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2009 (11) TMI 915 - HC - Income TaxAddition u/s 40A - cash payments exceeding permisiable limits - assessee made massive purchases from various suppliers of processed fish by paying cash instead of making payment through account payee cheques or demand drafts - claim of exemption for payments made to producers of fish or fish products for the purchases other than through account payee cheques or demand drafts - whether the assessee has discharged their burden of purchase of fish products from the suppliers in terms of r. 6DD(f)(iii) of the IT Rules ? - assessee is a marine exporter who directly export marine products and is also engaged in supplying marine products to export houses for export as a supporting manufacturer. HELD THAT:- We feel the exemption clause generally covers a class of goods in all forms without confining itself to any particular form leaving other forms of it from the very same class. When fish and even manufactured products of fish are covered by the exception clause and the payments to its producers in excess of the limit of ₹ 20,000 are covered by the exception clause, we see no reason why the processed fish which is an intermediary, should be taken out of the scope of the section. Rule makers never intended processed fish to be taken out of the scope of sub-cl. (iii) of cl. (f) of r. 6DD because the Government under the rule considers fish only in two forms, either fish as such or in it's product form. In other words, sub- r. (iii) of r. 6DD(f) covers all forms of fish, though the broad classification is only between fish and fish products. So much so, in our view, since the processed fish purchased is not fish in the same form it is obtained, it falls within the meaning of fish product under the above rule. As accepted the contention of the assessee that the processed fish purchased is fish product within the meaning of that term in the rule, we have to necessarily hold that the supplier namely, the processor of the fish, is certainly producer to whom payments are made. Decided in favour of the assessee and against Revenue. Part disallowance sustained by the CIT(A) and reversed by the Tribunal on the ground that the assessee cannot be expected to prove purchase against payment of cash -The only fool proof evidence to establish purchase from a person is the payment made through account payee cheque or demand draft which is the requirement of s. 40A(3). However, Government has chosen to liberalise the operation of s. 40A(3) to augment trade. After granting this facility, we are of the view that the Department cannot insist the assessees to get the suppliers confirm to the Department about the supplies made to the assessee and the payments received by them. In our view, the assessee should be taken to have discharged their burden by furnishing the copies of purchase bills or vouchers issued containing the names and addresses of the suppliers with date, value, quantity etc No doubt, if assessee's claim of purchase from a particular person is found to be bogus, then it is certainly open to the Department to disallow the expenditure in respect of such purchase. However, in this case it is the finding of the Tribunal that the assessee in fact purchased the quantity accounted by them and the same is seen exported and the assessee has accounted the export proceeds. So much so, in our view, the Tribunal rightly held that the Department cannot call upon the assessee to prove what is beyond their capacity i.e. to get the suppliers confirm the supplies made to the assessee in terms of the claim of the assessee. In our view, there is no logic in the Department disbelieving the assessee with regard to the purchases, but at the same time believe the denial of the supply and receipt of consideration by the suppliers. Besides the denial of full or part supply by the suppliers, we do not find any case of bogus purchases accounted by the assessee as found by any of the lower authorities. We, therefore, uphold the order of the Tribunal on this issue as well by answering the second question also in favour of the assessee.
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