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Appellant wins appeal on cash payment additions under Income Tax Act, Chennai Tribunal ruling The Tribunal ruled in favor of the appellant, deleting the addition made under section 40A(3) of the Income Tax Act for cash payments exceeding Rs. 20,000 ...
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Appellant wins appeal on cash payment additions under Income Tax Act, Chennai Tribunal ruling
The Tribunal ruled in favor of the appellant, deleting the addition made under section 40A(3) of the Income Tax Act for cash payments exceeding Rs. 20,000 for raw materials. The appellant's claim under Rule 6DD(k) for cash payments to agents was accepted, overturning the lower authorities' decisions. The appeal was allowed, and the order was issued on July 19, 2019, in Chennai.
Issues: 1. Disallowance made under section 40A(3) of the Income Tax Act, 1961 for cash payments exceeding Rs. 20,000 for raw materials.
Analysis: 1. The appellant's appeal was against the disallowance made under section 40A(3) of the Act for cash payments exceeding Rs. 20,000 for raw materials purchased. The assessment was reopened after a survey revealed cash payments of Rs. 99,50,546 for raw materials, violating the provisions of section 40A(3). The Assessing Officer determined the income at Rs. 22,73,612 after disallowances, which was confirmed by the CIT(A).
2. The appellant argued that payments were made in cash to butchers for raw skin, exempt under Rule 6DD(k) as payments to agents for goods or services. The appellant contended that butchers preferred cash over cheques. The appellant sought deletion of the disallowance, while the Department supported the lower authorities' decisions.
3. The Tribunal noted the appellant's business of manufacturing and exporting finished leather. The issue revolved around disallowance of cash purchases exceeding Rs. 20,000 for raw skins. The Assessing Officer rejected the appellant's claim under Rule 6DD(f) and 6DD, stating the suppliers were traders, not agents. The CIT(A) sought verification from the Assessing Officer, who reiterated the initial findings after eight years. The Tribunal found that the suppliers could function as agents, allowing the appellant's claim under Rule 6DD(k) for cash payments to agents.
4. The Tribunal, based on the facts presented, deleted the addition made under section 40A(3) of the Act, ruling in favor of the appellant. The appeal was allowed, and the order was pronounced on July 19, 2019, in Chennai.
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