ITAT held rule 40A(3) cannot be invoked as payments were exempted u/r 6DD(e)
ITAT held rule 40A(3) cannot be invoked as payments were exempted u/r 6DD(e)
In Treadstone International’s case, AO made an addition of Rs.36,92,935 on account of cash purchase of raw hide, u/s 40A(3). CIT(A) deleted the addition. ITAT held that payments for purchase of produces of animal husbandry were made to producer through commission agent. Thus rule 40A(3) cannot be invoked as it comes under exemption of rule 6DD(e).-500609
1. In Treadstone International’s case, special auditors pointed out that opening debit balance of in the name of a company was transferred to purchase account without producing any bills of purchases.
2. AO asked assessee to produce such bills but assessee could not produce the same, and thus AO disallowed the expenditure.
3. AO made an addition of Rs.36,92,935 on account of cash purchase of raw hide, u/s 40A(3).
4. CIT(A) accepted the assessee’s claims and deleted the additions.
On appeal, the ITAT held as under:
5. We find that the CIT(A) has rightly adjudicated the issue as the case of trading or business loss.
6. Accordingly, we find no infirmity in the order of CIT(A) and we confirm the order of CIT(A) on this issue.
7. Therefore, we are of the view that since the payments were made for purchase of raw hides to the producer through the commission agent provision of Rule 40A(3) cannot be invoked as its falls within the exemption clause of Rules 6DD(e) of the Rule.
8. We, therefore, do not find any justification in the addition of Rs. 22,10,155/- made on account of purchases in cash by invoking in provision of Rule 40A(3) of the Act so far as the addition deleted by the CIT(A) are concerned, we find that the CIT(A) has mentioned in his order that the payments were made in cash on Sunday therefore, the same stands excluded as per Rule 6DD(j) of the Rule.
9. We therefore, find no infirmity in the order of the CIT(A) deleting the addition of Rs. 1,57,650/-.
Case Reference - Asstt. Commissioner of Income Tax Vs M/s Treadstone International.
IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH "A", LUCKNOW
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER
AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER
ITA No.663/LKW/2013
(Assessment Year 2008-09)
