TMI Blog2023 (9) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the payment of assessee made in cash in violation of section 40A(3) of the Act is not eligible for benefit of exceptions envisages under Rules 6DD(f). Appeal of the assessee is dismissed. - SHRI C.M. GARG, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER For the Assessee : None. For the Revenue : Mr. Waseem Arshad, CIT DR. ORDER PER C. M. GARG, J. M.: 1. This appeal has been filed by the assessee against the order of the ld CIT(A)-XV, New Delhi dated 30.09.2014 for AY 2010-11. 2. The assessee has raised the following grounds of appeal:- 1) That the disallowance of Rs. 61,39,71,805/- being the alleged purchases of meat, sustained by CIT (Appeals) u/s 40A(3) of the Income-tax Act, 1961 (the Act) is arbitrary, unjust, based on suspicion and bad in law. 2) That the disallowance of Rs. 61,39,71,805/- made by the Assessing Officer and sustained by CIT (Appeals) u/s 40A(3) of the Act on account of non-genuineness of purchases, while accepting the sales as genuine, is arbitrary, based on presumptions and assumptions and bad in law. 3) That meat, which is an animal product, the payments related to purchased are covered under Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age a new advocate for the matter. In the adjournment application it has been stated that Shri Vijay Garg is suffering with some eye flue but there is no medical certificate in support of such ground. Finally, keeping in view the above conduct of AR of assessee and the fact of the case that the assessee has availed number of adjournment on various grounds in this old appeal pending since 2014, therefore, adjournment application is dismissed and we proceed to adjudicate the appeal ex parte qua assessee. 5. From the grounds raised by the assessee in the form 36 we note that the assessee is aggrieved with the order the ld CIT(A) wherein, the first appellate authority has upheld and sustained the disallowance of Rs. 61,39,71,805/- u/s 40A(3) of the Income Tax Act, 1961 (for short the Act). It is consistent argument and submissions of the assessee before the authorities below as well as before this Tribunal that the impugned disallowance made by the AO and sustained by the ld CIT(A) on account of non-genuineness of purchase is not sustainable as the department has accepted sales as genuine therefore, arbitrary disallowances based on presumption and surmises is bad in law. It is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Bench and in case of CIT Vs. Renukeswara Rice Mills (2005) 93 ITD 263. The ld CIT DR submitted that the assessee claimed to have purchased frozen meat from the farmers in huge quantity in violation of section 40A(3) of the Act but it is surprising that how can the farmers have equipment and facility to convert the raw meat into frozen meat in their villages. 9. The ld DR submitted that it is not the case of the AO that purchase undertaken by the assessee are not genuine or not but because the AO based accountant of the assessee that assessee has purchased frozen meat in cash which was in violation of section 40A(3) of the Act therefore, the disallowance made by the AO and sustained by the ld CIT(A) is quite correct and justified, thus, the same may kindly be upheld. 10. On careful consideration of the rival contention, for the sake of completeness of the order we find it appropriate to reproduce the relevant part of the order wherein, the AO made disallowance u/s 40A(3) of the Act:- 4. Disallowance on account of cash purchases under section 40A(3):- 4.1 The issue of cash purchases was also examined in the preceding years. While during the course of the assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, copy of agreement with agents, list of agents and the period since when the agents were working for the company. The AR attended and submitted that we do not have any agreement nor we do pay them any commission and agents keep changing time to time and there is no fixed tenure. The agents are farmer/grower/ villager. The reply of the assessee has been duly considered, AR relied on two points: - a). Assessee company has purchased directly from growers/ villages/ farmers. b). There are company's agent through which assessee company has made purchases. 4.5 Which are found to be factually wrong? Regarding assessee's claim vide point (a) above, the assessee, during the course of the assessment proceedings, was directed to furnish copy of the purchases A/C for verification along with the relevant vouchers and purchase ledger. However, the assessee has only furnished purchase ledger bill summary only with the signature of preparer only shown to have routed through banking channel. As has been accepted, the assessee issued bearer cheques, the payments are treated to have been made in cash only. These, purchase bill summary also does not contain the details of dai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppliers of raw material. However, the ld CIT(A) upheld that the disallowance of remaining part of the purchases undertaken in cash, in violation of section 40A(3) of the Act amounting to Rs. 61,39,71,805/-. The relevant part of first appellate order read as follows:- 7. These facts are ascertainable from the appellant's submissions filed on different dates, as referred in para 5 above. With the above undisputed facts, I intend to examine the claim of the appellant under Section 40A(3) r.w. Rule 6DD(f) (I). 