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TMI Blog2024 (7) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... swara Rice Mills [ 2004 (8) TMI 319 - ITAT BANGALORE-B] and Suresh Kumar s cases [ 2020 (12) TMI 1061 - ITAT DELHI] it is well settled that since assessee paid amounts to others which could be verified a combined reading of Clauses (f) and (1) of Rule 6DD will take away the transaction from the clutches of Section 40A(3). From the bills produced by the assessee before the assessing officer it is evident that the assessee apart from paying price of the products also paid commission to the payee. Thus, the payee has become the agent of assessee also. Such agent is required to pay the company in cash. Accordingly, there is no violation of Section 40A(3). We accordingly uphold deletion of the disallowance in respect of payment made to the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee. Assessee submitted that deposit was out of regular sale proceeds from various small retailers. Assessee has deposited the cash in the bank account which was transferred to the account of company i.e. Hisar Jind Co-Op. Milk Producers Union Ltd. On perusal of bank statement it was noticed that there were debit entries to the tune of Rs. 3,45,37,546/-. However the assessee showed purchase at Rs. 6,14,83,310/-. Assessee was required to furnish the source and mode of balance payment of Rs. 2,69,47,764/- with documentary evidence and furnish details of party-wise purchases made by him along with confirmed copies of account vide notice issued under section 142(1) on 15.12.2019 for 20.12.2019 but no response was received. Assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. We have carefully considered rival submissions and relevant facts of the case. Hon'ble Supreme Court while, interpreting the provision of Section 40A(3) in the case of Attar Singh Gurmukh Singh v. ITO 191 ITR 667 at page 672 and 673 held thus Section 40A(3) must not be read in isolation or to the exclusion of Rule 6DD. The section must be read along with the rule. If read together it will be dear that the provisions are not intended to restrict the business activities. There is no restriction on the assessee in his trading activities. Section 40A(3) only empowers the assessing officer to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The payment by crosse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proliferation of black money which is under circulation in our country. Any restraint intended to curb the chances and opportunities to use or create black money should not be regarded as curtailing the freedom of trade or business. (emphasis supplied) The Hon'ble Supreme Court noted that the intention to make payment by crossed cheque or crossed DD is to enable the assessing authority to ascertain that the payment is genuine and not out of the undisclosed source. It is also noted that Section 40A(3) is intended to regulate business transactions and to prevent the use of un-accounted monies or to reduce the chances of use of block money for business transactions. In the present case, it is seen that the assessee for purchase of rice, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction can be only through dealers and agents licensed to operate in the market yard. Thus, the person operating there, is not only the agent of the cultivator or grower but also of the persons purchasing the agricultural produce. Clause (f) of Rule 6DD provides that where the payment is made for the purchase of agricultural produce to the cultivator, Section 40A(3) will not apply. Similarly, Clause (1) of Rule 6 DD provides that where the payment is made by any person to his agent who is required to make payment in cash for goods, Section 40A(3) will not apply. Since the assessee has paid the sum to his agent who is the payee in the present case, and who in his turn is required to make payment to the cultivator, indirectly, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Milk Producers Union Ltd. The mode of collection against the sale of milk was in cash and the cash was paid through banking channel. Account statements show turnover was very high, the margins were very low in the business of milk distribution. As per ratio of judgments in Sri Renukeswara Rice Mills vs ITO and ITO vs. Suresh Kumar s cases (supra) it is well settled that since assessee paid amounts to others which could be verified a combined reading of Clauses (f) and (1) of Rule 6DD will take away the transaction from the clutches of Section 40A(3). From the bills produced by the assessee before the assessing officer it is evident that the assessee apart from paying price of the products also paid commission to the payee. Thus, the payee h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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