PRUTHVI CROP SCIENCE PRIVATE LIMITED ,ANAND vs. THE ITO, WARD-1, ANAND

PER ANNAPURNA GUPTA, AM:

The present appeal has been filed by the Assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “CIT(A)”) dated 12.11.2025 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”).

ITA No.77/Ahd/2026 Pruthvi Crop Science Prívate Limited - 2 – 2. The Grounds of appeal raised by the assessee read as under:- 1. The order passed by the Ld. CIT(A) dated 12.11.2025 is bad in law. 2. The Ld. CIT(A) erred in law and on facts in dismissing the appeal and upholding the disallowance of Rs.1,35,92,594/- u/s 40A(3) of the Income Tax Act, 1961. The impugned order is arbitrary, unjustified and contrary to the provisions of law. 3. The Ld. CIT(A) failed to appreciate that the cash payments were made for the purchase of agricultural produce to the producers thereof in rural areas under compelling business circumstances, thus qualifying for exemption under Rule 6DD of the Income Tax Rules, 1962. 4. The Ld. CIT(A) erred in blindly relying on the Remand Report of the Ld. A.O; which was prepared without conducting an independent inquiry into the genuineness of the statutory land records and evidence of identity provided as well as affording any opportunity of hearing or confrontation to the Appellant, thereby violating the principles of natural justice. 5. The Ld. CIT(A) erred in failing to consider crucial Gram Panchyat's (Sarpanch) certificates regarding identities of payee uploaded on ITBA Portal on 24,10.2024. 6. The Ld. CIT(A) erred in applying the judgement of the Hon'ble Supreme Court of India, Rajesh Kumar v/s CIT without considering the specific factual aspects of this case and exceptions available to agricultural producers under Rule 6DD of the Income Tax Rules, 1962. 7. The Appellant craves leave to add, alter, amend or withdraw any of the above grounds at the time of hearing. 3. The solitary issue in the present appeal relates to the disallowance of Rs.1,35,92,594/- made in the case of the assessee u/s 40A(3) of the Act. The assessee is a private company and runs the business of dealing in all kinds of seeds and vegetable seeds. The assessee was noted to have violated the provisions of Section 40A(3) of the Act, having been noted to have made payment in cash exceeding Rs.20,000/- to 48 persons, who are listed at page 2 and 3 of the assessment order. The assessee claimed to have made the

ITA No.77/Ahd/2026 Pruthvi Crop Science Prívate Limited - 3 – payment for purchase of agricultural produce and contended to be exempt from the provisions of Section 40A(3) of the Act by virtue of Rule 6DD of the Income Tax Rules, 1962 as per which payments made to cultivator, grower or producer of such article produce or things are exempt from the provisions of Section 40A(3) of the Act. The relevant Rule 6DD Sub-Clause (e) states as under:- ………………. 54[Cases and circumstances in which a payment or aggregate of payments exceeding ten thousand rupees may be made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as prescribed in rule 6ABBA.] 6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or 55[account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under rule 6ABBA, exceeds ten thousand rupees] in the cases and circumstances specified hereunder, namely :— ……………… (e) where the payment is made for the purchase of— (i) agricultural or forest produce; or (ii) the produce of animal husbandry (including livestock, meat, hides and skins) or dairy or poultry farming; or (iii) fish or fish products; or (iv) the products of horticulture or apiculture, to the cultivator, grower or producer of such articles, produce or products; ………… 4. The AO rejected assessee’s contention stating that the assessee had failed to substantiate its contention that the parties were primarily cultivators or growers or producers of seeds, and he also noted the assessee to have failed to establish the genuineness of payments and the identity of the parties having failed to give particulars of the parties identification of the parties by way of Adhaar Card, Election Card or any other Government document. He held that the assessee’s case could not fall under the exception of Rule 6DD of the Income Tax Rules, 1962. Accordingly, rejecting assessee’s reply, he made

ITA No.77/Ahd/2026 Pruthvi Crop Science Prívate Limited - 4 – disallowance of Rs.1,35,92,594/- all the expenses incurred by the assessee in cash in excess of the limits specified u/s 40A(3) of the Act, resulting in addition being made to the returned income of the assessee to the said extent.

ITA No.77/Ahd/2026 Pruthvi Crop Science Prívate Limited - 5 – the Act was made in AY 2014-15 for the same reasons ie: not furnishing the complete facts of the partiesie: payments in case to trade payables.

xi. The AO has found / stated in its orderthat, "....the assessee failed to substantiate its contention that these parties were primarily cultivators, growers or producers of seeds. The assessee failed to establish the genuineness of payments and the identity of the parties the assessee failed to give full particulars of the parties, identification of the parties by way of Adhar Card, election card, or any other government documents. It is evident that, the assessee's case does not fall under the exception of Rule 6DD of the Income Tax Rules...".

