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2018 (7) TMI 1462 - AT - Income TaxDisallowance under section 40A(3) - Held that:- Two-three contradictory situations viz. if assessee has itself made disallowance of ₹ 1.32 crores whether it is part of total payment of ₹ 2.25 crores or not, and if yes, then how the AO has made disallowance of ₹ 2.25 cores ? He should have only made disallowance of difference of ₹ 2.25 crores minus ₹ 1.32 crores. The second question arise is, whether Shree Sardar Co-op. Sugar Industries has acted as an agent on behalf of the assessee for purchase of sugarcane from farmers. Benefit of clause (e) and (k) of Rule 6DD would be given to the assessee if Shree Sardar Cooperative Sugar Industries has acted as an agent of the assessee and made direct payment to the farmers after receiving from the assessee. No such circumstances have been discussed by the ld.CIT(A) - we deem it appropriate to set aside this issue to the file of the AO for readjudication. The ld.AO shall determine whether Shree Sardar Cooperative Sugar Industries has acted as agent of the assessee for purchase of sugar cane from farmers. If yes, then benefit of Rule 6DD in terms of Hon’ble High Court’s decision be given to the assessee. Similarly, he will examine the issue with regard to the admission of disallowance made by the assessee. After ascertaining the facts on these two aspects, he will decide the issue in accordance with law. Penalty u/s 271(1)(c) - Held that:- The quantification of the penalty is depended upon the addition made to the income of the assessee. In the present case, the assessee has filed appeal before the CIT(A) against quantum addition. Adjudication of quantum addition was pending before the ld.CIT(A) and the penalty proceedings is solely depended upon the ultimate determination of income, therefore, appeal arising out of imposition penalty cannot be decided before adjudication of quantum appeal. On account of this simple procedural irregularity, we set aside the order of the ld.CIT(A) and remit this issue to the file of the AO for fresh adjudication - decided in favour of revenue for statistical purpose.
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