R.Arun, Udamalpet V. ITO, Pollachi

ITA 269/CHNY/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8038 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 05-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 05-02-2014
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: T VASUDEVAN
• Keywords: Business expenditure; Loose papers; Retraction
• Section: 40A(3); 56

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 269/MDS/2014 / ASSESSMENT YEAR : 2008-09 R. ARUN, S/O V.RAMANUJAM, 2/52, MODAKKUPATTI, DEEPALAPATTI (PO), UDUMALPET. PAN AJSPA1486F APPELLANT) V. THE INCOME-TAX OFFICER, WARD-I(1), POLLACHI. RESPONDENT) / APPELLANT BY : SHRI T. VASUDEVAN, ADVOCATE / RESPONDENT BY : SHRI A.V.SREEKANTH, JCIT ! / DATE OF HEARING : 05.01.2016 '# ! / DATE OF PRONOUNCEMENT: 10.02.2016 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DA TED - - ITA 269/14 2 20.11.2013 FOR THE ASSESSMENT YEAR 2008-09. 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD T O CONFIRMING THE ADDITION OF ` 30,00,000/- AS ADDITIONAL INCOME. 3. THE FACTS OF THE ISSUE ARE THAT THERE WAS A SURV EY CONDUCTED U/S.133A ON 25.3.2009 IN THE BUSINESS PRE MISES OF THE ASSESSEE. THE ASSESSEE HAS FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 30.9.2008 ADMITTING A TOTAL INCOME OF ` 2,04,810/-. DURING THE COURSE OF SURVEY, THE ASSESSEE MADE VOLUNTARY ADMISSION OF ` 30,00,000/- AND AGREED TO PAY TAX DEMAND ON OR BEFORE 31.3.2009. HOWEVER, ON 1.4.2009, THE ASSESSEE FILED A RETRACTION LETTER ST ATING THAT AS HE WAS IN A HURRY TO LEAVE THE PLACE FOR A FOREIGN TRI P, HE OFFERED `3 0 LAKHS AS INCOME WITHOUT APPLYING HIS MIND, AT THE T IME OF INSPECTION. IT WAS ALSO STATED THAT THE SWORN STAT EMENT WAS GIVEN IN A CONFUSED STATE OF MIND IN THE SITUATIONS PREVAILED AT HIS RESIDENCE. HOWEVER, THE ASSESSING OFFICER OVER LOOKING THE RETRACTION, MADE ADDITION OF ` 30 LAKHS ON THE BASIS OF SWORN STATEMENT RECORDED ON 25.3.2009. AGGRIEVED, THE AS SESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 4. ON APPEAL, THE COMMISSIONER OF INCOME-TAX(APPEAL S) - - ITA 269/14 3 CONFIRMED THE FINDING OF THE ASSESSING OFFICER ON T HE REASON THAT THE ASSESSEE STATED IN THE SWORN STATEMENT AS FOLLO WS: MY ACCOUNTS HAVE TO BE FINALISED FOR THE LAST F.Y. I.E. A.Y. 2009-10. FROM YOUR FINDINGS OF THE LOOSE SHEE TS OF BILLS FOUND IN MY PREMISES. I CAN ONLY SAY THAT ALL THESE ARE ACCOUNTED, HOWEVER, I AM READY TO OFFER T OTAL INCOME OF ` .30,00,000/- AND I AM READY TO PAY THE TAX ON OR BEFORE 31.03.09 ACCORDING TO THE COMMISSIONER OF INCOME-TAX(APPEALS ), THE ABOVE STATEMENT SHOWS THAT THE ASSESSEE HAD ADMITTE D AN INCOME OF ` 30 LAKHS DURING THE COURSE OF SURVEY