2018 (7) TMI 1462

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....A) dated 4.4.2016 which arises from the assessment order passed under section 143(3) r.w.s 147 of the Act. 2. First we take quantum appeal i.e. ITA No.2215/Ahd/2016. 3. Grounds taken by the Revenue are not in consonance with the Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963 - they are descriptive and argumentative in nature. In brief, grievance of the Revenue is that the ld.CIT(A) has erred in deleting disallowance of Rs. 2,25,65,154/- which was disallowed by the AO with the aid of section 40A(3) of the Act. 4. Brief facts of the case are that the assessee is a cooperative society with 52% shareholding of Government of Gujarat. It is engaged in the business of manufacturing sugar and other products from sugarcane. It ha....

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....ck No.058160412000582, we have disallowed a sum of Rs. 1,32,97,293/- as a disallowance under Rule 6DD which please note." Thereby the assessee has admitted that it had contravened the provisions of section 40A(3) of the Act. In view of the above, it is clear that the assessee had made payments of a sum exceeding twenty thousand rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft for purchase of sugarcane. The said payments in cash amounted to Rs. 2,25,65,154/- .Thus the assessee had contravened the provisions of sub section 3 of section 40A of the Act read with Rule 6DD. Hence, deduction to the tune of Rs. 2,25,65,154/- is disallowed and added back to the total income of the assessee. I am s....

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....0A(3) dissuades transactions otherwise than by account payee cheque/draft when payment of expenditure exceeds the sum of Rs. 20,000/- by disallowing any deduction in respect of such expenditure. However, when payment is made for purchase of agricultural or forest produce or the produce of animal husbandry or dairy or poultry farming etc. as per sub-clause (e) of rule 6DD or when the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such persons under clause (k) of Rule 6DD of Income Tax Rules, no disallowance under sub-section (3) of section 40A shall be made. In other words, exemptions are carved out under rule 6DD when purchase is of agricultural or forest produce etc. or....

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.... 7. A perusal of these clauses will indicate that if payment is being made for the purchase of agricultural or forest produces, the disallowance under section 40A(3) would not be made. Similarly, subclause (k) provides that where payment is made by any persons to his agent who is required to make payment in cash for goods or services on behalf of such person. A perusal of the written submissions of the assessee filed before the AO would indicate that the assessee itself admitted about the violation of section 40A(3). It has itself made disallowance of Rs. 1.32 crores. A perusal of this details indicate twothree contradictory situations viz. if assessee has itself made disallowance of Rs. 1.32 crores whether it is part of total payment of....