The Hon. Supreme Court in the case of Rajesh Kumar Vs CIT[2024] 161 taxmann.com 125 (SC)/[2024] 298 Taxman 753 (SC)/[2024] 463 ITR 328 (SC) had held -... SLP dismissed against impugned order of High Court that where payments made by assessee to suppliers for purchase were not made through an account payee cheque drawn on a bank, account payee bank draft or through use of electronic clearing system through a bank account and assessee failed to establish genuineness of transactions, AO was justified in denying deduction for said payment under section 40A(3) In the light of above facts of the case at point no.-(i) to (xii) and submissions of the assesseeand the contentions of the AO vide its remand report& its findings and the judgement of the Hon. Apex Court above in a similar matter, the additionmade by the AO for Rs. 1,35,92,594/- u/s. 40A(3) of the Income Tax Act, 1961disallowing such cash payments made to persons who are not covered or are exceptions under the Rule 6DD of the IT Rules (as these parties were not primarily cultivators, growers or producers of seeds), is found to be correct and thus UPHELD. The grounds of appeal no.-1 to 3 are NOT ALLOWED. Lastly, the ground no.-4 is general in nature and hence not adjudicated upon further.

ITA No.77/Ahd/2026 Pruthvi Crop Science Prívate Limited - 6 – addition made in the preceding year, he however did not produce the requisite details in the assessment proceedings for the impugned year. iii) He has affirmed the AOs finding that the assessee had failed to prove that the parties were primarily cultivators or growers of seeds and has also failed to establish the genuineness of the payments and the identity of the parties by way of furnishing their Adhaar Card, Election Card or any other Government document.

ITA No.77/Ahd/2026 Pruthvi Crop Science Prívate Limited - 7 – 9. The AO however, has stated that the assessee has not produced any evidence of the said parties having been the producers of agricultural produce sold to the assessee by way of a Certificate from any Government department certifying that they are producing agricultural produce. The report of the AO in this regard is as under:- vii. This Appellate authority had noted that, certain details and evidences under Rule 46A were filed by the appellant and thus the same were referred to the AO for its comments/report. The has furnished a Remand Report dt. 19.09.2024 in the present case of the appellant andwherein it stated that, "....In this case, assessment u/s. 143(3) of the I.T. Act, 1961 was made on 27/12/2017 determining the total income of the appellant at Rs. 1,36,92,254/- after making additions of Rs. 1,35,92,594/- on account of disallowance of payments made in cash u/s 40A(3) of the Income-tax Act. As to buy time more time without paying the tax dues or atleast paying up the 20% of the disputed demand, the assessee preferred an appeal before the Id. CIT(A) During the appellate proceedings, the appellant has placed on record some additional evidence under Rule 46A(1) of the Income-tax Act which was not submitted during the assessment proceedings. The Ld. CIT(A) had remanded the matter back to the Assessing Officer to submit remand report. TAX DE

In this case, assessment u/s. 143(3) of the I.T. Act, 1961 for the Assessment Year 2015-16 was made on 27/12/2017 determining the total income of the appellant at Rs. 1,36,92,254/- after making additions of Rs. 1,35,92,594/- on account of disallowance of payments made in cash u/s.40A(3) of the Income-tax Act.

In this case, the assessee had claimed huge deductions for payments in cash u/s. 40A(3) of the Income-tax Act. On verifying the ledger entries of the assessee it was found that, the assessee had made payments in cash to trade creditors/payable amounting to Rs. 1,35,92,594/- and claimed that these payments were made to purchase of agricultural produce and covered under Rule 6DD. The assessing officer after carefully considering the documents submitted by the assessee disallowed deduction claimed of these cash payments u/s. 40A(3) of the Income-tax Act and added to the income of the assessee.

It is pertinent to mention here that in this case, assessment was finalized u/s. 143(3) and not under 144 of the Income-tax Act, which clearly shows that reply of the assessee company had been taken into account. Due opportunities were granted to the assessee during the course of assessment proceedings but the assessee failed to submit any concrete evidences against the additions made and the assessment order has been made a speaking one, though the assessee has challenged the same at the appellate stage. It may be noted that the assessee has not contended the opportunities granted or non-service of notices issued by the Assessing Officer. Non-compliance during the assessment proceedings and

ITA No.77/Ahd/2026 Pruthvi Crop Science Prívate Limited - 8 – subsequently questioning the actions of the Assessing Officer before the Ld. CIT(A) is not at all justified.

