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TMI Blog2017 (10) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... ncludes discoloured, sprouted and weevilled grains, immature, broken and discoloured grain, or only the marketable rice. So, we cannot rely on the yield statics of these two mills. Tribunal has concluded that there was a maximum tolerance limit fixed for the rice yielded. Discoloured, sprouted and weevilled grains, immature, broken and discoloured grain, de-husked grain, moisture content, and so forth are the factors that have gone into making the total yield of 68%. The Tribunal has also found that the Kerala State Civil Supplies Corporation has expected the hullers to supply 60% return in sortex grade rice. The assessee’s yield of 62.66% is more than what was fixed by the Government.On this count, too, we concur with the majority of the Tribunal. - I. T. Appeal Nos.257 of 2015 And 39 of 2016 - - - Dated:- 3-10-2017 - Antony Dominic And Dama Seshadri Naidu, JJ. For The Appellant : Advs.Sri. P.K. R. Menon, Sr. Counsel, GOI(Taxes) And Sri. Jose Joseph, SC, For Income Tax For The Respondent : sri. Harisankar V. Menon And Smt.Meera V.Menon JUDGMENT Dama Seshadri Naidu, J Introduction: A rice-miller purchases paddy both from registered dealers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleaded, argues Sri Menon, that it had purchased the padding from 14,621 farmers, he could not produce the particulars of even a handful of those farmers. According to him, all the receipts produced by the assessee had been fabricated. 6. There was no occasion, further contends Sri Menon, for either the appellate authority or the Tribunal to interfere with the well considered assessment made by the assessing authority. According to him, the assessee improved its case before the Tribunal without, in the first place, any factual foundation or material support before the lower authorities. Sri Menon has also contended that the assessee has failed to discharge the statutory burden cast on it.To support his contentions, Sri Menon relied on Commissioner of Income Tax v. Interseas, Sea Food Exporters (2010) 188 Taxman 343 , and M/s. Attar Singh Gurmukh Singh v. Income Tax Officer, Ludhiana. 191 ITR 667 The Assessee s: 7. Sri Harisanker V. Menon, the learned counsel for the assessee, has straightaway drawn our attention to section 40A(3) of the IT Act to contend that only six out of 14,621 transactions exceeded the prescribed limit of ₹ 20,000/-. Further, all the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,61,270/- 12. The Appellate Authority reduced the disallowance from 75% to 25% but affirmed the Assessing Authority s findings on the unreported yield. Both the assessee and the Revenue approached the Tribunal, which allowed the assessee s second appeal and dismissed the Revenue s. 13. The assessee purchased paddy for ₹ 51,69,96,981/-, out of which paddy for ₹ 23,17,32,420/- was directly from 14,621 farmers. And those transactions were in cash. In other words, the assessee purchased 59% paddy directly from farmers by paying cash and 41% from the registered dealers. The assessee claims that the paddy was purchased at ₹ 10.56 per kg from the registered dealers; however, from the farmers it is purchased at ₹ 10.47 per Kg. In the scrutiny, the Assessing Officer required the assessee to produce, randomly, the proof of 26 farmers. But the assessee furnished the ration cards of six farmers to prove their identity. 14. Of the six people, whose identity the assessee supplied, the Assessing Officer examined none. Nor did he ascertain the prevailing market price of the rice per kilogram to conclude that the assessee supressed the sale price or fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g twenty thousand rupees is made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft in the cases and circumstances specified hereunder, namely: * * * ( f) where the payment is made for the purchase of-- ( i) agricultural or forest produce; or ( ii) the produce of animal husbandry (including hides and skins) or dairy or poultry farming; or ( iii) fish or fish products; or ( iv) the products of horticulture or apiculture; to the cultivator, grower or producer of such articles, produce or products. ( italics supplied) 18. So, the statutory position boils down to this: First, only the transactions involving money above ₹ 20,000/- need to be through, say, a bank transaction. Here, the assessee has asserted that he made only six purchases from farmers involving more than ₹ 20,000/- on a given day. The AO disbelieves the claim. But that the transactions involved farmers remains undisputed. Then, we should look to Rule 6 DD (f) (i) of the Rules. 19. As extracted above, if the assessee pays to the cultivator to purchase agricultural produce, the assessee should suffer no disallowance under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintained the accounts to confirm the turnover of supply to the assessee during the previous year. Other irregularities, too, have been noticed. In this factual backdrop, Interseas observed: We find force in the contention of the assessee that having regard to the nature of trade, the assessee would not be able to get the suppliers confirm the supplies to the assessee because they are not within the control of the assessee. After making supplies and after collecting cash payments the suppliers are absolutely free to disown the transaction and assessee obviously cannot be blamed for the same. . . The only foolproof evidence to establish purchase from a person is the payment made through Account Payee Cheque or Demand Draft which is the requirement of Section 40A(3). However, Government has chosen to liberalise the operation of Section 40A(3) to augment trade. After granting this facility, we are of the view that the department cannot insist the assessees to get the suppliers confirm to the department about the supplies made to the assessee and the payments received by them. In our view, the assessee should be taken to have discharged their burden by furnishing the copies of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tify the person who has received the cash payment. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the Rule. It will be clear from the provisions of Section 40A(3) and Rule 6DD that they are intended to regulate the business transactions and to prevent the use of unaccounted money or reduce the chances to use black-money for business transactions. The Price is the Prime Factor: 26. We may remember that the quantity of paddy purchased by the assessee was not suspected, but its price was. The assessee did purchase from the registered dealers about 55% paddy, and this was not doubted. It paid ₹ 10.56 per kg to the registered dealers. It paid to the farmers slightly lower: ₹ 10.47 per kg. As rightly pointed out by the Tribunal, the AO has not ascertained the prevailing market price of paddy at that time to doubt, if at all, the price quoted by the assessee. To reiterate, we may also observe that, initially, as to the authenticity of the transactions, the AO did not probe into whatever minimal evidence -ration cards and identity cards of six farmers-the assess ..... 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