TMI Blog2022 (12) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... e-sheet as such. The ground raised by the Revenue thus lacks merit and is dismissed. - ITA No. 4008/DEL/2018 - - - Dated:- 28-11-2022 - SHRI NARENDRA KUMAR BILLAIYA , ACCOUNTANT MEMBER AND SHRI KUL BHARAT , JUDICIAL MEMBER Assessee represented by : None Department represented by : Ms. Sarita Kumari , CIT - DR ORDER PER KUL BHARAT , JM : This appeal, by the Revenue, is directed against the order of the learned Commissioner of Income-tax (Appeals)-32, New Delhi, dated 29.12.2017, pertaining to the assessment year 2014-15. The Revenue has raised following grounds of appeal: 1. The impugned order of the CIT(A) is bad in law as well as on facts of the case. 2. On the facts and in the circumstances of the case and in law, the Ld. C1T(A) has erred in deleting the addition of Rs. 180,82,22,234/- made on account of disallowance u/s. 40A(3) by ignoring the fact that the addition made is as per provision mentioned in CBDT Circular No. 220 dated 31.05.1977 and that the assessee has failed to provide or mention any such exigencies faced by it as enunciated in the circular. Further, one of the primary observation which needs to be drawn in the assessee&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition. 7. We have heard the learned CIT(DR) and perused the material available on record. Undisputedly the Assessing Officer made addition by invoking the provisions of Section 40A(3) of the Act read with Rule 6DD(j) of the income-tax Rules, 1962 (in short Rules ). For the sake of clarity, both these provisions, as stood at the relevant time, are reproduced herein below:- [Expenses or payments not deductible in certain circumstances. 40A(1) . . . (3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. Rule 6DD(j): 6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has huge bank balance but have failed to show a single transaction through banking channel. There is not a remotest of doubt that the assessees indulging in sum other practice other than business profession. From 1977 to 2014 there has been a sea change in financial sector of Indian Economy. Assessee can not resort to the benefit of Rule 6DD without putting forth the concrete reasons- which compelled assessee; entering\ into cash- transaction... whereas on the other hand it is mentioned inter alia, .After examination of reply of the assessee, it was observed that assessee has entered into cash purchase which needs to be analyzed under the CBDT circular no. 220 dated 31.05.1977 which is the landmark circular determining the precondition where an assessee can entered into CASH transactions... The extant provisions of the Act and Rules in this regard have been thrown to-the winds! While certainly- there has been a sea change in the spread of rural banks in the country over the years however it is also a fact that the extant provisions of law [40A (3) r w Rule 6DD including exceptions thereto] have evolved over time - the disallowance of cash expenditure beyond the stipu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s inadvertently mentioned as loan obtained during the year under assessment. The details submitted on 29.11.2016 contains the closing balance of loan taken and loan given as on 31.03.2014 i.e. loan taken as on 31.03.2014 at Rs.40,99,90,801/- and loan given as orr31.03.2014 at Rs.65,57,64,069/-... .At this stage it is also appropriate to understand the modus operandi of the assessee s business in the right perspective so that the assessment be made in accordance with the provisions of the law. As explained above, the business of the assessee is manufacturing of sugar and sale of the same in the market. The raw material for manufacturing process is. the sugar cane crop which is procured, from, the farmers who grow the same within the vicinity of the assessee s factory. The farmers in general belong to lower rung of the society and normally do not have any bank account. The procurement therefore had to be in cash through Account Payee cheque It is also be understood that the farmers are to be supported in their endeavor to grow crop and in the process the Government has a number of relaxations and rules for them. Even the financial institutions are directed to offer loans / ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers which is essentially to secure the amount to be returned to the bank. Thus, the above transactions of loans do neither result in accrual of any income to the assessee nor can be categorized as advance given by the assessee or received by the assessee from the farmers thus, these transactions do not qualify the either disallowance or subjected to any penalty on account of cash involvement. It is suffice to say that giving of advance and taking of advance from the farmers is only an enabling process for the assessee to carry out its business and distinguish from loans or advance in commercial sense... 5.2b It is observed from the copies of the relevant financial statements as well as communication from the bank in this regard that the appellant s contention by the above submission is borne out from records. It is observed from the Assessment Record obtained from the AO that this communication (at the assessment stage) appears therein. However, it can be inferred safely that neither the issue was captured in the right perspective in its commercial sense in the impugned order nor the provision of the extant law in this regard was followed, thereby resulting in the addition t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
