The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that in absence of any evidence in support of identity and genuineness of the appellant benefit of Section 6DD(f) of the Income Tax Rules cannot be applied in favour of the assessee.
The assessee in this present case is M/s. Hind Industries Ltd. During the assessment proceeding the Assessing Officer (AO) made disallowance of Rs.61,39,71,805 being the alleged purchases of meat under Section 40A(3) of the Income-tax Act, 1961.
Aggrieved by the order the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], which sustained the disallowance under Section 40A(3) of the Income Tax Act.
Further aggrieved the assessee filed an appeal before the Tribunal. When the case was called for hearing neither the assessee nor any Authorized Representative (AR) appears, many adjournments were seeked by the assessee via e-mail.
In the adjournment application it has been stated that Vijay Garg General Manager (Finance) is suffering with some eye flue but there is no medical certificate in support of such ground. Finally, keeping in view the conduct of AR of assessee and the fact of the case that the assessee has availed number of adjournment on various grounds in this old appeal pending since 2014, therefore, adjournment application was dismissed and the Bench proceeded to adjudicate the appeal ex parte qua assessee.
From the grounds raised by the assessee in the form 36 we note that the assessee was aggrieved with the order the CIT(A) wherein, the first appellate authority has upheld and sustained the disallowance of Rs. 61,39,71,805 under Section 40A(3) of the Income Tax Act.
The Bench noted that the assessee consistently submitted and argued before the lower authorities that the impugned disallowance made by the AO and sustained by the CIT(A) on account of non-genuineness of purchase is not sustainable as the department has accepted sales as genuine therefore, arbitrary disallowances based on presumption and surmises is bad in law.
It is also a contention of assessee that that meat, which is an animal product, the payments related to purchased are covered under Rule 6DD of the Income Tax Rules, 1962, hence the disallowance of Rs.61,39,71,805 being the amount paid in cash for purchase of meat made by the AO and sustained by CIT (A) was arbitrary, untenable, unjust, bad in law, against rule of consistency and at any rate very excessive.
The Departmental Representative (DR) submitted that it is not the case of the AO that purchase undertaken by the assessee are not genuine or not but because the AO based accountant of the assessee that assessee has purchased frozen meat in cash which was in violation of Section 40A(3) of the Income Tax Act therefore, the disallowance made by the AO and sustained by the CIT(A) is quite correct and justified.
The Bench observed that the AO after evaluating the facts of the case noted that the assessee has no documentary evidence to prove that purchases are being made from individual growers/farmers/villages through Agents of assessee and thus the claim of assessee is false and unacceptable.
The Bench comprising of C.M. Garg, Judicial Member and Pradip Kumar Kedia, Accountant Member was in agreement to the conclusion drawn by the CIT(A) that the assessee was not eligible for benefit of exceptions enumerated under Rule 6DD(f) of the Rules as appellant failed to prove identity of suppliers and genuineness of the purchase made in cash.
It was further noted that in the present case the assessee could not establish that the purchase were made through agent. The Tribunal relied on the decision of Gujarat High Court in case of CIT Vs. Hynooup Food and Oil India (P) Ltd referred to by CIT(A), where it was held that in absence of any evidence in support of identity and genuineness of the appellant benefit of Section 6DD(f) of the Income Tax Rules cannot be applied in favour of the assessee therefore, the AO was right in making disallowance under Section 40A(3) of the Income Tax Act.
Thus, in agreement to the conclusion drawn by the CIT(A) that frozen meat could be purchased only from the meat processing units and therefore, the said suppliers, who are claimed to be illiterate villages with no bank accounts, cannot be held as cultivators or producer of frozen meat. Therefore, the explanation of assessee being devoid of merits and far away truthful factual positions was rightly discussed by the AO and CIT (A).
Hence it was held that the payment of assessee made in cash in violation of Section 40A(3) of the Income Tax Act is not eligible for benefit of exceptions envisages under Rules 6DD(f). Therefore the Bench did not interfere with the findings recorded by the CIT(A).
Thus, the appeal of the assessee was dismissed.
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