Appeal details
Counselvise Citation
[2022] 105 COUNSELVISE.COM (IT) 4319 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 2 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
19-04-2022
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
B
Assessment Year
2012-2013
Appeal Filed On
12-02-2019
Judgement Text
आयकर अपीलीय अिधकरण, ’बी’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ŵी वी दुगाŊ राव Ɋाियक सद˟ एवं ŵी जी. मंजुनाथा, लेखा सद˟ के समƗ Before Shri V. Durga Rao, Judicial Member & Shri G. Manjunatha, Accountant Member आयकर अपील सं./I.T.A. Nos.355, 356, 357 & 358/Chny/2019 िनधाŊरण वषŊ/Assessment Years: 2012-13 to 2015-16 & C.O. Nos. 32, 33, 34 & 35/Chny2019 [In I.T.A. Nos.355, 356, 357 & 358/Chny/2019] The Deputy Commissioner of Income Tax, Central Circle – 2, Madurai. Vs. M/s. Achu Traders, No. 11/1288, M. Pudur, Main Road, Govindapuram Post, Palakkad 678 507. [PAN:AAPFA8131B] (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent/Cross Objector) आयकर अपील सं./I.T.A. Nos.359, 360, 361 & 362/Chny/2019 िनधाŊरण वषŊ/Assessment Years: 2012-13 to 2015-16 & C.O. Nos. 36, 37, 38 & 39/Chny2019[In I.T.A. Nos. 359, 360, 361 & 362/Chny/2019] The Deputy Commissioner of Income Tax, Central Circle – 2, Madurai. Vs. Shri M. Shahjahan, Prop. M/s. Madeena Traders, No. VII/561, M. Pudur, Main Road, Govindapuram Post, Palakkad 678 507. [PAN:AIYPS1815P] (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent/Cross Objector) आयकर अपील सं./I.T.A. Nos.363, 444 & 445/Chny/2019 िनधाŊरण वषŊ/Assessment Years: 2012-13, 2014-15 & 2015-16 & C.O. Nos. 40, 42 & 43/Chny2019 & 41/Chny/2019 [In I.T.A. Nos. 363, 444 & 445/Chny/2019 & 443/Chny/2019] The Deputy Commissioner of Income Tax, Central Circle – 2, Madurai. Vs. Smt. J.S. Nihar Banu, Prop. Alfas Traders, No. 377/465, M. Pudur, Main Road, Govindapuram Post,Palakkad 678 507. [PAN: AGIPN8752E] (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent/Cross Objector) I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 2 आयकर अपील सं./I.T.A. Nos.364, 441 & 442/Chny/2019 िनधाŊरण वषŊ/Assessment Years: 2012-13, 2014-15 & 2015-16 & C.O. Nos. 44, 46 & 47/Chny2019 & 45/Chny/2019 [In I.T.A. Nos. 364, 441 & 442/Chny/2019 & 440/Chny/2019] The Deputy Commissioner of Income Tax, Central Circle – 2, Madurai. Vs. M/s. Appu Traders, No. XI/118C, M. Pudur, Main Road, Govindapuram Post, Palakkad 678 507. [PAN: AATFA7119H (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent/Cross Objector) Department by : Shri PV Pradeep Kumar, CIT Assessee by : Shri T.N. Seetharaman, Advocate सुनवाई की तारीख/ Date of hearing : 02.03.2022 घोषणा की तारीख /Date of Pronouncement : 20.04.2022 आदेश /O R D E R PER BENCH: The four groups of 14 appeals filed by the Revenue pertaining to different assesses of same group are directed against different consolidated orders of the ld. Commissioner of Income Tax (Appeals) 19, Chennai, all dated 29.11.2018 relevant to the assessment years 2012-13 to 2015-16. The assessees have also filed Cross Objections against the order of the ld. CIT(A). Since, the facts are identical and issues are common, for the sake of convenience these appeals as well as Cross Objections were heard together and are being disposed off, by this consolidated order. I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 3 2. All the appeals filed by the Revenue are delayed by three/four days in filing the appeal before the Tribunal for which, the Revenue has filed petitions in support of an affidavit for condonation of the delay explaining the cause for the delay in filing the appeals and prayed that the delay may be condoned and admitted the appeals for hearing. Against the submissions made in the affidavit by the Department, the ld. Counsel for the assessee has not raised any serious objection. Consequently, since the Department was prevented by sufficient cause, the delay of three/four days in filing of the appeals stands condoned and admitted the appeals for adjudication. The Revenue has raised the following grounds: 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2. The learned CIT(A) erred in directing the AO to delete the addition/disallowance made u/s 40A(3) of the LT. Act amounting to Rs.9,59,37,128/-. 3. The Id.CIT(A) failed to appreciate that there is no requirement envisaged by section 40A(3) to the effect that the recipient entities ought to be bogus or there should be inflation of purchases to invoke the provisions of section 40A(3) of the LT. Act. 4. Without prejudice to the above grounds of appeal, it may noted that the assessee and the so called agents could not provide full addresses of the farmers/suppliers of copras nor any details have been maintained with regard to payment made for copra purchases. In fact one of the agents, Shri Senthil had deposed that he will not expose the farmers, which facts go on to establish that the impugned transaction itself are sham in the disguise of invoking provisions under Rule 6DD(k) r.w.s. 40A(3) of the LT. Act. I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 4 5. The Id.CIT(A) failed to note that the assessee has not produced any material before the AO to substantiate its contention that the self cheque recipients are agents of the assessee and hence there can be no scope to apply the provisions of Rule 6DD(K) r.w.s 40A(3) to the facts of the instant case. In fact, the findings of search revealed that these so called agents Shri. Natarajan (Prop. Iswarya agencies), Chinna (Karpagan Traders) and Shri. Senthil are registered dealers in Tamil Nadu having TIN. To avoid levy of sales tax, they conduited themselves as middlemen for the assessee. 6. The Id.CIT(A) ought to have seen that the same disallowance made by the Department in the hands of M/s VVD & Sons Pvt Ltd on substantive basis has been deleted by the Id.CIT(A)-19, Chennai, vide order dated 23.04.2018 in ITA No.347 to 350/17-18, with an observation that any disallowance u/s 40A(3) can be considered only the group concerns of Shri Shahjahan and not in the hands of M/s VVD & Sons Pvt Ltd. M/s Achu Traders is one of the group concerns of Shri Shahjahan. 7. It is submitted that the Department has filed an appeal before the Hon'ble ITAT, Chennai in the case of M/s VVD & Sons Pvt Ltd. 8. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of Id. CIT(Appeals) may be set aside and that of the Assessing Officer be restored.” 2.1 The assessee has raised following objections in his CO: 1. The Commissioner of Income Tax (Appeals) has gone wrong in dismissing the ground filed by the appellant in respect of time barring of the assessment without considering the facts that the assessment order, demand notice and notice for penalty u/s.271(1)(c) are served on the respondent on 08-01-2018 and hence barred by limitation. 2. The respondent filed application for providing satisfaction u/s.153C of the Act, but the Assessing Officer has not provided the same to the respondent and hence the assessment order is invalid. 3. The respondent is buying copra from agriculturists through agents and the provisions of Section 40A(3) of the Act and rule 6DD(k) are applicable and hence the order of the Commissioner of Income Tax (Appeals) is correct and the contention of the revenue are liable to be dismissed.” 3. Facts are, in brief, that the assessee M/s. Achu Traders is a I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 5 partnership firm run by Shri Shahjahan and Smt. Nihar Bhanu, W/o. Shri Shahjahan. M/s. Appu Traders is engaged in the business of purchase and supply of copras. During the financial year 2011-12, it had mainly supplied copras to M/s. VVD & Sons (P) Limited. The assessee firm originally filed its return of income for the assessment year 2012-13 admitting Nil income and the case was selected for scrutiny through CASS and the scrutiny assessment was completed by the ITO, Ward-5, Palakkad, assessing the total income at ₹. Nil, by way of making certain disallowance of expenditure. 