Regarding the additions made by the AO U/s.40A(3) of the Act, this office has verified the fresh details submitted by the assessee before the your honour. It is very important to note that the assessee had totally failed to submit these details during the course of assessment proceedings. During the appellate stage also the assessee has only submitted the identity details of persons such as Election Card, 7/12 documents etc to substantiate that the assessee has purchased seeds from them. It is worth mentioning here that the assessee has not furnished any documents to show that the these persons to whom the assessee has made huge payments in cash are the real cultivator, grower or producer of agriculture products such as certificate from any Govt. Department certifying that he/she has produced agriculture products. Therefore the claim of the assessee now before your honour may not be allowed on the following grounds:

i) The Tax Audit report does not show the full names of the assessee. The names shown by the assessee are Ajitbhai, Kabhai, Sivabhai, Somabhai etc. At the time of assessment the assessee failed to file the documents in question and therefore it is not beyond doubts that these are the same persons whose documents the assessee has submitted at the appellate stage.

(ii) The assessee has not furnished any documents which prove that these persons are the real cultivators, growers of agriculture produces

iii) It is pertinent to note that in the case of the assessee assessment was also carried out for AY 2014-15 also which was completed before one year le in the month of December- 2016. The addition u/s. 40A(3) was also made in AY 2014-15 also. Therefore the assessee completely failed to file the required details in AY 2015-16 also eventhough he was aware of the facts that addition has been made in AY 2014-15 due to non-production of details.

(iv) In view of the above, it is humbly submitted that the new evidences filed by theassessee may not be accepted.

In view of the above discussion, it is humbly submitted that the additions made by the then Assessing Officer are justified and requested to kindly not to admit the additional evidences submitted by the assessee and uphold the additions made by the Assessing Officer. The delay in submitting the remand report as per the time frame given by the Ld.CIT(A) may kindly be pardoned keeping the time barring matters to be attended to by this office as JAO and also due to change of incumbent...".

ITA No.77/Ahd/2026 Pruthvi Crop Science Prívate Limited - 9 – was made is factually incorrect, since the AO himself in his remand report has stated, the assessee to have furnished the identity details of the persons such as their Election Card. Further, the finding of the Ld. CIT(A), that no evidence of the parties having carried out any agricultural activity is also incorrect, since the AO has noted the assessee to have furnish 7/12 documents of these parties. Therefore, both the factual findings of the Ld. CIT(A) for rejecting the assessee’s plea of being exempt from the provisions of Section 40A(3) of the Act by virtue of Rule 6DD sub-Clause (e) is found to be incorrect. The assessee, we have noted had sufficiently established the identity of the parties from whom he had purchased seeds by furnishing their Election Card as noted by the AO in his remand report. The assessee had also demonstrated the parties to be cultivators/agriculturalist by furnishing their 7/12 documents. All these documents were there before the AO, and he not given any adverse comments with regard to the same. His only remark in the remand report is that the assessee has not furnished any certificate from any Government Department certifying the parties to have produce agricultural produce and audit report does not give the full name of the assessee. These remarks, of the AO we find are of no consequence. As long as the names of the parties from whom purchases was made by the assessee as finds noted in the tax audit report is the same as that mentioned in the Election Card furnished by the assessee and in the 7/12 documents furnished, the assessee has ,we hold ,sufficiently discharged his onus of proving the identity of the parties as also the fact that they were cultivators of crops, which seeds were purchased by the assessee from them so as to be eligible to claim exemption from invocation of Section 40A(3) of the Act by virtue of Rule 6DD of the Rules.

ITA No.77/Ahd/2026 Pruthvi Crop Science Prívate Limited - 10 – 11. The assessee having furnished the Election Card and also 7/12 documents of these parties, all details including their complete address were available with the AO, and he could very well have conducted inquiry from the parties regarding the genuineness of the claim of the assessee. The assessee having submitted all these documents to the AO, he was duty bound to have verified the same. But the AO has rejected all the documents submitted by the assessee for frivolous reasons that the Tax Audit report does not give full names of persons to whom payment was made and further evidence of the parties being cultivators was not filed.

ITA No.77/Ahd/2026 Pruthvi Crop Science Prívate Limited - 11 – 13. In the light of the same, we direct the disallowance made in the hands of the assessee of Rs.1,35,92,594/- under Section 40A(3) of the Act to be deleted.

Sd/- sd/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 21/07/2026 Mittali आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad