INCOME TAX ACT, 1961

Section 40A(3) Rule 6DD(e)(i)

Business disallowance under section 40A(3) - Cash payment in excess of prescribed limit - Payment made for purchase of agricultural produce assessee could not produce farmers/list of farmers for which a reasonable explanation was also given -

Assessee purchased maize (an agricultural produce) from unregistered dealers for which payments were made in cash in excess of Rs. 20,000. AO invoked section 40A(3() and made disallowance on the ground that assessee had not produced details like address and identity of persons to whom cash payments were made except production bills and their names and name of their village to which they belonged. Assessee pleaded that payment in question was made for purchase of maize agricultural produce to cultivator of the produce and hence, no disallowance could be made under section 40A(3) read with rule 6DD(e) assessee also pointed out that under section 65(2A) Karnataka APMC (Regulation) Act, 1966, agricultural produce could not be moved unless market fee on such produce was paid.Held: In terms of rule 6DD(e)(i), when payment was made by cash exceeding Rs. 20,000 for purchase of agricultural produces and there were entries in books of accounts and payment was shown to have been made to farmers and receipts were also produced no disallowance could be made under section 40A(3) even if assessee could not produce farmers/list of farmers for which a reasonable explanation was also given.

Applied:Pr. CIT v. Keshvalal Mangaldas (2018) 257 Taxman 133 (Guj.) : 2018 TaxPub(DT) 5089 (Guj-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14 & 2014-15

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