PRINCIPAL COMMISSIONER OF INCOME TAX 3 vs. KESHVALAL MANGALDAS

TAXAP/725/2018HC GujaratGJHC24023497201802 July 2018Author: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE MR. JUSTICE A.Y. KOGJE5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the disallowance made by the Assessing Officer under Section 40A(3) of the Income Tax Act, 1961, was rightly deleted by the CIT(A) and confirmed by the ITAT. The Court reasoned that the assessee was engaged in the business of a commission agent for food-grain and agricultural produce, holding a license from the Agricultural Produce Market Committee. The payments in question were for the purchase of agricultural produce. Therefore, Rule 6DD(e)(i) of the Income Tax Rules, 1962, was applicable, which permits cash payments exceeding Rs. 20,000/- in such circumstances. The Court noted that although the assessee could not produce the farmers, a reasonable explanation was provided, and importantly, the AO did not reject the books of accounts. The Court found that the application of Rule 6DD(e)(i) by the lower authorities was correct and that no substantial question of law arose. The appeal was dismissed.

What were the facts?

The Revenue is in appeal against the order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2008-09. The ITAT had dismissed the Revenue's appeal, upholding the order of the Commissioner of Income Tax (Appeals) (CIT(A)). The CIT(A) had deleted an addition of Rs. 2,83,55,337/- made by the Assessing Officer (AO) under Section 40A(3) of the Income Tax Act, 1961. The assessee, a commission agent for food-grain, had made cash payments exceeding Rs. 20,000/- to various farmers for agricultural produce. The AO disallowed the expenditure as the assessee could not produce the farmers or their addresses, explaining it was difficult to track them by village name. The AO made the disallowance without rejecting the assessee's books of accounts.

What were the issues?

1. Whether the Appellate Tribunal was right in law and on facts in upholding the decision of the CIT(A) and thereby deleting the addition of Rs.2,83,55,337/- under Section 40A(3) of the Income Tax Act, 1961, made by the Assessing Officer? Assessee's Contention: The assessee argued that the payments were made for agricultural produce and therefore, cash payments exceeding Rs. 20,000/- were permissible under Rule 6DD(e)(i) of the Income Tax Rules, 1962. The assessee also provided receipts and a reasonable explanation for not being able to produce the farmers. Revenue's Contention: The Revenue contended that the assessee failed to furnish particulars of the persons to whom cash payments exceeding Rs. 20,000/- were made, leading to the disallowance under Section 40A(3). The Revenue did not rely on any specific authorities or precedents in the provided text.

Which sections of the Income-tax Act were involved?

Section 40A(3),Section 143(3),Section 147

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C/TAXAP/725/2018 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 725 of 2018

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE A.Y. KOGJE ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? No 2 To be referred to the Reporter or not ? No 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? No ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 3 Versus KESHVALAL MANGALDAS ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 MR MANISH J SHAH(1320) for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE A.Y. KOGJE

Date : 02/07/2018 ORAL JUDGMENT

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