SWAPANLOK APPARTMENT PVT. LTD., JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, JAIPUR

ITA 1019/JPR/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1306 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 04-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Assessee Lawyers: UMA SHANKAR SHARDA
• Keywords: Business expenditure
• Section: 40A(3); 143(3); 153A; 208; 13

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 1019/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2013-14 SWAPANLOK APPARTMENT PVT. LTD. 313A, OLD AMER ROAD, JAIPUR. CUKE VS. THE DCIT, CENTRAL CIRCLE- 3, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AALCS 1816 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI UMA SHANKAR SHARDA (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI VARINDER MEHTA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 03/12/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 05/12/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-4, JAIPUR DATED 01.06.2018 FOR THE ASSESSMEN T YEAR 2013-14 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND S OF APPEAL:- 1. UNDER THE FACTS & CIRCUMSTANCES OF THE CASE CIT (A) HAS ERRED BY DISALLOWANCE THE AMOUNT OF CASH PAYMENT MADE FOR PURCHASE OF LAND TO FARMERS SITUATED IN RURAL AREA U/S 40A(3 ) OF RS. 22,00,000/-, WHICH WAS PAID AS PER PERMISSIBLE INST ANCES U/S 40A(3) READ WITH RULE 6DD OF IT RULES 1962. 2.THE APPELLANT PRAYS THAT THE ADDITION OF RS. 22,0 0,000/- MADE IN RESPECT OF DISALLOWANCE U/S 40A(3) BE DELETED. ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 2 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS ENGAGED IN THE REAL ESTATE BUSINESS AND ASSESSMENT U/S 143(3) R.W.S. 153A OF THE ACT WAS COMPLETED VIDE ORDER DATED 08.03.2016 AT TO TAL INCOME OF RS. 21,55,300/-. THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS. 22,00,000/- U/S 40A(3) OF THE ACT ON ACCOUNT OF CONSIDERATION PAID IN CASH EXCEEDING THE PRESCRIBED THRESHOLD TOWARDS PURCHASE OF LAND. AS PER THE ASSESSING OFFICER, THE LAND SO PURCHASED HAS BEEN HELD BY THE ASSESSEE AS STOCK-IN-TRADE, SINCE THE ASSESSEE WAS LEGALLY BOUND TO MAKE PURCHASES BY A CROSSED CHEQUE OR BY A BANK DRA FT WHICH HE FAILED TO DO SO AND THE CASE OF THE ASSESSEE DOES NOT FALL WITHIN ANY OF THE EXCEPTIONS PROVIDED UNDER RULE 6DD OF THE IT RULES, CASH PURCHASES AMOUNTING TO RS. 22,00,000/- WAS DISALLOWED INVOKIN G THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS SUSTAINED THE SAID ADDITION. AS PER LD. CIT(A), IT IS NOT A CASE OF THE ASSESSEE THAT BANKING FACILITI ES ARE NOT AVAILABLE NOR THE FACT THAT THE SELLERS OF LAND DID NOT HAVE BANK ACCOUNTS AND THERE IS NO CASE MADE OUT FOR THE PRESSING CIRCUMSTANCES. TH ERE IS NOTHING ON RECORD TO PROVE THAT SELLERS INSISTED ON CASH PAYME NT AND IN FACT THE ASSESSEE COULD VERY WELL MADE PAYMENTS BY DEMAND DR AFT. THE LD. CIT(A) ACCORDINGLY HELD THAT THAT THE ASSESSEE WAS NOT ABLE TO ESTABLISH HIS CASE FALLS IN RULE 6DD(J) OF THE IT RULES AND T HE ADDITION WAS CONFIRMED BY THE LD. CIT(A). AGAINST THE SAID FIND INGS, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 3 4. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT THE ASSESSEE HAD PURCHASED TWO DIFFERENT PIECES OF LAND DURING THE YEAR UNDER CONSIDERATION. THE FIRST TRANSACTION RELATES TO LAND SITUATED AT VILLAGE KANOTA, TEHSIL-BASSI, JAIPUR WHICH WAS EXE CUTED THROUGH SALE DEED DATED 30.10.2012 REGISTERED WITH SUB-REGISTRAR FOR A TOTAL CONSIDERATION OF RS. 1.80 CRORES OUT OF WHICH TOKEN MONEY OF RS. 16,00,000/- WAS PAID IN CASH TO FOUR JOINT OWNE RS/SELLERS AS PER THEIR RESPECTIVE SHARES IN THE LAND AND THE BALANCE AMOUN T WAS PAID THROUGH CHEQUE AND ALL THIS TRANSACTIONS ARE DULY REFLECTED IN THE REGISTERED SALE DEED WHICH IS AVAILABLE ON RECORD. SIMILARLY, ANOTH ER TRANSACTION WAS ENTERED INTO WITH SHRI BABU LAL IN RESPECT OF LAND SITUATED AT VILLAGE KANOTA, TEHSHI- BASSI, JAIPUR VIDE REGISTERED SALE DEED DATED 30.10.2012 FOR A TOTAL CONSIDERATION OF RS. 2.74 CR ORES OUT OF WHICH RS. 6,00,000/- WAS PAID IN CASH AS INITIAL TOKEN MO NEY AND THE BALANCE MONEY WAS PAID THROUGH CHEQUE AND BOTH THESE TRANSA CTIONS ARE DULY RECORDED IN THE REGISTERED SALE DEED. IT WAS SUBMIT TED THAT THE ASSESSEE HAD PURCHASED THE AFORESAID PIECES OF AGRICULTURE L AND AND THE PAYMENT MADE WAS TO THE AGRICULTURIST AS EVIDENCED FROM COP Y OF JAMABANDI WHICH IS PLACED ON RECORD. IT WAS SUBMITTED THAT SI NCE THE FARMERS DID NOT HAD ANY PREVIOUS DEALING WITH THE ASSESSEE, THE REFORE, THEY DID NOT HAD ANY TRUST IN THE ASSESSEE TO ACCEPT THE CHEQUE TOWARDS TOKEN MONEY AND INSISTED ON INITIAL CASH PAYMENT TO AGREE TO THE DEAL. SIMILARLY, THE ASSESSEE WAS ALSO OF THE OPINION THA T THE PAYMENT THROUGH CHEQUE WILL TAKE TIME IN CLEARING AND WAS A LSO HAVING FEAR THAT EVEN AFTER RECEIVING THE CHEQUE, THE SELLERS MAY NO T LODGE THE CHEQUE IN BANK AND MAY SELL THE LAND TO OTHER PERSONS, THE REFORE, TOKEN MONEY WAS PAID IN CASH TO MAKE THEM AGREE TO SELL THE LAN D TO THE ASSESSEE. ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 4 IT WAS FURTHER SUBMITTED THAT BESIDES THE INITIAL T OKEN MONEY, ALL THE SUBSEQUENT PAYMENTS HAVE BEEN MADE THROUGH CHEQUE A ND ALL THESE TRANSACTIONS HAVE BEEN DULY REFLECTED IN THE SALE D EEDS. IT WAS ACCORDINGLY SUBMITTED THAT GENUINENESS OF TRANSACTI ON HAS BEEN ESTABLISHED AS EVIDENCED BY THE REGISTERED SALE DEE D, THE IDENTITY OF THE SELLERS ARE DOCUMENTED AND THE BUSINESS EXPEDIENCY HAS BEEN DULY DEMONSTRATED. IT WAS SUBMITTED THAT BUSINESS EXPED IENCY IS RELEVANT CONSIDERATION WHICH SHOULD BE CONSIDERED WHILE DECI DING THE PRESENT APPEAL AND IN SUPPORT, RELIANCE WAS PLACED ON THE C OORDINATE BENCH DECISION IN CASE OF M/S DAGA ROYAL ARTS VS. ITO (IN ITA NO. 1065/JP/2016 DATED 15.05.2018), IN CASE OF RAKESH KUMAR VS. ACIT (IN ITA NO. 102/ASR/2014 DATED 09.03.2016) AND THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN CASE OF GURDAS GAR G VS CIT (IN ITA NO. 413/2014 DATED 16.07.2015). 