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2023 (9) TMI 833 - AT - Income TaxAddition u/s 40A - amount paid in cash for purchase of meat - HELD THAT - In the present case the assessee could not establish that the purchase were made through agent. CIT(A) before upholding the disallowance noted from the relevant fact that the cash purchase made from 54 individuals were in respect of purchase of frozen meat being a produce of raw meat that is processed for long term storage, was to be produced by meat processing undertakings having plant and machinery for converting raw meat into frozen meat. Thus, we are in agreement to the conclusion drawn by the ld CIT(A) that frozen meat could be purchased only from the meat processing units and therefore, the said suppliers, who are claimed to be illiterate villages with no bank accounts, cannot be held as cultivators or producer of frozen meat. Therefore, the explanation of assessee being devoid of merits and far away truthful factual positions was rightly discussed by the ld AO CIT(A). Hence, the payment of assessee made in cash in violation of section 40A(3) of the Act is not eligible for benefit of exceptions envisages under Rules 6DD(f). Appeal of the assessee is dismissed.
Issues Involved:
1. Disallowance of Rs. 61,39,71,805/- under Section 40A(3) of the Income-tax Act, 1961. 2. Applicability of Rule 6DD of the Income-tax Rules, 1962. 3. Genuineness of purchases and identity of suppliers. Summary: Issue 1: Disallowance of Rs. 61,39,71,805/- under Section 40A(3) of the Income-tax Act, 1961 The assessee challenged the disallowance of Rs. 61,39,71,805/- for meat purchases made in cash, arguing that the disallowance was arbitrary, unjust, and based on suspicion. The Tribunal noted that the Assessing Officer (AO) had disallowed these purchases under Section 40A(3) due to non-genuineness, despite accepting the sales as genuine. The AO observed that the assessee had consistently made cash purchases in violation of Section 40A(3) from AY 2004-05 to 2009-10, and continued the same practice in AY 2010-11. The Tribunal upheld the AO's decision, noting that the assessee failed to provide documentary evidence to support the claim that purchases were made from individual growers/farmers/villagers. Issue 2: Applicability of Rule 6DD of the Income-tax Rules, 1962 The assessee contended that the payments for meat purchases were covered under Rule 6DD, which provides exceptions to Section 40A(3). The AO and CIT(A) found that the assessee's claim of purchasing directly from farmers was unsupported by evidence. The CIT(A) granted partial relief by deleting Rs. 25,23,81,862/- paid through account payee cheques but upheld the disallowance for the remaining amount paid in cash. The Tribunal agreed with the CIT(A) that the benefit of Rule 6DD(f) was not available as the assessee could not prove the identity of the suppliers and the genuineness of the purchases. Issue 3: Genuineness of purchases and identity of suppliers The Tribunal noted that the assessee failed to provide confirmations from suppliers, despite multiple opportunities. Notices issued under Section 133(6) to verify the identity and genuineness of transactions remained unserved or uncomplied. The CIT(A) found that the assessee's claim of purchasing frozen meat from illiterate villagers without bank accounts was implausible, as frozen meat requires processing facilities. The Tribunal upheld the CIT(A)'s findings, concluding that the purchases were unverifiable and the assessee was not eligible for the exceptions under Rule 6DD(f). Conclusion: The Tribunal dismissed the appeal, upholding the disallowance of Rs. 61,39,71,805/- under Section 40A(3) and finding that the assessee failed to prove the identity of suppliers and genuineness of purchases. The Tribunal agreed with the CIT(A) that the assessee was not entitled to the benefit of Rule 6DD(f) and that the disallowance was justified.
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