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2016 (9) TMI 438 - ITAT BANGALOREDisallowances of dehusking charges - inflation in the expenses - self-made vouchers - cash expenditures - Held that:- AO has not recorded the statement of labourers produced before him, but simply wrote their names against the signature. The CIT(Appeals) was of the view that there would be some inflation in the expenses claimed by the assessee and made a fair estimate that 20% of dehusking charges to be excessive and therefore upheld the addition to the extent of 20% of dehusking charges. We are of the opinion that in this kind of business where labour is employed and vouchers are prepared by the assessee, there ought to be certain inflation in the expenses and therefore we find no infirmity in the order of the CIT(Appeals) in determining 20% of dehusking charges to be excessive. We find that the addition sustained by the CIT(Appeals) is reasonable and therefore we confirm the same. We dismiss the ground raised by the department in its appeal as well as by the assessee in its CO on this issue. Disallowance of hamali, loading and unloading charges - Held that:- We subscribe to the view of the CIT(Appeals) that in the self-made vouchers, the probability of inflation has to be taken into account. The CIT(A) has reasonably restricted the disallowance to the extent of 10% of the total expenditure. Hence, we confirm the order of the CIT(Appeals) and dismiss the respective grounds raised by the department in its appeal as well as by the assessee in its CO on this issue. Cash payments in contravention of provisions of section 40A(3) - Held that:- We find the fact remains that the coconuts are products of farmers in rural areas and they need to be paid in cash only and each payment on the reverse of the bill is less than ₹ 20,000, even though each transaction mentioned in the voucher was more than ₹ 20,000 since the vouchers were prepared for transactions in respect of 3 to 4 farmers. Provisions of section 40A(3) shall not apply to purchases from farmers in rural areas as it is covered by exemption under proviso to section 40A(3). Further, the CIT(Appeals) has found that the assessee has been in this business for the past 30 years and for the AY 2008-09, no disallowance was made u/s. 40A(3), whereas in the AY 2009-10 the assessee’s claim was accepted by the AO in the set aside proceedings. Since coconuts purchases are from farmers and in the present year, each payment is less than ₹ 20,000, provisions of section 40A(3) is not applicable. Accordingly, we confirm the order of the CIT(Appeals) on this issue and dismiss the ground raised by the department.
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