3.1 Subsequently, a search action under section 132 of the Income Tax Act, 1961 [“Act” in short] was conducted in the case of M/s. VVD & Sons (P) Limited, Tuticorin. Simultaneously, search action was also conducted in the business premises of M/s. Achu Traders on 17.11.2015. 3.2 During the course of search conducted on 17.11.2015 in the business premises of M/s. VVD & Sons (P) Limited, it was found that copras were stated to have been purchased by M/s. VVD & Sons during the financial years 2011-12 to 2015-16 from M/s. other firms of the Shri Shahjahan. The concerns of Shri Shahjahan are connected cases in I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 6 which search was conducted by the Department under section 132 of the Act, whereas, M/s. VVD Group cases were the main search cases. 3.3 Subsequently search assessment proceedings were initiated by issue of notice under section 153C of the Act dated 06.12.2017. In response to the notice issued under section 153C of the Act, the assessee M/s. Appu Traders has filed the return of income on 14.12.2017 admitting a total income of Nil under the head business. Subsequently, notice under section 143(2) of the Act along with detailed questionnaire dated 15.12.2017 were sent to the assessee. 3.4 In response to notice under section 143(2) of the Act, the assessee has filed his reply on 27.12.2017 along with relevant particulars of purchases of copra. By considering the reply, the Assessing Officer has noted that during the search in the case of M/s. VVD & Sons (P) Limited, it was unearthed that the company M/s. VVD & Sons has stated to have made total purchases of copras amounting to ₹.9,66,67,671/- (including bogus purchase of ₹.7,30,543/- from all the concerns names of Shahjahan) from M/s. Achu Traders during the financial year 2011-12. The details of copra purchases made by M/s. VVD & Sons (P) Limited from M/s. Achu Traders, as narrated in the assessment order are as I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 7 follows: During the search conducted on 17.11.2015 in the residential premises of Shri Shahjahan, he has admitted that M/s. VVD & Sons Pvt. Limited has purchased copra from his firm M/s. Achu Traders during the financial year 2011-12 relevant to the assessment year 2012-13. In the sworn statement recorded on 17.11.2015 Shri Shahjahan has stated that he has supplied copras to M/s. VVD & Sons (P) Limited by procuring the copras through the agents (herein called three persons) at Pollachi namely, Shri Senthil, Natarajan and Chinna. Shri Shahjahan has prepared purchase invoices for the copras obtained from the above three persons and then prepared sales invoices in his concerns' names to M/s. M/s. VVD & Sons (P) Limited. The said three persons were identified in the name of his own concerns are Appu Traders – identified in the name of – Shri Chinna, Appu Traders – identified in the name of – Shri Senthil, Alfas Traders & Madeena Traders – identified in the name of – Shri Natajan. In the sworn statement recorded on 23.12.2015 from Shri Shahjahan, while answering to Q. No. 5, he has stated that Shri Natarajan, Senthil and Chinna are the three persons who had procured copras from various placed - in and around Pollachi and brought it near the Govindapuram, Check post, Kerala viz. near the location of M/s.Appu Traders, and on their direction over phone, Shri Shahjahan has prepared sales invoices as per the market rate. Thereafter, he has prepared purchase bills in his firm's name M/s. Appu Traders at the rate as reduced by 0.25 paise per kg. After this preparation of purchase bill, he logs into Kerala commercial tax website and has upload the transaction as Inter-state purchase' and prepared 'sales invoices' in favour of M/s. VVD & Sons (P) Limited for the same quantity of copra in the firm's name M/s. Appu Traders, at the rate as increased by 0.25 paise per kg. After preparing sales bills in favour of M/s. VVD & Sons (P) Limited he has stated to have handed over the sales invoices to the person who was waiting at Kerala Check post. Thereafter, the lorry driver carrying the copra had driven the lorry with into Kerala and stayed there for an hour and after one hour again the lorry driver with load of copra returns to Tuticorin with the sales bills drawn by Shri Shahjahan in favour of M/s. VVD & Sons. Shri Shahjahan has further stated in his sworn statement while answering to Q.No. 6 that he had I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 8 never entered into money dealing with M/s. VVD & Sons (P) Limited other than 'commission receipt' viz. by way of cash. However, he has opened bank accounts with Axis Bank, South Indian Bank, Andhra Bank, ICICI Bank, at Pollachi-in his firm's names such as M/s. Appu Traders, Achu Traders, Alfas Traders, Shahjahan traders, -Madeena Traders. Further as per his sworn statement it is found that even though said bank accounts were opened in Shri Shahjahan' s firm's names, they were never been operated by Shri Shahjahan but were operated by the three persons only. Even SMS alerts have also been sent by the banks to the above three persons. All payments for the copras supplied by M/s. Appu Traders to M/s. VVD & Sons (P) were dealt through Axis Bank, Pollachi. In his Sworn statement recorded during search as well assessment proceedings, Shri Shahjahan has stated that he has given bearer cheques to the above three persons to withdraw money from the above said bank accounts. He further stated that he would merely 'sign' the bearer cheques issued to the three persons, without filling the relevant particulars such as in whose favour the cheques are given (payee), date, amount, etc. The bearer/self- cheques are given to the three persons well in advance i.e., before M/s. VVD & Sons makes the payment through RTGS to the said accounts in the name of M/s. Achu Traders. During the search, Shri Shahjahan, while answering to Q.No.7 of the statement recorded he has stated that he is not aware the purchase orders raised by M/s, VVD & Company, details of copra purchased, load and weighment details and the settlement therein. Further in his statement while answering to Q.No. 8, Shri Shahjahan has stated that he has only signed the cheque leaves issued to the three persons and all other particulars are filled by any one of the three persons. According to Shri Shahjahan, the three persons namely Chinna, Senthil and Natarjan are only aware of the full details of copra purchase. During the course of search on 17.11.2015 certain books such as a note book (Kasthuri book) were found seized vide Ann/PC/MS/B&D/S dated 17.11.2015, which contain bank account numbers and cheque book details. However, During the search assessment proceedings it was found on verification of the said note and cheque books that the cheque books were handed by the above three persons, in which it was ascertained that there were no entries found to be made in the cheque books. The cheque leaves appeared to be fresh. I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 9 The details of the names of the firms run by M/s. Shahjahan and his wife Smt. Nihar Bhanu and the persons who are operating the bank accounts held in their names are as follows: Name of the Trader Bank Account No. Operated by Alfas Traders IDBI 000451 to 0005000 Natarajan Alfas Traders ICICI, Pollachi 016726 to 016750 Natarajan Alfas Traders IDBI 169091 to 169140 Natarajan Alfas Traders Axis Bank 025521 to 025535 Chinna Alfas Traders Axis Bank 037427 to 037425 Chinna Alfas Traders Axis Bank 053276 053358 Chinna 3.5 The Assessing Officer further noted that during the course of search assessment proceedings sworn statement was recorded from Shri D. Godandapani @ Chinna who is one among the three persons who stated to have supplied copras to Shri Shahjahan in order to raise sales invoices to M/s. VVD & Sons. In his statement, he has stated that he would purchase copras from farmers and sent it to Shahjahan and after two days, Shahjahan would give self- bearer cheques to Chinna and the same would be presented in the Axis bank and withdraw the amount from RTGS. In his sworn statement while answering to Q.No. 12 Shri Chinna has stated that he is not aware of any details about Shri Shahjahan sending Copras to M/s. VVD & Sons (P) Limited. Shri Chinna in his answer to Q.No.8 in his sworn statement has stated that he is not having any details I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 10 about the farmers from whom copras were purchased by him. Further, he also stated that he is not maintaining any books of accounts for the purchase of copra made by him. 3.6 The Assessing Officer has noted in para 14 that as per the sworn recorded during the search as well the assessment proceedings, Shri Shahjahan has issued self-cheques to the three persons at Pollachi, who in turn have withdrawn the money from RTGS payment of VVD & Sons. Shri Shahjahan, being the main seller of copra to M/s. VVD & Sons, he ought to have been maintained the records mentioning the particulars of payment made out of RTGS withdrawal. However, the Assessing Officer has noted that the assessee has not maintained any sort of register/record for such withdrawal and the disbursement of the- amount to those persons who Shri Shahjahan or his concerns claim to be supplier. 