AND THE ASSESSEE PLEADED THAT FURTHER STOCK NEED NOT BE TAK EN AS HE WAS IN A HURRY TO BOARD A FLIGHT TO OVERSEAS DESTIN ATION ON THE SAME DAY. THEREFORE, THE ASSESSING OFFICER HAS NOT TAKEN FULL STOCK OF THE ASSESSEE OF COCONUT AND COPRA ETC. FU RTHER, THE ASSESSING OFFICER HAS MADE IT CLEAR THAT THE ASSESS EE HIMSELF IS A POST GRADUATE, WELL TRAVELLED AND KNOWLEDGEABLE I N THIS LINE OF BUSINESS AND IS SUPPLYING COPRA TO ONE OF THE BIGGE ST BUYERS OF QUALITY COPRA I.E. MARICO INDUSTRIES AND THEREFORE, THERE IS NO FORCE IN THE ARGUMENT OF THE ASSESSEE AND REJECTED THE GROUND OF APPEAL OF THE ASSESSEE. ACCORDINGLY, THE CIT(APPEA LS) CONFIRMED THE FINDING OF THE AO. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. - - ITA 269/14 4 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE STAT EMENT RECORDED ON 25.3.2009. IN THAT STATEMENT, THE ASSE SSEE OFFERED ADDITIONAL INCOME OF ` 30 LAKHS FOR THE ASSESSMENT YEAR 2008-09 AND VIDE QUESTION NO.5, THE ASSESSEE ANSWERED AS FO LLOWS: 5. FROM YOUR PREMISES WE HAVE TRACED OUT SOME CHIT A BOOKS, SALE AND PURCHASE BILLS AND SOME LOOSE PAPERS. CAN YOU EXPLAIN THE TRANSACTIONS IN CLEAR CUT MANNER. ANS: I PURCHASE COPRA LOCAL FROM COPRA DRYING YARD S, THAT IN WHICH THE BILLS YOU FOUND FROM MY PREMISES. I PURCHASE COPRA FROM LOCAL MARKET AT LOCAL PRICES AN D SUPPLY TO M/S. MARICO LIMITED AT THE PRICE OFFERED TO US. THEIR PRICES ARE INCLUSIVE OF TRANSPORT, ROAD TAXES , PACKING, LOADING ETC. THE APPROPRIATE MARGIN OF PR OFIT IS AROUND ` 0.80 PER KG. I HAVE OFFERED AN INCOME OF ` 2,20,000/- FOR THE A.Y. 2008-09. MY ACCOUNTS HAVE TO BE FINALISED FOR THE LAST F.Y. I.E. A.Y. 2009-10. FROM YOUR FINDINGS OF THE LOOSE SHEETS OF BILLS FOUND IN MY PREMISES. I CAN ONLY SAY THAT ALL THESE ARE ACCOUN TED, HOWEVER, I AM READY TO OFFER TOTAL INCOME OF ` 30,00,000/-, AND I AM READY TO PAY THE TAX ON OR BE FORE 31.03.09. 5.1 AS SEEN FROM THE ABOVE, THERE IS NO CORROBORATI VE MATERIAL TO SUPPORT THE ADDITION OF ` 30 LAKHS EXCEPT THE SWORN STATEMENT. NO MATERIAL WAS FOUND TO PROVE THAT THE RE WAS UNDISCLOSED INCOME OR ANY INFLATION OF EXPENDITURE. ONLY ON THE BASIS OF STATEMENT RECORDED FROM THE ASSESSEE DURIN G THE - - ITA 269/14 5 COURSE OF SURVEY U/S.133A OF THE ACT, THE ADDITION WAS MADE. THIS STATEMENT WAS ALSO RETRACTED BY THE ASSESSEE O N 1.4.2009. IN OUR OPINION, THE STATEMENT GIVEN BY THE ASSESSEE , DURING THE COURSE OF SURVEY U/S.133A, IS NOWHERE SURVIVING AND IT IS NOT POSSIBLE TO HOLD THAT THE ADDITION CAN BE MADE ONLY ON THE BASIS OF SWORN STATEMENT RECORDED WITHOUT ANY SUPPORT OF CORROBORATIVE MATERIAL. THE ADMISSION OF THE ASSES SEE IN THE SWORN STATEMENT RECORDED U/S.133A OF