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Income Tax Appellate Tribunal, BANGALORE BENCH “ A ”
Before: SHRI ABRAHAM P GEORGE & SHRI VIJAY PAL RAO
Per Shri Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the order dt.5.6.2015 of Commissioner of Income Tax (Appeals), Hubli for the Asst. Year 2008-09.
The assessee has raised the following grounds :
“1. The learned CIT (Appeals) erred in confirming the order of the Assessing Officer passed under Section 143(3) of the IT Act. 1061. 2. The learned CIT (Appeals) failed to consider the written submission filed as also the explanation of the appellant before the passing the order.
3. The learned CIT (Appeals) failed to appreciate that the citations relied on by the appellant were squarely applicable to the case of the appellant and accordingly he ought to have allowed the appeal of the appellant.
4. The learned CIT (Appeals) ought to have appreciated that the provisions of section 40A(3) of the Act were not applicable since the appellant had not made any claim towards purchase of goods for which the payments were made and consequently the impugned disallowance as confirmed by him is liable to be deleted. 5. The learned CIT (Appeals) ought to have held that the payments made by the appellant would fall within the excluded category under Rule 6DD of the IT Rules, 1962 and consequently the provisions of section 40A(3) were not applicable and thus the impugned addition as confirmed by the learned CIT (Appeals) is liable to be deleted. 6. The learned CIT (Appeals) ought to have appreciated the evidence and material furnished by the appellant and refrained from confirming the impugned addition as made by the Assessing Officer. 7. The learned CIT (Appeals) ought to have appreciated that the remarks of the ADIT were not conclusive and the assessment proceedings being independent, the CIT (Appeals) ought to have considered the evidence furnished by the appellant and refrained from confirming the impugned addition. 8. The learned CIT (Appeals) erred in confirming the levy of interest under Sections 234B & 234C of the Act. 9. For these and such other grounds that may be urged at the time of hearing this appeal, the appellant prays that the appeal may be allowed.”
The only issue arises in the appeal of the assessee is regarding disallowance made by the Assessing Officer under Section 40A(3) in respect of the cash payment made by the assessee towards purchase of goods. The assessee is trading in agricultural products like onion and potato & also doing commission business. While completing the assessment under Section 143(3)
Assessing Officer has noted that as per the enquiry report dt.19.8.2008 of Asst. Director of Income Tax (Investigation), Hubli, cash payment has been made by the assessee to the extent of Rs.1,18,27,709. The said cash payment is treated to be made in contravention of provisions of section 40A(3) of the Act.
Accordingly, the Assessing Officer made disallowance of Rs.77,31,958 in respect of the cash payment made for purchase of gods in excess of Rs.20,000. Out of the total payment, the Assessing Officer allowed to the extent which was made directly to the agriculturists. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) and submitted that payment made by the assessee towards purchase of agricultural produce for the purpose of his business does not fall within the mischief of Section 40A(3) of the Act. The CIT (Appeals) was not impressed with the contention of the assessee and confirmed the disallowance made by Assessing Officer.
Before us, learned Authorised Representative submitted that payment made to the agent is for disbursement to the agriculturists which exempt from 40A(3) of the Act by virtue of Rule 6DD(k) of the IT Rules, 1962 whereas the payment made to the agriculturists is excluded from the provisions of Section 40A(3) by virtue of Rule 6DD(e) of the I.T.Rules. The learned Authorised
Representative has pointed out that the authorities below disallowed the claim of the assessee on the ground that the assessee has not produced the proof where as the assessee furnished the details of the persons which includes their addresses and supporting details provided by them towards purchase and settlement. He has referred the details of the payment and the agent, at page No.529 and 15 to 17 of the paper book and submitted that all these payments were made either to the agriculturists or to the commission agents which was to be disbursed to the agriculturists. Therefore, the provisions of section 40A(3) cannot be invoked in respect to such payments.
On the other hand, the learned Departmental Representative has submitted that the Assessing Officer as well as the CIT (Appeals) has given a finding that the assessee has failed to furnish the relevant supporting evidence to show that the payment was made to the commission agent to be disbursed to the agriculturists/farmers so that the provisions of Rule 6DD(k) of I.T. Rules can be applied. He has relied upon the orders of the authorities below and submitted that when the assessee could not furnish the relevant record then the benefit of Rule 6DD(k) cannot be given to the assessee.
We have heard the rival submissions as well as considered the relevant material on record. There is no dispute that the assessee made payment of cash to the extent ofRs.1,18,27,709 towards agriculture produce. It is also not in dispute that the payment in question was in excess of Rs.20,000; The Assessing Officer invoked the provisions of Section 40A(3) in respect of the payment of Rs.75,39,305 which was made in cash by the assessee to the persons other than agriculturists. The assessee contended before the authorities below that the said payment was made to the commission agents working under APMC and therefore the said payment was to be disbursed by these agents to the agriculturists / farmers and consequently the Rule 6DD(k) is applicable in respect of the same. We find that neither the CIT (Appeals) nor the Assessing Officer has examined the issue in the light of the provisions of Rule 6DD(e) & (k) which reads as under :
“6DD(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 products68; or (iv) the products of horticulture or apiculture, to the cultivator, grower or producer of such articles, produce or products; (f) ….. (g) …. (h)….
(i)…. (j)….. (k) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person;”
It is not in dispute that the payment was made towards the purchase of agriculture products however, the only disputed fact is required to be verified is whether the payment in question which was disallowed by the Assessing Officer under Section 40A(3) is made to the commission agent and was to be finally disbursed to the agriculturists / farmers as per clause (k) of Rule 6DD.
From the details furnished by the assessee it appears that these payments in question was made to the commission agents however, it is a matter of enquiry to find out whether this payment was towards procurement of the agriculture products by the assessee from the stock of these agents or it was only a transaction of purchase and sale through these commission agents between the assessee and agriculturists. If the transaction is purchase and sale of agriculture products from agriculturists through the commission agents, then such transaction falls under Rule 6DD(e) & (k) of the I.T. Rules. Accordingly, we set aside this issue to the record of the Assessing Officer to conduct a necessary enquiry for a limited purpose to find out the real nature of transaction and whether the payment made by the assessee to the agents was finally to be disbursed to the agriculturists/farmers. Needless to say the assessee should be given an appropriate opportunity of hearing before passing the final order.
6. In the result, the assessee's appeal is allowed for statistical purpose.
Order pronounced in the open court on 20.04.2016.