5. PER CONTRA, THE LD. DR SUPPORTED THE FINDING OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE FACT THAT THE CH EQUE PAYMENTS WERE SUBSEQUENTLY MADE TO THE SELLERS DEMONSTRATED THAT THE SELLERS WERE HAVING BANK ACCOUNTS AND EVEN THE TOKEN MONEY SO PA ID BY THE ASSESSEE COULD HAVE BEEN PAID THROUGH CHEQUE. IT W AS FURTHER SUBMITTED THAT THE CASE OF THE ASSESSEE DOES NOT FA LL IN ANY OF THE EXCEPTIONS AS LAID DOWN IN THE IT RULES AND THEREFO RE, THERE IS NO INFIRMITY IN THE FINDING OF THE LOWER AUTHORITIES T HAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT ARE ATTRACTED IN THE INST ANT CASE. IT WAS ACCORDINGLY SUBMITTED THAT THE ORDER OF THE LD. CIT (A) MAY BE CONFIRMED. ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 5 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. T HIS BENCH HAD AN OCCASION TO EXAMINE THE PROVISIONS OF SECTION 40A(3) AND TEST OF BUSINESS E XPEDIENCY IN CASE OF M/S A ROYAL DAGA ARTS VS ITO (SUPRA) IN LIGHT OF DECISION OF THE HONBLE SUPREME COURT IN CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO AND THE DECISIONS OF VARIOUS HIGH COURTS INCLUDING THE DECI SION OF THE JURISDICTIONAL HIGH COURT AND THE RELEVANT FINDINGS READS AS UNDER: 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. IT WOULD BE RELEVANT TO REFER TO THE PROVIS IONS OF SECTION 40A(3) OF THE ACT WHICH READS AS UNDER: '(3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN R ESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OT HERWISE 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 R ESPECT OF SUCH EXPENDITURE. (3A) WHERE AN ALLOWANCE HAS BEEN MADE IN THE ASSESS MENT FOR ANY YEAR IN RESPECT OF ANY LIABILITY INCURRED BY THE ASSESSEE F OR ANY EXPENDITURE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR (HEREINAFTER REFERRED TO AS SUBSEQUENT YEAR) THE ASSESSEE MAKES PAYMENT IN RESPECT THEREOF , OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAY EE BANK DRAFT, THE PAYMENT SO MADE SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS INCOME OF T HE SUBSEQUENT YEAR IF THE PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON I N A DAY, EXCEEDS TWENTY THOUSAND RUPEES: PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB-SECTION (3) AND THIS SUB-SECTION WHERE A PAYMENT OR AGGREGATE OF PAYMENT S MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAW N ON A BANK OR ACCOUNT PAYEE BANK DRAFT EXCEEDS TWENTY THOUSAND RUPEES, IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED, HAVING REGARD T O THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUS INESS EXPEDIENCY AND OTHER RELEVANT FACTORS : PROVIDED FURTHER THAT IN THE CASE OF PAYMENT MADE FOR PLYING, HIRIN G OR LEASING GOODS CARRIAGES, THE PROVISIONS OF SUB-SECTIONS (3) AND (3A) SHALL HAVE EFFECT AS IF FOR THE WORDS 'TWENTY THOUSAND RUPEES', THE WORDS ' THIRTY-FIVE THOUSAND RUPEES' HAD BEEN SUBSTITUTED. (4) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FORCE OR IN ANY CONTRACT, WHERE ANY PAYMENT IN RESP ECT OF ANY EXPENDITURE HAS TO ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 6 BE MADE BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT IN ORDER THAT SUCH EXPENDITURE MAY NOT BE DIS ALLOWED AS A DEDUCTION UNDER SUB-SECTION (3), THEN THE PAYMENT MAY BE MADE BY SU CH CHEQUE OR DRAFT; AND WHERE THE PAYMENT IS SO MADE OR TENDERED, NO PERSON SHALL BE ALLOWED TO RAISE, IN ANY SUIT OR OTHER PROCEEDING, A PLEA BASED ON THE G ROUND THAT THE PAYMENT WAS NOT MADE OR TENDERED IN CASH OR IN ANY OTHER MANNER .' 19. THE AFORESAID PROVISIONS HAVE TO BE CONSIDERED AND INTERPRETED IN LIGHT OF VARIOUS AUTHORITIES WHICH HAVE BEEN QUOTED AT THE BAR AND R ELIED UPON BY THE LD AR AND LD DR IN SUPPORT OF THEIR RESPECTIVE CONTENTIONS. 20. IN CASE OF ATTAR SINGH GURMUKH SINGH (SUPRA), THE MATTER WHICH CAME UP FOR CONSIDERATION BEFORE THE HON'BLE SUPREME COURT, THE FACTS OF THE CASE WERE THAT ASSESSEE HAD MADE PAYMENT IN CASH EXCEEDING A SUM O F RS. 2,500/- FOR PURCHASE OF CERTAIN STOCK-IN-TRADE. PAYMENTS WERE NOT ALLOWED A S DEDUCTIONS IN THE COMPUTATION OF INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSI NESS OR PROFESSIONS' AS THE SAME WERE HELD TO BE IN CONTRAVENTION OF SECTION 40A(3) READ WITH THAT 6DD OF THE INCOME RULES. IN THAT FACTUAL BACKGROUND, THE QUESTION REG ARDING VALIDITY OF SECTION 40A(3) AND APPLICABILITY OF THE SAID PROVISIONS TO PAYMENT MADE FOR ACQUIRING STOCK-IN-TRADE CAME UP FOR CONSIDERATION BEFORE THE HON'BLE SUPREM E COURT. 21. THE HON'BLE SUPREME COURT REFERRING TO THE PROVISI ONS OF SECTION 40A(3) AND RULE 6DD AND IN PARTICULAR, RULE 6DD(J), AS EXISTED AT R ELEVANT POINT IN TIME, HAS HELD AS UNDER: '6. AS TO THE VALIDITY OF SECTION 40A(3), IT WAS UR GED THAT IF THE PRICE OF THE PURCHASED MATERIAL IS NOT ALLOWED TO BE ADJUSTED AG AINST THE SALE PRICE OF THE MATERIAL SOLD FOR WANT OF PROOF OF PAYMENT BY A CRO SSED CHEQUE OR CROSSED BANK DRAFT, THEN THE INCOME-TAX LEVIED WILL NOT BE ON TH E INCOME BUT IT WILL BE ON AN ASSUMED INCOME. IT IS SAID THAT THE PROVISION AUTHO RIZING LEVY TAX ON AN ASSUMED INCOME WOULD BE A RESTRICTION ON THE RIGHT TO CARRY ON THE BUSINESS, BESIDES BEING ARBITRARY. 7. IN OUR OPINION, THERE IS LITTLE MERIT IN THIS CO NTENTION. SECTION 40A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSION OF RULE 6D D. THE SECTION MUST BE READ ALONG WITH THE RULE. IF READ TOGETHER, IT WILL BE C LEAR THAT THE PROVISIONS ARE NOT INTENDED TO RESTRICT THE BUSINESS ACTIVITIES. THERE IS NO RESTRICTION ON THE ASSESSEE IN HIS TRADING ACTIVITIES. SECTION 40A(3) ONLY EMPO WERS THE ASSESSING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RE SPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED CHEQUE OR CROSSED BANK DRAFT. THE P AYMENT BY CROSSED CHEQUE OR CROSSED BANK DRAFT IS INSISTED ON TO ENABLE THE ASSESSING AUTHORITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHER IT WAS O UT OF THE INCOME FROM DISCLOSED SOURCES. THE TERMS OF SECTION 40A(3) ARE NOT ABSOLUTE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. THE GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF T HE ASSESSING OFFICER THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GEN UINE DIFFICULTY TO THE PAYEE. ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 7 IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PER SON WHO HAS RECEIVED THE CASH PAYMENT. RULE 6DD PROVIDES THAT AN ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSS ED BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF SECTION 40A(3) AND RULE 6DD THAT THEY ARE INTENDED TO REGULATE THE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK-MONEY FOR BUSINESS TRANSACTIONS. - MUD IAM OIL CO. V. ITO [1973] 92 ITR 519 (AP) . IF THE PAYMENT IS MADE BY A CROSSED CHEQUE ON A B ANK OR A CROSSED BANK DRAFT, THEN IT WILL BE EASIER TO ASCERTAIN, WH EN DEDUCTION IS CLAIMED, WHETHER THE PAYMENT WAS GENUINE AND WHETHER IT WAS OUT OF T HE INCOME FROM DISCLOSED SOURCES. IN INTERPRETING A TAXING STATUTE THE COURT CANNOT BE OBLIVIOUS OF THE PROLIFERATION OF BLACK-MONEY WHICH IS UNDER CIRCULA TION IN OUR COUNTRY. ANY RESTRAINT INTENDED TO CURB THE CHANCES AND OPPORTUN ITIES TO USE OR CREATE BLACK- MONEY SHOULD NOT BE REGARDED AS CURTAILING THE FREE DOM OF TRADE OR BUSINESS.' 22. FURTHER, THE HON'BLE SUPREME COURT UPHELD THE APPL ICABILITY OF SECTION 40A(3) TO PAYMENT MADE FOR ACQUIRING STOCK-IN-TRADE AND RAW M ATERIALS AND ALSO AFFIRMED THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN CASE OF FAKRI AUTOMOBILES V. CIT [1986] 24 TAXMAN 578/160 ITR 504 (RAJ) TO THE EFFECT THAT THE PAYMENTS MADE FOR PURCHASIN G STOCK-IN-TRADE OR RAW MATERIAL SHOULD ALSO BE REGAR DED AS EXPENDITURE FOR THE PURPOSES OF SECTION 40A(3) OF THE ACT. 23. THE HON'BLE SUPREME COURT HAS THEREFORE UPHELD THE CONSTITUTIONAL VALIDITY OF SECTION 40A(3) OF THE ACT AND HAS HELD THAT THE PRO VISIONS ARE NOT INTENDED TO RESTRICT THE BUSINESS ACTIVITIES AND RESTRAINT SO PROVIDED A RE ONLY INTENDED TO CURB THE CHANCES AND OPPORTUNITIES TO USE OR CREATE BLACK MONEY AND THE SAME SHOULD NOT BE REGARDED AS CURTAILING THE FREEDOM OF TRADE OR BUSINESS. THE HON'BLE SUPREME COURT HAS THUS LAID GREAT EMPHASIS ON THE INTENTION BEHIND INTRODU CTION OF THESE PROVISIONS AND IT WOULD THEREFORE BE RELEVANT TO EXAMINE WHETHER IN T HE PRESENT CASE, THERE IS ANY VIOLATION OF SUCH INTENTION AND IF ULTIMATELY, IT I S DETERMINED THAT SUCH INTENTION HAS BEEN VIOLATED, THEN CERTAINLY, THE ASSESSEE DESERVE S THE DISALLOWANCE OF THE EXPENDITURE SO CLAIMED. 24. THE HON'BLE SUPREME COURT REFERRING TO THE PROVISI ONS OF SECTION 40A(3) AS EXISTED AT RELEVANT POINT IN TIME WHICH TALKS ABOUT CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS AND RULE 6DD( J) WHICH PROVIDES FOR THE EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES AND THE FA CT THAT THE PAYMENT IN THE MANNER AFORESAID WAS NOT PRACTICAL OR WOULD HAVE CAUSED GE NUINE DIFFICULTY TO THE PAYEE AND FURNISHING THE NECESSARY EVIDENCE TO THE SATISFACTI ON OF THE ASSESSING OFFICER AS TO THE GENUINENESS OF THE PAYMENTS AND THE IDENTITY OF THE PAYEE HAS HELD THAT: 'THE TERMS OF SECTION 40A(3) ARE NOT ABSOLUTE. CONS IDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLU DED. THE GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE ASSE SSING OFFICER THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECE IVED THE CASH PAYMENT. RULE ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 8 6DD PROVIDES THAT AN ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSSED BANK DRAFT IN THE CI RCUMSTANCES SPECIFIED UNDER THE RULE.' 25. HERE, IT IS RELEVANT TO NOTE THAT THERE HAS BEEN N O CHANGE IN THE PROVISIONS OF SECTION 40A(3) IN SO FAR AS CONSIDERATIONS OF BUSIN ESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE CONCERNED, AS EXISTED AT RELEVANT POINT IN TIME AND AS CONSIDERED BY THE HON'BLE SUPREME COURT AND THE PROVISIONS OF SECTION 40A(3) AS EXIST NOW AND RELEVANT FOR THE IMPUNGED ASSESSMENT YEAR I.E. AY 2 013-14. HOWEVER, RULE 6DD(J) HAS BEEN AMENDED AND BY NOTIFICATION DATED 10.10.20 08, IT NOW PROVIDES FOR AN EXCEPTION ONLY IN A SCENARIO WHERE THE PAYMENT WAS REQUIRED TO BE MADE ON A DAY ON WHICH BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDA Y OR STRIKE. A QUESTION WHICH ARISES FOR CONSIDERATION IS WHETHER THE LEGAL PROPO SITION SO LAID DOWN BY THE HON'BLE SUPREME COURT REGARDING CONSIDERATION OF BUSINESS E XPEDIENCY AND OTHER RELEVANT FACTORS HAS BEEN DILUTED BY WAY OF DELEGATED LEGISL ATION IN FORM OF INCOME TAX RULES WHEN THE PARENT LEGISLATION IN FORM OF SECTION 40A( 3) TO WHICH SUCH DELEGATED LEGISLATION IS SUBSERVIENT HAS BEEN RETAINED IN ITS ENTIRETY. ALTERNATIVELY, CAN IT BE SAID THAT WHAT HAS BEEN PRESCRIBED AS EXCEPTIONAL CIRCUM STANCES IN RULE 6DD AS AMENDED ARE EXHAUSTIVE ENOUGH AND WHICH VISUALIZES ALL KIND S AND NATURE OF BUSINESS EXPEDIENCY IN ALL POSSIBLE SITUATIONS. 26. IF WE LOOK AT THE LEGISLATIVE HISTORY OF SECTION 4 0A(3) AND RULE 6DD, WE FIND THAT INITIALLY, SECTION 40A(3) PROVIDES FOR DISALLOWANCE OF 100% OF THE EXPENDITURE UNLESS THE MATTER FALLS UNDER EXCEPTION AS PROVIDED IN RUL E 6DD(J) LATER ON, SECTION 40A(3) HAS BEEN AMENDED TO PROVIDE FOR DISALLOWANCE OF 20% OF THE EXPENDITURE INCURRED IN CASH AND RULE 6DD(J) WAS OMITTED. THEREAFTER, BY VI RTUE OF ANOTHER AMENDMENT, DISALLOWANCE UNDER SECTION 40A(3) WAS INCREASED FRO M 20% TO 100%, HOWEVER, RULE 6DD(J) WAS NOT REINTRODUCED IN ORIGINAL FORM TO PRO VIDE FOR EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES RATHER IT WAS RESTRICTED TO PAYMENT BY WAY OF SALARY TO EMPLOYEES AND THEREAFTER, BY VIRTUE OF LASTEST AMEN DMENT IN YEAR 2008 TO PAYMENTS MADE ON A DAY ON WHICH THE BANKS WERE CLOSED ON ACC OUNT OF HOLIDAY OR STRIKE. 