JCIT (OSD), Dehradun V. Shri D.M. Agarwal, Dehradun

ITA 1137/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97729 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 05-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NANDITA KANCHAN
• Keywords: Unexplained expenditure; Income from undisclosed sources; Document seized; Documents seized
• Section: 44AD; 40A(3); 142(1); 153A; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B: NEW DELHI) BEFORE SHRI A.T. VARKEY, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.1137/DEL./2012 (ASSESSMENT YEAR : 2007-08) JCIT (OSD), CENTRAL CIRCLE, VS. SHRI D.M. AGGARWAL , DEHRADUN. 363/218, PARK ROAD, DEHRADUN. (PAN : AGVPA7376G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SOMIL AGARWAL, CA REVENUE BY : MS. NANDITA KANCHAN, CIT DR DATE OF HEARING : 15.10.2015 DATE OF PRONOUNCEMENT : 10.11.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THIS APPEAL, AT THE INSTANCE OF THE REVENUE, IS DIR ECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, DEHRADU N DATED 30.12.2010 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS AN INDIVIDUAL. THE ASSESSEE IS AN ADVOCATE AND DEED WRITER IN THE CIVIL COURTS AT DEHRADUN AND THE INCO ME RECEIVED WAS SHOWN AS PROFESSIONAL RECEIPTS OF THE ASSESSEE; AND THERE WA S ALSO INCOME FROM INTEREST ON FDR'S AND BANK ACCOUNTS. THE ASSESSEE WAS ALSO EN GAGED IN THE BUSINESS OF REAL ESTATE TRANSACTIONS. 2 ITA NO.1137/DEL/2012 3. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL WHICH ARE AS UNDER :- 1. THE LD. CIT HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.11,35,949/- MADE BY THE A.O. ON ACCOUNT OF UNVER IFIABLE CONSTRUCTION EXPENSES, WITHOUT APPRECIATING THE FACT THAT THE CI T (APPEALS) HAD HIMSELF ADMITTED IN HIS ORDER THAT THE ASSESSEE WAS NOT MAI NTAINING ADEQUATE BOOKS OF ACCOUNT, AND FURTHER THAT THE ASSESSEES CASE WAS N OT COVERED UNDER THE PROVISIONS OF SECTION 44AD OF THE ACT AS THE TURNOV ER OF THE BUSINESS EXCEEDED RS.40.00 LACS, THEREFORE, ACCEPTING PROFIT EQUIVALENT TO 10% OF THE GROSS RECEIPT WAS PERVERSE APPLICATION OF LAW IN TH E ASSESSEES CASE. 2. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,00,000/- MADE BY THE A.O. U/S 40(A)(3) OF T HE ACT ON ACCOUNT OF CASH EXPENDITURE EXCEEDING RS.20,000/- WITHOUT APPRECIAT ING THE FACT THAT THE PAYMENT OF STAMP DUTY WERE NOT COVERED UNDER THE EX CEPTION PROVIDED IN RULE 6DD OF THE I.T. RULES AND NEITHER THE EXPENDITURE M ADE ON ACCOUNT OF SELLERS WAS COVERED UNDER THE EXCEPTION OF RULE 6DD OF THE I.T. RULES. 3. GROUND NO.1 IS AGAINST THE DELETION OF ADDITION OF RS.11,35,949/-MADE ON ACCOUNT OF UNVERIFIABLE CONSTRUCTION EXPENSES. 