TaxTMI 
TaxTMI 
2018 (12) TMI 1693
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....elief. 2.1. Further aggrieved, the assessee is in appeal before us on the following grounds:- "1. For that on the facts of the case, the order of the Ld. C.I.T.(A) is completely arbitrary, unjustified and illegal. 2. For that on the facts of the case the Ld. CIT(A) was wrong in dittoing the order of the A.O. and confirming the estimated addition amounting to Rs. 7,87,193/- @20%, out of total commission paid to retailers at Rs. 39,35,967/- which is completely arbitrary unjustified and illegal. 3. For that on the facts of the case the Ld. CIT(A) was wrong in not considering the fact that all entries in books of accounts & their respective ledger produced are supported by confirmation of retailers and their identities, therefore, the estimated addition of Rs. 7,87,193/- on based on surmise, presumption and conjecture and should be deleted. 4. For that on the facts of the case the Ld. CIT(A) was wrong in dittoing the order of the A.O. and confirming the addition amounting to Rs. 1,74,429/- on suppression of purchase which is completely arbitrary unjustif....
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....s not able to reconcile the purchase figures and the Assessing Officer was reasonable in adopting the gross profit. On turnover ratio as profit on undisclosed purchases. The assessee submitted that the figures have been reconciled. As no reconciliation has been furnished before us, we see no reason to interfere in this fatual finding of the ld. CIT(A). Hence Ground No. 4, is dismissed. 6. Ground Nos. 5 & 6, are on the issue of disallowance u/s 40A(3) of the Act. 6.1. In this case, the undisputed facts is that the assessee deposited the amounts in question directly into the bank account of the principal seller of the goods. In fact, ASL, the principal company had issue a letter to the assessee dt. 01/05/2006, informing him that for smooth transactions, cash deposit facility is provided at the home location. The Assessing Officer as well as the ld. CIT(A) were of the opinion that such direct payment into the bank account of the seller is not covered by the exceptions specified in Rule 6DD of the Income Tax Rules, 1962 (Rules), and hence the provisions of Section 40A(3) of the Act, apply. ASL has confirmed the receipt of all the payments in question. The genuineness of the payme....
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....sed-cheque or crossed-bank draft. The payment by crossed-cheque or crossed bank-draft is insisted upon to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of income from undisclosed sources. The terms of section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing officer the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed-cheque or crossed-bank draft in the circumstances specified under the rule. It will be clear from the provisions of section 40A(3) and rule 6DD that they are intended to regulate business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions." CIT v....
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....onger time and such payments should be made only in cash in their bank account - If assessee would not make cash payment and make cheque payments alone, it would have received recharge vouchers delayed by 4/5 days which would severely affect its business operation - Assessee, therefore, made cash payment - Whether in view of above, no disallowance under section 40A (3) was to be made in respect of payment made to principal - Held, yes [Paras 21 to 23] [in favour of the assessee] " Sri Laxmi Satyanarayana Oil Mill v. CIT [2014] 49 taxmann.com 363/226 Taxman 139 (AP) "Section 40A(3) of the Income-tax Act, 1961, read with Rule 6DD of the Incometax Rules, 1962 - Business disallowance - Cash payment exceeding prescribed limit (Rule 6DD) - Assessee made certain payment of purchase of groundnut in cash exceeding prescribed limit - Assessee submitted that he made payment in cash because seller insisted on that and also gave incentives and discounts - Further, seller also issued certificate in support of this - Whether since assessee had placed proof of payment of consideration for its transaction to seller, and later admitted payment and there was no doubt about genuineness of paymen....
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....ent of law to be followed by the assessee was of as technical nature as was in the case of Swastik Roadways (3 SCC 640) and the consequence to fall for failure to observe such norms in the present case are much higher than which were prescribed under the Madhya Pradesh Sales Tax Act. Apparently, it is a relevant consideration for the assessing authority under the Income-tax Act that before invoking the provisions of section 40A(3) in the light of Rule 6DD as clarified by the Circular of the CBDT that whether the failure on the part of the assessee in adhering to requirement of provisions of section 40A(3) has any such nexus which defeats the object of provision so as to invite such a consequence. We hold that the purpose of section 40A(3) is only preventive and to check evasion of tax and flow of unaccounted money or to check transactions which are not genuine and may be put as camouflage to evade tax by showing fictitious or false transactions. Admittedly, this is not the case in the facts of the assessee herein. The assessee had directly deposited cash in the bank account of the supplier M/s Pickme Feeds which fact is also acknowledged by the concerned supplier by crediting the s....