9911796707
Advanced Search 
TMI Blog2016 (4) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee for paperwork and evidently not part of transaction. 2. Ld. CIT(A) has erred in ignoring the fact that there was no requirement for the assessee or its agent to make payment in cash. The order of Ld. CIT(Appeals) tells that M/s R A Traders had put a condition that the assessee had to pay 'in cash. Ld. CIT(A) has failed to appreciate that this requirement cannot be said to be legal or factual as given in 6DD(k) and cannot be accepted as ground to contravene the provisions contained in section 40A(3) of I. T Act read with 6DD. 3. Ld. CIT (A) has erred to appreciate the intention of the provision contained in 6DD (k) of I.T Rules that it is only to facilitate to the assessee and does not provide any immunity to the agents. 4. The Ld. CIT (A) has grossly misunderstood the provision and the order of the Ld. CIT (A) is in the nature of creating a bypass in special circumstances, which has never been intention of the law. Ld. C1T(A) has not tried to find those special circumstances. 5. The Ld. CIT has grossly misunderstood the law that exception cannot be made available on the payment in cash for the purchase of potatoes from a person, who is not proved to be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to file an application u/s 144A of the Act before the Addl. CIT, Range-II, Moradabad who passed the order as under: "I have gone through each minute detail of the case, the Court cases cited by the assessee and have gone through each fact of both the parties, who are involved in transaction. As per section 40(A)(3), no deduction is to be allowed, if aggregate payment to a person in a day exceeding Rs. 20,000 otherwise than by an a/c payee bank cheque or a/c payee bank draft, barring cases covered in rule 6DD which provides for exemption in certain cases or circumstances. Here in this case, the assessee, M/s Pranay Towers has made purchases for a sum of Rs. 1,17,20,000/- from M/s R.A. Traders in cash in a day exceeding Rs. 20,000/-. The assessee has stated that the purchases have been made through agent though no evidence of that also not been produced except an entry in the Profit and Loss Account which halfheartedly tries to explain that one payment of Rs. 1,20,000/- was made to some agent. It is observed from the available facts that: * The payments made for purchases are covered in definition of expenditure as contained in section 40A(3) of l.T.Act,1961 as per Attar Singh G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved that there was no requirement for the assessee or its agent to make payment in cash and that the version of the assessee that it could contravene the provision of Section 40A(3) of the Act only by making a debit entry of Rs. 1,50,000/- towards payment to agent was far from truth and could not be said to have been covered by Rule 6DD of I.T. Rules. He further observed that the cash memo signed between the assessee and M/s R.A. Traders revealed that the agent was used only for technical purposes and that payment to agent would have been allowed even if such payment was covered within Rule 6DD of the I.T. Rules if the assessee had made it. The AO also observed that the Rule 6DD(k) of the I.T. Rules was to facilitate the assessee that if the transaction between the assessee and the other party was within Rule 6DD(k) of I.T. Rules, same would hold true and in norms between the agent of the assessee and the other party too but, if any, transaction between the assessee and the third party was in contravention of the provisions of Section 40A(3) of the Act, the same transaction could not be said to be within norms if the same was done between the agent of the assessee and the third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt before the AO and it was the business needs of the assessee who had clearly stated the fact before the AO that the purchases were made through agents and the cash payment was made as it was a condition laid down by the seller. It was accordingly submitted that the assessee's case was squarely covered under the exceptions laid down in Rule 6DD(k) of the Income Tax Rules. As regards to the purchases of Rs. 2,88,000/-, it was submitted that the same were purchased from farmers directly in the shape of loose potatoes, the purchases had not been doubted by the AO. Therefore, no addition could have been made u/s 40A(3) of the Act. The reliance was placed on the following case laws: * DCIT, Circle-12(1), New Delhi Vs Hind Industries Ltd. * Sh. Renukeshwara Rice Mills Vs ITO, Bangalore * DCIT, Hyd Vs Heritage Foods (India) Ltd. 8. The ld. CIT(A) after considering the submissions of the assessee observed that the assessee had made purchases of Rs. 1,20,00,000/-, out of which purchases of Rs. 1,17,12,000/- had been made from M/s R.A. Traders and the balance amounting to Rs. 2,88,000 had been made from other small parties. He further observed that in the case of provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same has to be conducted. The ld. CIT(A) also observed that M/s R.A. Traders had specifically confirmed before the AO that the entire deal was struck through the agents and not directly between the parties and that M/s R.A. Traders had confirmed that it had demanded payments only in cash from the assessee as it doubted the credibility of the assessee. The ld. CIT(A) further observed that Sh. S.K. Tiwari had confirmed the fact that he had acted as an agent of the entire transaction of purchases and payments were done through him. The ld. CIT(A) opined that this was a case of a genuine transaction where the purchases were made through Sh. S.K. Tiwari in cash as was required by the seller, therefore, it was squarely covered by the exception laid down in Rule 6DD(k) of the I.T. Rules and thus the assessee was not hit by the provisions of Section 40A(3) of the Act. Accordingly, addition of Rs. 1,17,12,000/- was directed to be deleted. Regarding the balance payment of Rs. 2,88,000/-, the ld. CIT(A) observed that the assessee had made the payments for the purchase of loose potatoes from farmers on various dates and the AO had not doubted the said fact, therefore, no addition was liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices on behalf of such person." 12. In the present case, it is an admitted fact that Sh. S.K. Tiwari acted as an agent and procured the potatoes from M/s R.A. Traders, Moradabad who doubted the credibility of the assessee and insisted on cash payment. The agent made the payment in cash to the seller of the potatoes i.e. M/s R.A. Traders and it is nowhere established that the assessee directly made the cash payment to M/s R.A. Traders. Even in response to the notice u/s 133(6) of the Act, the seller firm M/s R.A. Traders, itself confirmed this fact to the AO that the payments were made through the agent only. Therefore, the cash payments amounting to Rs. 1,17,12,000/- was clearly covered by the exception laid down in clause (k) of Rule 6DD of the I.T. Rules, 1962. In that view of the matter, we are of the view that the ld. CIT(A) was fully justified in deleting the addition made by the AO. As regards to the judgment of the Hon'ble Apex Court relied by the AO in the case of Attar Singh Gurmukh Singh Vs ITO, Ludhiana 191 ITR 667 (supra) relied by the AO is concerned in the said case, it has been held as under: "Section 40A(3) of the Income-tax Act, 1961, which provides that expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubted the credibility of the assessee who required the purchases to be made for smooth running of its business. The purchases were made through the agent Sh. S.K. Tiwari who procured the potatoes from M/s R.A. Traders and this fact was not doubted by the AO that the purchases were made by the assessee through its agent Sh. S.K. Tiwari from M/s R.A. Traders, Moradabad in cash. In the instant case, the cash payments were made by the assessee to the agent Sh. S.K. Tiwari who in turn made the purchases in cash for the assessee and charged the commission for the said transaction which has been accepted as genuine and allowed to be set off against the income in the profits and loss accounts, by the AO. Therefore, the transaction relating to the purchases of potatoes amounting to Rs. 1,17,12,000/- was clearly covered by the exception laid down in Rule 6DD(k) of the I.T. Rules, 1962 and was outside the purview of the provisions of Section 40A(3) of the Act. We, therefore, by considering the totality of the fact as discussed hereinabove, are of the view that the ld. CIT(A) rightly deleted the addition made by the AO amounting to Rs. 1,17,12,000/-. As regards to the remaining addition of R ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