THE ACT IS NOT A CONCLUSIVE EVIDENCE. FURTHER, IT WAS HELD BY THE SUPREME COUR T IN THE CASE OF PULLANGODE RUBBER PRODUCE CO. VS. STATE OF KERAL A AND ANR. (91 ITR 18), THAT AN ADMISSION IS EXTREMELY IMPORTA NT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIV E. IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT I S INCORRECT. IN THE CASE OF SAVEETHA INSTITUTE OF MEDICAL AND TE CHNICAL SCIENCES V. ACIT (2011) [12 (TRIB) 376] (CHEN), WHE REIN ADDITION TOWARDS CAPITATION FEE ALLEGEDLY COLLECTED BY THE I NSTITUTE WAS MADE SOLELY ON THE BASIS OF STATEMENT OF STUDENTS A ND STAFF RECORDED UNDER SEC.132(4) WAS MADE. EXCEPT FOR A N OTE GIVING THE BREAKUP OF NUMBER OF STUDENTS WHO WERE ADMITTED UNDER DIFFERENT QUO0TAS IN VARIOUS COURSES, THERE WAS NO INCRIMINATING - - ITA 269/14 6 MATERIAL AS TO THE RECEIPT OF CAPITATION FEE. REFE RRING TO THE INSTRUCTION NO.286/2/2003-IT(INV.II) DATED 10.3.200 3 ADDITION DELETED AFTER OBSERVING THAT ADMISSION MADE U/S.133 A WAS NOT A VALID EVIDENCE. THEREFORE, IT IS WELL SETTLED JUDI CIAL PROPOSITION THAT MERELY ON THE BASIS OF STATEMENT WHICH IS NOT SUPPORTED BY THE DEPARTMENT AND COGENT MATERIAL CANNOT BE A VALI D ADDITION BASIS FOR SUSTAINING SUCH ADHOC ADDITIONS. IT IS TH E BURDEN OF THE DEPARTMENT TO PROVE THAT THERE EXISTED RELEVANT AND COGENT MATERIAL TO ENABLE THE AO TO MAKE SUCH ADDITIONS. T HE DEPARTMENT HAS GROSSLY FAILED TO PROVE OR DEMONSTRA TE EXISTENCE OF ANY SUCH RELEVANT OR COGENT MATERIAL SUPPORTING THE ADDITION. THE ASSESSEE HAS DEMONSTRATED THAT THE ADDITIONS WE RE NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING TH E COURSE OF SEARCH. EVEN IN THE ABSENCE OF PROOF SUPPORTED WI TH COGENT MATERIAL, THE STATEMENT RECORDED U/S.132(4) BY ITSE LF CANNOT BE TAKEN AS CONCLUSIVE. A PERUSAL OF THE CBDT INSTRUC TION DATED 10.3.2003 REVEALS THAT EVEN THE BOARD IS AWARE OF SUCH LACONIC DISCLOSURES, IT WANTS THEM TO BE BASED ON INCRIMINA TING MATERIAL. THE CBDT ALSO IS NOT IN FAVOUR OF SEARCH ASSESSMENT S BEING BASED ON SUCH DISCLOSURES, IT WANTS THEM TO BE BASE D ON - - ITA 269/14 7 INCRIMINATING MATERIAL. 6. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE RETRACTED THE STATEMENT RECORDED U/S.133A OF THE ACT VIDE ITS LETTER DATED 1.4.2009 STATING THAT THE INC OME-TAX TEAM VISITED THE ASSESSEES RESIDENCE, WHEN HE WAS CONDU CTING POOJA ON 13 TH DAY OF DEATH CEREMONY OF HIS GRAND FATHER AND HE W AS ALSO STARTING ABROAD ON THE SAME DAY. HE REQUIRED TO PROCEED TO ABROAD AT 3.30 P.M. AND HE WAS IN TENSION BY THE DI STURBANCE OF THE INCOME-TAX TEAM AT THE TIME OF POOJA. THEREFOR E, HE WANTED TO GET RID OF THE INCOME-TAX TEAM AND AGREED TO OFF ER ` 30 LAKHS AS INCOME. LATER, HE CAME TO KNOW THAT IN A CONFUS ED STATE OF MIND, HE WAS WRONGLY OFFERED ` 30 LAKHS AS INCOME AND HE FILED A LETTER TO THE INCOME-TAX OFFICER TO WITHDRAW THE OFFER. 