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TMI Blog2024 (3) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... rusal of the submissions made by the assessee's Representative, the Ld. AO observed that the assessee made purchases of husk from various Grams and certain varieties of Dal from various farmers which include cash purchases. The AR of the assessee has produced 331 vouchers in respect of the purchases made from the farmers. The AR also submitted before the Ld. AO that the purchases are made from farmers and the payments are made in cash. Thereafter, the Ld. AO asked the assessee to furnish the details of persons from whom the purchases were made, circumstances under which such cash purchases are made, to produce suppliers for cash purchases made by the assessee, details of Dal purchases made in cash and the details of record maintained in respect of cash purchases etc., vide the letter dated 9/12/2016. In reply, the assessee submitted that the agricultural produce is mainly purchased from the farmers which visit the assessee directly to sell the produce. It was further submitted that the suppliers are none other than the farmers who demanded the assessee to pay in cash. It was also submitted before the Ld. AO that since the payment is made for purchase of agricultural produce, no dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 40A(3) r.w.r 6DD of the IT Rules, 1962. 3. The Ld. CIT(A) relied on the decision of the Supreme Court in the case of CIT vs. Cynamid India Limited (104 Taxmann 94 (1994) (SC)] however, the case law quoted by the Ld. CIT(A) is not relevant to this case as the assessee has provided only Pattadar pass books of five persons and confirmation letters of two person only and not filed or provided any other information / evidences before the Assessing Officer. 4. Any other ground that may be urged at the time of appeal hearing." 3. Now the question before us that is arising out of the findings of the Ld. CIT(A)-NFAC is whether cash purchases of husk beyond the prescribed limit of Rs. 20,000/- per day as contemplated U/s. 40A(3) r.w.r 6DD of the Income Tax Rules, 1962 is applicable to the facts of the case or not? It is the submission of the assessee that the assessee is merely dealing with husk of various agricultural produce viz., Bengal Gram Husk, Green Gram Husk, Massor Husk, Orud Husk, Red Gram Husk etc. The assessee is carrying on his business in the Market Yard and many of the agriculturists used to supply their products to the assessee because of his reputation and his regular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther argued that the Ld. AO does not have discretionary power to bifurcate the purchases while applying the provisions of section 40A(3) of the Act. Further, the Ld. AR also submitted that these purchases cannot be treated as bogus since the assessee has disclosed the same while filing the VAT returns. The Ld.AR also submitted a copy of the Central Sales Tax assessment order is produced before us which is available in the paper book pages 244 and 245. The Ld. AR therefore pleaded that since the Ld. AO did not dispute the nature of product which is an agricultural produce, the provisions of section 40A(3) r.w.r 6DD cannot be applied to the instant case. Per contra, the Ld. Departmental Representative heavily relied on the order of the Ld. AO. The Ld. DR further submitted that the assessee has not produced the farmers before the Ld. AO for enquiries and also the assessee made cash payments beyond Rs. 20,000/- and therefore it is a clear cut case of violation of the provisions of section 40A(3) of the Act. The Ld. DR therefore pleaded to set-aside the order passed by the Ld. CIT(A) and to confirm the order of the Ld. AO. 4. We have heard both the sides and perused the material avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the facts and circumstances of the case, we find that the cash transactions does not fall within the ambit of section 40A(3) r.w.r 6DD of the Act as it is covered under Clause-(e) of Rule-6DD of the Income Tax Rules, 1962. Further, we rely on the decision of the Hon'ble Gujarat High Court in the case of Principal Commissioner of Income Tax vs. Keshvalal Mangaldas reported in [2018] 96 taxmann.com 83 (Gujarat) for the proposition that "Where cash payments exceeding Rs. 20,000 made by assessee to farmers was clearly covered by exemption provided under rule 6DD(e)(i), disallowance made under section 40A(3) was not justified". For the sake of brevity and reference, the relevant paras from the judgment of the Hon'ble Gujarat High Court is reproduced hereunder: "3. We have heard Mrs. Mauna M. Bhatt, learned advocate appearing on behalf of the Revenue and Shri Manish J. Shah, learned advocate appearing on behalf of the respondent-assessee. We have perused and considered the order passed by the learned A.O., CIT (A) as well as the learned ITAT. 4. It is required to be noted and it is not in dispute that the assessee is engaged in the business as a Commission Agent for purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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