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PRINCIPAL COMMISSIONER OF INCOME TAX-III, RAJKOT Versus MARUTI GINNING AND PRESSING INDS

2016 (9) TMI 71 - GUJARAT HIGH COURT

Revision u/s 263 - addition u/s 40A(3) - AO limited the disallowance only to 20% of expenditure - CIT(A) directed the Assessing Officer to verify the genuineness of the claim of purchases of URD Kapas by making necessary investigation and verification in respect of agricultural land holding, crop taken and actual purchases by the assessee from the concerned traders and then pass a fresh order of assessment - Held that:- As noted, the Assessing Officer in the process of framing assessment had mad .....

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payments were made and documents concerning their lands were also produced. Merely because there were some minor discrepancies in some of them would not be sufficient to conclude that the Assessing Officer did not make a proper inquiry. The revisional powers could not have been exercised for making better or further inquiry. - Decided against revenue - TAX APPEAL NO. 654 of 2016 - Dated:- 30-8-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE APPELLANT : MR PRANAV G DESAI, ADVOCATE ORAL .....

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by the Commissioner under Section 263 of the Income Tax Act,1961 ['the Act' for short]. Upon reopening of the assessment, the Assessing Officer questioned the assessee about cash payments in excess of ₹ 20,000/- in terms of Section 40A(3) of the Act. The case of the assessee was that total expenditure of ₹ 3.98 crores was made for purchase of cotton directly from farmers, producers. Undisputedly, if such payments were for purchase of agricultural produce made to the cultivato .....

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the opinion that such order of the Assessing Officer was erroneous and prejudicial to the interest of the Revenue. He, therefore, after hearing the assessee, exercised revisional powers under Section 263 of the Act. He noticed certain discrepancies in the records pertaining to the farmers to whom such payments were made. The Commissioner, therefore, set aside the order of assessment and directed the Assessing Officer to verify the genuineness of the claim of purchases of URD Kapas by making nec .....

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e orders of the authorities below as well as the judgements relied upon by the ld. Counsel for the assessee. The undisputed facts are that, in this case, the assessment was reopened on the ground that the purchases of URD Kapas of ₹ 3,98,60,119/- had been made in violation of provision of section 40A(3) r.w.s. 6DD(J) of the I.T.Rules, 1962. There is no dispute that the AO had issued a notice requesting the assessee to explain such purchases. In reply thereto, the assessee had submitted tha .....

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emonstrate that the purchases are made of agricultural produce and the payments are made to the cultivator or grower of such produce. The AO was required to examine this aspect and to verify the claim of the assessee by making necessary enquiry in this regard. If the AO fails to make inquiry with regard to the claim of the assessee, then in our considered view, the order of the AO would be erroneous and prejudicial to the interests of the Revenue and the ld. CIT would be within its jurisdiction .....

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