7. IN OUR OPINION, THE ADDITION CANNOT BE SUSTAINED ONLY ON THE BASIS OF ADMISSION DURING THE COURSE OF SURVEY. THIS PLEA OF THE LD. AR IS SUPPORTED BY THE JUDGMENT OF THE SUPR EME COURT IN THE CASE OF CIT V. S. KHADER KHAN SON (352 ITR 480) , WHEREIN THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT V. S. KHADER KHAN SON (300 ITR 157) HAS BEEN CONFIR MED, BY OBSERVING THAT SEC.133A DOES NOT EMPOWER IT AUTHORI TY TO - - ITA 269/14 8 EXAMINE ANY PERSON ON OATH, HENCE ANY SUCH STATEMEN T HAS NO EVIDENTIARY VALUE AND ANY ADMISSION MADE DURING SUC H STATEMENT CANNOT, BY ITSELF, BE MADE THE BASIS FOR ADDITION. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. NEXT GROUND IN THIS APPEAL IS WITH REGARD TO CON FIRMING THE ADDITIONS OF ` 19,46,899/- AND ` 14,34,188/- MADE U/S.40A(3) OF THE ACT. 9. THE ASSESSEE MADE THE PAYMENT OF ` 15,34,188/- TO ONE SHRI DHAKSHINAMOORTHY AND ANOTHER PAYMENT OF ` 20,46,899/- TO ONE SHRI RAMANTHAN. SUMMONS U/S.131 OF THE ACT WER E ISSUED TO THEM AND THEY WERE APPEARED BEFORE THE AO. THE Y ARE TRADING IN COPRA AND BOTH OF THEM HAVE BANK ACCOUNT S. SHRI DHAKSHINAMOORTHY IS HAVING BANK ACCOUNT WITH TAMIL NADU MERCANTILE BANK AND SHRI RAMANATHAN IS HAVING BANK ACCOUNT WITH SYNDICATE BANK. BOTH OF THEM HAVE AGRICULTURA L LANDS IN ADDITION TO TRADING ACTIVITY. THEY INFORMED THAT T HEY USED TO RECEIVE THE PAYMENTS BY CASH AS PER THE BILLS IN SI NGLE PAYMENT. THOUGH THEY ARE DOING SOME AGRICULTURAL OPERATIONS, THEY ARE MAINLY COPRA TRADERS. THUS, THE AO INVOKING THE PR OVISIONS OF SEC.40A(3), DISALLOWED A SUM OF ` 14,34,188/- OUT OF - - ITA 269/14 9 ` 15,34,188/- IN RESPECT OF SHRI DHAKSHINAMOORTHY AND ` 19,46,899/- OUT OF ` 20,46,899/- FROM SHRI RAMANATHAN. ON APPEAL, THE CIT(APPEALS) CONFIRMED THE FINDING OF T HE AO. 10. THE LD. AR SUBMITTED THAT THE CIT(APPEALS) FAIL ED TO APPRECIATE THAT SEC.40A(3) OF THE ACT CANNOT BE INV OKED ON ESTIMATED ADDITIONS. FURTHER, HE SUBMITTED THAT TH E CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITIONS UNDER SEC.40A(3) WITH REGARD TO THE PAYMENTS FOR THE AGRICULTURAL PR ODUCE, NAMELY COPRA JUSTIFIABLY MADE BY THE ASSESSEE BY CASH AN D WOULD INDEED BE A BUSINESS EXPENDITURE FOR ALLOWANCE WITH IN THE PRECINCTS OF THE LAW. HE RELIED ON THE DECISION OF THE TRIBUNAL, (THIRD MEMBER), COCHIN BENCH IN THE CASE OF M/S. KE ERTHI AGRO MILLS (P) LTD. V. ACIT IN ITA NOS.145/COCH/2014 DA TED 7.5.22015 FOR THE ASSESSMENT YEAR 2010-11 STATING T HAT THERE CANNOT BE ANY DEMAND FOR INVOKING THE PROVISIONS OF SEC.40A(3) OF THE ACT. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED T HE RECORD. SECTION 40A(3) OF THE I.T. ACT DEALS WITH EXPENSES OR PAYMENTS NOT DEDUCTIBLE IN CERTAIN CIRCUMSTANCES AN D THE PROVISIONS OF THE SECTION SHALL HAVE EFFECT NOTWITH STANDING - - ITA 269/14 10 ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PRO VISION OF THE ACT RELATING TO THE COMPUTATION OF INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. SECTION 40A( 3) PROVIDES THAT WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN R ESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DR AWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY TH OUSAND RUPEES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. THE PROVISO TO THE SUB-SECTION IS NOT MATERIAL. A PLAIN READING OF THE SECTION MAKES IT CLEAR THAT AN Y AMOUNT EXPENDED BY AN ASSESSEE EXCEEDING THE SUM OF ` 20,000/- UNLESS THE PAYMENT HAS BEEN MADE IN THE MANNER PROV IDED IN THE SUB-SECTION, SHALL NOT BE DEDUCTED IN COMPUTING THE ASSESSEES TOTAL INCOME ARISING FROM PROFITS AND GA INS OF BUSINESS OR PROFESSION. HOWEVER RULE 6DD PROVIDES CERTAIN EXCEPTIONS TO THE PROVISION UNDER SECTION 40A(3) WH ICH READS AS UNDER: 6DD. NO DISALLOWANCE UNDER SUB-SECTION (3) OF SECT ION 40A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UND ER SUB- SECTION (3A) OF SECTION 40A WHERE A PAYMENT OR AGGR EGATE OF PAYMENTS MADE TO A PERSON IN A DAY OTHERWISE THA N BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT - - ITA 269/14 11 PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES IN THE CASES AND CIRCUMSTANCES SPECIFIED HEREUNDER, NAMELY :- (A) WHERE THE PAYMENT IS MADE TO (I) THE RESERVE BANK OF INDIA OR ANY BANKING COMPAN Y AS DEFINED IN CLAUSE (C) OF SECTION 5 OF THE BANKIN G REGULATION ACT, 1949 (10 OF 1949); (II) THE STATE BANK OF INDIA OR ANY SUBSIDIARY BANK AS DEFINED IN SECTION 2 OF THE STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT, 1959 (38 OF 1959). (III) ANY CO-OPERATIVE BANK OR LAND MORTGAGE BANK. (IV) ANY PRIMARY AGRICULTURAL CREDIT SOCIETY OR ANY PRIMARY CREDIT SOCIETY AS DEFINED U/S. 56 OF THE BANKING REGULATION ACT, 1949 (10 OF 1949). (V) THE LIFE INSURANCE CORPORATION OF INDIA ESTABLI SHED U/S. 3F OF THE LIFE INSURANCE CORPORATION ACT, 1956 (31 OF 1956). (B) WHERE THE PAYMENT IS MADE TO THE GOVERNMENT AND UNDER THE RULES FRAMED BY IT, SUCH PAYMENT IS REQUIRED TO BE MADE IN LEGAL TENDER: (C) WHERE THE PAYMENT IS MADE BY (I) ANY LETTER OF CREDIT ARRANGEMENTS THROUGH A BAN K; (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 BANK MEANS ANY BANK, BANKING COMPANY OR SOCIETY REFERRED TO IN SUB-CLAUSES (I) T O (IV) OF CLAUSE 9A) AND INCLUDES ANY BANK (NOT BEING A BANKING COMPANY 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. - - ITA 269/14 12 (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 SERVICE RENDERED BY THE ASSESSEE TO SUCH PAYEE; (E) WHERE THE PAYMENT IS MADE FOR THE PURCHASE OF (I) AGRICULTURAL OR FOREST PRODUCE; OR (II) THE PRODUCE OF ANIMAL HUSBANDRY (INCLUDING LIVESTOCK, MEAT, HIDES AND SKINS) OR DAIRY OR POULT RY FARMING; (III) OR FISH OR FISH PRODUCTS; OR (IV) THE PRODUCTS OF HORTICULTURE OR APICULTURE. TO THE CULTIVATOR, GROWER OR PRODUCER OF SUCH ARTIC LES, PRODUCE OR PRODUCTS; (F) WHERE THE PAYMENT IS MADE FOR THE PURCHASE OF T HE PRODUCTS MANUFACTURED OR PROCESSED WITHOUT THE AID OF POWER IN A COTTAGE INDUSTRY, TO THE PRODUCER OF SU CH PRODUCTS; (G) 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, I N ANY SUCH VILLAGE OR TOWN; (H) WHERE ANY PAYMENT IS MADE TO AN EMPLOYEE OF THE ASSESSEE OR THE HEIR OF ANY SUCH EMPLOYEE, ON OR IN CONNECTION WITH THE RETIREMENT RETRENCHMENT, RESIGNATION, DISCHARGE OR DEATH OF SUCH EMPLOYEE, O N ACCOUNT OF GRATUITY, RETRENCHMENT COMPENSATION OR SIMILAR TERMINAL BENEFIT AND THE AGGREGATE OF SUCH SUMS PAYABLE TO THE EMPLOYEE OR HIS HEIR DOES NOT EXCEED FIFTY THOUSAND RUPEES; (I) WHERE THE PAYMENT IS MADE BY ANY ASSESSEE BY WA Y OF SALARY TO HIS EMPLOYEE AFTER DEDUCTING THE INCOM E- TAX FROM SALARY IN ACCORDANCE WITH THE PROVISIONS O F SECTION 192 OF THE ACT, AND WHEN SUCH EMPLOYEE (I) IS TEMPORARILY POSTED FOR A CONTINUOUS PERIOD O F FIFTEEN DAYS OR MORE IN A PLACE OTHER THAN HIS NORMAL - PLACE OF DUTY OR ON A SHIP; AND (II) DOES NOT MAINTAIN ANY ACCOUNT IN ANY BANK AT SUCH PLACE OR SHIP. - - ITA 269/14 13 (J) WHERE THE PAYMENT WAS REQUIRED TO BE MADE ON A DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUN T OF HOLIDAY OR STRIKE; (K) WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON; (L) WHERE THE PAYMENT IS MADE BY AN AUTHORIZED DEAL ER OR A MONEY CHANGER AGAINST PURCHASE OF FOREIGN CURRENCY OR TRAVELERS CHEQUES IN THE NORMAL COURSE OF HIS BUSINESS. EXPLANATION FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSIONS AUTHORIZED DEALER OR MONEY CHANGER MEANS A PERSON AUTHORIZED AS AN AUTHORIZED DEALER O R A MONEY CHANGER TO DEAL IN FOREIGN CURRENCY OR FOREIG N EXCHANGE UNDER ANY LAW FOR THE TIME BEING IN FORCE. 12. FROM THE ABOVE PROVISIONS, IT IS CLEAR THAT IN ORDER TO FALL WITHIN THE EXEMPTION CLAUSE, THE ASSESSEE HAS TO MA KE PAYMENT IN EXCESS OF ` 20,000/- BY ACCOUNT PAYEE CHEQUE OR BY DEMAND DRAFT. THE ASSESSEE SHALL PROVE THAT IT WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEES HAVING REGARD TO T HE NATURE OF TRANSACTIONS. THE ASSESSEE SHALL PROVE WITH EVIDEN CE TO THE SATISFACTION OF THE AO AND ESTABLISH THE GENUINENES S OF THE PAYMENT AND IDENTITY OF THE PAYEES. THEREFORE, THE BURDEN OF PROVING THE ABOVE CONDITIONS AS STIPULATED UNDER RU LE 6DD BY FURNISHING THE NECESSARY EVIDENCE IS OBVIOUSLY ON T HE ASSESSEE. 