TMI Blog2023 (10) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... ons as provided under Rule 6DD of the Rules. As considered the facts whether the assessee s case requires any estimation of profit. I noted that the assessee made a claim before us that the assessee has made 98% of purchases in account payee cheque or bank draft or through banking channel only as envisaged in the provisions of section 40A(3) - But due to compulsion imposed by some of the farmers who wanted their money back from the rice mill, clearly reveals that there was a business expediency to make cash payment that being a very minimal amount ranging from 6.92% to 0.28% in various years. The assessee also argued that there was fluctuating demand in the rice due to which there is price raise of rice commodity and due to that the farmers agreed to sell in cash to the rice mills. In turn, the rice mill asked the assessee to make part of payment during some months in cash. Considering the entirety of facts, I m of the view that on the disputed purchase, the AO can apply a higher profit rate instead of profit rate declared by assessee of 0.26%. Thus estimation of profit @ 10% of the disputed purchases disallowed by AO by invoking the provisions of section 40A(3) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the purchase bills and printed copy of purchase ledger accounts of rice, that the assessee firm has made payment in cash exceeding Rs. 20,000/- for purchase of rice to one person in a day. The AO has tabulated the entire cash payment in excess of Rs. 20,000/- and therefore he computed the total payments in cash in excess of Rs. 20,000/- to a single person in a single day aggregating to Rs. 34,76,920/-. The AO noted that these payments for purchase of rice is in excess of Rs. 20,000/- to a single person in a single day in violation of provisions of section 40A(3) of the Act and assessee does not fall under any of the exempted categories as per Rule 6DD of the Income Tax Rules, 1962 and hence, he disallowed the cash payments made in excess of Rs. 20,000/- by invoking the provisions of section 40A(3) of the Act at Rs. 34,76,920/-. Aggrieved, assessee preferred appeal before CIT(A). 6. The CIT(A) noted that the assessee is a contractor and has purchased rice from rice mills who are the processor and not from the grower/purchaser/cultivator therefore, it is does not fall under any of the exceptions covered under Rule 6DD of the Rules. For this, he observed in para 6.3.8 6.3.9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o business expediency it requires consideration that the cash payments are made in excess of Rs. 20,000/- for purchase of rice and CIT(A) rejected the assessee s claim vide para 6.3.13 as under:- 6.3.13 In the instant case pending before me, the Appellant has not proved any business expediency that requires to be considered in the light of the exceptions provided under Rule 6DD of the IT Rule. In view of this, the decision relied upon by the Appellant in the case of Smt. Harshila Chordia will not apply to the facts and circumstances of the Appellant case. Aggrieved on these three counts, assessee now came in appeal before the Tribunal. 7. Before us ld. counsel for the assessee Shri S. Sridhar argued that the issue in present appeal is regarding application of the provisions of section 40A(3) of the Act pertaining to the purchase of rice as the assessee being in the business of trade in rice namely purchase and sale of rice commodity. He argued that the transaction of the assessee involves purchase of rice and it is carried on by way of cash purchase only for the convenience of the rice mill owners to settle their payments to the farmers of the village from whom, the pad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinate Bench of this Tribunal in the case of DCIT vs. Sree Daksha Property Developers India Pvt. Ltd., in ITA No. 2067/CHNY/2017, order dated 03.05.2023 for estimating the profit rate. 8. On the other hand, the ld. Senior DR heavily relied on the order of CIT(A) and stated that the CIT(A) rejected the assessee s contention in regard to the assessee being grower / purchaser / cultivator or agent or assessee s case falling under business expediency for various paras reproduced above. The ld. Senior DR argued that estimation of profit rate is not possible in case where the disallowance of expenses is made by invoking the provisions of section 40A(3) of the Act as the assessee has made payment in excess of Rs. 20,000/- in cash and these are deeming provisions except the exceptions provided in Rule 6DD of the Rules. According to him, the assessee s case did not fall under any of the exceptions and there is no provision which permits estimation of profit rates. 9. I have heard rival contentions and gone through facts and circumstances of the case. Admittedly, the assessee is a trader in rice purchasing rice from rice mills who are the processor and not the grower / producer / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the assessee has also computed the net profit, total turnover and net profit percentage as under:- Assessment year Turnover Net profit (Rs.) Net Profit (%) AY 2008-09 1,11,75,380 -513 0 AY 2009-10 1,30,40,535 17,062 0.13 AY 2010-11 1,69,84,706 18,343 0.107 AY 2011-12 2,23,65,998 31,185 0.133 AY 2012-13 2,74,17,951 71,571 0.261 AY 2013-14 3,73,59,077 91,710 0.245 AY 2014-15 5,38,06,074 2,39,780 0.445 AY 2015-16 7,15,90,305 3,39,445 0.474 AY 2016-17 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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