, undertaking of Rajasthan State Government after depositing cash and other levies. IMFL and beer has been purchased from M/s Jai Santoshi Wine, Jodhpur, amounting to Rs. 77,21,479. assessee also received rebate amounting to Rs. 1,56,491. net purchases therefore have been claimed at Rs. 70,59,258. AO observed that assessee did not make payment to said party M/s Jai Santoshi Wine by way of crossed bank draft or crossed cheque but same were paid by way of adjustment against excise duty challan. AO noticed that there is violation of provisions of s. 40A(3) of Act and thus required assessee to show cause as to why disallowance should not be made in terms of s. 40A(3). assessee, however, explained that payments have been made to Excise Commissioner, Government authority for and on behalf of suppliers and as such provisions of s. 40A(3) would not be applicable. learned assessing authority did not find explanation satisfactory. Finding that out of total purchases of Rs. 70,65,000 after rebate, assessee has made payments aggregating to Rs. 1,78,010 for which payment in cash is below Rs. 20,000 and also taking into account basic exemption available for 108 payments made by assessee, he worked out amount paid in violation of provisions of s. 40A(3) of Act to extent of Rs. 47,26,990. 20 per cent of this amount stood disallowed under s. 40A(3) of Act and disallowance has been worked out at Rs. 9,45,398 which was added to income of assessee. Before learned CIT(A), assessee contended that payments to t h e Excise Department have been made on behalf of suppliers under business compulsion and per request made by supplier and as such his case was governed by exception provided under r. 6DD(j) r/w Circular No. 34, dt. 5th March, 1970. plea of assessee however did not find favour with learned CIT(A) who confirmed decision reached by assessing authority. Before us, assessee s counsel contends that he did not incur any expenditure in cash in making payments for purchases. It was stated that out of total payments, assessee paid Rs. 7,86,878 to distillers by demand draft and Rs. 39,80,100 have also been paid through demand draft to Excise Commissioner on behalf of its supplier as per details contained in written submissions. Provisions of s. 40A(3) were not applicable in these payments. balance amount of Rs. 22,98,010 was also paid to Excise Commissioner i.e. i n Government account on behalf of suppliers on different dates and were later adjusted against purchases. In fact, payments were made to Excise Department on behalf of suppliers which were adjusted in purchase account. Such payments made on behalf of suppliers were due to business compulsion and on request of such suppliers. Had assessee not adhered to such request suppliers would not have made any supply. This would have resulted into total loss of business of appellant. Furthermore, assessee received discount for making such payments and on that account also provisions of s. 40A(3) were not applicable and assessee s case would have been covered by exception contained under r. 6DD of Rules. On other hand, learned Departmental Representative supports decision taken by authorities below. We have heard parties and perused material on record. In peculiar nature of business assessee was required to make payment to Excise Commissioner. Payments aggregating to Rs. 7,86,878 made are to distillers for purchases and Rs. 39,80,100 were paid by way of account payee demand draft to Excise Commissioner against liability of appellant s supplier. On these payments provisions of s. 40A(3) are not attracted. balance payment of Rs. 22,98,010 in different dates have been deposited in cash with Excise Commissioner. These payments have also been made to discharge liability of supplier which was later adjusted against purchases made by appellant. appellant also received discount from supplier on that account. It, therefore, cannot be held that appellant made expenditure in violation of s. 40A(3) of Act. Even otherwise, genuineness of transaction was also not doubted by authorities below. supplier was duly identifiable and payments stood duly confirmed in that respect. Since assessee had adduced evidence of genuineness of purchase and necessity to make payment in cash, having regard to IT r. 6DD(j), disallowance under s. 40A(3) was not contemplated. Hon ble Delhi High Court in case of Ramaditya Investments vs. CIT (2003) 262 ITR 491 (Del) taking note of fact that assessee having filed evidence of genuineness of payment and established necessity of making cash payments held that disallowance under s. 40A(3) could not be made. In that view of matter also we do not find any justification in sustenance of disallowance made in present case in appeal where payment in cash were made on consideration of business exigency and exceptional circumstance like inducement of rebate to assessee. disallowance so made is therefore directed to be deleted. In ITA No. 713/Del/2002, assessing authority made disallowance of cash payment to Excise Department in account of suppliers and thus m d e disallowance of Rs. 7,00,232. learned CIT(A) confirmed disallowance. After hearing parties and as borne out from assessment order on record, it is found that assessee does not maintain any bank account. payments have been made to Excise Commissioner on behalf of suppliers and later adjusted against purchases made from them due to compelling circumstances and on request of such parties as in case of M/s compelling circumstances and on request of such parties as in case of M/s Mahender Singh & Party in ITA No. 712/Del/2002. Since assessee made payments due to business exigency and he did not maintain any bank account, authorities below were not justified in making any disallowance under s. 40A(3) of Act particularly when assessee had led evidence of genuineness of payment and, evidence to make such payments in cash to different authority had been brought on record. For parity of reasons in appeal of Mahender Singh & Party and also respectfully following principle cited by jurisdictional High Court in case of Ramaditya Investments vs. CIT (supra), disallowance so made under s. 40A(3) in this appeal under consideration is also directed to be deleted. In result, both appeals stand allowed. *** MAHENDER SINGH & PARTY v. DEPUTY COMMISSIONER OF INCOME TAX