13. IN THE PRESENT CASE, THE AO IDENTIFIED THE PART IES I.E. SHRI DHAKSHINAMOORTHY AND RAMANATHAN, TO WHOM THE PAYMEN TS - - ITA 269/14 14 WERE MADE BY THE ASSESSEE IN VIOLATION OF SEC.40A(3 ) OF THE ACT. THERE WAS A PAYMENT OF ` 15,34,188/- TO SHRI DHAKSHINAMOORTHY. HOWEVER, AFTER CONSIDERING THE A MOUNT OF `1 ,00,000/- AS HIS OWN AGRICULTURAL PRODUCE, BY APPLY ING THE PROVISIONS OF SEC.40A(3), THE AO MADE THE ADDITION OF `1 4,34,188/-. SIMILARLY, OUT OF TOTAL PURCHASE OF ` 20,46,899/- FROM SHRI RAMANATHAN, THE AO CONSIDERED ` 1,00,000/- FROM HIS OWN AGRICULTURAL PRODUCE AND THE BALANCE OF ` 19,46,899/- CONSIDERED FOR DISALLOWANCE U/S.40A(3) OF THE ACT, AS HE WAS DEALING AS A TRADER. REGARDING THE IDENTITY OF THE RECIPIENTS, THERE IS NO DISPUTE. THE AMOUNT OF ` 1,00,000/- TO BE CONSIDERED AS AGRICULTURAL PRODUCE IN THEIR HANDS A ND SEC.40A(3) DOES NOT APPLY. THE CONTENTION OF THE LD. AR IS TH AT THESE TWO PARTIES ARE CULTIVATORS. THEY ARE NOT ONLY AGRICUL TURISTS BUT ALSO TRADERS. BEING SO, HE RELIED ON THE DECISION OF T HE TRIBUNAL IN THE CASE OF KEERTHI AGRO MILLS (P) LTD. (SUPRA) IS NOT APPROPRIATE. IN THAT CASE, THERE WAS A PAYMENT OF ` 23,17,32,420/-, WHICH IS PURCHASES OF PADDY BY CASH PAYMENT IN RESPECT OF 14 ,744 PARTIES. THE ASSESSEE HAS NEVER GIVEN THE NAME AND ADDRESS OF THE PARTIES AND NOT PRODUCED THE PARTIES BEFORE THE ASSESSING - - ITA 269/14 15 AUTHORITY. IDENTITY WAS ALSO NOT PROVED AND THE EN QUIRY COULD NEVER PROGRESS INTO THE NEXT LEVEL, WHERE WHETHER T HE OCCUPATION OF THESE PERSONS WAS FARMING OR NOT. THE AO CONSI DERED 75% OF ` 23,17,32,420/- AND DISALLOWANCE WAS WORKED OUT AT ` 17,37,99,315/- BY INVOKING THE PROVISIONS OF SEC.40 A(3) OF THE ACT. HOWEVER, IN THE PRESENT CASE, THE PARTIES ARE IDENTIFIED AND THE AMOUNTS ARE ALSO QUANTIFIED. BEING SO, THE RAT IO OF THE ABOVE DECISION OF THE TRIBUNAL CANNOT BE APPLIED. MORE S O, OCCUPATION OF SHRI DHAKSHINAMOORTHY AND SHRI RAMANATHAN IS NOT SOLELY AGRICULTURAL PRODUCE AND THEY ARE TRADING ALSO. TH ERE IS NO DISPUTE IN THIS FACT AND THE PROVISIONS OF RULE 6DD CANNOT BE APPLIED. ACCORDINGLY, THIS GROUND OF APPEAL IS DIS MISSED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 10 TH OF FEBRUARY, 2016 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 10 TH FEBRUARY, 2016. MPO* - - ITA 269/14 16 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.