TMI Blog2023 (5) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank account of the supplier i.e., M/s. K D Enterprises, against supply of certain medicines. We hold that the purpose of Section 40A(3) of the Act, is only preventive and to check tax evasions and flow of unaccounted money or to check transaction which are not genuine and may be put up as camouflage to evade tax by showing fictitious or false transactions. Admittedly, this is not so in the present case of the assessee, as ld. AO also has accepted the fact that assessee directly deposited cash in the bank account of the supplier M/s. K D Enterprises. As decided in Smt. Shelly Passi [ 2013 (3) TMI 219 - PUNJAB AND HARYANA HIGH COURT ] cash payment in the bank account of payee is sufficient to get exemptions in terms of Rule 6DD inasmuch as it is ensured that payee alone receives the payment and to ensure that the payment is routed through bank channel so as to trace the origin and conclusion of the transactions is traceable thereby fulfilling the criterion of introduction of Section 40A(3) of the Act. Thus we allow the ground of appeal and direct for deletion of addition made u/s 40A(3). Addition u/s 69C - suppressed purchases - AO has treated this amount as unexplained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has placed on record revised grounds of appeal for which ld. Counsel for the assessee gave assurance to the Bench that there are no new grounds taken while revising the grounds. These are merely to summarize and concise the grounds originally taken by the assessee. There are five issues involved in the present appeal which are dealt here in-seriatim. 3. Brief facts of the case are that assessee is proprietor of M/s. K D Pharma, which is in the business of distribution of wholesale in line of medicines. Assessee filed its return of income on 31/07/17, reporting total income at Rs.50,94,820/-. During the course of assessment proceedings u/s 143(3) of the Act. Ld. AO passed an order by making additions which are in contest by this appeal. 4. In respect of Ground No. 1, ld. AO made addition of Rs.3,95,400/- for cash deposited in the Axis Bank account of assessee. Assessee deposited Rs.29,400/- which included Rs.21,000/- towards old currency and Rs.3,74,000/- on the two dates, namely, 12/11/2016 and 13/12/2016. Assessee had submitted before ld. AO that these deposits were made from sale proceeds and only small amount of Rs.21,000/- was deposited in the old currency. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted the total purchases of the assessee claimed in the profit and loss statements which includes the purchases made from M/s. K D Enterprise. 5.1. During the course of hearing before us ld. Counsel has made an application under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963, for filing fresh evidence containing certificate issued by the M/s. K D Enterprise, whereby it is confirmed that the seller has specifically insisted on advance payments in cash before dispatching the required medicines from its godown. The letter issued by M/s. K D Enterprises is dt. 02/04/2016 and is taken on record. Ld. CIT(A) sustained the addition made by ld. AO in this respect. 5.2. We have heard the rival submissions and perused the material available on record and gone through the paper book. We note that the transactions of purchases by the assessee from M/s. K D Enterprises are genuine, the supplier is identified, part of purchases are made by making payments through bank account and part of it by making deposit of cash directly into the bank account of the supplier. The genuineness of the payment is not doubted and, therefore, the provisions of Section 40A(3) of the Act cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transactions is traceable thereby fulfilling the criterion of introduction of Section 40A(3) of the Act. 5.5. Accordingly, considering the above facts and judicial precedents and the material placed on record discussed above, we allow the ground of appeal and direct for deletion of addition of Rs.1,22,97,460/-, made u/s 40A(3) of the Act. 6. On the third issue relating to addition of Rs.22,11,728/- u/s 69C of the Act on account of alleged suppressed purchases from M/s. Aditya Medisales Ltd., it was submitted by the assessee that the difference in reconciliation of account of M/s. Aditya Medisales Ltd., is on account of dishonor of cheque of equal amount which has no effect on the purchases made by the assessee. Ld. AO has treated this amount as unexplained expenditure by holding that there is difference of creditors balance as on 31/03/2017. In this respect, ld. Counsel for the assessee invited attention to the ledger account of M/s. Aditya Medisales Ltd., placed at page 58 of the paper book as well as the bank statement to demonstrate that the difference is on account of dishonor of cheque which the ld. AO failed to recognize. Ld. Counsel for assessee referred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by ld. AO. 7.2. Before us, ld. Counsel for assessee referred to the list of sales commission agents, placed in paper book at page 60, which contained sales made by each of the salesmen and their respective PAN. Ld. Counsel for assessee also reconciled the total sales of the assessee during the year by giving details of sales made directly by the assessee and sales through these sales agents. Further, ld. Counsel for assessee referred to statements of salesman-wise as well as for each of the sales-man. These statements contained the details in respect of retailers, their addresses and the amount of sales made to these retailers by each of the salesmen. Ld. Counsel for assessee also referred to the chart giving comparison of sales and commission made by the assessee with all the salesmen, in the preceding three assessment years as well as the subsequent assessment year, to demonstrate that assessee has been consistently conducting its business through these salesmen and incurring expenditure towards sales commission. Ld. Counsel also referred to some of the confirmation which were obtained against notice u/s 133(6) of the Act on some of the salesmen and their income tax returns ..... 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