SHANKARLAL PRAYAGCHAND PUROHIT,SURAT vs. ITO, WARD 1(2)(1), SURAT

The learned CIT(A) grossly erred in not appreciating the various documents filed which prove that the appellant was commission agent in the Krushi Upad Mandali Samittee, Bikaner and also evidence regarding payment to the farmers having agricultural land thereof.” Asst. Year : 2022-23 - 2–

The briefly stated facts of the case are that the assessee is engaged in the business of selling agricultural produce on commission basis. During the assessment proceedings, the Assessing Officer observed that the assessee had made cash payments exceeding the prescribed limit to various persons in a day, aggregating to Rs. 1,90,36,240/-. The Assessing Officer held that such payments violated the provisions of section 40A(3) of the Act and accordingly disallowed the same. The assessee contended before the Assessing Officer that he was acting as a commission agent and the impugned amounts represented payments made to farmers against sale proceeds of agricultural produce collected on their behalf. The Assessing Officer was not satisfied with the explanation of the assessee and made addition of Rs. 1,90,36,240/- u/s 40A(3) of the Act.

Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A), who confirmed the addition holding that the assessee failed to substantiate that the payments were covered under the exceptions provided in Rule 6DD.

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

Before us, the Ld. AR submitted that the assessee holds valid licence from Krushi Upaj Mandi Samittee, Shridungargarh, Bikaner. The Ld. AR contended that the assessee is a commission agent and not a trader purchasing goods on his own account. The Ld. AR produced before us copies of mandi parchi (receipts), cash book, affidavits of farmers and revenue records were placed on record. The Ld. AR also submitted the copy of CBDT Circular No. 452 dated 17.03.1986, which clarifies distinction between kachha arhatia and pacca arhatia. The Ld. AR, thus, submitted that the payments made to cultivators of agricultural produce are covered under Rule 6DD. For this proposition, Ld. AR relied upon following judicial precedents : Asst. Year : 2022-23 - 3–

The Ld. DR supported the orders of the lower authorities.

We have heard the rival submissions and perused the material available on record. It is not in dispute that the assessee holds a valid licence from the Krushi Upaj Mandi Samittee and is engaged in commission agency business, for which the assessee has placed on record the documents such as (i) Mandi licence, (ii) Mandi parchi (receipts) showing name of farmer (seller), (iii) buyer and commission earned, (iv) Affidavits of farmers, and (v) Revenue records evidencing agricultural land holding. The Revenue has not brought any material on record to disprove the genuineness of these documents. The evidences placed before us clearly demonstrate that the assessee was acting as a commission agent and that the agricultural produce belonged to the farmers. The assessee merely facilitated the sale and received commission thereon. Hence, keeping in view the Rule 6DD and the CBDT Circular No. 452 dated 17.03.1986, we hold that provisions of Section 40A(3) of the Act are not attracted in this case.

In the result, the appeal of the assessee is allowed.

""थ" / The Respondent. 2. संबंिधत आयकर आयु" / Concerned CIT 3. 4. आयकर आयु" अपील ( ) / The CIT(A)- 5. िवभागीय "ितिनिध आयकर अपीलीय अिधकरण /DR,ITAT, Surat, , , 6. गाड" फाईल / Guard file. आदेशानुसार/ BY ORDER,सहायक पंजीकार (Asstt.