SHRI RAKESH AGARWAL,NAGAON vs. ITO, WARD-2, NAGAON

Shri Akkal Dedhwewala, Advocate, represented on behalf of the assessee and Shri Santhosh Kr. Karnani, Addl. CIT represented on behalf of the revenue.

It was submitted by the ld. AR that the only issue in the assessee’s appeal is against the action of the Assessing Officer in making a disallowance u/s 40A(3) of the Act in respect of purchase of coal through the agent of the assessee. It was the submission of the ld. AR that the assessee is manufacturing of bricks. It was the submission that for the purpose of brick manufacturing, the assessee has purchased coal through his agent namely M. Haque. It was the submission that as the payment for purchase of coal has been made through cash, the Assessing Officer had invoked the provisions of section 40A(3) and had disallowed the same. It was the submission that the purchase of the raw materials was substantially through cash. It was the submission that even Rule 6DD permits the payments to be made to the agents. It was the submission that the business exigency required the payments to be made in cash. It was prayed that the addition as made by the Assessing Officer and confirmed by the ld. CIT(A) may be deleted.

In reply, the ld. DR drew our attention to the written submission filed by the revenue which reads as follows:

It was the submission that the coal is commodity on which royalty is liable to be given to the government for mining. It was the submission that it is for the purpose of controlling illegal mining that this issue needs to be looked into. It was prayed that the addition as made by the Assessing Officer and confirmed by the ld. CIT(A) be upheld.

The ld. AR submitted that there has been no disallowance u/s 40A(3) for any of the earlier or subsequent assessment years in respect of purchase of coal though some of the assessments have been done u/s 143(3). It has been fairly agreed by both the sides that it is the agent

We have considered the rival submissions and perused the facts. Admittedly, the assessee is in labour oriented business and raw materials would be required to be purchased in cash in many cases and in business exigency, the payments would have been made in cash. It is noticed that the agent who has been mentioned by the assessee has not been examined by the Assessing Officer. The issues in this appeal are restored to the file of the Assessing Officer for re-adjudication after examining the said agent namely M. Haque. If the agent confirms the transaction then obviously the addition will not remain. With the above direction, the issues in this appeal are restored to the file of the Assessing Officer for re-adjudication after giving the assessee adequate opportunity of being heard.

In the result, the appeal of the assessee partly allowed for statistical purposes.