4. A SEARCH UNDER SECTION 132 OF THE INCOME-TAX ACT , 1961 (HEREINAFTER THE ACT) WAS INITIATED AND TOOK PLACE IN THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE ON 04.03.2009. A NOTICE UNDER SECTION 153A (1)(A) OF THE ACT WAS ISSUED ON 31.12.2009 AND SERVED UPON THE ASSESSEE O N 06.01.2010. FURTHER, A QUESTIONNAIRE AND NOTICE UNDER SECTION 142(1) WAS I SSUED ON 20.09.2010 ON THE BASIS OF SEIZED MATERIAL AS THE ASSESSEE HAD NOT FI LED ANY RETURN IN RESPONSE TO THE NOTICES ISSUED EARLIER. IN RESPONSE TO THIS NO TICE, THE ASSESSEE FILED A RETURN ON 22.11.2010 DECLARING AN INCOME OF RS.5,79,030/-, AS AGAINST AN INCOME OF RS.3,60,850/- DISCLOSED IN THE RETURN OF INCOME FIL ED EARLIER UNDER SECTION 139 OF THE ACT. 3 ITA NO.1137/DEL/2012 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE PRODUCED THE DETAILS OF INCOME AND BALANCE SHEET SHOWING INVESTM ENTS AND LIABILITIES WHICH WERE PREPARED ON THE BASIS OF ACCRETION TO THE ASSE TS, AS NO BOOKS OF ACCOUNTS WERE MAINTAINED BY THE ASSESSEE. AFTER PERUSING TH E DOCUMENTS PRODUCED BEFORE HIM, THE AO OBSERVED THAT THE ASSESSEE HAD I NCURRED AN EXPENDITURE OF RS.1,13,59,499/- ON THE CONSTRUCTION. HE OBSERVED THAT THE ASSESSEE HAD NOT PRODUCED THE COMPLETE ACCOUNTS AND DETAILS OF ALL T HESE EXPENSES AND FROM THE SEIZED MATERIAL, HE ALSO FOUND THAT NO REGULAR BOOK S OF ACCOUNT WERE BEING MAINTAINED AND THERE WERE HALF COMPLETE INSTANCES A ND LEDGER ETC. OF THE EXPENDITURE FROM WHERE THE COMPLETE ACCOUNTS WERE N OT EMERGING. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAD INCREASED TH E RECEIPTS AFTER THE SEARCH AND ACCORDINGLY THE EXPENDITURE PART WAS BOUND TO GO UP . HE OBSERVED THAT IT HAS TO BE BACKED BY THE CREDIBLE DATA AND DETAILS WHICH WE RE MISSING IN THIS CASE. ACCORDINGLY, THE AO MADE A DISALLOWANCE OF RS.11,35 ,949/- WHICH IS 10% OF THE EXPENDITURE ON CONSTRUCTION AT RS.1,13,59,499/- . THE AO FURTHER OBSERVED THAT THE ASSESSEE'S CASE WAS NOT ENTIRELY THAT OF A CIVIL CONTRACTOR WHERE PROFITS WERE DETERMINED ON PERCENTAGE IN VIEW OF THE PROVIS IONS OF SECTION 44AD. HE OBSERVED THAT THIS WAS A CASE OF A BUILDER, DEVELOP ER AND THE CONSTRUCTION ACTIVITIES WERE A PART OF THAT BUSINESS. 5. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE T HE FIRST APPELLATE AUTHORITY AND THE LD. CIT (A) DELETED THE ADDITION BY OBSERVI NG AS UNDER :- 4 ITA NO.1137/DEL/2012 1.2 THE SUBMISSION HAS BEEN CONSIDERED. ADMITTEDLY , THE ASSESSEE WAS A PROFESSIONAL, WORKING AS AN ADVOCATE-CUM-DEED WRITE R, AND ALSO INDULGED IN REAL ESTATE BUSINESS. HE DID NOT MAINTAIN ADEQUATE DOCUMENTATION WHICH WOULD SATISFY THE REQUIREMENT OF LAW IN SUPPORT OF THE REAL ESTATE BUSINESS. THE DOCUMENTS SEIZED DURING SEARCH ALSO SUGGESTED THAT HE HAD BEEN EARNING UNACCOUNTED INCOME IN THE SAME. IN THIS CONNECTION, THE ASSESSEE WAS REQUIRED TO FURNISH COMPLETE DETAILS OF THE DISCLOSURE MADE U/S 132(4) OF THE I.T. ACT AND THE ADDITIONAL INCOME ACTUALLY DISCLOSED IN THE RETURNS OF INCOME FURNISHED PURSUANT TO THE SEARCH. THE FOLLOWING INF ORMATION WAS FURNISHED BY THE ASSESSEE :- SHRI ASHISH MOHAN AGARWAL: ORIGINAL FILED U/S 139 FILED AFTER SEARCH U/S 153A ADDITIONAL INCOME 50,000 1,05,000 55,000 59,500 1,24,290 64,790 1,05,600 7,22,600 6,17,000 1,40,000 36,07,830 34,67,830 2,92,280 37,71,920 34,79,640 9,95,230 36,32,100 26,36,870 NOT DUE 45,31,800 45,31,800 SHRI DEVENDRA MOHAN AGARWAL: ORIGINAL FILED U/S 139 FILED AFTER SEARCH U/S 153A ADDITIONAL INCOME 50,000 3,35,380 2,85,380 67,500 3,73,890 3,06,390 1,07,000 3,07,770 