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TMI Blog2022 (12) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... of the primary observation which needs to be drawn in the assessee's case is that the assessee has not supported any of the transaction entered into by them either by way of bank statement, bills or vouchers" 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 40,99,90.801/- u/s. 68 of the IT Act by ignoring the fact that as mandated by the IT Act the assessee in this case has failed to provide the genuineness of the transaction and creditworthiness of the lender from whom loans were received" 4. The Appellant craves leave or reserving the right to amend, modify, alter, add or forego any of the Ground(s) of Appeal at any time before or during the hearing of this appeal." 2. Facts giving rise to the present appeal are that in this case the assessee filed its return of income through electronic mode on 31.3.2016 declaring loss of Rs. 2,59,52,223/-. Case of the assessee was picked up for scrutiny assessment and the assessment u/s 143(3) of the Income-tax Act, 1961 (in short "the Act") was framed on 28.12.2016. The Assessing officer made addition on account of purchases made in cash amounting to Rs. 1,80, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account payee bank draft, exceeds twenty thousand rupees in the cases and circumstances specified hereunder, namely:- ...... . ......... . (j) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike." 8. The contention of the assessee before the learned CIT(Appeals) was that the Assessing officer grossly erred in law and on facts for applying provisions of Section 40A(3) read with Rule 5DD(j). Undisputedly, the assessee made purchases from farmers of their agricultural produce. Hence, the transaction would not be hit by Section 40A(3) read with Rule 6DD(j) as a specific exception is provided under Rule 6DD(e). For the sake of clarity Rule 6DD(e) is reproduced here-in-below: "Rule 6DD(e): (e) where the payment is made for the purchase of - (i) agricultural or forest produce; or (ii) the produce of animal husbandry (including livestock, meat, 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;" 9. In this backdrop the finding of learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e beyond the stipulations provided therein (subject to exceptions) is no longer dependent on genuineness of such payment. 5.1c Accordingly, in view of the above including the extant position of law in this regard; the disallowance made u/s 40A (3) with regard to cash purchases of sugarcane (agricultural produce) by the appellant in the impugned order (Rs. 180,82,22,234/-) is deleted The ground at (b) above is allowed. 10. In the light of specific exception provided under Rule 6DD(e) in respect of agricultural produce, since the assessee made purchases of sugarcane, which is essentially an agricultural produce, coupled with the fact that Revenue has earlier accepted this claim of the assessee, we therefore, do not see any infirmity into the impugned order. Same is hereby sustained. This ground of Revenue's appeal is dismissed. 11. Apropos ground no. 3 learned DR supported the assessment order. 12. We have heard learned DR and perused the material on record. We find that learned CIT(Appeals) has given a finding of fact that impugned loan amount was not taken during the year under consideration. For the sake of clarity, finding of the learned CIT(Appeals) is reproduced as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / advances at lower/no rate of interest to promote cultivation and agricultural activities in India and for the welfare of the farmers, the loans by the financial institutions are thus basically in the interest of cultivation and other procurements for growing of the crops. However, since the financial institutions mainly banks are also subjected to various regulations and standard, therefore, in the interest of funds disbursed such institutions also want to secure the same It is also worthwhile to mention here that majority of such disbursement is also to be made in cash since the farmers have no bank accounts. Thus, the process of disbursement be as such that it should guard the interest of all parties involved and at the same time it be ensured that agriculturists are promoted and motivated and the procurement of agriculturists produce is ensured and also the bank interest is also guarded and the security of the disbursed amount be ensured. Therefore, the process of disbursement of loan are routed through the assessee company to whom the farmers have dealings and also known to the assessee company. Since the assessee company is directly or indirectly is touch with the farmers, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in u/s 68 of the Act. 5.2c Further, Section 68 of the Income tax Act 1961 deals with cash credits and states inter alia, "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer is not satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless - (a) the person, being a resident in whose name such credit is recorded in the books of accounts of such company also offers an explanation about the nature and source of such sum so credited, and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that...." Thus, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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