3.7 The statements of account obtained from M/s. VVD & Sons for the amount transferred to M/s. Achu Traders for the period 1.4.2011 to 31.03.2012 were obtained and found that they were only RTGS payment transferred to M/s. Achu Traders. While the same was verified with respect to the bank account statement of M/s. Achu Traders for the said I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 11 period it is found that for every of amount of credit from VVD & Sons there is an equal debit entry found on the same day with a narration 'SELF'. It is also seen that the amount withdrawn through such self- cheques are found to be amounts each exceeding rupees twenty thousand, almost all the withdrawal entries ranges to ₹.2,00,000/- to ₹.7,00,000/-. It is evident from the bank statement that in a month the approximate withdrawal found to be ₹. 20,00,000 for a annual payment of ₹.9,66,67,671/- made by M/s. VVD & Sons. In the case of M/s. Appu Traders, the self-cheques issued by Shri Shahjahan were withdrawn by Shri Chinna at Pollachi, as per sworn statement of Shri Shajahnan and Chinna. A sworn statement was recorded from Shri Godhandapani @ Chinna in which he was asked to furnish the details of farmers from whom copras were procured, quantity procured the mode of payment/settlement therein. However, in his answer to Q.No. 8 he has categorically stated that "I do not know any details of any farmers & I have not maintained any record for this purchase". In this context it is opined that whatever payment made by M/s. VVD & Sons through RTGS and later withdrawn by Chinna by giving self-bearer cheques signed by Shahjahan, should have been disbursed to the suppliers of copra at I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 12 Pollachi through either account payee cheque or account payee bank draft only, wherever the payment exceeded ₹.20,000/- as per section 40A (3) of the Act. But it was not done accordingly. 3.8 The Assessing Officer has further noted that the assessee has violated section 40A(3) of the Act, which mandates that where an assessee incurs any expenditure in respect of which a payment or aggregate of payment made to a person in a day, exceeding ₹. 20,000/- such payment ought to be made through an account payee cheque drawn on a bank or account payee bank draft exceeding ₹. 20,000/-. 3.9 The fact of violation of section 40A(3) of the Act has been proved by issuance of self-bearer cheques in the name of M/s. Appu Traders by Shri Shahjahan. It not only stops with that but also with the subsequent withdrawal by Chinna and disbursement to the suppliers of copra are not disclosed to the department during the search as well as assessment proceedings, despite several opportunities offered to them. Thus, since, it is clear that M/s. Appu Traders has violated the provisions of section 40A(3) of the Act, for the reasons narrated above and therefore, disallowance under section 40A(3) of the Act has been considered in the I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 13 search assessment order of M/s. Appu Traders for the assessment year 2012-13 for the payments to the tune of ₹.9,59,37,128/-(₹.9,66,67,671/-(- ) ₹.7,30,543/-) made to the three persons by Shri Shahjahan in the name of his concern M/s. Achu Traders for purchase of copras through issue of self-bearer cheques which is otherwise than account payee cheques/ account payee bank drafts. Further, the total copra stated to have been purchased from M/s. Achu Traders for assessment year 2012-13 is ₹.9,66,67,671/-, as claimed by the VVD & Sons. However, out of the said amount a sum of ₹.7,30,543/- is treated as bogus purchase made by VVD & Sons and the same is now excluded in the hands M/s. Achu Traders since it represents addition in the hands of M/s. VVD & Sons Pvt. Limited on account bogus purchase for the assessment year 2012- 13. Thus, the Assessing Officer made on account of payment made in violation of section 40A(3) of the Act of ₹. 9,59,37,128/- and completed the assessment order under section 143(3) r.w.s. 153C of the Act. 4. On appeal, the ld. CIT(A) has deleted the addition made by the Assessing by observing as under: “6. Decision on grounds of appeal: 6.1. The perusal of the written submissions filed during the course of appellate proceedings, it is observed that the first ground of appeal is pertaining to the I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 14 assertion made by the appellant that the assessment is barred by time limitation and hence it is liable to be cancelled. It is submitted that the demand notices and assessment order along with the notices for initiating for penalty proceedings are dated 8.1.2018, whereas the date of limitation was 31.12.2017 and hence the order is time barred. 6.2. In respect of this contention, the assessee relied upon the decision of Karnataka High Court in the case of M/s.Maharaja Shopping Complex Vs. DCIT Circle-I (2), in ITA No.832/2008, and the judgment in the case of Government of Wood Works Vs. State of Kerala in the High Court of Kerala. The factual matrix of the above assertion of the appellant was looked into and it is noted that for the assessment to be framed u/s.153A/ 153C, the requirement is that the order is to be passed by the AO the sections states that the AO shall make an order with in a period of 2 years from the end of the Financial Year in which the last of the authorization for search u/s.132 was executed. The section does not say that the order is required to be served. The perusal of the Assessment Order clearly shows that it is dated 31st December 2017 and has been duly served on the appellant on 8th January 2018, a fairly reasonable time within which the assessments framed have reached the appellant. Therefore, this ground of the appellant is dismissed. Regarding the judgments relied upon, it is observed that Karnataka High Court Judgment pertains to assessments framed for AY.2013-14 and in that particular case, the order has been served on the assessee on 18.4.2006, i.e., after 18 days of time limitation falling on 31.3.2006. However, in the present case, the time between the passing of the order and the service of the order is nearly 8 days and can be said to be reasonable. Hence the present order survives the time limitation test and is held to be passed within the time limitation prescribed. 