7.2 At the time of hearing on 30.08.2013, the AR of the appellant was asked to file details of the persons (including name, address, PAN cheque/bank details) to whom payments were made for procuring meat. Further, the confirmed ledger accounts were also sought and a note on the procurement method and responsibilities of such persons was sought. Vide letter dated 06.12.2013, the appellant had filed details of suppliers showing their name, name of the village and the amount paid in respect of such purchases. The details show that the appellant had made payment in respect of purchases of Rs. 25,23,81,862 by cheque. Further, an amount of Rs. 23,39,05,551 was paid to 54 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.12.2013, the appellant made the following submissions: that in the meat business, the suppliers are not regular suppliers. They keep changing from time to time, the nature of this business is such that on a given day a person may be supplying to us while the next day he may be supplying to another factory hence the continuity of suppliers from year to year may differ. Hence it becomes difficult to trace a four or five year old supplier 7.3 The other evidence filed before me by the appellant is in the form of bank vouchers issued by the appellant company. I find that there is no specific voucher No. and the details shown on such bank vouchers include date, name of the lead person (without address), amount and details of the bearer cheque and the concerned bank from which such payment was to be made. The appellant had also filed bank statements before me, which show that on different dates, cash cheques were issued to certain persons, however such names are limited to few individuals. For example, in the month of March, 2010, from the Indian Bank A/c of the appellant, cash cheques were paid to one Mr. Annu Aslam on different dates. In the month of February 2010, cash chequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Abdul Qadir Meerut, Village Nek, Meerut, UP 14 20.02.2014 Aftab Meerut, Village Kishori, Meerut, UP 15 20.02.2014 Aftab Unnao, Village Kishori, Meerut, UP 16 20.02.2014 Aftab Khurja, Village Kishori, Meerut, UP 17 20.02.2014 Aftab Jattari, Village Kishori, Meerut, UP 18 20.02.2014 Iqbal, Village Nawal Garh, Rajasthan 19 20.02.2014 Ashqeen, Village Baamasee, Barmer, Rajasthan 20 20.02.2014 Aman Qureshi, Village Chandwar, Firozabad, UP 21 20.02.2014 Ahsan Qureshi, V/i! 1 age Mirpur, Khurja, UP 22 20.02.2014 Ezaz Ershad, Village Ritoli, Bulandshar, UP 23 20.02.2014 Saleem Devband, Village Salooni, Devband, UP 12. On careful consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... farmers was also made in cash amounting to Rs. 3,39,55,869/- for purchase of veal (young cattle). The ld CIT(A) noted that the assessee failed to furnish the details including complete PAN, complete address of lead vendors and when the assessee was furnished written confirmation of lead persons through whom purchase for more than Rs. 25 lakhs were made during the year then despite several opportunities the appellant submitted that in view of large number of such suppliers, it is not possible to to furnish confirmations. The ld CIT(A) further granted time to assessee reducing the scope of enquiry and asked to submit confirmation from the individuals from whom total purchase of above Rs. 50 lakhs were made during the year in cash but no compliance was made by the assessee and the assessee simply submitted ledger account of suppliers of raw material in the books and payment vouchers which was not sufficient to establish identity of persons/ suppliers and genuineness of the transactions. 15. The ld CIT(A) thereafter, considered the reply of assessee in detail submitted by the assessee and also issued notices u/s 133(6) of the Act and most of them remain unserved and un-complied. Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was correct and justified in upholding the same. The ld CIT(A) before upholding the disallowance noted from the relevant fact that the cash purchase aggregating to Rs. 23,39,05,551/- made from 54 individuals were in respect of purchase of frozen meat being a produce of raw meat that is processed for long term storage, was to be produced by meat processing undertakings having plant and machinery for converting raw meat into frozen meat. Thus, we are in agreement to the conclusion drawn by the ld CIT(A) that frozen meat could be purchased only from the meat processing units and therefore, the said suppliers, who are claimed to be illiterate villages with no bank accounts, cannot be held as cultivators or producer of frozen meat. Therefore, the explanation of assessee being devoid of merits and far away truthful factual positions was rightly discussed by the ld AO CIT(A). Hence, the payment of assessee made in cash in violation of section 40A(3) of the Act is not eligible for benefit of exceptions envisages under Rules 6DD(f). In totality of the facts and circumstances, we are unable to see any valid reason to interfere with the findings recorded by the ld CIT(A) while sustaining the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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