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TMI Blog2017 (9) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... issue should be remanded to the CIT(A) for the limited purpose to enable the CIT(A) to afford opportunity to the AO for verifying the veracity of the Certificate filed by the Assessee as additional evidence before the CIT(A). The question whether the CBDT Circular No.8 of 2006 will apply to the facts of the case should also be left open for comments by the AO in his remand report. The said CBDT Circular talks of payment by purchaser of meat from a producer of livestock and meat. If applied to the facts of the present case, it might apply to the Military/Defence establishments making payment in cash to the Assessee. As to whether it will apply to payments made by a producer of meat or livestock for purchase of livestock and chicken is also an issue which needs to be decided. The scope of remand by the Tribunal includes all aspects of the disallowance u/s.40A(3) of the Act and since the AO was not afforded an opportunity on the additional evidence filed by the Assessee, this aspect also should be left open and cannot be construed as enlarging the scope of the proceedings before CIT(A) than what was contemplated by the Tribunal while remanding the issue vide its order dated 9.3.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e previous year in which the payment was so made : Provided further that no disallowance under this sub-section shall be made where any payment in a sum exceeding twenty thousand rupees is made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors. 3. The provisions of Sec.40A(3) of the Act has been enacted as one of the measures for countering evasion of tax. It was found from experience, that deductions were being claimed for payment made from unaccounted money in the computation of business or professional income. This provision was enacted to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of the income from undisclosed sources. 4. The second proviso lays down that sub-section (3) would not apply in the cases and circumstances to be notified in the IT Rules, 1962 (Rules) and they were so notified by insertion of rule 6DD in the said Rules after considering the views of several public bodies. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. It is not in dispute that meat would be a product of animal husbandry falling within the ambit of Rule 6DD(f)(ii) of the Rules. In the course of assessment proceedings for AY 2003-04 to 2005-06, the AO noticed that the Assessee had made purchases of live goat and chicken from different local farmers and effected supplies to the Military Authorities. The Assessee paid the farmers in cash and each of such payments were above ₹ 20,000 and fell within the ambit of Sec.40A(3) of the Act. The AO in his order of assessment for AY 2003-04 to 2005-06 disallowed 20% of the expenses on account of purchases claimed by the Assessee as deduction while computing income from business by invoking the provisions of Sec.40A(3) of the Act. 7. On appeal by the Assessee, the CIT(A) confirmed the orders of the AO. The plea of the Assessee in the appeals before CIT(A) was that it was a producer of meat and the persons from whom he effected purchase of livestock insisted on cash payment. The Assessee asked to submit a confirmation from a veterinary doctor certifying that he was a producer of meat and that slaughtering was done under his supervision. A remand report was called for from the AO a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh withdrawals made by the assessee for his day-to-day requirements from the disallowance made u/s 40A(3) of the IT Act. 9. The CIT(A) on remand by the Tribunal deleted the addition made by the AO by relying on the certificate of Military Veterinary Doctor certifying that the Assessee was a producer of meat. The following were the relevant observations of the CIT(A): 5. In compliance to the direction of the Hon'ble ITAT, Kolkata the matter has been re-examined. During the appellate proceedings the case was discussed with the AR of the appellant who has filed written submission along with a paper book. On careful consideration of the remand report of the AO and the submissions filed by the appellant, my findings and decision thereon are as follows :- 5.1. The appellant is a supplier of meat to the Defense/Military Authorities. The appellant participates in tenders floated by the Military and is bound by the terms thereof. The appellant had filed the copies of the tender papers which are on pages 105 - 156 of the paper book filed before me. On page 132 I find that the terms and conditions of the tender mention that live stock shall be liable to inspection of the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted when cash payments are made to such persons by the appellant. In view of the above circumstances I hold that the payments made for the purchase of met incurred in cash cannot be disallowed u/s 40A(3) of the Act and therefore the disallowance of ₹ 49,11,290/- u/s 40A(3) is hereby deleted. 10. Aggrieved by the order of the CIT(A), the Revenue has preferred the present appeal before the Tribunal. The common ground of appeal of the revenue in all these appeals reads thus: 1. The Ld. CIT(A) erred in law by violating Rule 46A, as fresh evidence was introduced and no remand report was called for. 2. The Ld. CIT(A) failed to appreciate the fact that no supporting documents to fulfill the conditions of Rule 6DD were produced at the assessment/first appellate/first remand stage. The documents were produced before the Hon 'ble ITAT the case was restored back to the CIT(A). The Ld. CIT(A) erred in law in deleting the entire addition on account of violation of provisions of Sec 40A(3) of the I.T.Act, 1961 without calling for remand report from the A.O. 3. The revenue craves leave to add, alter or modify the grounds of appeal. 11. The Grounds raised in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements of r. 46A. It is clear from the rule that the AAC should not have taken into account any evidence produced under sub-r. (1), unless the ITO had been allowed a reasonable opportunity to examine the evidence or to cross-examine the witness whose evidence was taken on record or to produce any evidence in rebuttal of the additional evidence produced by the assessee. Even if no such rule was in existence, ends of justice and fair play demand that when an assessee produces additional evidence in his appeal an opportunity is given to the ITO to test the evidence or to counter the effect of the evidence by producing evidence in rebuttal or otherwise. 13. The learned counsel for the Assessee on the other hand relied submitted that u/s.250(4) of the Act, the CIT(A) has power to make enquiries by himself or alternatively has power to direct the AO to make enquires and submit a remand report. While CIT(A) exercises powers to make enquiries on his own u/s.250(4) of the Act, the rigours of Rule 46A of the Rules do not come into play. He placed reliance on the order of the CIT(A) and further placed reliance on the decision of the Hon ble Rajasthan high Court in the case of Silver Art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) or, as the case may be, the Commissioner (Appeals)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely :- (a) where the Assessing Officer has refused to admit evidence which ought to have been admitted ; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer ; or (c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal ; or (d) where the Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals)] records in writing the reasons for its admission. (3) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the AO to have his say on the additional evidence produced by an Assessee before the CIT(A). We are therefore of the view that the issue should be remanded to the CIT(A) for the limited purpose to enable the CIT(A) to afford opportunity to the AO for verifying the veracity of the Certificate filed by the Assessee as additional evidence before the CIT(A). The CIT(A) after such an opportunity and getting a remand report from the AO is directed to decide the validity or otherwise of the addition made u/s.40A(3) of the Act. The question whether the CBDT Circular No.8 of 2006 will apply to the facts of the case should also be left open for comments by the AO in his remand report. The said CBDT Circular talks of payment by purchaser of meat from a producer of livestock and meat. If applied to the facts of the present case, it might apply to the Military/Defence establishments making payment in cash to the Assessee. As to whether it will apply to payments made by a producer of meat or livestock for purchase of livestock and chicken is also an issue which needs to be decided. The scope of remand by the Tribunal includes all aspects of the disallowance u/s.40A(3) of the Act and since t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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