Tribunal Upholds AO's Disallowance of Payments (3) (k)

The Tribunal reversed the CIT(A)'s order and upheld the AO's assessment disallowing payments under Section 40A(3) for all relevant years. The Revenue's appeals were allowed, and the assessee's cross objections were dismissed. The Tribunal found the payments did not qualify for the Rule 6DD(k) exception as evidence of payments to farmers was lacking.

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Issues Involved:
1. Delay in filing appeals by the Revenue.
2. Erroneous order by the Commissioner of Income Tax (Appeals) [CIT(A)].
3. Deletion of addition/disallowance under Section 40A(3) of the Income Tax Act.
4. Validity of assessment order due to time barring.
5. Application of Rule 6DD(k) in relation to Section 40A(3).

Detailed Analysis:

1. Delay in Filing Appeals by the Revenue:
The appeals filed by the Revenue were delayed by three to four days. The Revenue filed petitions supported by an affidavit for condonation of the delay, explaining the cause. The assessee did not raise serious objections. Consequently, the delay was condoned, and the appeals were admitted for adjudication.

2. Erroneous Order by the Commissioner of Income Tax (Appeals) [CIT(A)]:
The Revenue contended that the CIT(A) erred in directing the Assessing Officer (AO) to delete the addition/disallowance made under Section 40A(3) amounting to Rs. 9,59,37,128/-. The CIT(A) failed to appreciate that there is no requirement under Section 40A(3) for the recipient entities to be bogus or for there to be inflation of purchases to invoke the provisions. The CIT(A) also failed to note that the assessee did not produce any material before the AO to substantiate its contention that the self-cheque recipients were agents of the assessee.

3. Deletion of Addition/Disallowance under Section 40A(3) of the Income Tax Act:
The AO noted that during the search at the premises of M/s. VVD & Sons (P) Limited, it was found that copras were purchased from M/s. Achu Traders through agents. The payments were made through bearer cheques, which were withdrawn in cash, violating Section 40A(3). The CIT(A) deleted the addition, stating that the payments were made to agents who further paid the farmers, thus falling under the exception provided in Rule 6DD(k). However, the Tribunal found that neither the assessee nor the agents could provide details of the farmers or maintain any records of the transactions, thus failing to establish that payments were made to farmers.

4. Validity of Assessment Order Due to Time Barring:
The assessee argued that the assessment order was barred by limitation as it was served on 08.01.2018, beyond the due date of 31.12.2017. The Tribunal held that the assessment order was passed on 31.12.2017, within the period of limitation, and the delay in service was due to postal authorities. Therefore, the assessment order was not barred by limitation.

5. Application of Rule 6DD(k) in Relation to Section 40A(3):
The Tribunal analyzed the applicability of Rule 6DD(k), which exempts payments made to agents required to make cash payments on behalf of the assessee. The Tribunal found that the assessee failed to provide any evidence that payments were made to farmers. The agents' statements were contradictory and lacked details of the farmers or the transactions. Therefore, the Tribunal concluded that the payments did not fall under the exception provided in Rule 6DD(k).

Conclusion:
The Tribunal reversed the order of the CIT(A) and restored the assessment order passed by the AO, disallowing the payments under Section 40A(3) for all the assessment years under appeal. The appeals filed by the Revenue were allowed, and the cross objections filed by the assessee were dismissed.

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