27. WE DO NOT BELIEVE THAT BY VIRTUE OF THESE AMENDMEN TS, THE LEGAL PROPOSITION SO LAID DOWN BY THE HON'BLE SUPREME COURT REGARDING CONSIDE RATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS HAS BEEN DILUTED IN ANY WAY. AT THE SAME TIME, WE ALSO BELIEVE THAT RULE 6DD AS AMENDED ARE NOT EXHAUSTIVE ENOUGH AND WHICH VISUALIZES ALL KINDS AND NATURE OF BUSINESS EXPEDIENCY IN ALL POSS IBLE SITUATIONS AND IT IS FOR THE APPROPRIATE AUTHORITY TO EXAMINE AND PROVIDE FOR A MECHANISM AS ORIGINALLY ENVISAGED WHICH PROVIDES FOR EXCEPTIONAL OR UNAVOID ABLE CIRCUMSTANCES TO THE SATISFACTION OF THE ASSESSING OFFICER WHEREBY GENUI NE BUSINESS EXPENDITURE SHOULD NOT SUFFER DISALLOWANCE. 28. FURTHER, THE COURTS HAVE HELD FROM TIME TO TIME TH AT THE RULES MUST BE INTERPRETED IN A MANNER SO AS TO ADVANCE AND NOT TO FRUSTRATE T HE OBJECT OF THE LEGISLATURE. THE INTENTION OF THE LEGISLATURE IS MANIFESTLY CLEAR AN D WHICH IS TO CURB THE CHANCES AND OPPORTUNITIES TO USE OR CREATE BLACK MONEY AND TO A SCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF THE INCOME FROM DI SCLOSED SOURCES. AND SECTION 40A(3) CONTINUES TO PROVIDE THAT NO DISALLOWANCE SH ALL BE MADE IN SUCH CASES AND ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 9 UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED HAVIN G REGARD TO THE NATURE AND EXTENT OF THE BANKING FACILITIES AVAILABLE, CONSIDE RATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. IN OUR VIEW, GIVEN THAT THE RE HAS BEEN NO CHANGE IN THE PROVISIONS OF SECTION 40A(3) IN SO FAR AS CONSIDERA TION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE CONCERNED, THE SAME CONT INUES TO BE RELEVANT FACTORS WHICH NEEDS TO BE CONSIDERED AND TAKEN INTO ACCOUNT WHILE DETERMINING THE EXCEPTIONS TO THE DISALLOWANCE AS CONTEMPLATED UNDER SECTION 40A(3) O F THE ACT SO LONG AS THE INTENTION OF THE LEGISLATURE IS NOT VIOLATED. WE FIND THAT OU R SAID VIEW FIND RESONANCE IN DECISIONS OF VARIOUS AUTHORITIES, WHICH WE HAVE DIS CUSSED BELOW AND THUS SEEMS FORTIFIED BY THE SAID DECISIONS. 29. WE REFER TO THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN CASE OF SMT. HARSHILA CHORDIA (SUPRA), WHERE THE FACTS OF CASE W ERE THAT THE ASSESSEE HAD MADE CERTAIN CASH PAYMENTS TOWARDS PURCHASE OF SCOOTER/M OPEDS WHICH EXCEEDED RS. 10,000/- IN EACH CASE TO THE PRINCIPAL AGENT INSTEA D OF MAKING PAYMENT THROUGH THE CROSS CHEQUES OR BANK DRAFT. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 40A(3) AND HELD THAT THEY WERE NO EXCEPTIONAL CIRCU MSTANCES FALLING UNDER RULE 6DD WHICH COULD AVOID CONSEQUENCES OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE LD. CIT (A) HELD THAT SUCH EXCEPTIONAL CIRCUMSTANCES DI D EXIST. HOWEVER, THE FINDINGS OF THE LD. CIT (A) WERE REVERSED BY THE TRIBUNAL AND T HE MATTER CAME UP FOR CONSIDERATION BEFORE THE HON'BLE HIGH COURT. 30. THE HON'BLE HIGH COURT OBSERVED THAT THE PRINCIPAL REASON WHICH WEIGHED WITH THE TRIBUNAL IN DISCARDING THE EXPLANATION FURNISHE D BY THE ASSESSEE WAS THAT THE CASE OF THE ASSESSEE DID NOT FALL IN ANY OF THE CLAUSES ENUMERATED IN THE CIRCULAR ISSUED BY THE CBDT ABOUT THE EXPLANATORY NOTE APPENDED TO CLA USE (J) WAS TO OPERATE AS IT WAS EXISTING AT THE RELEVANT TIME AND ENUMERATED CIRCUM STANCES IN THE CIRCULAR WAS EXHAUSTIVE OF EXCEPTIONAL CIRCUMSTANCES. THE HON'BL E HIGH COURT OBSERVED THAT THE TRIBUNAL HAS ERRONEOUSLY ASSUMED THAT ENUMERATION O F INSTANCES IN THE CIRCULAR IN WHICH THE PROVISIONS OF CLAUSE (J) UNDER RULE 6DD W OULD OPERATE TO BE EXHAUSTIVE OF SUCH CIRCUMSTANCES AND HAD NOT BEEN PROPERLY UNDERS TOOD ITS IMPLICATION. IT WAS FURTHER OBSERVED BY THE HON'BLE HIGH COURT THAT PRI MARY OBJECT OF ENACTING SECTION 40A(3) IN ITS ORIGINAL INCARNATION WAS TWO-FOLD, FI RSTLY, PUTTING A CHECK ON TRADING TRANSACTIONS WITH A MIND TO EVADE THE LIABILITY TO TAX ON INCOME EARNED OUT SUCH TRANSACTION AND, SECONDLY, TO INCULCATE THE BANKING HABITS AMONGST THE BUSINESS COMMUNITY. THE CONSEQUENCE WHICH WAS PROVIDED WAS T O DISALLOW OF DEDUCTION OF SUCH PAYMENTS/EXPENSES WHICH WERE NOT THROUGH BANK EITHER BY CROSSED CHEQUES OR BY DEMAND DRAFT OR BY PAY ORDER. IT WAS FURTHER HELD B Y THE HON'BLE HIGH COURT THAT: 'APPARENTLY, THIS PROVISION WAS DIRECTLY RELATED TO CURB THE EVASION OF TAX AND INCULCATING THE BANKING HABITS. THEREFORE, THE CONSEQUENCES, WHICH WERE TO BEFALL ON ACCOUNT OF NON-OBSERVATION OF SUB-SECTION (3) OF SECTION 40A MUST HAVE NEXUS TO THE FAILURE OF SUCH OBJECT. THEREFORE THE GENUINENESS OF THE TRANSACTIONS AND IT BEING FREE FROM VICE OF ANY DEVICE OF EVASIO N OF TAX IS RELEVANT CONSIDERATION WHICH HAS BEEN OVERLOOKED BY THE TRIB UNAL.' 31. IT WAS ACCORDINGLY HELD BY THE HON'BLE HIGH COURT THAT IT IS THE RELEVANT CONSIDERATION FOR THE ASSESSING AUTHORITY UNDER THE INCOME TAX ACT THAT BEFORE ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 10 INVOKING THE PROVISIONS OF SECTION 40A(3) IN LIGHT OF RULE 6DD AS CLARIFIED BY CIRCULAR OF THE CBDT THAT WHETHER THE FAILURE ON THE PART OF THE ASSESSEE IN ADHERING TO REQUIREMENT OF PROVISIONS OF SECTION 40A(3) HAS ANY SUCH NEXUS WHICH DEFEATS THE OBJECT OF PROVISION SO AS TO INVITE SUCH A CONSEQUE NCE. THIS IS PARTICULARLY SO, BECAUSE THE CONSEQUENCE PROVIDED U/S 40A(3) FOR FAILURE TO MAKE PAYMENTS THROUGH BANK IS NOT ABSOLUTE IN TERMS NOR AUTOMATIC BUT EXCEPTIONS HAVE BEEN PROVIDED AND LEVERAGE HAS BEEN LEFT FOR LITTLE FLEXING BY MAKING A GENERAL PR OVISION IN THE FORM OF CLAUSE (J) IN RULE 6DD. THEREAFTER, THE HON'BLE HIGH COURT REFERS TO THE CLAUSE 6DD(J) AND THE CIRCULAR DATED 31ST MAY, 1977 ISSUED BY THE BOARD I N THE CONTEXT OF WHAT SHALL CONSTITUTE EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCE S WITHIN THE MEANING OF SECTION CLAUSE (J). THE HON'BLE HIGH COURT OBSERVED THAT TH E CIRCULAR IN PARAGRAPH 5 GIVES A CLEAR INDICATION THAT RULE 6DD(J) HAS TO BE LIBERAL LY CONSTRUED AND ORDINARILY WHERE THE GENUINENESS OF THE TRANSACTION AND THE PAYMENT AND THE IDENTITY OF THE RECEIVER IS ESTABLISHED, THE REQUIREMENT OF RULE 6DD(J) MUST BE DEEMED TO HAVE BEEN SATISFIED. THE HON'BLE HIGH COURT OBSERVED THAT APPARENTLY SEC TION 40A(3) WAS INTENDED TO PENALIZE THE TAX EVADER AND NOT THE HONEST TRANSACT IONS AND THAT IS WHY AFTER FRAMING OF RULE 6DD(J), THE BOARD STEPPED IN BY ISSUING THE AFORESAID CIRCULAR AND THIS CLARIFICATION, IN OUR OPINION, IS IN CONFORMITY WIT H THE PRINCIPLE ENUNCIATED BY THE SUPREME COURT IN CTO V. SWASTIK ROADWAYS [2004] 3 S CC 640. 