2,00,770 1,20,000 31,66,890 30,46,890 3,60,850 5,79,030 2,18,180 44,363 15,55,410 15,11,047 NOT DUE 4,29,050 4,29,050 THE GROUP CONSISTS OF THE ASSESSEE AND HIS SON SHRI ASHISH MOHAN AGARWAL. IT WAS ALSO SUBMITTED THAT, TOGETHER, THEY HAD MADE DI SCLOSURE OF ADDITIONAL INCOME OF RS.1,70,00,000/- DURING THE SEARCH, AS AG AINST WHICH THE ADDITIONAL INCOME ACTUALLY OFFERED FOR TAXATION IN THE RETURNS FURNISHED PURSUANT TO THE SEARCH WAS RS.2,16,42,960/. THE PURPOSE OF SEARCH I S TO DETECT EVIDENCE RELATING TO UNDISCLOSED INCOME EARNED BY THE ASSESS EE AND TO COLLECT TAX ON THE SAME. IF A PERSON HAS EARNED UNDISCLOSED INCOME, IT IS LOGICAL THAT SUCH INCOME WOULD NOT FORM PART OF HIS REGULAR BOOKS OF ACCOUNT . HENCE, IF THE PERSON HAS OFFERED THE ADDITIONAL INCOME (AS IS APPARENT WITH REFERENCE TO THE SEIZED DOCUMENTS AND ANY OTHER EVIDENCE WHICH THE AO MAY G ATHER), THE AO SHOULD AVOID MAKING FURTHER ADDITION TO SUCH INCOME SIMPLY BECAUSE SUCH INCOME WAS NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT IN THE FIRST PLACE. HE WOULD, OF COURSE, BE JUSTIFIED IN MAKING FURTHER ADDITION IF HE CAN MARSHAL ANY EVIDENCE SUGGESTING THAT THE ACTUAL INCOME EARNED B Y THE ASSESSEE WAS MORE THAN WHAT WAS DISCLOSED BY THE LATTER IN COURSE OF THE SEARCH AND SUBSEQUENTLY IN HIS RETURNS. IN THIS CASE, NO SUCH EVIDENCE IS T HERE. THE ADDITION WAS MADE 5 ITA NO.1137/DEL/2012 SIMPLY BECAUSE THE ASSESSEE HAD NOT MAINTAINED REGU LAR BOOKS OF ACCOUNT AND THE REQUIRED DOCUMENTS IN RESPECT OF SUCH INCOME. I T IS SETTLED LAW THAT AN ESTIMATE OF INCOME SHOULD BE COGENT AND SHOULD NOT BE CAPRICIOUS OR WHIMSICAL. THE ASSESSEE HAS CLAIMED TO HAVE FURNISH ED HIS INCOME AND EXPENDITURE ACCOUNT AS WELL AS STATEMENT OF HIS ASS ETS AND LIABILITY YEAR AFTER YEAR, INCORPORATING THE FINDINGS RELATING TO UNDISC LOSED INCOME AND ASSETS DURING THE SEARCH. HE HAS SHOWN THAT THE ADDITIONAL INCOME ACTUALLY OFFERED IN THE RETURNS FURNISHED BY HIM AND HIS SON PURSUANT T O SEARCH EXCEEDED THE ADDITIONAL INCOME DISCLOSED BY THEM DURING THE SEAR CH. ON THE OTHER HAND, THE AO HAS NOT RECORDED ANY FINDING THAT THERE IS ANY E VIDENCE OF ANY UNEXPLAINED EXPENDITURE/INVESTMENT OR ANY INCOME WHICH WAS NOT COVERED IN THE ADDITIONAL INCOME DISCLOSED BY THE ASSESSEE. IN VIE W OF THIS, THERE IS NO JUSTIFICATION FOR MAKING AD HOC DISALLOWANCE OF 10% OUT OF THE EXPENDITURE CLAIMED TO HAVE BEEN INCURRED BY THE ASSESSEE IN 'I S CONSTRUCTION BUSINESS. THE DEBATE WHETHER HE WAS A BUILDER/DEVELOPER OR A CIVIL CONTRACTOR IS NOT RELEVANT. THE ISSUE IS ESTIMATION OF REASONABLE NET PROFIT OF THE ASSESSEE'S BUSINESS. EVEN IF HE WERE A CIVIL CONTRACTOR, HIS C ASE WOULD NOT BE COVERED BY SECTION 44AD OF THE I.T. ACT (BECAUSE THE TURNOVER OF THE BUSINESS EXCEEDED RS.40,00,000/). ON THE OTHER HAND, EVEN IF HE WERE JUST A BUILDER/DEVELOPER, HIS NET PROFIT HAD STILL TO BE ESTIMATED AT A REASO NABLE FIGURE. THE RATE OF 8% GIVEN IN SECTION 44AD IS TAKEN ONLY AS A BENCHMARK FOR PURPOSES OF ESTIMATION OF NET PROFIT IN SUCH CASES. THE ASSESSE E HAS SUBMITTED THAT THE NET PROFIT SHOWN BY HIM WAS A HEALTHY 10% OF HIS GROSS RECEIPT. IN VIEW OF THIS, THERE IS NO JUSTIFICATION FOR ANY SEPARATE DISALLOW ANCE OUT OF EXPENDITURE. THE ADDITION IS DELETED. 