Mr. A.K. Agrawal, your situation seems to be very complicated as you are bound to pay such expenditure in cash.
Please consider the below given Decision
ITO should adopt practical and not a technical approach - The ITO should take a practical approach to problems and strike a balance between the direction of law and hardship to the assessee. He should not enmesh himself in technicalities. After all, the object is not to deprive the assessee of the deduction which he is otherwise entitled to claim - Girdharilal Goenka v. CIT (supra).
The contention of the department behind section 40A(3) is to avoid usage of black money and not to hinder the growth of business.
In your case your problem is very genuine and thats why i think that expenditures shall be allowed.
In my opinion I have two way outs :-
1. Stop purchasing from them (practically not possible).
2. Take a written representation from them that they will accept payment only in cash along with the reasons for the same.( you know how to do it)