32. THE LEGAL PROPOSITION THAT ARISES FROM THE ABOVE D ECISION OF THE HON'BLE RAJASTHAN HIGH COURT IS THAT THE CONSEQUENCES, WHICH WERE TO BEFALL ON ACCOUNT OF NON- OBSERVATION OF SUB-SECTION (3) OF SECTION 40A MUST HAVE NEXUS TO THE FAILURE OF SUCH OBJECT. THEREFORE THE GENUINENESS OF THE TRANSACTIO NS AND IT BEING FREE FROM VICE OF ANY DEVICE OF EVASION OF TAX IS RELEVANT CONSIDERAT ION AND WHICH SHOULD BE EXAMINED BEFORE INVOKING THE RIGOURS OF SECTION 40A(3) OF TH E ACT. 33. IN CASE OF ANUPAM TELE SERVICES THE MATTER WHICH C AME UP FOR CONSIDERATION BEFORE THE HON'BLE GUJARAT HIGH COURT, THE FACTS OF THE CASE WERE THAT THE ASSESSEE WHO IS INVOLVED IN THE BUSINESS OF DISTRIBUTION MOB ILE AND RECHARGE VOUCHERS OF TATA TELE SERVICES LTD HAD MADE PAYMENT OF RS. 33,10,194 /- TO TATA TELE SERVICES LTD., BY CASH ON DIFFERENT DATES. THE ASSESSEE HAD MADE SUCH PAYMENT THROUGH ACCOUNT PAYEE CHEQUES TILL 22ND AUG, 2005, WHEN A CIRCULAR WAS IS SUED BY TATA TELE SERVICES LTD., REQUIRING THE APPELLANT TO DEPOSIT CASH AT THE COMP ANY'S OFFICE AT SURAT. IN THAT FACTUAL BACKGROUND , THE HON'BLE HIGH COURT HELD AS UNDER: '17. RULE 6DD OF THE IT RULES, 1962 PROVIDES FOR SI TUATIONS UNDER WHICH DISALLOWANCE UNDER S. 40A(3) SHALL NOT BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSI ON UNDER THE SAID SECTION. AMONGST THE VARIOUS CLAUSES, CL. (J) WHICH IS RELEV ANT, READ AS UNDER: (J) WHERE THE PAYMENT WAS REQUIRED TO BE MADE ON A DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE; 18. IT COULD BE APPRECIATED THAT S. 40A AND IN PART ICULAR SUB-CL. (3) THEREOF AIMS AT CURBING THE POSSIBILITY OF ON-MONEY TRANSACTIONS BY INSISTING THAT ALL PAYMENTS WHERE EXPENDITURE IN EXCESS OF A CERTAIN SUM (IN TH E PRESENT CASE TWENTY ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 11 THOUSAND RUPEES) MUST BE MADE BY WAY OF ACCOUNT PAY EE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT. 19. AS HELD BY THE APEX COURT IN CASE OF ATTAR SING H GURMUKH SINGH (SUPRA). '..IN OUR OPINION, THERE IS LITTLE MERIT IN THIS CO NTENTION. SEC. 40A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSION OF R. 6DD. TH E SECTION MUST BE READ ALONG WITH THE RULE. IF READ TOGETHER, IT WILL BE CLEAR T HAT THE PROVISIONS ARE NOT INTENDED TO RESTRICT THE BUSINESS ACTIVITIES. THERE IS NO RE STRICTION ON THE ASSESSEE IN HIS TRADING ACTIVITIES. SEC. 40A(3) ONLY EMPOWERS THE A .O. TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RESPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED CHEQUE OR CROSSED BANK DRAFT. THE PAYMENT BY CROSSE D CHEQUE OR CROSSED BANK DRAFT IS INSISTED ON TO ENABLE THE ASSESSING AUTHOR ITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF THE IN COME FROM UNDISCLOSED SOURCES, THE TERMS OF S. 40A(3) ARE NOT ABSOLUTE. C ONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLU DED. GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE A.O. THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN S. 40A(3) W AS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECEIVED THE CASH PAYME NT. RULE 6DD PROVIDES THAT AN ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSSED BANK DRAFT IN THE CIRCUMSTANCES S PECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF S. 40A(3) AND R. 6D D THAT THEY ARE INTENDED TO REGULATE BUSINESS TRANSACTIONS AND TO PREVENT THE U SE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTIONS:' 20. IT WAS BECAUSE OF THESE CONSIDERATIONS THAT THI S COURT IN CASE OF HYNOUP FOODS (P.) LTD. (SUPRA) OBSERVED THAT THE GENUINENE SS OF THE PAYMENT AND THE IDENTIFY OF THE PAYEE ARE THE FIRST AND FOREMOST RE QUIREMENTS TO INVOKE THE EXCEPTIONS CARVED OUT IN R. 6DD(J) OF THE IT RULES, 1962. 21. IN THE PRESENT CASE, NEITHER THE GENUINENESS OF THE PAYMENT NOR THE IDENTITY OF THE PAYEE WERE IN ANY CASE DOUBTED. THESE WERE THE CONCLUSIONS ON FACTS DRAWN BY THE CIT(A). THE TRIBUNAL ALSO DID NOT DISTURB SU CH FACTS BUT RELIED SOLELY ON R. 6DD(J) OF THE RULES TO HOLD THAT SINCE THE CASE OF THE ASSESSEE DID NOT FALL UNDER THE SAID EXCLUSION CLAUSE NOR WAS COVERED UNDER ANY OF THE CLAUSES OF R. 6DD, CONSEQUENCES ENVISAGED IN S. 40A(3) OF THE ACT MUST FOLLOW. 22. IN OUR OPINION, THE TRIBUNAL COMMITTED AN ERROR IN COMING TO SUCH A CONCLUSION. WE WOULD BASE OUR CONCLUSIONS ON THE FO LLOWING REASONS: ( A ) THE PARAMOUNT CONSIDERATION OF SECTION 40A(3) IS TO CURB AND REDUCE THE POSSIBI LITIES OF BLACK MONEY TRANSACTIONS. AS HELD BY THE SUPREME COURT IN ATTAR SINGH GURMUKH SINGH (SUPRA ), SECTION 40A(3) OF THE ACT DOES NOT ELIMINATE CON SIDERATIONS OF BUSINESS EXPEDIENCIES. ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 12 (B) IN THE P RESENT CASE, THE APPELLANT ASSESSEE WAS COMPELLED T O MAKE CASH PAYMENTS ON ACCOUNT OF PECULIAR SITUATION. SUCH SITUATION WAS A S FOLLOW- (I) THE PRINCIPAL COMPANY, TO WHICH THE ASSESSEE WAS A DISTRIBUTOR, INSISTED THAT CHEQUE PAYMENT FROM A CO-OPERATIVE BANK WOULD NOT DO, SINCE THE REALIZATION TAKES A LONGER TIME; (II) THE ASSESSEE WAS, THEREFORE, REQUIRED TO MAKE CASH PAYMENTS ONLY; (III) TATA TELE SERVICES LTD. ASSURED THE ASSESSEE THAT S UCH AMOUNT SHALL BE DEPOSITED IN THEIR BANK ACCOUNT ON BEHALF OF THE AS SESSEE; (IV) IT IS NOT DISPUTED THAT THE TATA TELE SERVICES LTD. DID NOT ACT ON SUCH PROMISE; (V) IF THE ASSESSEE HAD NOT MADE CASH PAYMENT AND RELIE D ON CHEQUE PAYMENTS ALONE, IT WOULD HAVE RECEIVED THE RECHARGE VOUCHERS DELAYED BY 4/5 D AYS AND THEREBY SEVERELY AFFECTING ITS BUSINESS OPERATIONS. WE WOULD FIND THAT THE PAYMENTS BETWEEN THE ASSESSE E AND THE TATA TELE SERVICES LTD. WERE GENUINE. THE TATA TELE SERVICES LTD. HAD INSISTED THAT SUCH PAYMENTS BE MADE IN CASH, WHICH TATA TELE SERVICES LTD. IN T URN ASSURED AND DEPOSITED THE AMOUNT IN A BANK ACCOUNT. IN THE FACTS OF THE PRESE NT CASE, RIGORS OF S. 40A(3) OF THE ACT MUST BE LIFTED. 23. WE NOTICE THAT THE DIVISION BENCH OF THE RAJAST HAN HIGH COURT IN CASE OF SMT. HARSHILA CHORDIA V. ITO (2007) 208 CTR (RAJ ) HAD OBSERVED THAT THE EXCEPTIONS CONTAINED IN R. 6DD ARE NOT EXHAUSTIVE A ND THAT THE SAID RULE MUST BE INTERPRETED LIBERALLY.' 34. IN CASE OF AJMER FOOD PRODUCTS (P.) LTD. V. JCIT [ IT APPEAL NO. 625 (JP) OF 2014, DATED 28-9-2016] A SIMILAR ISSUE HAS COME UP BEFORE THE CO-ORDINATE BENCH AND SPEAKING THROUGH ONE OF US, IT WAS HELD AS UNDER: '4.5 THE GENUINENESS OF THE TRANSACTION AS WELL AS THE IDENTITY OF THE PAYEE ARE NOT DISPUTED. FURTHER, THE APPELLANT HAS EXPLAINED THE BUSINESS EXPEDIENCY OF MAKING THE CASH PAYMENTS TO BOTH THE PARTIES WHICH HAS NOT BEEN CONTROVERTED BY THE REVENUE. FOLLOWING THE DECISION OF GUJARAT HIGH COURT IN CASE OF ANUPAM TELE SERVICES (SUPRA) AND RAJASTHAN HIGH COURT IN C ASE OF HARSHILA CHORDIA (SUPRA), THE ADDITION OF RS. 45,738/- UNDER SECTION 40A(3) IS DELETED.' 35. IN CASE OF GURDAS GARG (SUPRA), THE MATTER WHICH C AME UP FOR CONSIDERATION BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT, THE FACTS OF THE CASE ARE PARI MATERIA TO THE INSTANT CASE AND THE RATIO OF THE SA ID DECISION CLEARLY APPLIES IN THE ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 13 INSTANT CASE. IN THAT CASE, THE FACTS OF THE CASE W ERE THAT THE ASSESSEE WAS ENGAGED IN TRADING IN PROPERTIES AND DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THE AO OBSERVED THAT THERE ARE TRANSACTIONS WHERE THE PAYM ENTS HAVE BEEN MADE IN EXCESS OF RS. 20,000/- IN CASH WHICH WERE DISALLOWED U/S 40A( 3) OF THE ACT. THE HON'BLE HIGH COURT HELD THAT RULE 6DD(J) IS NOT EXHAUSTIVE OF TH E CIRCUMSTANCES IN WHICH THE PROVISO TO SECTION 40A(3) IS APPLICABLE AND IT ONLY ILLUSTRATIVE. THE HON'BLE HIGH COURT REFERS TO THE DECISION OF THE HON'BLE RAJASTH AN HIGH COURT IN CASE OF SMT. HARSHILA CHORDIA (SUPRA) AND THE DECISION OF HON'BL E SUPREME COURT IN CASE OF ATTAR SINGH GURMUKH SINGH (SUPRA). THE HIGH COURT FURTHER OBSERVED THAT THE LD. CIT(A) HAS GIVEN A FINDING THAT THE IDENTITY OF THE PAYEE I.E. VENDORS IN RESPECT OF LAND PURCHASE BY THE APPELLANT WAS ESTABLISHED, THE SALE DEEDS WERE PRODUCED, THE GENUINENESS THEREOF WAS ACCEPTED AND THE AMOUNT PAI D IN RESPECT OF EACH OF THESE AGREEMENT WAS SATISFIED BEFORE THE STAMP REGISTRATI ON AUTHORITY AND THE TRANSACTIONS WERE HELD TO BE GENUINE AND THE BAR AGAINST THE GRA NT OF DEDUCTIONS U/S 40A(3) OF THE ACT WAS NOT ATTRACTED. THE HON'BLE HIGH COURT FURTH ER OBSERVED THAT THE TRIBUNAL DID NOT UPSET THESE FINDINGS INCLUDING AS TO THE GENUIN ENESS AND THE CORRECTNESS OF THE TRANSACTIONS AND IT IS ALSO IMPORTANT TO NOTE THAT THE TRIBUNAL NOTED THE CONTENTION ON BEHALF OF THE APPELLANT THAT THERE WAS A BOOM IN TH E REAL ESTATE MARKET AND THEREFORE IT WAS NECESSARY, THEREFORE, TO CONCLUDE THE TRANSACTI ONS AT THE EARLIEST AND NOT TO POSTPONE THEM; THAT THE APPELLANT DID NOT KNOW THE VENDORS AND OBVIOUSLY THEREFORE, INSISTED FOR PAYMENT IN CASH AND THAT AS A RESULT T HEREOF, PAYMENTS HAD TO BE MADE IMMEDIATELY TO SETTLE THE DEALS. THE TRIBUNAL DID N OT DOUBT THIS CASE. THE TRIBUNAL, HOWEVER, HELD THAT THE CLAIM FOR DEDUCTION WAS NOT SUSTAINABLE. IN VIEW OF SECTION 40A(3) AS THE PAYMENTS WHICH WERE OVER RS. 20,000/- WERE MADE IN CASH. THE HON'BLE HIGH COURT ACCORDINGLY OBSERVED THAT 'THE TRIBUNAL HAS NOT DISBELIEVED THE TRANSACTIONS OR THE GENUINENESS THEREOF NOR HAS IT DISBELIEVED THE FACT THAT PAYMENTS HAVING BEEN MADE. MORE IMPORTANTLY, THE REASONS FUR NISHED BY THE APPELLANT FOR HAVING MADE THE CASH PAYMENTS, WHICH WE HAVE ALREAD Y ADVERTED TO, HAVE NOT BEEN DISBELIEVED. IN OUR VIEW, ASSUMING THESE REASONS TO BE CORRECT, THEY CLEARLY MAKE OUT A CASE OF BUSINESS EXPEDIENCY.' 36. THE CO-ORDINATE BENCH IN CASE OF DHURI WINE V. DY. CIT [2017] 83 TAXMANN.COM 20 (CHD. - TRIB.) HAS HELD THAT THE PROPOSITION SO LAID DOWN BY THE HON'BLE HIGH COURT IN CASE OF GURDAS GARG (SUPRA) IS QUITE UNAMB IGUOUS TO THE EFFECT THAT EVEN IF THE CASE OF THE ASSESSEE DOES NOT FALL IN ANY OF TH E CLAUSES OF RULE 6DD OF THE INCOME TAX RULES, INVOKING THE PROVISIONS OF SECTION 40A(3 ) OF THE ACT CAN BE DISPENSED WITH IF THE ASSESSEE IS ABLE TO PROVE THE BUSINESS EXPED IENCY BECAUSE OF WHICH IT HAS TO MAKE THE CASH PAYMENTS, THE GENUINENESS OF THE TRAN SACTIONS HAVE ALSO TO BE VERIFIED. 37. THE CO-ORDINATE BENCH IN CASE OF RAKESH KUMAR V. A SSTT. CIT [IT APPEAL NO. 102 (ASR.) OF 2014, DATED 09-03-2016] RELYING ON THE DE CISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN CASE OF GURDAS GARG (SUPRA) H AS HELD THAT THE GENUINENESS OF THE PAYMENT HAS NOT BEEN DOUBTED AS THE ASSESSING O FFICER HIMSELF HAS HELD THAT SALE DEEDS OF PROPERTIES WERE REGISTERED WITH THE REVENU E DEPARTMENT OF THE GOVERNMENT. THEREFORE, FOLLOWING THE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT, THE PAYMENT FOR PURCHASE OF LAND WAS ALLOWED. ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 14 38. WE FURTHER NOTE THAT IN CASE OF ACE INDIA ABODES L IMITED [DB APPEAL NO. 45/2012, DATED 11-09-2017], A SIMILAR ISSUE HAS COM E UP BEFORE THE HON'BLE RAJASTHAN HIGH COURT REGARDING PAYMENT FOR PURCHASE OF LAND FROM VARIOUS AGRICULTURIST FOR WHICH THE ASSESSEE HAS PAID CONSI DERATION IN CASH AND SHOWN THE LAND AS ITS STOCK-IN-TRADE. THE HON'BLE RAJASTHAN H IGH COURT REFERRING TO THE INTENT BEHIND INTRODUCTION OF SECTION 40A(3) AND CATENA OF DECISIONS RIGHT FROM ATTAR SINGH GURMUKH SINGH, SMT. HARSHILA CHORDIA, GURDAS GARG, ANUPAM TELE SERVICES REFERRED SUPRA HAS DECIDED THE ISSUE IN FA VOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 39. THE ISSUE WHICH IS BEING DISPUTED BEFORE US HAS TO BE CONSIDERED AND DECIDED IN LIGHT OF FACTS ON RECORD AND THE LEGAL POSITION WHI CH EMERGES FROM THE ABOVE REFERRED DECISIONS. THE FACTS OF THE CASE ARE THAT DURING TH E YEAR UNDER CONSIDERATION, THE ASSESSEE FIRM HAS PURCHASED 26 PIECES OF PLOT OF LA ND IN THE MONTH OF APRIL AND MAY, 2012 FROM VARIOUS PERSONS FOR A TOTAL CONSIDERATION OF RS. 2,46,28,425/-, OUT OF WHICH PAYMENT AMOUNTING TO RS. 1,71,67,000/- WERE MADE IN CASH TO VARIOUS PERSONS, PAYMENT AMOUNTING TO RS. 59,48,920/- WERE MADE IN C HEQUE TO VARIOUS PERSONS, AND RS. 8,15,700/- AND RS. 6,84,296/- WERE PAID IN CASH TOWARDS STAMP DUTY AND COURT FEE RESPECTIVELY. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSEE SUBMITTED COPIES OF THE SALE DEED, THE PARTICULARS OF WHICH F IND MENTION ON PAGE 7 AND 8 OF THE ASSESSMENT ORDER. ON PERUSAL OF THE SAID DETAILS, I T IS OBSERVED THAT THE SAID DETAILS CONTAINS THE NAME OF THE SELLER, DATE OF SALE DEED, PLOT NO., PURCHASE VALUE, STAMP DUTY, COURT FEE AND MODE OF PAYMENT - CASH/CHEQUE. THEREFORE, AS FAR AS THE IDENTITY OF THE PERSONS FROM WHOM THE PURCHASES HAVE BEEN MA DE AND GENUINENESS OF THE TRANSACTIONS OF PURCHASE OF VARIOUS PLOTS OF LAND A ND PAYMENT IN CASH IS CONCERNED, THE SAME IS EVIDENCED BY THE REGISTERED SALE DEEDS AND THERE IS NO DISPUTE WHICH HAS BEEN RAISED BY THE REVENUE EITHER DURING THE ASSESS MENT PROCEEDINGS OR BEFORE US. THE IDENTITY OF THE SELLERS AND GENUINENESS OF THE TRANSACTIONS IS THEREFORE FULLY ESTABLISHED IN THE INSTANT CASE. 40. FROM PERUSAL OF THE ASSESSMENT ORDER, IT IS FURTHE R NOTED THAT THE AO, ON PERUSAL OF THE DETAILS OF THE PROPERTIES PURCHASED, AS PER COPIES OF THE SALE DEED FURNISHED, HELD THAT THE ASSESSEE HAD MADE CASH PAYMENTS REGUL ARLY AND NO SPECIFIC CIRCUMSTANCES HAVE BEEN BROUGHT TO HIS KNOWLEDGE TH AT THE CASH PAYMENTS WERE MADE DUE TO SOME UNAVOIDABLE CIRCUMSTANCES. IT WAS HELD BY THE AO THAT MAXIMUM CASH PAYMENTS WERE MADE TO PERSONS RESIDING IN JAIPUR CI TY AND IN SINGLE FAMILY, REPEATED CASH PAYMENTS WERE MADE WHICH ITSELF SHOWS THAT THE RE WERE NO UNAVOIDABLE CIRCUMSTANCES TO MAKE CASH PAYMENTS TO THE SELLERS. WHAT IS THEREFORE RELEVANT TO NOTE THAT THE AO HAS APPRECIATED THE NECESSITY OF DETERM INING THE UNAVOIDABLE CIRCUMSTANCES WHICH COULD HAVE LED THE ASSESSEE TO MAKE CASH PAYMENTS. DURING THE COURSE OF ASSESSEMENT PROCEEDINGS, IT WAS SUBMITTED BY THE ASSESSEE THAT THE PAYMENT FOR PURCHASE OF LAND HAS BEEN MADE IN CASH BECAUSE THE SELLERS WERE NEW TO THE ASSESSEE AND REFUSED TO ACCEPT THE CASH. IT WAS SUB MITTED THAT THE DELAY IN MAKING THE CASH PAYMENT, IT COULD HAVE LOST THE LAND DEALS. IN THIS REGARD, THE LD AR SUBMITTED BEFORE US THAT THE ASSESSEE HAD PURCHASED THE LANDS BOTH THROUGH CASH AND CHEQUES. BASED ON THE REQUIREMENT OF THE SELLER, ASSESSEE HA D SELECTED THE MODE OF PAYMENT. FOR THE SELLERS, WHO HAD INSISTED THE PAYMENTS IN C ASH, ASSESSEE HAD WITHDRAWN THE ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 15 CASH FROM BANK ON THE SAME DATE OF REGISTRY AND MAD E THE PAYMENTS TO SELLER ACCORDINGLY. THE WITHDRAWALS FROM BANK AND PAYMENTS TO SELLER HAVE BEEN TABULATED BELOW AS PER DATES BELOW: DATE BANK GRAND TOTAL CUMULATIVE BALANCE UTILIZATION NET BALANCE ICICI BANK YES BANK DATE AMOUNT 18,00,000 5 - APR- 12 14,50,000 3,50,00 18,00,000 18,00,000 5,07,00 9 - APR- 12 - 9,00,000 9,00,000 27,00,000 9 - APR- 12 21,93,000 3,34,000 11 - APR- 12 - 2,00,000 2,00,000 29,00,000 11 - APR- 12 3,73,000 3,34,000 12 - APR- 12 - - - 29,00,000 - - 3,34,000 13 - APR- 12 - - - 29,00,000 - - 11,97,100 19 - APR- 12 - 30,00,000 30,00,000 59,00,000 23 - APR- 12 21,36,900 11,57,000 24 - APR- 12 30,00,000 25,00,000 55,00,000 1,14,00,000 24 - APR- 12 55,40,100 11,57,000 25 - APR- - - - 1,14,00,000 - - 11,57,000 ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 16 12 30 - APR- 12 - - - 1,14,00,000 - - 11,57,000 4 - MAY- 12 - - - 1,14,00,000 - - 11,57,000 7 - MAY- 12 - - - 1,14,00,000 - - 11,57,000 8 - MAY- 12 19,00,000 23,00,000 42,00,000 1,56,00,000 8 - MAY- 12 38,55,000 15,02,000 12 - MAY- 12 - - - 1,56,00,000 - - 15,02,000 14 - MAY- 12 - - - 1,56,00,000 - - 15,02,000 15 - MAY- 12 - - - 1,56,00,000 - - 15,02,000 16 - MAY- 12 - 15,00,000 15,00,000 1,71,00,000 - - 30,02,000 17 - MAY- 12 - 15,00,000 15,00,000 1,86,00,000 17 - MAY- 12 30,69,000 14,33,000 TOTAL 63,50,000 1,42,50,000 1,86,00,000 1,71,67,000 ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 17 41. IT WAS SUBMITTED BY THE LD AR THAT IN ORDER TO SEC URE THE DEAL, ASSESSEE HAD NO OTHER OPTION BUT TO MAKE THE PAYMENT IN CASH. CASH PAYMENTS WERE MADE FROM THE DISCLOSED SOURCES BEING THE AMOUNT WITHDRAWN FROM B ANK. IT WAS FOR SHEER INSISTENCE OF THE SELLER THAT THE PAYMENTS WERE MADE IN CASH. HAD THE ASSESSEE DENIED THE CASH PAYMENT LOOKING TO THE PROVISIONS OF SECTIONS 40A(3 ), THE DEAL COULD NOT HAVE BEEN FINALIZED. IN SUCH CIRCUMSTANCES, IN THE BUSINESS I NTEREST AND TO COMPLETE THE DEAL, THE ASSESSEE HAD CHOSEN TO MAKE THE PAYMENTS IN CASH FO RTIFIED THROUGH REGISTERED SALE DEED. THE PAYMENT HAS BEEN MADE OUT OF THE EXPLAINE D SOURCES, THROUGH THE REGISTERED DOCUMENT AND AS A DISCLOSED TRANSACTION. 