6.3. The second ground of appeal of the assessee is pertaining to the contention that the assessment framed u/s. 143(3) rws 153C is made by making disallowances u/s.40A(3) of the IT Act and these additions are not arising out of any seized material and hence the addition u/s. 40A(3) framed u/s. 143(3) rws 153C is invalid. The above contention of the appellant was examined and the relevant record was perused. It is observed that the search on the premises of the tax payer was carried out on 18.11.2015 and was carried out in connection with search conducted on M/s.VVD and Sons Group. The warrant of authorization is in the name of VVD & Sons in which connection the residential and business premises of the present appellant were also searched. During the search and seizure operation some diary, cheque books, note books and bill books were seized. The Assessing Officer in his order mentions in para 12 and 13 about these seized material and discusses about the examination of these cheque book and other bills during the course of search. Therefore, it is not correct on the part of the appellant to state that the proceedings are not based on any seized material. The AO has examined the material seized and the statements recorded during the search u/s 132 of the I.T Act. Once the AO has relied upon the seized material the sufficiency of the seized material cannot be questioned. Therefore, this ground of the appellant that the issues are not emanating from the material seized during is not correct and hence it is dismissed. I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 15 6.4. Secondly, during the course of appellate proceedings, it was also submitted that the assessment u/s. 153C is invalid since the satisfaction as per requirements by section 153C was not made. It is stated further by the appellant that the satisfaction was not made available to the appellant by the Assessing Officer despite request for same therefore presumption is that the said satisfaction was not recorded and hence rendering the assessment void and liable to be quashed. This objection of the appellant was also looked into and relevant details were asked for from the Assessing Officer vide letter No. ITA No.363 to 366 dated 8.11.2018. The AO has submitted the reply vide letter in PAN-AIYPS1815P/CC-2/MDU/2018-19 dated 13.11.2018 where by the satisfaction is recorded for the respective years in the case of M/s.Achu Traders have been made available and it is observed that the said satisfaction has been duly recorded and the same has also been approved by the JCIT Central Range, Madurai. The AO has recorded his satisfaction based on the material seized and stated that this will have a bearing in determination of the total income of the appellant. On the basis of the afore-mentioned verification from the AO it is held that the objection of the assessee that satisfaction has not been recorded is found to be not correct and therefore the same is also dismissed. The requirement of the Section 153C is that the AO should be satisfied that the books of accounts or documents or assets seized should have a bearing on the determination of income and thus the requirement that the Assessing Officer records his satisfaction. He is under no obligation to disclose the same to the assessee/appellant therefore the mere fact of non-disclosure of the satisfaction to the assessee cannot be considered as a violation of Section 153C and therefore this ground of the assessee raised in the written submission is also dismissed. 6.5. The third ground of appeal, is that the appellant is supplying copra and purchases are made from the agriculturist through agents and then payments are made through agents in case of agricultural products. For purchase of agricultural products through agents the provisions of Section 40A(3) of the Act r.w.rule 6DD(k) are applicable and therefore the addition u/s.40A(3) made by AO is not justified. Before deciding on the issue the following facts need to be considered: 1.The assessment in the case of Mr. Achu Traders was done u/s. 143(3) for the AY.2013-14 wherein it has been observed by the Assessing Officer that "the Authorised Representative has stated that the assessee is doing their business of purchasing and selling mainly of agricultural produces like Rice, Coconut, copra, coconut-oil and also river sand and sometimes through the local brokers or agents and in the process of these articles of large purchase expenses are incurred in the form of freight, courier, broker etc" (para-5 of AY. 13-14). It has been observed by the AO that the expenses have been incurred through self-made vouchers and on account of non-maintenance of proper vouchers of payment, the AO has disallowed Rs.12 lakhs in AY. 13-14 (20% of Direct expenses). 2. During the course of search as mentioned in the Assessment order, Para-9, "Shri Shahjahan has stated that he has supplied copras to VVD and Sons P limited by I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 16 procuring copras through the agents (herein called three persons) at Pollachi namely, ShriSenthil, Natrajan and Chinna". Statement of Shri Senthil, Natarajan and Chinna were recorded during the search. In the statement recorded they have not denied that they are working as agents for commission for Shri Shahjahan. The purchases were infact made for VVD & sons and they received their amount from Shri Shahjahan who gave them signed self-cheques to get them encashed and make further payments to other respective suppliers. It is nowhere the case of the AO that it is a case of bogus purchases or inflation of purchase bills. Nowhere the transactions of the cheque payment received from VVD has been questioned. 3. The turnover of the appellant in the years involved for the assessment u/s. 153C has not been challenged and the same tallied even with the VAT return furnished with the Kerala Government. 4. Now the question whether the provisions of Section 40A(3) are attracted in the case of these payments made to the agents who in turn enabling,, supplies of agricultural products. In this context it will be relevant to see what exactly are the provisions of section 40A(3) or Rule 6DD. The Section 40A(3) basically deals with certain expenses or payment that are not deductible in certain circumstances. One such subsection is 40A (3) that states that “Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure". However, this section is qualified by the application of Rule 6DD. The Rule 6 DD states that no disallowances are under section 40A(3) shall be made in cases and considerations specified in that Rule. Some of the items specified under Rule 6DD are e.g. where payments are made to SBI, RBI (Rule 6DD(a)); where payments are made to Government (6DD (b)) where, payments is particular for purchases of agricultural"" produce (6DD(e)) and inter alia Rule 6DD(k) that specifically mentions "where payments is made fey any person to his agent who is required to make" payment in cash for goods or services on behalf of such person." 5. The appellant claims that since in his case, the assessment has been framed u/s. 143(3) for the AY. 2013-14. Therefore, the additions cannot be made as the said issue is not emanating from any seized material. This contention of the assessee is not correct as the AO has mentioned about the seized material in para 9,10,11,12 & 13 of the Assessment orders and the very fact of issuing self-cheques has come to the notice of the Department only through the examination and verification carried out during the search. Thus this issue is not relevant. 