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2022 (12) TMI 686 - ITAT AHMEDABADDisallowance u/s 40A(3) read with Rule 6DD - expenses incurred in cash - payment through agent - cash purchase of old vehicles from unknown sellers for business of dealing of old vehicles, equipment’s and machineries - HELD THAT:- It is not disputed that before the ld.CIT(A) the assessee had furnished all evidences to prove genuineness of the transaction by giving all details of the seller of the vehicles, their names, address, identity proof and also furnished their affidavits affirming on oath that they had received cash on selling vehicles to the assessee, besides also stating that they had no bank account. Assessee had explained that he had purchased these vehicles through an agent, Shri Mohansingh Rawat, who was produced before the AO in remand proceedings, and the AO had examined him, when the said person had confirmed having received cash from the assessee for making payment in cash for purchases made from these very persons. CIT(A) has upheld disallowance for the reason that circumstances in which the payment in cash was made by the assessee did not fall in any of the specified circumstances under Rule 6DD of IT Rules which notifies circumstances which are exempt from rigour of section 40A(3) of the Act. As far as the assessee’s case falling under section 6DD(g) is concerned, which specifies that payment made in village or town which on the date of payment is not served by any bank to any person ordinarily resides or carries on business there, we find that the ld.CIT(A) has rightly held that such Rule is of no help to the assessee, since there was nothing on record to suggest existence of such circumstances. Even the ld.counsel for the assessee has been unable to demonstrate the same before us. Applicability of Rule 6DD(k) is concerned, we find that the ld.CIT(A) has clearly erred in holding that the same does not apply to the case of the assessee - In the present case, the Revenue does not dispute the fact that the assessee had made payment in cash not directly to the seller, but through his agent i.e. he had paid cash to the agent, who in turn paid to the seller for procuring vehicles from them. There is no finding of the Ld.CIT(A) to the effect that the agent was not genuine .Further it is a fact on record that the agent had appeared before the AO and confirmed the said fact to him that he had acted as agent for the assessee in the impugned transactions taking cash from him for making payment further to the sellers. The sellers on affidavits have stated that they did not have any bank account and had therefore insisted on receiving money in cash. It is amply clear that the situation envisaged in clause (k) of Rule 6DD is clearly satisfied in the present case, and therefore, the assessee is entitled to be exempt from the rigours of section 40A(3). CIT(A), we find has mis-appreciated/misunderstood clause (k) of Rule 6DD of the Rules. The ld.CIT(A) we find has stated inapplicability of clause (k) by stating that it has not been proved beyond doubt that the agent who received cash from the person selling vehicles was required to make payment in cash for goods or services on behalf of such person to third party, which means that the ld.CIT(A) has understood clause (k) to mean that the agent should be receiving cash from the sellers. But this cannot be the interpretation since sellers are not required to make any payment. It is the buyer who is required to make payment. - Decided in favour of assessee.
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