Star Realcon Pvt. Ltd, New Delhi V. ITO Ward -24(2), New Delhi

ITA 1110/DEL/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7589 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 12-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 40A(3); 14A

Judgement Text

1 ITA NO. 1110/DEL/2019 IN THE INCOME TAX APPELLAT E TRIBUNAL DELHI BENCH: SMC -1 NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBE R AND MS SUCHITRA KAMBLE, JUDIC IAL MEMBER ITA NO. 1110/DEL/2019 ( A.Y 2013-14) (THROUGH VIDEO CONFEREN CING) STAR REALCON PVT. LTD. 1010, FAIZ ROAD, KAROL BAGH, NEW DELHI AAJCS9555L (APPELLANT) VS ITO WARD-24(2) ROOM NO. 236, C. R. BUILDING, NEW DELHI 110002 (RESPONDENT) APPELLANT BY SH. ROHIT TIWARI, ADV RESPONDENT BY SH. AJAY KUMAR, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 28/01/2019 PASSED BY CIT(A)-XXV, NEW DELHI FOR A SSESSMENT YEAR 2013-14. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APP EALS)-25, DELHI IS BAD BOTH IN EYES OF LAW AND ON FACTS. 2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-25, DELHI HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 10, 00,000/- MADE BY AO ON ACCO UNT OF CASH PAYMENT MADE FOR PURCHASE OF LAND AT GHAZIABAD, U.P. INVOKI NG THE PROVISION OF DATE OF HEARING 11.01.2021 DATE OF PRONOUNCEMENT 21.01.2021 2 ITA NO. 1110/DEL/2019 SECTION 40A(3) OF THE ACT IGNORING THE FACT THAT LA ND SHOWN IN 'NON-CURRENT INVESTMENT' IN AUDITED FINANCIAL STATEMENTS. 3 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-25, DELHI HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 10,00,000/- MADE BY AO ON ACCOU NT OF CASH PAYMENTS MADE AGAINST THE PURCHASE OF LAND AT BHIWADI, RAJAS THAN INVOKING THE PROVISION OF SECTION 40A(3) OF THE ACT IGNORING THE FACT THAT THE PAYMENT MADE IN CASH ON 'SUNDAY' WHICH IS EXEMPT UNDER RULE 6DD OF THE INCOME TAX RULES, 1962. 4 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-25, DELHI HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 20,00,000/- DESPITE THE FACTS T HAT THESE PAYMENTS HAVING BEEN MADE OUT OF BUSINESS EXPEDIENCY AS THE APPELLA NT IS ENGAGED IN REAL ESTATE BUSINESS. 5 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-25, DELHI HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 20,00,000/- DESPITE THE FACT TH AT THERE BEING NO DOUBT AS TO THE GENUINENESS OF TRANSACTIONS AS SUCH NO DISAL LOWANCE SHOULD HAVE BEEN MADE UNDER THE PROVISION OF SECTION 40A(3) OF ACT. 3. THE ASSESSEE COMPANY IS A PRIVATE LIMITED COMPAN Y DULY REGISTERED WITH ROC NCT OF DELHI AND HARYANA. THE ASSESSEES CARRYING ON THE BUSINESS OF CONSTRUCTION OF RESIDEN TIAL HOUSES/FLATS, COMMERCIAL BUILDINGS ETC. THE ASSESSEE FILED ITS R ETURN OF INCOME ON 30/9/2013 DECLARING NIL INCOME. IN THE COMPUTATION OF INCOME AFTER SETTING OFF OF BROUGHT FORWARD UNABSORBED DEP RECIATION TO THE EXTENT OF RS. 9,45,763/-, THE ASSESSING OFFICER AS SESSED THE INCOME OF THE ASSESSEE AT RS.22,88,072/-. THE ASSESSING O FFICER DISALLOWED CASH PAYMENTS TOWARDS PURCHASE OF LAND U /S 40A (3) OF 3 ITA NO. 1110/DEL/2019 THE INCOME TAX ACT, 1961 AMOUNTING TO RS. 20 LACS ( RS. 10 LCAS OUT OF RS. 3.36 CRORES AND RS. 10 LACS OUT OF RS. 12.87 CRORES). THE ASSESSING OFFICER ALSO DISALLOWED RS. 2,88,072/- U/ S 14A OF THE ACT. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWE D THE APPEAL OF THE ASSESSEE. 