Sri. Maruthi Traders, Hosadurga V. ITO, Chitradurga

CO 3/BANG/2016

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4024 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 28-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT
• Assessee Lawyers: C RAMESH
• Keywords: Set aside
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1421/BANG/2015 ASSESSMENT YEAR : 2010-11 THE INCOME TAX OFFICER, WARD 2, CHITRADURGA. VS. M/S. SRI MARUTHI TRADERS, MAIN ROAD, BELAGUR. HOSADURGA TQ. CHITRADURGA DIST. PAN: AAEFM 4207H APPELLANT RESPONDENT CO NO.3/BANG/2016 [IN ITA NO.1421/BANG/2015] ASSESSMENT YEAR : 2010-11 M/S. SRI MARUTHI TRADERS, MAIN ROAD, BELAGUR. PAN: AAEFM 4207H VS. THE INCOME TAX OFFICER, WARD 2, CHITRADURGA. CROSS OBJECTOR RESPONDENT REVENUE BY : SHRI SUNIL KUMAR AGARWALA, JT. CIT(DR) ASSESSEE BY : SHRI C. RAMESH, CA DATE OF HEARING : 15.06.2016 DATE OF PRONOUNCEMENT : 14.07.2016 ITA NO.1421/BANG/2015 & CO NO.3/BANG/2016 PAGE 2 OF 12 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THE APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 31.08.2015 OF THE CIT(APPEALS), DAVANGERE FOR THE ASSESSMENT YEAR 2010-11. 2. THE ASSESSEE IS A PARTNERSHIP FIRM, ENGAGED IN T RADING OF COCONUTS. FOR THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE FILE D THE RETURN OF INCOME DECLARING INCOME OF RS.60,300. THE SCRUTINY ASSESSM ENT U/S.143(3) R.W.S.144A WAS COMPLETED ON 28/3/2013 BY COMPUTING A TOTAL INCOME OF RS.81,84,540 AFTER DISALLOWANCES OF AN AMOUNT OF RS .13,95,106/- OUT OF DE- HUSKING CHARGES, RS.3,09,429/- OUT OF HAMALI, LOADI NG & UNLOADING CHARGES AND RS.63,79,700/- U/S.40A(3) OF THE ACT. 3. AS FAR AS DEHUSKING CHARGES ARE CONCERNED, THE A SSESSEE SUBMITTED BEFORE THE AO THAT THE ASSESSEES LABOURERS ARE EMP LOYED TO DE-HUSK THE COCONUTS AT THE PURCHASE POINT AND THAT THE HUSK IS LEFT WITH THE SELLERS AND THEREFORE ACCOUNTING SALES OR CLOSING STOCK OF HUSK DOES NOT ARISE. HOWEVER, THE ASSESSEE HAS NOT EXPLAINED AS TO WHY T HE ASSESSEE HAS TO EMPLOY ITS OWN LABOURERS TO DE-HUSK THE COCONUTS AN D THEREAFTER TAKE THE COCONUTS ONLY AND LET THE HUSK WITH THE SELLERS. A CCORDING TO THE AO, THE ASSESSEE IS PURCHASING COCONUTS THAT HAVE ALREADY B EEN DE-HUSKED. THE AO DID NOT ACCEPT THE ASSESSEES STATEMENT THAT THE DE-HUSKING CHARGES ARE ACCOUNTED AND CLAIMED AS EXPENDITURE AND THE HU SK WHICH IS USED IN ITA NO.1421/BANG/2015 & CO NO.3/BANG/2016 PAGE 3 OF 12 VARIOUS INDUSTRIES INCLUDING COIR INDUSTRY IS LEFT WITH THE SELLERS. THE AO OBSERVED THAT THE ASSESSEE IS RUNNING A COIR PRODUC TS UNIT AND THE HUSK IS THE MAIN RAW MATERIAL FOR THAT INDUSTRY. THEREFORE , THE ASSESSEES STAND THAT THE HUSK IS LEFT WITH THE SELLERS WAS NOT