TMI Blog2021 (1) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... AO made addition u/s 40A(3) of the Act rejecting the contention of the assessee that the payments were made on behalf of the farmers and subsequently deducted from sale proceeds given to the farmers, therefore the said expenditure is in the nature of payment made to the farmers for purchase of agriculture goods. As pointed out by the Ld. counsel for the assessee in the case of ITO vs. M/s Dhanshree Ispat, [ 2017 (6) TMI 170 - ITAT PUNE] and the Tribunal has dismissed the appeal of the revenue and deleted the addition made u/s 40A(3) of the Act, holding that the assessee has explained the circumstances under which the payments were made. Hon ble Supreme Court in the case of Attar Singh Gurmukh Singh vs. ITO [ 1991 (8) TMI 5 - SUPREME ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case are that the assessee firm having income from business, filed its return of income for the assessment year under consideration declaring total income at ₹ 51,18,155/-. Since, the case was selected for scrutiny, the AO issued notice u/s 143 (2) and 142 (1) of the Act. In response thereof Shri Nitin Parekh, partner attended from time to time and filed the details called for. It was noticed that during the year relevant to the assessment year under consideration, the assessee had made payments to the transporters in cash under the heading transportation (inward) in its ledger accounts. Accordingly, AO asked the assessee to show cause as to why the amount of ₹ 5,52,455/- should not disallowed u/s 40A(3) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m after giving advance. The farmers also used to send the Bill along with goods showing balance amounts to be paid as transport charges to the transporter by the assessee on behalf of the farmers. The assessee used to deduct the said amounts from the sale proceeds. In the present case, the assessee had made payment of ₹ 5,52,455/- to 13 such transporters above ₹ 35,000/- in cash. Since, the payments were made to the farmers for purchase of agriculture goods, it is covered under rule 6DD(e) being payment for the purpose of agriculture produce. The Ld. counsel further submitted that the assessee has submitted vouchers showing payments to the transporters, copies of bills from transporters mentioning the freight charges and copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the said cases are different from the facts of the assessee s case. 6. We have heard the rival submissions of the parties and perused the material on record including the cases relied upon by the authorities below and the cases relied upon by the Ld. counsel for the assessee. Admittedly, in the present case, the revenue has not disputed the payments made to the transporters. Further, the assessee has explained the circumstances under which the questioned payments were made to the transporters. We notice that the AO made addition u/s 40A(3) of the Act rejecting the contention of the assessee that the payments were made on behalf of the farmers and subsequently deducted from sale proceeds given to the farmers, therefore the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in his trading activities. Section 40A(3) only empowers the Assessing Officer to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed cheque or 'crossed bank draft. The payment by crossed cheque or crossed bank draft is insisted on to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of the income from undisclosed sources. The terms of section 40A(3) are not absolute. Considerations of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions are genuine. 8. The Hon ‟ ble Punjab and Haryana High Court in the case of Gurdas Garg Vs. Commissioner of Income Tax (supra) while considering similar issue where disallowances u/s. 40A(3) was made deleted the disallowance by observing that where genuineness of transaction made in cash in excess of ₹ 20,000/- was not disbelieved by authorities, the same cannot be disallowed u/s. 40A(3) of the Act. 9. In the present case, the payment made by the assessee to the individual truck driver has not been disputed. It is not the case of Department that the payments made by the assessee are not genuine or the payees are not identifiable. The assessee has sufficiently explained the circumstances under which the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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