In furtherance to what Mr. Hiremath has suggested i would like to state a recent important judgment:
COMMISSIONER OF INCOME –TAX V. RAJA PAL AUTOMOBILES (2010) 320 ITR 185 (ALL), it has been held that if the assessee had fully explained the details of payment made in cash, that the entire evidence in the form of bill, cash memos, etc; had also been furnished by the assessee, that the payment had been made under unavoidable and exceptional circumstances and that the genuineness of the transactions and the identity of the persons to whom the payments were made had not been doubted, then it will be covered under rule 6DD. Further, the section has been held constitutionall valid in Attar Singh Gurmukh singh vs, ITO  191 ITR 667. The Application of sec-40A (3) is an anti-evasion section and it is not a draconain section. Hence, both the sections should be read together.
Further, one of the very imporatant factors i.e. "business expediency" should also be considered.