BELI EVABLE/ACCEPTABLE ESPECIALLY WHEN THE LABOURERS PRODUCED BY THE ASSES SEE BEFORE THE A.O. STATED THAT THEY ARE EMPLOYED TO ISSUE HUSK TO THE COIR INDUSTRY RUN BY THE ASSESSEE. IN VIEW OF THE ABOVE, THE SUM OF RS.13,95 ,106/- CLAIMED TOWARDS DE-HUSKING CHARGES WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME BY THE AO. 4. DURING THE APPELLATE PROCEEDINGS BEFORE THE CIT( APPEALS), THE ASSESSEE FILED WRITTEN SUBMISSIONS AS UNDER:- A. THE ASSESSEE PRODUCED ALL THE 1173 NUMBER OF V OUCHERS FOR AOS PERUSAL. B. THE HUSK, AFTER DE-HUSKING, GOES TO THE SELLER/ FARMER FOR BEING USED AS FUEL. C. DE-HUSKING IS DONE AT PURCHASERS POINT AND LABOU R OF THE ASSESSEE WHO ACCOMPANIED THE TRUCKS DO DE-HUSKING. D. DE-HUSKED COCONUTS ARE MORE ECONOMICAL THAN UN-H USKED COCONUTS SINCE THE COST OF TRANSPORTATION IS MORE I N THE CASE OF LATTER. E. THE LABOURERS WHO HAVE PRODUCED BEFORE THE AO A DMITTED THE FACT OF HAVING TRAVEL IN THE TRUCKS TO THE PLACE OF FARMERS FOR THE HE-HUSKING. F. THE AO INSTEAD OF RECORDING THERE STATEMENTS SI MPLY TOOK THEIR SIGNATURE AGAINST THEIR NAMES. ITA NO.1421/BANG/2015 & CO NO.3/BANG/2016 PAGE 4 OF 12 G. THE AO CAME TO THE CONCLUSION THAT THE EXPENSES WERE NOT GENUINE ON THE BASIS OF THE PRESUMPTION AND ASSUMPT IONS. 5. THE CIT(APPEALS) OBSERVED THAT THE ASSESSEE HAS BROUGHT OUT DETAILED FACTS THAT IT HAS PURCHASED COCONUTS AFTER BEING DE-HUSKED TO FACILITATE TRANSPORTATION TO CARRY MORE COCONUTS. HE NOTED THAT THE A.O. MADE THE ADDITION ON PRESUMPTION THAT DE-HUSKED ITE MS BRING BETTER REVENUE WHICH WILL BE USED IN VARIOUS INDUSTRIES IN CLUDING COIR INDUSTRY. BUT THE ASSESSEE HAS EXPLAINED HOW PURCHASE OF DE-HUSKE D COCONUTS ARE BENEFICIAL, COST WISE AS WELL AS TRANSPORTING THE C OCONUTS FROM PURCHASE POINT TO SHOP. THE CIT(A) HAS POINTED OUT THAT THE A.O. HAS NOT RECORDED THE STATEMENT OF LABOURERS TO ASCERTAIN THE VERACIT Y OF PAYMENT OF DE- HUSKING CHARGES, BUT SIMPLY WRITTEN THEIR NAMES AGA INST THEIR SIGNATURES. THE CIT(A) HELD THAT A.O. FAILED TO PROVE THAT DE-H USKING CHARGES HAVE NOT BEEN INCURRED. HOWEVER, THE CIT(A) OBSERVED THAT I N THIS KIND OF BUSINESS, WHERE THE ASSESSEE MAKES VOUCHERS AT HIS FREEWILL, INFLATION OF EXPENSES CANNOT BE RULED OUT AND THEREFORE HELD THAT RS.2,79 ,020/- BEING 20% OF DE- HUSKING CHARGES CAN REASONABLY BE PRESUMED TO BE EX CESSIVE AND UPHELD THE ADDITION TO THIS EXTENT. RELIEF GRANTED TO THE ASSESSEE WAS RS.11,16,080/-. 6. AGGRIEVED, THE DEPARTMENT IS IN APPEAL AND HAS R AISED GROUND NO.2 BEFORE US WHICH IS AS FOLLOWS:- ITA NO.1421/BANG/2015 & CO NO.3/BANG/2016 PAGE 5 OF 12 WHETHER THE HONBLE CIT(APPEAL) IS JUSTIFIED IN GR ANTING RELIEF TO THE ASSESSEE TAKING A COMPLETELY DIFFERENT VIEW TAKEN BY THE AO, WITHOUT CONSIDERING THE FACTS THAT WHEY THE ASS ESSEE LEAVING HUSK OF COCONUT WITH THE SELLERS, THE RAW MATERIAL CAN BE USED IN COIR INDUSTRY RUN BY HIM EVEN INCURRING DE-HUSKING EXPENSES? 