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2021 (1) TMI 354 - ITAT MUMBAIDisallowance u/s 40A(3) - payment to transporters - as pep AO the assessee had made payment of ₹ 5,52,455/- to 13 such transporters above ₹ 35,000/- in cash - assessee submitted that the assessee is a trader in onion and potato and as a matter of practice, the farmers used send the produce from villages through transporters arranged by them after giving advance - HELD THAT:- Admittedly, in the present case, the revenue has not disputed the payments made to the transporters - assessee has explained the circumstances under which the questioned payments were made to the transporters. We notice that the AO made addition u/s 40A(3) of the Act rejecting the contention of the assessee that the payments were made on behalf of the farmers and subsequently deducted from sale proceeds given to the farmers, therefore the said expenditure is in the nature of payment made to the farmers for purchase of agriculture goods. As pointed out by the Ld. counsel for the assessee in the case of ITO vs. M/s Dhanshree Ispat, [2017 (6) TMI 170 - ITAT PUNE] and the Tribunal has dismissed the appeal of the revenue and deleted the addition made u/s 40A(3) of the Act, holding that the assessee has explained the circumstances under which the payments were made. Hon’ble Supreme Court in the case of Attar Singh Gurmukh Singh vs. ITO [1991 (8) TMI 5 - SUPREME COURT] has held that the provisions of section 40A(3) read with rule 6DD(e) cannot be said to be intended to restrict business activities. The provisions of section 40A(3) apply for payments made for acquiring stock-in–trade and other materials. In our considered view, the assessee has explained the circumstances under which the payments were made to the transporters. The assessee has demonstrated before the authorities below that the payments were made for purchase of agricultural produce. On the other hand, there is no evidence on record to conclude that the questioned payments do not come within the ambit of rule 6DD(e) of the Income Tax Rules. Even the AO did not examine the concerned farmers or sought their explanation to verify the contention of the assessee. Hence, we direct the AO to delete the addition made u/s 40A(3) - Decided in favour of assessee.
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