5. THE LD. AR SUBMITTED THAT THE CIT(A) ERRED IN CO NFIRMING THE DISALLOWANCE OF RS. 10 LACS MADE BY THE ASSESSEE O N ACCOUNT OF CASH PAYMENT TOWARDS PURCHASE OF LAND AT GHAZIABAD, UP UNDER THE PROVISIONS OF SECTION 40A(3) OF THE ACT THEREBY IGNORING THE FACT THAT LAND IS SHOWN IN NON CURRENT INVESTMENT IN TH E AUDITED FINANCIAL STATEMENTS AND NOT CLAIMED AS EXPENDITURE IN P & L ACCOUNT. THE LD. AR FURTHER SUBMITTED THAT THE CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.10 LACS MADE BY T HE ASSESSEE ON ACCOUNT OF CASH PAYMENTS MADE AGAINST THE PURCHASE OF LAND AT BHIWADI, RAJISTHAN, INVOKING THE PROVISIONS OF SECT ION 40A(3) OF THE ACT IGNORING THE FACT THAT THE PAYMENT MADE IN CAS H ON SUNDAY WHICH IS EXEMPT UNDER RULE 6DD OF THE INCOME TAX RU LES, 1962. THE LD. AR FURTHER SUBMITTED THAT THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 20 LACS DESPITE THE FACT TH AT THESE PAYMENTS HAVING BEEN MADE OUT OF BUSINESS EXPEDIENCY AS THE ASSESSEE IS ENGAGED IN REAL ESTATE BUSINESS. THE LD. AR FURTH ER SUBMITTED THAT THERE WAS NO DOUBT CREATED BY THE ASSESSING OFFICER AS TO THE GENUINENESS OF THE TRANSACTION. THEREFORE, NO DISA LLOWANCE SHOULD 4 ITA NO. 1110/DEL/2019 HAVE BEEN MADE IN THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE LD. AR RELIED UPON VARIOUS DECISIONS WHICH ARE AS F OLLOWS: I) KALYAN CONSTRUCTIONS VS. ITO (ITA NO. 2113/HYD/2 017 ORDER DATED 31.07.2018 HYDERABAD BENCH) II) DCIT VS. M/S BRILLIANT SARE REALITY PVT. LTD. ( IT(SS)A NO. 44/IND/2015 ORDER DATED 28.12.2018 INDORE BENCH) III) PRIMA INFRA DEVELOPERS PVT. LTD. VS. ITO (ITA NO. 7144/DEL/2017 ORDER DATED 27.06.2018 DELHI BENCH) 6. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. FROM THE PERUSAL OF THE ASSES SMENT ORDER AS WELL AS THE CIT(A) BOTH THE REVENUE AUTHORITIES HAV E NOT GIVEN ANY REASON AS TO WHY SECTION 40A(3) WILL BE APPLICABLE ALONG WITH RULE 6D (J). IN-FACT, BOTH THE REVENUE AUTHORITIES HAVE NOT DISPUTED THE IDENTITY OF THE SELLERS AS WELL AS THE PURCHASE /SA LE DEED BETWEEN THE PARTIES AND THE ASSESSEE, BUT WHETHER THE PAYME NTS WERE BONAFIDE AND THE CONSIDERATION OF A GENUINE TRANSAC TION WAS PROPERLY DISCLOSE BY THE ASSESSEE DURING THE ASSESS MENT PROCEEDINGS AS WELL AS THE APPELLATE PROCEEDINGS IS ALSO NOT SPECIFIED IN BOTH THE REVENUE AUTHORITIES ORDERS. T HE SUBMISSIONS OF THE LD. AR THAT THE CASH PAYMENTS WERE MADE ON SUNDAYS WHICH IS A NON-BANKING DAY BUT THE ASSESSEE FROM TH E RECORDS HAS NOT SHOWN AS TO WHAT WAS THE NECESSITY TO MAKE PAYM ENT ON 5 ITA NO. 1110/DEL/2019 SUNDAYS. THUS, THE REVENUE AUTHORITIES AS WELL AS THE ASSESSEE HAS NOT CLEARLY STATED THEIR RESPECTIVE CASES U/S 4 0A(3) READ WITH RULE 6DD(J), IT WILL BE APPROPRIATE TO REMAND BACK THIS MATTER TO THE FILE OF THE ASSESSING OFFICE FOR ALLOWING THE A SSESSEE TO ESTABLISH AS TO WHY THE PAYMENTS WERE MADE ON SUNDAYS AND WHY THE APPLICABILITY OF SECTION40A(3) DOES NOT ARISE IN AS SESSEES CASE WHEN LAND SHOWN IN NON CURRENT INVESTMENT IN THE AUDITE D FINANCIAL STATEMENTS WHICH IS NOT CLAIMED AS EXPENDITURE IN P & L ACCOUNT. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 8. IN RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JANUARY, 2021. SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED: 21/01/2021 R. NAHEED COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NO. 1110/DEL/2019