7. THE ASSESSEE IN ITS CO IN GROUND NO.2 RAISED OBJ ECTION, AS IT IS AGGRIEVED BY THE ORDER OF CIT(APPEALS) SUSTAINING A N ADDITION OF RS.2,79,020 WITH RESPECT TO DEHUSKING CHARGES. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSI ONS MADE BEFORE THE CIT(APPEALS). THE ASSESSEE HAD SUBMITTED THE DETA ILS OF PURCHASE OF COCONUTS AFTER DEHUSKING. IT WAS EXPLAINED THAT T HE DEHUSKED COCONUTS ARE BENEFICIAL TO THE ASSESSEE IN AS MUCH AS TRANSP ORTATION IS EASIER AND IS MORE VIABLE COST-WISE ALSO. A LIST OF 1173 NOS. OF VOUCHERS WAS PRODUCED BEFORE THE AO. IT WAS SUBMITTED THAT THE DEHUSKING IS DONE AT THE PURCHASE POINT AND LABOURERS OF THE ASSESSEE WERE SENT IN TR UCKS TO DO DEHUSKING. THE AO HAS NOT RECORDED THE STATEMENT OF LABOURERS PRODUCED BEFORE HIM, BUT SIMPLY WROTE THEIR NAMES AGAINST THE SIGNATURE. THE CIT(APPEALS) WAS OF THE VIEW THAT THERE WOULD BE SOME INFLATION IN T HE EXPENSES CLAIMED BY THE ASSESSEE AND MADE A FAIR ESTIMATE THAT 20% OF D EHUSKING CHARGES TO BE EXCESSIVE AND THEREFORE UPHELD THE ADDITION TO T HE EXTENT OF 20% OF DEHUSKING CHARGES. WE ARE OF THE OPINION THAT IN THIS KIND OF BUSINESS ITA NO.1421/BANG/2015 & CO NO.3/BANG/2016 PAGE 6 OF 12 WHERE LABOUR IS EMPLOYED AND VOUCHERS ARE PREPARED BY THE ASSESSEE, THERE OUGHT TO BE CERTAIN INFLATION IN THE EXPENSES AND THEREFORE WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(APPEALS) IN DETER MINING 20% OF DEHUSKING CHARGES TO BE EXCESSIVE. WE FIND THAT THE ADDITION SUSTAINED BY THE CIT(APPEALS) IS REASONABLE AND THEREFORE WE CONFIRM THE SAME. WE DISMISS THE GROUND RAISED BY THE DEPARTMENT IN ITS APPEAL AS WELL AS BY THE ASSESSEE IN ITS CO ON THIS ISSUE. 9. THE NEXT ISSUE RELATES TO DISALLOWANCE OF HAMALI , LOADING AND UNLOADING CHARGES. THE AO FOUND AN AMOUNT OF RS. 5,77,854/- AND RS. 6,59,863/- WAS CLAIMED AS EXPENDITURE TOWARDS LOADI NG AND UNLOADING CHARGES AND HAMALI CHARGES RESPECTIVELY. THE ASSES SEE PRODUCED 805 VOUCHERS FOR HAMALI PAYMENTS AND 244 VOUCHERS FOR T HE LOADING & UNLOADING CHARGES BEFORE THE AO FOR EXAMINATION. IT WAS SUBMITTED THAT THE EXPENSES ARE IN THE NATURE OF PAYMENT TO COOLIE S WHICH ASSESSEE HAS BEEN FOLLOWING FOR THE LAST 30 YEARS CONSISTENTLY AND NO ADDITION HAS BEEN MADE IN SCRUTINY FOR THE A.Y.2009-10 ON THIS ACCOUN T. THE ASSESSEE ALSO SUBMITTED THAT HE WAS READY TO PRODUCE ALL THE LABO URERS FOR EXAMINATION AND ALSO PRODUCED 10 TO 15 LABOURERS BEFORE THE AO FOR EXAMINATION. HOWEVER, ON THE GROUND THAT THE