6.6 Another set of submissions was also made by the appellant during the course of hearing and the same is mentioned below:- Further submissions dated 20.11.2018 submitted on 26.11.2018 I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 17 (1) "The scrutiny assessments u/s. 143(3) were completed in all the above cases. In the assessment orders, it is specifically mentioned that purchase of copra by the assessees, which is an agricultural product, through agents from rural areas. No disallowance under the provisions of Section 40A(3) were made in the scrutiny assessments. (2) At the time of assessment u/s.153C, agents have given affidavit stating their function of purchase of copra and the payment of the purchase price through them. No evidence whatsoever is obtained during the assessment u/s.253C of the Act contradicting or opposing the facts of the case as stated above. In the above circumstance, the application of provisions u/s.40A(3) in the assessment U/S.153C are not sustainable. (3) In respect of all the assessments, except in the case of Mr.M.Shahjahan, it is specifically stated in the assessment orders that the assessments are completed on a 'protective basis. I may submit that there should be a substantive assessment under the provisions of section 40A(3) in the case of searched assessee u/s.153A, specifically u/s.40A(3). When such assessment is existing only, there can be a protective assessment in the above cases. At the moment, I am not aware of any such substantive assessment u/s.40A(3) in the case of the searched assessee on a substantive basis. Since this information is not available with the assessee, a verification may be done to this effect by your goodself. (4) During the assessment proceedings, the creditors payable are verified, in respect of major amounts, confirmations are filed, which are accepted by the Assessing Officer. (5) The purchase of copra by the assessee and sale to M/s. WD& Sons Pvt Ltd, Tuticorin, are accepted as genuine transactions after due verification with the agents, at check post and with the VAT Return and authorities during the assessment proceedings". 6.7. Before proceeding further in the matter it will be relevant to note what was stated by the persons to whom the self-cheques are issued by the appellant during their statements recorded. The relevant portion of the statements done u/s.131 of Shri Srirangaraj (on 16.11.2017), Shri D.Godhandapani @ Chinna (on 16.11.2017) and Shri Natarajan (on 18.11.2017) are given below: Shri Srirangaraj: Q.No. 2. Identify yourself: Ans. My name is S. Srirangaraj @ Senthil. Age 38. I am residing at No. 3/170, Mariamman Koil Street, Koppanurpudur, Kappalankarai (Post) I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 18 Kinathukadavu Taluk for the past 6 years. My wife name is S. Vijayalakshmi. I have 2 sons. My Mobile No: 9842535879. Q. No. 3 Explain in detail regarding your business and income. Ans. I used to purchase copra from the farmers and sell it for commission. I will fix the rate with the farmers and inform the same to the purchasers. On the basis of commission I will purchase it from the farmers. For each load (200 bags-each 50 kgs.) I receive Rs.500/- as commission. Q.No.4 If it is so, for on behalf of whom you have arranged to purchase and received the commission? Ans. I arranged only for Shahjahan and received the commission. For Shahjahan. Q.No.5 How you send the copra to Shahjahan? How you receive the commission? Ans. I will fix the rate with the farmers of Anamalai, Divansapudur, Valanthaiamaram, Vettaikaranpudur, lyyampalayam Villages. Shahjahan will send the lorry. For higher value Shahjahan will issue the self or bearer cheque. On the amount from the bank I will issue the cash to the farmers in the bank itself or in their places. On the same day itself after taking my commission I pay the remaining amount to Shahjahan. Q.No.6 You have told that you receive the income of commission from Shahjahan. Explain. Ans. I receive Rs.2/- per bag. I receive Rs.400/-for 200 bags + expense^ 500/-. I receive the commission amount from Shahjahan as self-cheque. I receive the self-cheque for total amount and in that after taking my commission amount the remaining balance will be issued to the farmers from whom I have purchased copra. Approximately I receive Rs. 5000/- per month as commission. D.Godhandapani @ Chinna Q.No.2. Identify yourself: Ans: My name is D.Godhandapani @ Chinna. I am residing at 5/312, Goppanurpudur, Kappalankarai Post, Kindathukadavu Taluk for the past 5 years. Age 36. My wife name is G.Sangeetha, I got one female and male children. My CellNo:9443933561. Q.No.3. Explain in detail regarding your business and income. I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 19 Ans: I am acting as a commission agent/broker for the past 4 years, in purchasing copra for Shahjahan Traders. I used to purchase copra from various farmers in the area of Anaimalai, Ganapathipalayam, Semampathi, Moongamadai, Kilavanpudur, Negamam and send the same to Shahjahan Trader. In this lused to get Rs.500/-per load. I get approximately Rs.30,000/- to 40,000 per year. Q.No.4. In the aforesaid question No.3 you have told that you used to purchase the copra from various farmers. How your transport the same to Shahjahan Traders? Ans: I will send the purchased copra in the lorries which were arranged by him. For this Shahjahan used to issue cheque on the same day or on the next day. Subsequent to that I present the cheque before the bank and withdraw the amount: Q.No.5. Whether you know Kandasamy, who is working as a broker to VVD & Son's? Whether he has asked you to purchase copra? Explain. Ans: I know Kandasamy. From the year 2009 onwards I used to sale copra in\ whole sale to VVD & Sons. My concern name is Karpagam Traders. If Kandasamy asks copra I will supply through it. Apart from this if at all Shahjahan Informs I supplied for commission also. Q.No.6. How and when you receive the commission from Shahjahan? Ans: On receiving the amount in the bank account, I will get a message. Then on presenting the self-cheque in the bank, I will withdraw the amount and paid the same to the farmers. Shri Natarajan: Q.No.2. Identify Yourself? Ans: My name is S.Natarajan Age 42. My wife name is Smt. Lakshmi. I got one female child. My cell No.9443082252. I am residing in the aforesaid address. Q.No.3.Explain in detail regarding your business and income? Ans: I am doing copra whole sale business for the past 7 years. I am acting as a commission agent and helping for Thiru Shahjahan of Govindapuram in purchasing the copra and selling the same to VVD & Sons. In this way I am getting Rs.100-300 per load through Shahjahan. Q,No.4. Explain in detail regarding from whom you are purchasing copra? On purchasing the same how are you selling to VVD & Sons? How you are I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 20 paying the sale amount to the setters? How you are receiving the commission amount? Ans: The broker of VVD & Sons Thiru Kandasamy inform me through telephone regarding the details of required quantity for VVD & Sons and rate, subsequent to that I purchase the goods from the setters and send it to the Ms. VVD & Sons. The amount will be paid in to the account of Alfas Traders, and Madhina Traders, in the banks of Andhra Bank, Axis Bank and IDBI Bank of Pollachi Branch, for which M. Shahjahan is the owner. Even prior to that I am always had the signed bearer cheques issued Shahjahan, when Ms. WD Company paid the amount in the aforesaid accounts I used to withdraw the amount through the bearer cheques and disburse the amount to the various sellers. Q.No.5. You has told that you have used to purchase copra from various business men. Explain from whom and what quantity you have purchased? Further to whom you have paid the purchase amount? Explain whether you are maintaining the ledgers for particulars/account for the purchase and sale? Ans: I am not having the aforesaid particulars. The sale amount will be transferred by WD & Sons through RTGS to Shahjahan who is having the accounts in the name of Madeena Traders and Alfas Traders. I used to withdraw the amount by using the signed self-cheques of Shahjahan and settle the amount in cash to the local agriculturists from which I have purchased the copra. 