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2019 (11) TMI 1236 - ITAT VISAKHAPATNAMRevision u/s 263 - Addition u/s 40A(3) - Cash payment against purchases - HELD THAT:- As seen from the assessment order, the assessee also filed affidavit from land owners insisting the payments in cash. AO did not believe the contention of the assessee and brushed aside the submissions merely because of the endorsements on the reverse side of the agreement acknowledging the receipt of cash payment. There is no dispute that the land owners have given endorsement to the effect that they had received the cash on various dates. As per the affidavit, land owners have insisted for cash payments and Shri G.V.K.Chowdary has acted as an agent and the firm has given the cash to Shri G.V.K.Chowdary who in turn made the disbursements to the land owners. Merely because of endorsement made on agreement it does not conclusively prove that the assessee made cash payment directly to the land owners. Though Shri G.V.K.Chowdary has given the affidavit, the AO has simply brushed aside the agreement without making any enquiry. AO without examining either Shri G.V.K.Chowdary or the land owners has come to a conclusion that the documents were created to strengthen the assessee’s case which is based on surmises without having any evidence. Any conclusion has to be drawn only after verification of the facts. AO ought to have examined Shri G.V.K.Chowdary and the land owners to ascertain the fact regarding the payments, made directly or through the agent. The fact that the land owners were agriculturists and small farmers, insisted the cash payment was supported by the affidavits given by the land owners as seen from the assessment order. There is no reason to disbelieve the submission of the assessee that the payment was made through the agent to the farmers, hence, there is no case for application of section 40A(3). Apart from the above, all the recipients are identifiable and the payments were genuine. The department also did not dispute the genuineness of payment. Since the assessee has furnished the evidences supporting it’s contentions, we hold that the case law relied upon by the assessee in the case of Sri K.Phani Kumar cited supra squarely applicable to assessee’s case. There is no reason to make the disallowance u/s 40A(3) and accordingly, we set aside the order of the CIT(A) and allow the appeal of the assessee.
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