ASSESSEE FAILED TO PRODUCE DETAILS OF NUMBER OF COCONUTS LOADED/UNLOADED PER DAY AND THAT THE VOUCHERS FOR SUCH EXPENSES WERE SELF MADE ONES, THE AO DISALLOWE D RS.3,09,429/- BEING 25% OF THE EXPENSES. ITA NO.1421/BANG/2015 & CO NO.3/BANG/2016 PAGE 7 OF 12 10. ON APPEAL BEFORE THE CIT(APPEALS), THE ASSESSEE ALSO PRODUCED COPY OF VOUCHERS FOR HAMALI CHARGES AND LOADING & U NLOADING CHARGES. THE ASSESSEE SUBMITTED THAT EVEN THOUGH LABOURERS F OR HAMALI, LOADING AND UNLOADING CHARGES WERE PRODUCED BEFORE THE A.O. , HE FAILED TO RECORD THE STATEMENT FROM THEM. 11. THE CIT(APPEALS) NOTED THAT THE SAMPLE VOUCHERS PRODUCED BEFORE HIM WERE IN ORDER, HOWEVER, HE OBSERVED THAT THE VO UCHERS ARE SELF MADE ONES AND IN MOST OF THE VOUCHERS, FULL NAME IS NOT WRITTEN AND ONLY ADDRESS IS WRITTEN. HE FURTHER OBSERVED THAT FROM THE STYL E OF SIGNATURES, THE LABOURERS ARE ILLITERATES AND CAME TO THE CONCLUSIO N THAT THE LABOURERS SIGNED THE VOUCHERS WITHOUT KNOWING THE CONTENT. H E WAS OF THE VIEW THAT INFLATION OF EXPENSES COULD NOT BE RULED OUT. THE CIT(A) THEREFORE RESTRICTED THE DISALLOWANCE TO 10% OF TOTAL EXPENDI TURE. 12. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), BOT H THE REVENUE AND THE ASSESSEE BY WAY OF CO ARE IN APPEAL BEFORE US. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE LD. AR FOR THE ASSESSEE SUBMITTED BEF ORE US THAT THOUGH LABOURERS WERE PRODUCED BEFORE THE AO, BUT THE AO F AILED TO RECORD THEIR STATEMENT. HE SUBMITTED THAT SAMPLE VOUCHERS WERE PRODUCED BEFORE THE ITA NO.1421/BANG/2015 & CO NO.3/BANG/2016 PAGE 8 OF 12 CIT(APPEALS), BUT THE CIT(A) THOUGH FOUND THEM TO B E IN ORDER, HE HOWEVER WAS OF THE VIEW THAT THE LABOURERS WERE ILLITERATES AND WOULD HAVE SIGNED THE VOUCHERS WITHOUT KNOWING THE CONTENTS. HE WAS OF THE VIEW THAT WHEN SELF-MADE VOUCHERS ARE MADE, THERE IS A TEMPTATION TO INFLATE THE EXPENSES. IN THESE CIRCUMSTANCES, THE CIT(A) RESTRICTED THE D ISALLOWANCE AT 10% OF TOTAL EXPENDITURE. 14. WE SUBSCRIBE TO THE VIEW OF THE CIT(APPEALS) TH AT IN THE SELF-MADE VOUCHERS, THE PROBABILITY OF INFLATION HAS TO BE TA KEN INTO ACCOUNT. THE CIT(A) HAS REASONABLY RESTRICTED THE DISALLOWANCE T O THE EXTENT OF 10% OF THE TOTAL EXPENDITURE. HENCE, WE CONFIRM THE ORDER OF THE CIT(APPEALS) AND DISMISS THE RESPECTIVE GROUNDS RAISED BY THE DEPAR TMENT IN ITS APPEAL AS WELL AS BY THE ASSESSEE IN ITS CO ON THIS ISSUE. 15. THE NEXT ISSUE IS REGARDING CASH PAYMENTS IN CO NTRAVENTION OF PROVISIONS OF SECTION 40A(3). THE AO NOTED THAT A LL THE PAYMENTS MADE TOWARDS PURCHASE OF COCONUTS ARE MADE BY CASH AND T HE PAYMENT IN 239 CASH BILLS/VOUCHERS EXCEEDS RS.20,000/- TOTALLING T O RS.63,79,700/-. THE ASSESSEES CONTENTION WAS THAT WHEREVER BILLS EXCEE D RS.20,000/-, THE NAME OF THE ROUTE IS MENTIONED AND ON THE REVERSE O F THE BILL A LIST OF SELLERS AND AMOUNTS PAID TO THEM ARE NOTED. THE AO WAS OF THE OPINION THAT THE ASSESSEE DOES NOT PURCHASE COCONUTS DIRECTLY FROM F ARMERS AND THAT THE NUTS ARE BROUGHT TO THE ASSESSEE BY A TRADER OR AGE NT. MOREOVER, THE 18 FARMERS PRODUCED BEFORE THE A.O. HAVE FILED A COPY OF RTCS. ON ITA NO.1421/BANG/2015 & CO NO.3/BANG/2016 PAGE 9 OF 12 VERIFICATION OF THE SAME, IT WAS SEEN THAT ONLY IN SIX RTCS THE CROP GROWN IS SHOWN AS COCONUT AND ALL THE RTCS SHOW THAT THE LAND HELD ARE DRY LANDS AND VARIOUS OTHER CROPS INCLUDING ARECA ARE BEING C ULTIVATED BY THE HOLDERS OF THE RTC. HENCE THE ASSESSEE HAS FAILED TO PROVE THAT THE COCONUTS ARE PURCHASED FROM THE FARMERS. THE AO FURTHER OBSERV ED THAT THE ASSESSEES CLAIM THAT WHENEVER THE BILL AMOUNT EXCEEDS RS.20,0 00/- A LIST OF SELLERS ARE NOTED ON THE REVERSE OF THE BILLS ACTUALLY GOES TO PROVE THE FACT THAT COCONUTS ARE NOT PURCHASED INDIVIDUALLY FROM FARMER S BUT ARE BEING PURCHASED AT PARTICULAR PURCHASE POINT. FURTHER TH E NAME OF THE ROUTE OF PURCHASE IS ONLY MENTIONED ON THE BILLS AND NAMES O F THE SELLERS ARE NOT MENTIONED, IT IS ONLY WRITTEN ON THE REVERSE OF THE BILLS. NONE OF THE FARMERS WHO APPEARED BEFORE THE A.O. HAVE PRODUCED ANY BILL OR VOUCHER OR ANY KIND OF EVIDENCE TO SHOW THAT THEY HAVE SOLD COCONU TS TO THE ASSESSEE. THE AO THEREFORE CONCLUDED THAT THE ASSESSEE HAS FA ILED TO PROVE THAT THE COCONUTS ARE PURCHASED DIRECTLY FROM FARMERS. AS T HE PAYMENTS ARE MADE IN CASH AND IN THE PAYMENTS IN THE CASE OF 3239 BIL LS/VOUCHERS EXCEEDS RS.20,000/- AGGREGATING TO RS.63,79,000/- ARE IN CO NTRAVENTION OF THE PROVISIONS OF THE SECTION 40A(3), A SUM OF RS.63,7 9,700/- WAS, THEREFORE, DISALLOWED AND ADDED BACK TO THE TOTAL INCOME. 16. THE CONTENTIONS OF THE ASSESSEE BEFORE THE CIT( A) ARE THAT, COCONUTS ARE PRODUCTS OF FARMERS IN RURAL AREAS AND THE FARMERS NEED TO BE PAID ONLY IN CASH AND EACH PAYMENT WAS LESS THAN RS .20,000/- EVEN THOUGH EACH TRANSACTION MENTIONED IN THE VOUCHER WA S FOR MORE THAN ITA NO.1421/BANG/2015 & CO NO.3/BANG/2016 PAGE 10 OF 12 RS.20,000/- AS THE VOUCHERS WERE PREPARED FOR TRANS ACTION IN RESPECT OF 3 TO 4 FARMERS. VOUCHERS AND BILLS WERE PRODUCED BEF ORE THE CIT(A), WHICH HAD BEEN PRODUCED BEFORE THE AO DURING ASSESSMENT P ROCEEDINGS IN A BOOKLET FORM. THE CIT(APPEALS) OBSERVED THAT THE A O HAS NOT DISPUTED THE GENUINENESS OF PURCHASES. THE ASSESSEE SUBMITTED T HAT THE GP AND NP RATIO INCREASED SUBSTANTIALLY DURING THE YEAR UNDER CONSIDERATION COMPARED TO THE PREVIOUS TWO YEARS, EVEN THOUGH TURNOVER HAS INCREASED SUBSTANTIALLY. 17. DURING APPELLATE PROCEEDINGS, THE ASSESSEE HAS FURNISHED A BOOKLET CONTAINING COPIES OF ALL VOUCHERS FOR PURCHASE OF C OCONUTS. THE CIT(APPEALS) ON EXAMINATION OF THE SAME FOUND THAT, WHEREVER BILL EXCEEDED RS.20,000/-, THE VOUCHER IS MADE IN THE N AME OF PURCHASE ROUTE NOT IN ANY INDIVIDUAL NAME ON THE REVERSE OF THE BI LL, BUT 3 TO 4 TRANSACTIONS ARE RECORDED WHEREIN THE NAME OF THE PERSONS AND AM OUNT ARE MENTIONED WHICH ARE LESS THAN RS.20,000/- IN EACH CASE. THES E VOUCHERS WERE SUBMITTED TO THE AO DURING THE ASSESSMENT PROCEEDIN GS. 18. THE CIT(APPEALS) HELD THAT THE ASSESSEE IS INTO THIS BUSINESS FOR THE PAST OVER 30 YEARS. THIS IS FOR THE SECOND TIME TH AT THE PROVISIONS OF SEC. 40A(3) HAS BEEN APPLIED IN THE YEAR (APART FROM A.Y . 2009-10 WHEREIN IN THE SET ASIDE PROCEEDINGS THE ASSESSEES CLAIM WAS ACCEPTED) AND THERE WAS NO DISALLOWANCE U/S. 40A(3) FOR THE A.Y. 2008-0 9. IN VIEW OF THE ABOVE, THE CIT(A) CAME TO THE CONCLUSION THAT COCON UTS ARE PURCHASED ITA NO.1421/BANG/2015 & CO NO.3/BANG/2016 PAGE 11 OF 12 FROM FARMERS AND ALSO THE VALUE OF EACH PURCHASE IS LESS THAN RS.20,000/- HENCE, SEC.40A(3) IS NOT APPLICABLE FOR THE PURCHAS ES MADE FROM FARMERS. ACCORDINGLY, THE CIT(A) DELETED THE ADDITION. 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES. WE FIND THE FACT REMAINS THAT THE COCONUTS ARE PRODUCTS OF FARMERS IN RURAL AREAS AND THEY NEED TO BE PAID IN CASH ONLY AND EACH PAYMENT ON THE REVERSE OF THE BILL IS LESS THAN RS. 20,000, EVEN THOUGH EACH TRANSACTION MENTIONED IN THE VOUCHER WAS MORE THAN RS.20,000 SINCE THE VOUCHERS WERE PREPARED FOR TRANSACTIONS IN RESPECT OF 3 TO 4 FARMERS. PROVISIONS OF SECTION 40A(3) SHALL NOT APPLY TO PUR CHASES FROM FARMERS IN RURAL AREAS AS IT IS COVERED BY EXEMPTION UNDER PRO VISO TO SECTION 40A(3). FURTHER, THE CIT(APPEALS) HAS FOUND THAT THE ASSESS EE HAS BEEN IN THIS BUSINESS FOR THE PAST 30 YEARS AND FOR THE AY 2008- 09, NO DISALLOWANCE WAS MADE U/S. 40A(3), WHEREAS IN THE AY 2009-10 THE ASSESSEES CLAIM WAS ACCEPTED BY THE AO IN THE SET ASIDE PROCEEDINGS . SINCE COCONUTS PURCHASES ARE FROM FARMERS AND IN THE PRESENT YEAR, EACH PAYMENT IS LESS THAN RS.20,000, PROVISIONS OF SECTION 40A(3) IS NOT APPLICABLE. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(APPEALS) ON THIS IS SUE AND DISMISS THE GROUND RAISED BY THE DEPARTMENT. ITA NO.1421/BANG/2015 & CO NO.3/BANG/2016 PAGE 12 OF 12 20. IN THE RESULT THE APPEAL BY THE DEPARTMENT AND THE CO BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF JULY, 2016. SD/- SD/- ( INTURI RAMA RAO ) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 14 TH JULY, 2016. /D S/ COPY TO: 1. REVENUE 2. ASSESSEE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.