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TMI Blog2022 (12) TMI 1453X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the submissions that the suppliers insisted on cash payment before delivery of rice and the payment was made as per regular trade practice could not be disregarded. The assessee would have no option but to follow the existing rice trading practice to carry on its business. It could also be seen that agriculture produce is nowhere defined in the Act. In such a case, the assistance could be taken from the provision of Tamil Nadu Agricultural Produce Marketing (Regulation) Act, 1987 which define agricultural produce to mean any produce of agriculture whether processed or unprocessed as specified in the schedule. The schedule specifies Rice in all forms as agricultural produce under Cereals. The same would support the case of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of addition made by the AO both on facts and circumstances. 4. The Ld. CIT(A) has erred in allowing the appeal of the assessee, observing that the AO could not draw adverse inference from the statements u/s 131 recorded from the suppliers when no such statement(s) was recorded by the AO from the suppliers. Contrary to facts on record; and on this ground alone, the order of the CIT(A) is liable to be set aside. 5. The Ld. CIT(A) has erred to appreciate that exemption under Rule 6DD (e) or under Rule 6DD(f) r.w.s. 40A(3) of the act would only apply to growers, cultivators or producers of agricultural produces or their agents and not to traders and that the CIT(A) has failed to notice that the parties at Sl. Nos. 1,2,3,5,6,8,9,12, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n tabulated in para 4.2 of the assessment order. During this year, the payment aggregated to Rs.306.67 Lacs. The same led Ld. AO to invoke the disallowance u/s 40A(3). During the course of assessment proceedings, the account confirmation was obtained from two major parties who confirmed the transactions with the assessee and receipt of money from assessee. The assessee, accordingly, submitted that the payments were genuine and bona-fide and no such disallowance would be warranted. 3.3 Regarding exceptional circumstances, it was submitted that the company was formed on 05.06.2015 and this was the first assessment for the assessee company. The assessee was new to suppliers and the suppliers insisted immediate payment before delivery of rice. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business transactions and meant to prevent the use of unaccounted money. The assessee also relied on the decision of this Tribunal in Shri K. Babu vs. ACIT (ITA No.181/Chny/2019; dated 19.07.2019) rendered under similar factual matrix. 4.2 The Ld. CIT(A) observed that as per Rule 6DD(e)(i), payment for agriculture produce would be exempt from disallowance u/s 40A(3). The payment was made by the assessee in cash as per regular market practice. The provision of Tamil Nadu Agricultural Produce Marketing (Regulation) Act, 1987 define cereal to mean rice in all forms. Further, in terms of Rule 6DD(k), the payment to agents on behalf of principal was exempt from disallowance u/s 40A(3). As per the stated regulations, the 'commission agents' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AR has submitted that those two suppliers supplied rice to the assessee for Rs.2.30 crore out of total purchase of 3.06 crore which constituted 75%. The AR has argued that the deposition of the suppliers before the AO has proved beyond doubt the genuineness and the circumstances under which the appellant purchased rice by paying cash to the suppliers. Perusal of the assessment order reveals that the AO has not referred to the statements recorded from those two suppliers. It appears that the AO could not draw adverse inference from the statements in which both the suppliers have confirmed the supply of rice to the appellant by collecting payment in cash. 6.8 In view of the above remarks, and respectfully following the decision of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Act, 1987 which define agricultural produce to mean any produce of agriculture whether processed or unprocessed as specified in the schedule. The schedule specifies 'Rice in all forms' as agricultural produce under Cereals. The same would support the case of the assessee in terms of Rule 6DD(e)(i). The application of Rule 6DD(k) as applied by Ld. CIT(A) is duly supported by the decision of this Tribunal in Shri K. Babu vs. ACIT (ITA No.181/Chny/2019; dated 19.07.2019) from which an analogy could be drawn that the rice mill acted as agent for the assessee. Therefore, the same could not be faulted with. 7. Finally, considering the facts and circumstances of the case, we do not find any reason to interfere in the impugned order. 8. The app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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