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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL,
Before: MANISH AGARWAL
This is an appeal filed by the assessee against the order of the ld This is an appeal filed by the assessee against the order of the ld This is an appeal filed by the assessee against the order of the ld CIT(A), CIT(A), NFAC, NFAC, Delhi Delhi dated dated 24.5.2024 in Appeal No. CIT(A),Cuttack/10371/2019 A),Cuttack/10371/2019-2020 for the assessment year for the assessment year 2017-18.
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Shri Mohit Sheth, ld AR appeared for the assessee and Shri Sanjay Kumar, CIT DR appeared for the revenue.
3. It was submitted by ld AR that the assessee is running a Dall Mill. It was the submission that the assessee purchases raw dall from cultivators, process them and then sell the same. It was the submission that the purchases and sales by the assessee have been accepted by the Assessing Officer. However, the Assessing Officer invoked the provisions of section 40A(3) of the Act to bring to tax the payments made to the cultivators in excess of Rs.20,000/-. It was the submission that consequently, in para 3.1.2 and 3.1.3, the Assessing Officer disallowed the purchases made from the cultivators to an extent of Rs.4,68,12,680/- in toto. It was the submission that in the assessment order itself in para 3.1.2, the Assessing Officer has mentioned that the purchases were made from the cultivators. Ld AR has placed before us the copies of purchase vouchers as also weigh bills in respect of goods which have crossed the Jagatpur Check Post and contain the signature of the Check Post Officer. Samples are as follows:
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4. It was the submission that the addition as made by the Assessing Officer and as confirmed by the ld CIT(A) is liable to be deleted insofar as P a g e 5 | 11 the purchases have been made from the cultivators and the same is exempt in view of the Circular issued by CBDT No.27/2017 dated 3.11.2017, which reads as follows:
“F.No.370149/213/2017-TPL Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes) ***** Circular No. 27/2017 New Delhi, Dated 3 rd November, 2017
Clarification on Cash sale of agricultural produce by cultivators/ agriculturist Representations have been received from the stakeholders . regarding applicability of income-tax provision to cash sale of agricultural produce by cultivators/agriculturists to traders.
2. In this context, it is stated that the provisions of section 40A (3) of the Income-taxAct,1961 ('the Act') provides for the disallowances of expenditure exceeding Rs. 10000 made otherwise than by an account payee cheque/draft or use of electronic clearing system through a bank account. However, rule 6DD of the Income-tax Rules, 1962 ('IT Rules') carves out certain exceptions from application of the provisions of section 40A (3) in some specific cases and circumstances, which inter alia include payments made for purchase of agricultural produce to the cultivators of such produce. Therefore, no disallowance under section 40A(3)of the Act can be made if the trader makes cash purchases of agricultural produce from the cultivator.
Further, section 269ST, subject to certain exceptions, prohibits receipt of Rs.2lakhormore otherwise than by an account payee cheque/draft or by use P a g e 6 | 11 of electronic clearing system through a bank account from a person in a day or in respect of a single transaction or in respect of transactions relating to an event or occasion from a person. Therefore, any cash sale of an amount of Rs. 2 lakh or more by a cultivator of agricultural produce is prohibited under section 269STof the Act.
Further also the provisions relating to quoting of PAN or furnishing of Form No.60 under rule 114B of the IT Rules do not apply to the sale transaction of Rs.2 Lakh or less.
5. In view of the. above, it is clarified that cash sale of the agricultural produce by its cultivator to the trader for an amount less than Rs 2 Lakh will not:-
a) result in any disallowance of expenditure under section 40A (3) of the Act in the case of trader. b) attract prohibition under section 269ST of the Act in the case of the cultivator; and c) require the cultivator to quote his PAN/ or furnish Form No.60.
Dr. T.S.Mapwal Under Secretary to the Government of India
Ld AR has also filed written submission, as follows:
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In reply, ld CIT DR vehemently supported the order of the AO and ld CIT(A). Ld CIT DR drew our attention to page 4 of the assessment order to P a g e 9 | 11 submit that on verification of the certificate issued by the cultivators, which are nothing but the seal on the backside of the vouchers and did not contain the name of the cultivators and handwritings of the same.
We have considered the rival submissions. A perusal of the vouchers, most specifically back side of the vouchers clearly shows that the certificate issued but the cultivators are nothing but the filling up the seal, which has been put on the backside of the vouchers. The front of the vouchers clearly shows the name, quantity and amount and in the back of the vouchers, the area, and quantum of land is also mentioned. A perusal of the assessment order in para 3.1.2 also shows that the Assessing Officer also recognizes that the payments have been made to cultivators. In these circumstances, in view of the provisions of Rule 6DD(e) and the circular issued by CBDT No.27/2017 dated 3.11.2017, as the payments have been made to cultivators, no disallowance u/s 40A(3) of the Act is called for. In these circumstances, the addition as made by the AO and confirmed by ld CIT(A) of Rs.4,68,12,680/- stands deleted.
In the result, appeal of the assessee stands allowed.