6.8. The perusal of the above statements show that the persons are acting on behalf of the appellant i.e. Shri Shahjahan partner in the concern and are earning commission from the services they are providing to the appellant. Even the payments are further made to the agriculturists. It is nowhere the case of the Assessing officer that the transaction of purchase of Copra from these entities is bogus or the purchases are inflated. Thus the obvious conclusion is that these are indeed actual transactions. The other fact is that payment for these purchases are made by RTGS to the appellant who in turn issues self-cheques to his agents who further disburse them to the farmers. The self-cheques are encashed and payments are further disbursed to agriculturists in a mode otherwise than account payee cheques/DD thus attracting the mischief of the section 40A(3). However, the section 40A(3) is to be applied by taking the exceptions provided in Rule 6DD. The Rule 6 DD is about Cases and circumstances in which a payment or aggregate of payments exceeding twenty thousand rupees may be made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft. The case | of the assessee is that the payment through self-cheques have been made to agents and these agents have made payments on behalf of the appellant to the farmers and the case of the assessee is covered under the exemption provided in Rule 6DD(k) that states that "where the payment is made by I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 21 any person to his agent who is required to make payment in cash for goods or services on behalf of such person", then such persons is exempt from the application of the provisions of section 40A (3). In the case under consideration in fact that is the j factual situation. A similar issue also came before the Hon’ble Madras High Court in the case of Shanmuga Ginning factory vs CIT. In that case the Hon'ble Court observed as follows: "Therefore, after rendering such factual finding on the status of those persons as agents, the first appellate authority rejected the contention of the Assessing Officer. On further appeal, the Tribunal further found that all those persons to whom the disputed payment made by the assessee had charged 1 per cent, commission from the assessee and, therefore, such persons were acting on behalf of the assessee in the process of auction. When that being the factual finding in respect of the status of those persons, concurrently, by the first appellate authority as well as by the Tribunal by holding that those persons have acted as agents of the assessee, we have no hesitation in holding that the assessee is entitled to protection under rule 6DD(i) of the said Rules as the disputed payments were made only to its agents. Apart from that aspect, by going through the nature of business and transaction between the parties, an element of commercial expediency was also involved in this case, which we can take judicial notice. There are no other materials placed before us by the Revenue to take a different view, moreover when those findings rendered by the first appellate authority as well as the Tribunal is totally a finding of fact, we are not inclined to interfere with the same. Consequently, we find no merits in this appeal and the question of law is answered against the Revenue. Accordingly, the tax case appeal is dismissed.” (2013) 37 taxmann.com 422(Madras). [In the above judgement though the rule referred is 6DD(i) which is an inadvertent mistake however the matter pertains to rule 6DD(k) only].” 5. First, we shall take the Cross objections of the assessee for adjudication. By referring to the first ground of cross objection, the ld. Counsel for the assessee has submitted that the Assessing Officer has completed the assessment on 31.12.2017, which is in time. However, it was only served on the assessee on 08.01.2018 and submitted that it is I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 22 barred by limitation. Further, the ld. Counsel for the assessee has relied on the judgement of the Hon’ble Supreme Court in the case of CIT v. Mohammed Meeran Shahul Hameed (2021) 438 ITR 288(SC) and submitted that the assessment order may be quashed. 6. On the other hand, the ld. DR has submitted that in this case, the assessment order was passed on 31.12.2017 relating to the assessment years under appeal and further submitted that the Assessing Officer has passed the assessment order well within the time prescribed as per the Act. So far as serving the order is concerned, which is on 08.01.2018, it is only a short delay from postal authorities and not from the Assessing Officer. Therefore, the limitation has no application in this case. The ld. DR has also submitted that the facts are entirely different in the judgement of the Hon’ble Supreme Court relied on by the assessee in the case of CIT v. Mohammed Meeran Shahul Hameed (supra) and as such, no application to the facts of the present case in hand. 7. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In this case, the assessment order was passed on 31.12.2017. Therefore, once the assessment order is passed within the period of limitation, it is service I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 23 subsequently within a period of eight days, it cannot be said that the assessment order passed by the Assessing Officer is with delay and therefore, it cannot be quashed on that ground. 7.1 So far as case law relied on by the assessee in the case of CIT v. Mohammed Meeran Shahul Hameed (supra), the revision order was passed on 26.03.2012 and the order was served on 29.11.2012, i.e., nearly after eight months. Therefore, we are of the opinion that the facts of the case law relied on by the assessee has no application to the facts of the present case and the argument of the ld. Counsel on this count is rejected. 7.2 In the case of State of Andhra Pradesh v. M. Ramakishtaiah and Company in Civil Appeal No. 491 of 1977 dated 17.02.1994 (SC), the order passed by the DCIT was on 06.01.1973 and served on 21.11.1973, i.e., more than nine months. Therefore, the judgement of the Hon’ble Supreme Court in the case of State of Andhra Pradesh v. M. Ramakishtaiah and Company (supra) has no application to the facts of the present case. I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 24 7.3 In the case of Sanka Agencies v. Commissioner of Commercial axes (2005) 142 STC 496 (AP), the impugned order was passed on 17.05.1996 and received by the assessee on 14.11.1996. Therefore, the Hon’ble High Court came to a conclusion that the order was not made on the date it was purported to have made. The above decision has no application to the facts of the present case. 7.4 In view of the above, we find that there is no delay in passing the assessment order and therefore, the Cross Objection raised by the assessee is dismissed. 7.5 The second cross objection raised by the assessee was not argued before the Tribunal and the same is dismissed. 7.6 The third cross objection raised by the assessee is being dealt by the Tribunal while deciding the merits of the case. 7.7 Since common grounds of cross objection has been raised by all the assessee on an identical facts and circumstances and therefore, all the cross objections filed by the assessee are dismissed. I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 25 8. So far as appeals filed by the Department are concerned, against the order passed by the ld. CIT(A), the Revenue has preferred further appeal and the ld. DR has submitted that the assessee has received the money through RTGS and the money was withdrawn through bearer cheques by the assessee’s agent and payments were made to farmers as claimed by the assessee. However, there is no evidence that what payment is made to whom, no details of farmers or details of purchases made are brought on record before the Assessing Officer inspite of repeated request made by the Assessing Officer, no such details are filed. Therefore, the provisions of section 40A(3) of the Act clearly applies in this case and strongly supported the assessment order. 8.1 On the other hand, the ld. Counsel for the assessee has strongly supported the order passed by the ld. CIT(A). 