42. WE FIND FORCE IN THE CONTENTIONS SO RAISED BY THE LD AR. THE TRANSACTIONS HAVE BEEN EXECUTED BY THE ASSESSEE WITHIN A SPAN OF ONE AND HALF MONTH AND THERE ARE TRANSACTIONS WHERE THE PAYMENT HAS BEEN MADE THROUG H CHEQUE AND THERE ARE TRANSACTIONS WHERE THE PAYMENT HAS BEEN MADE THROUG H CASH. THE SAID CONTENTIONS ARE SUPPORTED BY THE FACT THAT ON THE SAME DAY, THE RE ARE CASH AND CHEQUE PAYMENTS AS EVIDENCED FROM THE DETAILS OF THE TRANSACTIONS A PPEARING AT PAGE 7 AND 8 OF THE ASSESSMENT ORDER. IT IS THEREFORE CLEAR THAT THE AS SESSEE WAS HAVING SUFFICIENT BANK BALANCE AND ONLY AT THE INSISTENCE OF THE SPECIFIC SELLERS, THE ASSESSEE HAS WITHDRAWN CASH AND MADE PAYMENT TO THEM AND WHEREVER, THE SEL LER HAS INSISTED ON CHEQUE PAYMENTS, THE PAYMENT HAS BEEN MADE BY CHEQUE. THIS MAKES OUT A CASE THAT THE ASSESSEE HAS BUSINESS EXPEDIENCY UNDER WHICH IT HAS TO MAKE PAYMENT IN CASH AND IN ABSENCE OF WHICH, THE TRANSACTIONS COULD NOT BE COM PLETED. THE SECOND PROVISO TO SECTION 40A(3) REFERS TO 'THE NATURE AND EXTENT OF BANKING FACILITY, CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS' WHI CH MEANS THAT THE OBJECT OF THE LEGISLATURE IS NOT TO MAKE DISALLOWANCE OF CASH PAY MENTS WHICH HAVE TO BE COMPULSORY MADE BY THE ASSESSEE ON ACCOUNT OF BUSIN ESS EXPEDIENCY. FURTHER, THE SOURCE OF CASH PAYMENTS IS CLEARLY IDENTIFIABLE IN FORM OF THE WITHDRAWALS FROM THE ASSESSEE'S BANK ACCOUNTS AND THE SAID DETAILS WERE SUBMITTED BEFORE THE LOWER AUTHORITIES AND HAVE NOT BEEN DISPUTED BY THEM. IT IS NOT THE CASE OF THE REVENUE EITHER THAT UNACCOUNTED OR UNDISCLOSED INCOME OF TH E ASSESSEE HAS BEEN UTILISED IN MAKING THE CASH PAYMENTS. 43. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE LEGAL PROPOSITION LAID DOWN BY THE VARIOUS COUR TS AND COORDINATE BENCHES REFERRED SUPRA, WE ARE OF THE VIEW THAT THE IDENTIT Y OF THE PERSONS FROM WHOM THE VARIOUS PLOTS OF LAND HAVE BEEN PURCHASED AND SOURC E OF CASH PAYMENTS AS WITHDRAWALS FROM THE ASSESSEE'S BANK ACCOUNT HAS BE EN ESTABLISHED. THE GENUINENESS OF THE TRANSACTION HAS BEEN ESTABLISHED AS EVIDENCE D BY THE REGISTERED SALE DEEDS AND LASTLY, THE TEST OF BUSINESS EXPEDIENCY HAS BEEN ME T IN THE INSTANT CASE. FURTHER, AS HELD BY THE HON'BLE RAJASTHAN HIGH COURT IN CASE OF SMT. HARSHILA CHORDIA (SUPRA), THE CONSEQUENCES, WHICH WERE TO BEFALL ON ACCOUNT O F NON-OBSERVATION OF SUB-SECTION (3) OF SECTION 40A MUST HAVE NEXUS TO THE FAILURE O F SUCH OBJECT. THEREFORE THE GENUINENESS OF THE TRANSACTIONS AND IT BEING FREE F ROM VICE OF ANY DEVICE OF EVASION OF TAX IS RELEVANT CONSIDERATION. THE INTENT AND THE P URPOSE FOR WHICH SECTION 40A(3) HAS BEEN BROUGHT ON THE STATUTE BOOKS HAS BEEN CLEARLY SATISFIED IN THE INSTANT CASE. THEREFORE, BEING A CASE OF GENUINE BUSINESS TRANSAC TION, NO DISALLOWANCE IS CALLED FOR BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 18 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. 7. IN THE INSTANT CASE, THE UNDISPUTED FACTS ARE TH AT THE LAND HAS BEEN PURCHASED BY THE ASSESSEE FROM THE AGRICULTURI ST THROUGH TWO REGISTERED SALE DEEDS AND INITIAL TOKEN MONEY HAS B EEN PAID IN CASH AND SUBSEQUENT PAYMENTS HAVE BEEN MADE THROUGH CHEQUES. BOTH THE CASH AND CHEQUE TRANSACTIONS ARE RECORDED IN THE REGISTE RED SALE DEED AND ARE AVAILABLE ON RECORD. THEREFORE, THE IDENTITY O F THE PERSONS FROM WHOM THE PURCHASES HAVE BEEN MADE AND THE GENUINENE SS OF THE TRANSACTIONS OF THE LAND PURCHASE HAVE BEEN ESTABLI SHED. REGARDING THE BUSINESS NECESSITY OF MAKING THE CASH PAYMENT, I T WAS SUBMITTED THAT SINCE THE FARMERS DID NOT HAD ANY PREVIOUS DEALING WITH THE ASSESSEE, THEY INSISTED ON INITIAL CASH PAYMENT TO AGREE TO T HE DEAL. SIMILARLY, THE ASSESSEE WAS ALSO OF THE BELIEF THAT INITIAL CASH P AYMENT WOULD PROVIDE ASSURANCE TO THE SELLERS AND MAKES THEM AGREE TO SE LL THEIR LAND. WHERE AS PART OF NEGOTIATIONS, A DEAL IS IN-PRINCIP LE AGREED UPON, IT IS CUSTOMARY TO PAY A TOKEN AMOUNT TO BLOCK THE DEAL T ILL ALL LEGAL AND OTHER FORMALITIES ARE COMPLETED. IN THE INSTANT CA SE, WHERE THE ASSESSEE DECIDED TO PAY TOKEN MONEY TO THE SELLERS WHO ARE RURAL AGRICULTURIST TO MAKE THEM AGREE TO SELL THEIR LAND , IT IS CLEARLY A BUSINESS DECISION TAKEN BY THE ASSESSEE AND THE TEST OF BUSINESS EXPEDIENCY HAS BEEN ESTABLISHED. AS HELD BY THE HON BLE SUPREME COURT IN CASE OF ATTAR SINGH GURMUKH SINGH (SUPRA) THAT T HE TERMS OF SECTION 40A(3) ARE NOT ABSOLUTE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. THE GENUIN E AND BONAFIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE ASSESSING OFFICER THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 19 SECTION 40A(3) WAS NOT PRACTICABLE OR WOULD HAVE CA USED GENUINE DIFFICULTY TO THE PAYEE. FURTHER , AS HELD BY THE HON'BLE RAJASTHAN HIGH COURT IN CASE OF SMT. HARSHILA CHORDIA (SUPRA), THE CONSEQUENCES, WHICH WERE TO BEFALL ON ACCOUNT OF NON-OBSERVATION OF SUB -SECTION (3) OF SECTION 40A MUST HAVE NEXUS TO THE FAILURE OF OBJEC T FOR WHICH THE PROVISIONS HAVE BEEN ENACTED. THEREFORE THE GENUIN ENESS OF THE TRANSACTION AND IT BEING FREE FROM VICE OF ANY DEVI CE OF EVASION OF TAX IS RELEVANT CONSIDERATION FOR WHICH SECTION 40A(3) HAS BEEN BROUGHT ON THE STATUTE BOOKS AND WHICH HAS BEEN SATISFIED IN THE I NSTANT CASE. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE LEGAL PROPOSITION LAID DOWN BY THE VA RIOUS COURTS AND COORDINATE BENCHES REFERRED SUPRA, NO DISALLOWANCE IS CALLED UNDER SECTION 40A(3) OF THE ACT AND THE SAME IS DIRECTED TO BE DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 05/12/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 05/12/2019. *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SWAPANLOK APPARTMENT PVT. LTD., JAIP UR 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CENTRAL CIRCLE-3, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. ITA NO. 1019/JP/2018 SWAPANLOK APPARTMENT PVT. LTD. VS. DCIT 20 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 1019/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR