2022 (12) TMI 1453

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.... Officer [AO] u/s.143 of the Act on 14-12-2018. The sole grievance of the revenue is deletion of disallowance u/s 40A(3). The concise grounds filed by the revenue on 02.05.2022 read as under: - 1. The order of the ld. CIT(A) is contrary to the law and facts of the case. 2. The Ld. CIT(A) erred in deleting the addition of Rs.3,06,67,096/- made u/s 40A(3) of the Income Tax Act, 1961 by the AO for making cash payment to suppliers, who are principal suppliers / traders and not agent of any farmer, grower etc. 3. The Ld. CIT(A) erred in relying on the decision of Hon'ble Supreme Court in the case of Attar Singh Gurmukh vs. ITO (1981) 59 Taxman 11 (SC) which actually supports the case of addition made by the AO both on ....

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....O and submitted that the payments were not covered by any exception carved out in Rule 6DD. The Ld. AR, on the other hand, supported the findings given in the impugned order. Having heard rival submissions, our adjudication would be as under. Assessment Proceedings 3.1 The assessee being resident corporate assessee is stated to be engaged in trading of rice. The assessee purchases rice from various states and repacks the same in its own containers. The assessee does not have any manufacturing unit of its own. 3.2 Upon perusal of details, it transpired that the assessee made purchases from various parties and made cash payment in excess of Rs.20,000/- per day in violation of the provisions of Sec.40A(3). The same has been tabulated ....

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.... 1987 which define agricultural produce to mean any produce of agriculture whether processed or unprocessed as specified in the schedule. The schedule specifies 'Rice in all forms' as agricultural produce under Cereals. The assessee also referred to the decision of Hon'ble Apex Court in Attar Singh Gurmukh Singh Vs ITO (59 Taxman 11) wherein it was held that the terms of Sec. 40A(3) were not absolute. The consideration of business expediency and other relevant facts are not excluded. It was open for assessee to demonstrate the circumstances under which the payment as prescribed u/s 40A(3) was not practicable or would have cause genuine difficulty to the payee. Further, the provisions of Sec.40A(3) and Rule 6DD were intended to regulate the ....

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....xempted as per Rule 6DD(k). The AR has submitted that in the assessee's case too, the rice mill owner acted as agent. The AR has contended that the aforesaid decision of Hon'ble ITAT, Chennai is squarely applicable to the appellant's case. Besides, the AR has relied on the decision in the case of Attar Singh Gurumukh Singh Vs. ITO [1980] 59 Taxman 11 (SC), reproduced above on page 15 & 16. 6.7 The AR has further drawn attention to the AO's issue of notices to suppliers and recording of statement u/s.131, the AR has stated that the AO recorded statement from two suppliers namely M. Selvanambi and M/s. Thirumagal & Co. who appeared before the AO and confirmed that they supplied rice to the appellant by collecting paym....

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....actions have been confirmed by the suppliers of the assessee. The only reason to disallow the same is the fact that the payment has been made in cash in excess of Rs.20,000/- per day. From the fact, it emerges that the assessee is a corporate entity and this is the first year of its operations. Therefore, the submissions that the suppliers insisted on cash payment before delivery of rice and the payment was made as per regular trade practice could not be disregarded. The assessee would have no option but to follow the existing rice trading practice to carry on its business. 6. It could also be seen that agriculture produce is nowhere defined in the Act. In such a case, the assistance could be taken from the provision of Tamil Nadu Agricu....