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TMI Blog2018 (7) TMI 1462X X X X Extracts X X X X X X X X Extracts X X X X ..... d (k) of Rule 6DD would be given to the assessee if Shree Sardar Cooperative Sugar Industries has acted as an agent of the assessee and made direct payment to the farmers after receiving from the assessee. No such circumstances have been discussed by the ld.CIT(A) - we deem it appropriate to set aside this issue to the file of the AO for readjudication. The ld.AO shall determine whether Shree Sardar Cooperative Sugar Industries has acted as agent of the assessee for purchase of sugar cane from farmers. If yes, then benefit of Rule 6DD in terms of Hon’ble High Court’s decision be given to the assessee. Similarly, he will examine the issue with regard to the admission of disallowance made by the assessee. After ascertaining the facts on these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsonance with the Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963 - they are descriptive and argumentative in nature. In brief, grievance of the Revenue is that the ld.CIT(A) has erred in deleting disallowance of ₹ 2,25,65,154/- which was disallowed by the AO with the aid of section 40A(3) of the Act. 4. Brief facts of the case are that the assessee is a cooperative society with 52% shareholding of Government of Gujarat. It is engaged in the business of manufacturing sugar and other products from sugarcane. It has filed its return of income under section 139(1) on 29.9.2008 declaring NIL income. The assessment was framed under section 143(3) on 28.12.2010 and total loss was determined at ₹ 22,30,11,720/- as against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 40A(3) of the Act. In view of the above, it is clear that the assessee had made payments of a sum exceeding twenty thousand rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft for purchase of sugarcane. The said payments in cash amounted to ₹ 2,25,65,154/- .Thus the assessee had contravened the provisions of sub section 3 of section 40A of the Act read with Rule 6DD. Hence, deduction to the tune of ₹ 2,25,65,154/- is disallowed and added back to the total income of the assessee. I am satisfied that, the assessee firm has furnished inaccurate particulars of income. Therefore, penalty proceedings u/s.271(1 )(c): of the IT Act is initiated on this issue. A separate, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure. However, when payment is made for purchase of agricultural or forest produce or the produce of animal husbandry or dairy or poultry farming etc. as per sub-clause (e) of rule 6DD or when the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such persons under clause (k) of Rule 6DD of Income Tax Rules, no disallowance under sub-section (3) of section 40A shall be made. In other words, exemptions are carved out under rule 6DD when purchase is of agricultural or forest produce etc. or when such purchase is made through agent who was required to pay in cash. I agree with the Ld. Authorized Representative that the facts of the present case are identical and Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (k) provides that where payment is made by any persons to his agent who is required to make payment in cash for goods or services on behalf of such person. A perusal of the written submissions of the assessee filed before the AO would indicate that the assessee itself admitted about the violation of section 40A(3). It has itself made disallowance of ₹ 1.32 crores. A perusal of this details indicate twothree contradictory situations viz. if assessee has itself made disallowance of ₹ 1.32 crores whether it is part of total payment of ₹ 2.25 crores or not, and if yes, then how the AO has made disallowance of ₹ 2.25 cores ? He should have only made disallowance of difference of ₹ 2.25 crores minus ₹ 1.32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be less than but which shall not exceed three times of the amount of tax sought to be evaded by reason of concealment of income or furnishing of inaccurate particulars of income. In other words, the quantification of the penalty is depended upon the addition made to the income of the assessee. In the present case, the assessee has filed appeal before the CIT(A) against quantum addition. Adjudication of quantum addition was pending before the ld.CIT(A) and the penalty proceedings is solely depended upon the ultimate determination of income, therefore, appeal arising out of imposition penalty cannot be decided before adjudication of quantum appeal. On account of this simple procedural irregularity, we set aside the order of the ld.CIT(A) and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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