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TMI Blog2016 (3) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the judgment of the Jurisdictional High Court in the case of CIT v. S. Khader Khan Son (2007 (7) TMI 182 - MADRAS HIGH COURT) has been confirmed, by observing that sec.133A does not empower IT authority to examine any person on oath, hence any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition. - Decided in favour of assessee Addition u/s 40A - AO identified the parties i.e. Shri Dhakshinamoorthy and Ramanathan, to whom the payments were made by the assessee in violation of sec.40A(3) - Held that:- Regarding the identity of the recipients, there is no dispute. The amount of ₹ 1,00,000/- to be considered as agricultural produce in their hands and sec.40A(3) does not apply. The contention of the ld. AR is that these two parties are cultivators. They are not only agriculturists but also traders. Being so, he relied on the decision of the Tribunal in the case of Keerthi Agro Mills (P) Ltd. (2015 (5) TMI 1014 - ITAT COCHIN) is not appropriate. In that case, there was a payment of ₹ 23,17,32,420/-, which is purchases of paddy by cash payment in respect of 14,744 parties. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner of Income-tax(Appeals) confirmed the finding of the Assessing Officer on the reason that the assessee stated in the sworn statement as follows: My accounts have to be finalised for the last F.Y. i.e. A.Y. 2009-10. From your findings of the loose sheets of bills found in my premises. I can only say that all these are accounted, however, I am ready to offer total income of Rs. .30,00,000/- and I am ready to pay the tax on or before 31.03.09 According to the Commissioner of Income-tax(Appeals), the above statement shows that the assessee had admitted an income of ₹ 30 lakhs during the course of survey and the assessee pleaded that further stock need not be taken as he was in a hurry to board a flight to overseas destination on the same day. Therefore, the Assessing Officer has not taken full stock of the assessee of coconut and copra etc. Further, the Assessing Officer has made it clear that the assessee himself is a post graduate, well travelled and knowledgeable in this line of business and is supplying copra to one of the biggest buyers of quality copra i.e. Marico Industries and therefore, there is no force in the argument of the assessee and rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusive. It is open to the person who made the admission to show that it is incorrect. In the case of Saveetha Institute of Medical and Technical Sciences v. ACIT (2011) [12 (Trib) 376] (Chen), wherein addition towards capitation fee allegedly collected by the institute was made solely on the basis of statement of students and staff recorded under sec.132(4) was made. Except for a note giving the breakup of number of students who were admitted under different quo0tas in various courses, there was no incriminating material as to the receipt of capitation fee. Referring to the Instruction No.286/2/2003-IT(Inv.II) dated 10.3.2003 addition deleted after observing that admission made u/s.133A was not a valid evidence. Therefore, it is well settled judicial proposition that merely on the basis of statement which is not supported by the Department and cogent material cannot be a valid addition basis for sustaining such adhoc additions. It is the burden of the Department to prove that there existed relevant and cogent material to enable the AO to make such additions. The Department has grossly failed to prove or demonstrate existence of any such relevant or cogent material supporting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO. They are trading in copra and both of them have bank accounts. Shri Dhakshinamoorthy is having bank account with Tamil Nadu Mercantile Bank and Shri Ramanathan is having bank account with Syndicate Bank. Both of them have agricultural lands in addition to trading activity. They informed that they used to receive the payments by cash as per the bills in single payment. Though they are doing some agricultural operations, they are mainly copra traders. Thus, the AO invoking the provisions of sec.40A(3), disallowed a sum of ₹ 14,34,188/- out of ₹ 15,34,188/- in respect of Shri Dhakshinamoorthy and ₹ 19,46,899/- out of ₹ 20,46,899/- from Shri Ramanathan. On appeal, the CIT(Appeals) confirmed the finding of the AO. 10. The ld. AR submitted that the CIT(Appeals) failed to appreciate that sec.40A(3) of the Act cannot be invoked on estimated additions. Further, he submitted that the CIT(Appeals) was not justified in confirming the additions under sec.40A(3) with regard to the payments for the agricultural produce, namely copra justifiably made by the assessee by cash and would indeed be a business expenditure for allowance within the precincts of the law. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it society as defined u/s. 56 of the Banking Regulation Act, 1949 (10 of 1949). (v) the Life Insurance Corporation of India established u/s. 3f of the Life Insurance Corporation Act, 1956 (31 of 1956). (b) where the payment is made to the Government and under the rules framed by it, such payment is required to be made in legal tender: (c) where the payment is made by (i) any letter of credit arrangements through a bank; (ii) a mail or telegraphic transfer through a bank; (iii) a book adjustment from any account in a bank to any other account in that or any other bank; (iv) a bill of exchange made payable only to a bank; (v) the use of electronic clearing system through a bank account; (vi) a credit card. (vii) a debit card. Explanation For the purposes of this clause and clause (g), the term bank means any bank, banking company or society referred to in sub-clauses (i) to (iv) of clause 9a) and includes any bank (not being a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), whether incorporated or not, which is established outside India. (d) where the payment is made by way of adjustm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n exchange under any law for the time being in force. 12. From the above provisions, it is clear that in order to fall within the exemption clause, the assessee has to make payment in excess of ₹ 20,000/- by account payee cheque or by demand draft. The assessee shall prove that it would have caused genuine difficulty to the payees having regard to the nature of transactions. The assessee shall prove with evidence to the satisfaction of the AO and establish the genuineness of the payment and identity of the payees. Therefore, the burden of proving the above conditions as stipulated under Rule 6DD by furnishing the necessary evidence is obviously on the assessee. 13. In the present case, the AO identified the parties i.e. Shri Dhakshinamoorthy and Ramanathan, to whom the payments were made by the assessee in violation of sec.40A(3) of the Act. There was a payment of ₹ 15,34,188/- to Shri Dhakshinamoorthy. However, after considering the amount of ₹ 1,00,000/- as his own agricultural produce, by applying the provisions of sec.40A(3), the AO made the addition of ₹ 14,34,188/-. Similarly, out of total purchase of ₹ 20,46,899/- from Shri Ramanathan, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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