REKHA AGARWAL,JAIPUR vs. ITO WD 4(1), JAIPUR

ITA 844/JPR/2025Status: DisposedITAT Jaipur21 October 2026AY 2021-228 pages
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What were the facts?

The assessee, Rekha Agarwal, engaged in wholesale agricultural produce business and warehousing, filed her return for AY 2021-22. The CPC processed the return under Section 143(1) and made adjustments, including a disallowance of Rs. 19,13,684 under Section 40A(3) for cash payments for agricultural produce and Rs. 45,000 under Section 40(a)(ia). The assessee appealed to the CIT(A). The CIT(A) allowed relief on the Section 40(a)(ia) disallowance but upheld the Section 40A(3) disallowance, holding that payments made to an intermediary, Shri Pradeep Kumar, did not qualify for the exception under Rule 6DD(e) as they were not directly to cultivators. The assessee then appealed to the ITAT, seeking admission of additional evidence and arguing that the payments to Shri Pradeep Kumar fell under Rule 6DD(e) or alternatively under Rule 6DD(k).

What did the Tribunal hold?

The Tribunal held that the contention that Rule 6DD(e) extends to payments made indirectly to cultivators through an agent cannot be accepted, as the clause specifically contemplates direct payment to the cultivator, grower, or producer. The mere assertion that an intermediary subsequently disbursed the money to the farmers does not bring the payment within this exception. Therefore, the claim under Rule 6DD(e) was rejected. However, the Tribunal found that the alternative claim under Rule 6DD(k) stood on a distinct footing, depending on whether Shri Pradeep Kumar was the assessee's agent required to make cash payments for goods on her behalf. The additional evidence furnished by the assessee, including farmers' affidavits, required examination along with relevant books of account and the alleged agency arrangement, which had not been verified by the Assessing Officer. In the interests of justice, the Tribunal restored the issue to the Assessing Officer for a fresh examination of the claim under Rule 6DD(k), considering the admitted additional evidence and other relevant material, and affording the assessee a reasonable opportunity of being heard. The disallowance under Section 40A(3) was set aside to the extent of the disputed amount for this limited purpose.

What were the issues?

1. Whether the disallowance of Rs. 19,13,684 under Section 40A(3) of the Income Tax Act, 1961, is justified, considering the payments were made in cash to an intermediary for agricultural produce. - Assessee's contention: The payments made to Shri Pradeep Kumar, who acted as an agent for purchasing agricultural produce from farmers, were ultimately for the farmers and thus fell within the exception provided under Rule 6DD(e) of the Income Tax Rules, 1962. Alternatively, the payments were covered by Rule 6DD(k) as they were made to an agent required to make cash payments on behalf of the assessee. - Revenue's contention: The nature of the relationship between the assessee and Shri Pradeep Kumar, including the alleged agency arrangement and commission, required verification by the Assessing Officer. 2. Whether the CIT(A) erred in neglecting the provisions of Rule 6DD of the Income Tax Rules, 1962, while upholding the disallowance.

Which sections of the Income-tax Act were involved?

Section 40A(3),Section 40(a)(ia),Section 143(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES, “SMC” BENCH, JAIPUR

For Appellant: Shri Anoop Bhatia, CA and Apeksha Kalra, Adv
Hearing: 15.10.2026Pronounced: 21.10.2026

Per Shri Om Prakash Kant, AM :- This appeal by the assessee is directed against order dated 29.04.2025, passed by the Addl./Joint Commissioner of Income Tax, Appeal-5 Delhi (hereinafter referred to as “Ld. CIT(A)”) for assessment year 2021-22, raising following grounds:-

1.

On the Facts and Circumstances of the case and in the law the Ld. CIT(A) has grossly erred in upholding the disallowance

2 Asst. Year: 2021-22 of 1 Rs. 19,13,684/- under section 40A(3) of the Income Tax Act, 1961. Such addition is incorrect and against the law hence deserves to be quashed.

2.

On the facts and circumstances of the case and in law the Id. CIT(A) has furthered erred in neglecting the provision of Rul

The order continues below.

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