Rajeshbhai Naranbhai Patel Vs ACIT (ITAT Ahmedabad)
In the case of Rajeshbhai Naranbhai Patel vs. ACIT, the Income Tax Appellate Tribunal (ITAT) Ahmedabad upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which deleted a ₹12.92 crore addition made by the Assessing Officer under Section 40A(3) of the Income Tax Act. The dispute arose from the revenue’s claim that payments exceeding ₹20,000 were made in cash for agricultural produce that was allegedly not cultivated by the sellers. The CIT(A) concluded that the purchases were valid and supported by documents such as confirmations from farmers and 7/12 land extracts. The gross profit was estimated at 5.02%, based on historical trends, to address concerns of profit suppression.
The ITAT reviewed the evidence and affirmed the CIT(A)’s findings. It determined that the addition under Section 40A(3) was unwarranted since the payments qualified for exemption under Rule 6DD(e)(i) of the Income Tax Rules, which allows exceptions for payments made to farmers. Additionally, the tribunal agreed with the CIT(A)’s methodology of estimating gross profit based on past data, finding it reasonable and consistent with established practices. Consequently, the appeals filed by both the assessee and the revenue were dismissed, leaving the CIT(A)’s order intact.