8.2 We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The case of the assessee is that he has supplied copras to M/s. VVD & Sons (P) Ltd. and the purchases have been made through three agents namely, Shri Chinna, Shri Senthil & Shri Natarajan. When the Assessing Officer asked the modus operandi of the business, the assessee Shri Shahjahan has I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 26 submitted that he has supplied copras to M/s. VVD & Sons (P) Ltd. by procuring copras at Pollachi through the above three agents. During the search, Shri Shahjahan, while answering to Q.No.7 of the statement recorded he has stated that he is not aware the purchase orders raised by M/s, VVD & Sons, details of copra purchased, load and weighment details and the settlement therein. Further in his statement while answering to Q.No. 8, Shri Shahjahan has stated that he has only signed the cheque leaves issued to the three persons and all other particulars are filled by any one of the three persons. According to Shri Shahjahan, the three persons namely Chinna, Senthil and Natarjan are only aware of the full details of copra purchase. Further, during the course of search assessment proceedings sworn statement was recorded from Shri D. Godandapani @ Chinna who is one among the three persons who stated to have supplied copras to Shri Shahjahan in order to raise sales invoices to M/s. VVD & Sons. In his statement, he has stated that he would purchase copras from farmers and sent it to Shahjahan and after two days, Shahjahan would give self-bearer cheques to him and the same would be presented in the Axis bank and withdraw the amount from RTGS. In his sworn statement, while answering to Q.No. 12 Shri Chinna has stated that he is not aware of any details about Shri I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 27 Shahjahan sending Copras to M/s. VVD & Sons (P) Limited. Shri Chinna in his answer to Q.No.8 in his sworn statement has stated that he is not having any details about the farmers from whom copras were purchased by him. Further, he also stated that he is not maintaining any books of accounts for the purchase of copra made by him. 8.3 When we read carefully the statements given by the assessee as well as his agent, Shri Shahjahan, the assessee is stating that he is not aware of purchase of copra and Chinna is only directly dealing with M/s. VVD & Sons and he is not aware of any quantity details supplied to M/s. VVD & Sons. In the sworn statement, the agent of the assessee Chinna is stating that he is procuring copras on behalf of Shri Shahjahan and same is sending to Shri Shahjahan and after two days he receives bearer cheque and thereafter payments are made. Chinna does not know the details of farmers, such as, the farmers from whom he has purchased, what is the quantity, what are the payments to be made. He is not maintaining any books of accounts. The facts remain that he is withdrawing the cash more than Rs.20,000/- and says that payments are made to farmers, but, he is not aware of the details of farmers and he is not aware of any other details for the reason that the copras are supplied I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 28 by Shri Shahjahan to M/s. VVD & Sons. Shri Shahjahan says that he is only receiving the copras and he is not aware of its purchases and after sales to M/s. VVD & Sons, Shri Shahjahan is receiving RTGS payments and in turn, he issues bearer cheques and the same is handed over to Shri Chinna. The above statements are contradictory to each other. If we analyse carefully, what are the purchases made by Shri Chinna is not known to Shri Shahjahan and Shri Shahjahan is also not known what are the purchases made by Shri Chinna. However, the assessee is receiving payments through RTGS and he is issuing bearer cheques and Shri Chinna is withdrawing the amounts. Shri Shahjahan does not know to whom the payments are made by Shri Chinna. Shri Shahjahan is not maintaining any books of accounts in respect of payments received and payments made. Under these facts and circumstances of the case, we are of the opinion that the assessee failed to discharge the onus cast upon him with regard to the payments made through Shri Chinna towards purchase of copras, which was supplied to M/s. VVD & Sons. Moreover, wherever the payment exceeds more than Rs. 20,000/-, the assessee would have disbursed to the suppliers of copra at Pollachi through either account payee cheque or account payee bank draft and since it was not done so, the provisions of section 40A(3) of the Act I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 29 attracts. For the sake of convenience, section 40A(3) of the Act is reproduced as under: 40A(3):Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. 8.4 As per the above section, the assessee has to make the payment by account payee cheque drawn on a bank or account payee bank draft and then only deduction will be allowed. In the present case, the assessee has paid to his agent through bearer cheque, in turn; his agent has withdrawn the cash. From the above it is very clear that the assessee has violated section 40A(3) of the Act. 9. In so far as exception provided to the above section under Rule 6DD(k) of Income Tax Rules, 1962 is concerned, for the sake of convenience, the same is extracted as under: Rule 6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under rule 6ABBA, exceeds twenty thousand rupees in the cases and circumstances specified hereunder, namely :— (a) to (i) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (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; I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 30 9.1 In this case, neither the assessee nor his agent has able to establish that the payments are made to farmers. The Agent of the assessee Shri Chinna says that he was not having any details of farmers and after purchase, the entire material has been transported to the assessee and the assessee is only handling the remaining part of the business. Shri Chinna further says that he was not having the details of farmers to whom payment was made. The assessee Shri Shahjahan says that he was not aware from whom the copras were purchased by his agent and also supplied directly by his agent to M/s. VVD & Sons. Ultimately, neither the assessee nor his agent is able to prove that the payments have been made to the farmers. Therefore, the case of the assessee does not come within the purview of exception provided under Income Tax Rules in Rule 6DD(k). 9.2 That apart, during the course of assessment proceedings, the Assessing Officer has asked the assessee to furnish the details of purchases and supplies made to M/s. VVD & Sons and no details are filed inspite of repeated request made by the Assessing Officer. Even before us, no details are filed. Only in the written submissions, figures I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 31 are stated and figures are not amounting to details of purchases and sales which are actually required for adjudication. 9.3 So far as deletion of addition by the ld. CIT(A) is concerned, in his order, the ld. CIT(A) has gave a finding that the payments are made to agriculturists. No details were brought on record about the agriculturists and there is no basis exists for coming to such conclusion. Neither the assessee is having the details nor the agent Shri Chinna is having the details, neither filed before the Assessing Officer nor before the ld. CIT(A) or even before the ITAT. Therefore, the above findings given by the ld. CIT(A) has no basis. The ld. CIT(A) gave further findings that the transactions are actual transactions, however, how the ld. CIT(A) came to such findings without verifying any details. No details of purchases, no details of supply, no details from whom it was purchase, etc. were provided by the assessee. Thus, the above findings of the ld. CIT(A) is an incorrect findings. 9.4 The ld. CIT(A) gave a further finding that the assessee made the payments through self-cheque through his agent and the agent made payments on behalf of the assessee and therefore, the provisions of Rule 6DD(k) applies. It is correct that the assessee receives money from I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 32 M/s. VVD & Sons through RTGS and the assessee has given self cheques to his agent Shri Chinna and he withdrew the entire amount and his case is that he made the payments to the farmers. However, the details of from whom the copras were purchased, what is the quantity, what is the commission that he has taken, what is the transport charges, etc. are not at all furnished before any authorities. Neither the agent knew the farmers, nor did the assessee know the farmers from whom the copras were purchased and payments were made. Therefore, without examining any materials, the ld. CIT(A) has simply accepted the explanation given by the assessee and wrongly deleted the addition. The order passed by the ld. CIT(A) is without any basis and it requires interference. 9.5 So far as case law relied on by the ld. CIT(A) in the case of Shanmuga Ginning Factory v. CIT (2013) 37 taxmann.com 422 (Madras) is concerned, the ITAT gave a factual finding that the agents are actually participated in the auction process and 1 per cent commission has been charged and therefore, the Tribunal has held that the agents are acted on behalf of the assessee and entitled to protection under Rule 6DD(i) of the Rules. Apart from that, by going through the nature of business and I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 33 transaction between the parties, the Hon’ble Jurisdictional High Court went on to hold that the element of commercial expediency was involved and dismissed the appeal of the Revenue. However, in the present case, neither the assessee proved nor the assessee’s agent proved of payments made to farmers or furnished any iota of details required in this case. Therefore, the Hon’ble Jurisdictional High Court’s decision has no application and the ld. CIT(A) has wrongly passed the appellate order. 9.6 So far as case law relied on by the ld. DR in the case of Nam Estates (P.) Ltd. v. ITO [2021] 123 taxmann.com 218.com 218 (Kar) is concerned, the assessee is a real estate company and payments are made in cash towards purchase of land to agriculturists/farmers. The Assessing Officer disallowed the entire amount, which was confirmed by the ld. CIT(A) and ITAT on further appeal and moreover, the Hon’ble High Court has dismissed the appeal of the assessee. The above judgement squarely applies to the case of the assessee. 9.7 In the case of Natesan Krishnamurthy v. ITO [2019] 103 taxmann.com 342 (Madras), the assessee is an individual, along with group of bidders formed a syndicate and through bidding process, purchased old gold jewellery and made cash payment. The Tribunal held I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 34 that the assessee was unable to demonstrate a situation which compelled him to make payment in cash, confirmed the disallowance and the same was upheld by the Hon’ble High Court. 9.8 In the case of N. Mohammed Ali v ITO [2016] 65 taxmann.com 189 (Mad), the assessee carried on business of purchase and sale of crackers and it was submitted that he was not purchasing crackers from companies themselves, but were purchasing crackers from agents and retailers in villages. In the absence of even names of agencies or agents or retailers to whom payments were made on a day-to-day basis, vague statement made by assessee could not offset entries made in books of account therefore, impugned disallowance made by authorities below was upheld by the Hon’ble Jurisdictional High Court. 9.9 In the case of Oceanic Bio Harvest Ltd. v. DCIT [2021] 127 taxmann.com 50 (Chennai - Trib.), the assessee had incurred pond and farm maintenance expenses in cash and claimed that the said expenditure was paid to farmers and allowable as deduction under ection 40A(3) of the Act read with Rule 6DD(e). The Assessing Officer has noted that payments have been made to labours for cleaning of pond, for JCB baffling charges, for purchase of sand, bricks, jally, purchase of salt, I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 35 etc. and the assessee has not provided any evidences namely, bills and vouchers to prove that said payments had been made to cultivator, grower or producer in order to be excluded under section 40A(3) of the Act by virtue of Rule 6DD(e). It was held that the assessee has not proved that payments had been made to cultivator, grower or producer as per Rule 6DD(e) in order to exclude the said payments from provision of section 40A(3) of the Act, the Tribunal has upheld the order of the Assessing Officer. 9.10 In the case of International Ships Stores Suppliers v JCIT [2016] 75 taxmann.com 130 (Mumbai - Trib.), the assessee was engaged in business of supplier of stores to ocean going ships and made certain payments to suppliers upfront in cash. The Assessing Officer disallowed the said cash payment under section 40A(3), which was upheld by the ld. CIT(A). Before the Tribunal, it was submitted that genuineness and veracity of purchase transactions under consideration were not in doubt, coupled with fact that same were prompted on account of business exigencies, no disallowance under section 40A(3) was warranted. The Tribunal has held that mere finding of purchase transactions as genuine would not in simpliciter take same beyond scope of disallowance I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 36 contemplated under section 40A(3) of the Act since assessee had not been able to demonstrate that its case was covered by either of exceptions contemplated under rule 6DD and therefore, confirmed the disallowance made under section 40A(3) of the Act. 9.11 In the case of P.K. Ramasamy Nadar & Bros. v ITO (2014) 41 taxmann.com 538 (Mad), the assessee was engaged in manufacturing business and made payment towards lorry freight in cash. The Assessing Officer disallowed the said amount on the ground that it exceeded the prescribed limit under section 40A(3) of the Act. Before the Tribunal, it was submitted that the lorry drivers to whom cash was paid acted as his agents. The Tribunal has held that the payment made to the driver of the lorry of the Supplier was not payment to agent of assessee and so Rule 6DD(k) of the Income Tax Rules, 1962 could not be invoked which finding was affirmed by the Hon’ble High court. 10. Considering the entirety of facts and circumstances of the case, case law relied on by both the assessee as well as Department, we are of the considered opinion that the assessee has not furnished any details as to whom the payments were made. Accordingly, we reverse the common order passed by the ld. CITA) for all the assessment years I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 37 under appeal and restore that of the assessment order passed by the Assessing Officer. Accordingly, the ground raised by the Revenue is allowed for all the assessment years. 11. Since similar grounds on identical facts and circumstances have been raised by the Revenue in respect of all other assessees and accordingly, the appellate order passed by the ld. CIT(A) in respect of other assessees have also been reversed and restored that of the assessment order passed by the Assessing Officer for all the assessment years under appeal. Accordingly, all the appeals filed by the Revenue are allowed. 12. In the result, the Cross Objections filed by the assessees in C.O. Nos. 32, 33, 34 & 35/Chny2019 (M/s. Achu Traders), C.O. Nos. 36, 37, 38 & 39/Chny2019 (Shri M. Shahjahan), C.O. Nos. 40, 42 & 43/Chny2019 & 41/Chny/2019 (Smt. J.S. Nihar Banu) and C.O. Nos. 44, 46 & 47/Chny2019 & 45/Chny/2019 (M/s. Appu Traders) are dismissed. 12.1 In the result, the appeals filed by the Revenue in I.T.A. Nos.355, 356, 357 & 358/Chny/2019 (M/s. Achu Traders), I.T.A. Nos.359, 360, 361 & 362/Chny/2019 (Shri M. Shahjahan), I.T.A. Nos.363, 444 & I.T.A. Nos. 355-364, 441 & 442 & 444 & 445/Chny/19 & C.O. Nos. 32-46/Chny/19 38 445/Chny/2019 (Smt. J.S. Nihar Banu) and I.T.A. Nos.364, 441 & 442/Chny/2019 (M/s. Appu Traders) are allowed. Order pronounced on 20 th April, 2022 at Chennai. Sd/- Sd/- (G. MANJUNATHA) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER Chennai, Dated, 20.04.2022 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ (अपील)/CIT(A), 4. आयकर आयुƅ/CIT, 5. िवभागीय Ůितिनिध/DR & 6. गाडŊ फाईल/GF.
Mehul