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2018 (12) TMI 1693 - AT - Income TaxDisallowance of commission paid to retailer on an adhoc basis - HELD THAT:- Disallowance of 20% of the commission claimed on an adhoc basis is not justified. As only 26 parties did not respond to the notices, the Assessing Officer should have made further enquiries and directed the assessee to produce further evidence. It is well known that in this line of business as the sales made through these retailers are maintained by the assessee in its books of accounts and as these books have not been doubted, we are of the opinion that the adhoc disallowance is exercise and unreasonable. Hence, we delete the same and allow this ground of the assessee. Suppression of turnover - HELD THAT:- CIT(A) records that the assessee was not able to reconcile the purchase figures and the Assessing Officer was reasonable in adopting the gross profit. On turnover ratio as profit on undisclosed purchases. The assessee submitted that the figures have been reconciled. As no reconciliation has been furnished before us, we see no reason to interfere in this fatual finding of the ld. CIT(A). Hence Ground No. 4, is dismissed. Disallowance u/s 40A(3) - AO as well as the ld. CIT(A) were of the opinion that such direct payment into the bank account of the seller is not covered by the exceptions specified in Rule 6DD of the Income Tax Rules, 1962 - HELD THAT:- It is a relevant consideration for the assessing authority under the Income-tax Act that before invoking the provisions of section 40A(3) in the light of Rule 6DD as clarified by the Circular of the CBDT that whether the failure on the part of the assessee in adhering to requirement of provisions of section 40A(3) has any such nexus which defeats the object of provision so as to invite such a consequence. We hold that the purpose of section 40A(3) is only preventive and to check evasion of tax and flow of unaccounted money or to check transactions which are not genuine and may be put as camouflage to evade tax by showing fictitious or false transactions. Admittedly, this is not the case in the facts of the assessee herein. The assessee had directly deposited cash in the bank account of the supplier M/s Pickme Feeds which fact is also acknowledged by the concerned supplier by crediting the said cash receipts in the ledger account of the assessee and the same ledger account has been obtained by the Learned AO u/s 133(6) directly from the concerned supplier M/s Pickme Feeds. It is also pertinent to note that in the case of Smt. Harshila Chordia v. ITO 2006 (11) TMI 117 - RAJASTHAN HIGH COURT had held that the exceptions contained in Rule 6DD of Income-tax Rules are not exhaustive and that the said rule must be interpreted liberally. - Decided in favour of the assessee.
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