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TMI Blog2022 (12) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... in any of the specified circumstances under Rule 6DD of IT Rules which notifies circumstances which are exempt from rigour of section 40A(3) of the Act. As far as the assessee s case falling under section 6DD(g) is concerned, which specifies that payment made in village or town which on the date of payment is not served by any bank to any person ordinarily resides or carries on business there, we find that the ld.CIT(A) has rightly held that such Rule is of no help to the assessee, since there was nothing on record to suggest existence of such circumstances. Even the ld.counsel for the assessee has been unable to demonstrate the same before us. Applicability of Rule 6DD(k) is concerned, we find that the ld.CIT(A) has clearly erred in holding that the same does not apply to the case of the assessee - In the present case, the Revenue does not dispute the fact that the assessee had made payment in cash not directly to the seller, but through his agent i.e. he had paid cash to the agent, who in turn paid to the seller for procuring vehicles from them. There is no finding of the Ld.CIT(A) to the effect that the agent was not genuine .Further it is a fact on record that the age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicles were purchased from the individual persons who were working as small roadside contractors and were residents of distant and separate states. The gross sales/receipts of the business were of Rs.64,71,100/- and purchases were of Rs.72,20,414/-. Thus, the appellant company was not subjected to audit as per the provisions of section 44AB of the Act. However, the assessee-company had obtained the tax audit report and furnished the same voluntarily. Based on the remarks made in the said tax audit report, the A.O. observed that the assessee had made payment in cash exceeding the limit specified u/s 40(A)(3) of the Act on purchase of five old vehicles/JCB Machines on various s dates as under: Sr No Name of the seller Date of payment made to Shri Mohan Singh Rawat or his authorized representative Date of possession of the asset i.e. date on which purchase booked in books of the Amount 1 Jaychandra Rammanohar 03-08-2014 06.08.2014 6,89,500/- 2 Vimalcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such agent Shri Mohansinh Rawat. All details of the said person were furnished and on the direction of the AO he also appeared for examination and confirmed to the AO of having received cash from the assessee for making payment to the sellers of vehicles in cash. The assessee further relied on various judgments of Hon ble High Courts in support of its contentions that having proved genuineness of the transaction no disallowance under section 40A(3) was warranted. The ld.CIT(A) considered the allowability of assesses claim the impugned transactions not being covered u/s 40A(3) of the Act in the light of Rule 6DD of the Rules, which prescribed circumstances in which the payment in cash could be made without inviting any disallowance under section 40A(3) of the Act. He found that the assessee s explanation fit only in two circumstances mentioned in the rule viz. (i) in clause g where payment made in village or town not served by the bank is specified to be exempt from rigour of section 40A(3) of the Act; and (ii) in clause (k) which stipulates payment made in cash by any person to his agent who is required to make further payment in cash on behalf of the assessee. Referring to both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the rules framed by it, such payment is required to be made in legal tender 64a- (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 hank means any bank, banking company or society referred to in sub-clauses (i) to (iv) of clause (a) and includes any bank [not being a banking company65- 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; 66(d) where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee; 67(e) where the payment is made for the purchase of- (i) agricultural or forest produce; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, the submissions made by the appellant supported with the affidavits of the sellers of the vehicles suggest that the appellant's case would fall in category (g) of the Rule 6DD which specifies where the payment is made in a village or town which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town. The close perusal of the money receipts obtained from all the five persons named above does not lead to the conclusion that the payments were made in a village or town on the dates mentioned in the money receipts could not be served by any bank to these persons who claimed to be residing in the village or town mentioned in the money receipt as well as in the sworn affidavits (not duly notarized or identified by the Notary). Therefore, the appellant's claim for the exception provided under Rule 6DD(g) of the IT. Rules cannot be substantiated. 5.3 Further, it is an undisputed fact that the appellant is a company comprising of the Board of Directors and has its own bank accounts and the cash has been found to be withdrawn from the said bank accounts. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be confirmed. 6. Before us, the ld.counsel of the assessee reiterated the contentions made before the lower authorities, pointing out that by filing affidavits of the sellers who had sold the vehicles to him against cash receipts and giving all their details including identity proofs the genuineness of the transactions had been established by him. He further pointed out even the agent who had acted on his behalf for procuring these vehicles had confirmed the fact of receipt of cash from the assessee for making payments to these persons before the AO. The ld.counsel for the assessee contended therefore that the assessee having proved genuineness of the transaction, there is no scope for making any disallowance under section 40A(3) of the Act. He relied upon various decision of the Hon ble High Courts, particularly jurisdictional High Court decision in the case of Anupam Tele Service Vs. ITO, (2014) 43 taxmann.com 199 (Guj). The ld.DR relied on the order of the ld.CIT(A). 7. We have heard rival contentions gone through the orders of the authorities below and also case laws referred to before us. The issue before us related to the disallowance of expenses incurred in cash as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by any person to his agent who is required to make payment in cash for goods or services on behalf of such person; 8. As is evident, the Rule specifies that where payment for expenses are made by a person to an agent who is required to make payment in cash on behalf of such person, then rigours of section 40A(3) are not applicable. In the present case, the Revenue does not dispute the fact that the assessee had made payment in cash not directly to the seller, but through his agent i.e. he had paid cash to the agent, who in turn paid to the seller for procuring vehicles from them. There is no finding of the Ld.CIT(A) to the effect that the agent was not genuine .Further it is a fact on record that the agent had appeared before the AO and confirmed the said fact to him that he had acted as agent for the assessee in the impugned transactions taking cash from him for making payment further to the sellers. The sellers on affidavits have stated that they did not have any bank account and had therefore insisted on receiving money in cash. It is amply clear that the situation envisaged in clause (k) of Rule 6DD is clearly satisfied in the present case, and therefore, the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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