TaxTMI 
TaxTMI 
2013 (9) TMI 874
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....the appeal on the following substantial questions of law:- "1. Whether the I|TAT in the facts and circumstances has correctly interpreted the provisions of Section 40-A (3). 2. Whether the ITAT erred in law in giving a finding that assessee's case was not covered by Circular No.34 dated 05.03.1970 but was covered by Circular No.452 which deals with Section 44AB. 3. Whether the ITAT was justified in ignoring the assessment order, specially the fact that payments over Rs.5,17,96,824/- have been made but none of the entries exceeds Rs.20,000/-. 4. Whether the ITAT was justified in ignoring the fact that the cash payments were not made to Farmers for which the CBDT has made an exception in Circular No.34 dated 05.03.1970, but cash p....
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....g any option but to make payment in cash, was not correct. We have examined the order passed by the A.O., CIT (A) and the ITAT. The assessee is engaged in the trading of foodgrains. He filed returns of income at Rs.1,95,376/- on 31.7.2006. The assessee had traded food grains, both on its own account as well as on account of its principals on commission basis (kachcha Arahtiya). The total purchases made during the year was Rs.8,26,04,408/- out of which purchases made on its own behalf on trading account is to the extent of Rs.5,17,96,824/- and rest Rs.3,08,07,584/- on behalf of the principals. All the purchases were made from 'Khair Mandi', which is the place for first arrival of food grains. The purchases were made by way of cash payment....
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.... is required to make payment in cash for goods or services on behalf of such person." The ITAT considered the nature of business and found that the assessee acts as per Mandi Samiti Rules. There was no dispute that 'kachcha Arahtiya' are agents in true sense as they mediate between farmers on the one hand and purchasers (wholesellers) 'pucca Arahtiya' on the other hand. All statutory forms namely Form 6A for purchase and Form 9A for sale have to be maintained in accordance with the Rules made under U.P. Krishi Utpadan Mandi Adhiniyam, 1964. 'Kachcha Arahtiya' in order to facilitate sale of agricultural products, which farmers bring to the Mandi take exemption from the 'pucca Arahtiya'. The case of the assessee was found to be squarely co....
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....of Rule 6DD would also apply. Reliance placed on the order of the ITAT, Vishakhapatnam Bench in the case of ACIT Circle 1 (1) Venkatadri Oils Ltd. v. Penamaluru, ITA No.422 of 2007 and decision of Delhi High Court in the case of R.C. Goel v. CIT in ITA No.636 of 2012 dated 4.12.2012 was also found to be appropriate. We have examined the facts of the case. It was found that the assessee was maintaining all the books of account and also accounts on all statutory forms required under the U.P. Krishi Utpadan Mandi Adhiniyam, 1962. Rule 6DD (e) and (k) of the Income Tax Rules are clearly attracted in this case as the purchases were made in the present case in commission agency business from the farmers. Whenever purchases were made through co....