6. LD. DR RELIED ON THE ORDER OF THE AO AND SUBMITT ED THAT THE LD. CIT (A) DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF U NVERIFIABLE CONSTRUCTION EXPENSES WITHOUT APPRECIATING THE FACT THAT THE ASS ESSEE WAS NOT MAINTAINING ADEQUATE BOOKS OF ACCOUNT AND FURTHER THE ASSESSEE S CASE WAS NOT COVERED UNDER THE PROVISIONS OF SECTION 44AD OF THE ACT AS THE TURNOVER OF THE BUSINESS EXCEEDED RS.40 LAKHS, THEREFORE ACCEPTING PROFIT EQ UIVALENT TO 10% OF THE GROSS PROFIT WAS PERVERSE APPLICATION OF LAW IN ASSESSEE S CASE. SO, SHE PLEADED THAT THE ORDER OF THE LD. CIT(A) BE REVERSED AND THE ORD ER OF AO BE RESTORED ON THIS ADDITION . 6 ITA NO.1137/DEL/2012 7. LD. AR FOR THE ASSESSEE REITERATED HIS SUBMISSIO NS MADE BEFORE THE LD. CIT (A) AND RELIED ON THE ORDER OF THE LD. CIT (A). LD. AR SUBMITTED THAT THE ASSESSEE HAD HIMSELF SHOWN NET PROFIT RATE OF 10% W HICH WAS IN EXCESS OF 8% SPECIFIED IN SECTION 44AD OF THE ACT. HE FURTHER S UBMITTED THAT THE DISALLOWANCE WAS ARBITRARY AS THE AO DID NOT PINPOI NT ANY SPECIFIC DEFECT. IN THIS REGARD, THE LD. AR MADE A REFERENCE TO THE DEF INITIONS OF THE TERMS 'BUILDER' AND 'DEVELOPER' AND RELIANCE WAS PLACED ON A NUMBER OF DECISIONS IN SUPPORT OF THE CONTENTION THAT ARBITRARY DISALLOWANCE WAS NOT JUSTIFIED. ACCORDINGLY, LD. AR WANTS US NOT TO INTERFERE IN THE ORDER OF THE LD . CIT (A). 8. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. WE FIND THAT THE ASSESSEE WAS A PROFESSIONAL, WORKING AS AN ADVOCATE-CUM-DEED WRITER, AND ALSO INDULGED IN REAL ESTATE BUSINESS. HOWEVER, THE ASSESSEE DID NOT MAINTAIN ADEQUATE BOOKS OF ACCOUNT WHICH WOULD SATI SFY THE REQUIREMENT OF LAW IN SUPPORT OF THE REAL ESTATE BUSINESS. WE TAKE NOT E OF THE FACT THAT THE DOCUMENTS SEIZED DURING SEARCH ALSO SUGGESTED THAT HE HAD BEEN EARNING UNACCOUNTED INCOME. THEREFORE, THE ASSESSEE WAS REQ UIRED TO FURNISH COMPLETE DETAILS OF THE DISCLOSURE MADE U/S 132(4) OF THE AC T AND WE FIND THAT THE ADDITIONAL INCOME ACTUALLY DISCLOSED IN THE RETURNS OF INCOME FURNISHED PURSUANT TO THE SEARCH AND ACCORDINGLY, THE ASSESSEE FURNISH ED THE REQUIRED INFORMATION. WE FIND THAT THE GROUP CONSISTED OF THE ASSESSEE AN D HIS SON SHRI ASHISH MOHAN AGARWAL AND TOGETHER, THEY HAD MADE DISCLOSURE OF A DDITIONAL INCOME OF 7 ITA NO.1137/DEL/2012 RS.1,70,00,000/- DURING THE SEARCH, AS AGAINST WHIC H THE ADDITIONAL INCOME ACTUALLY OFFERED FOR TAXATION IN THE RETURNS FURNIS HED PURSUANT TO THE SEARCH WAS RS.2,16,42,960/. WE FIND THAT THE LD. CIT (A) RIGH TLY OBSERVED THAT THE PURPOSE OF SEARCH IS TO DETECT EVIDENCE RELATING TO UNDISCL OSED INCOME EARNED BY THE ASSESSEE AND TO COLLECT TAX ON THE SAME. THE LD. CI T(A) HAS ALSO OBSERVED THAT IF A PERSON HAS EARNED UNDISCLOSED INCOME, IT IS LO GICAL THAT SUCH INCOME WOULD NOT FORM PART OF HIS REGULAR BOOKS OF ACCOUNT, HENC E, WHEN THAT PERSON HAS OFFERED THE ADDITIONAL INCOME (AS IS APPARENT WITH REFERENCE TO THE SEIZED DOCUMENTS AND ANY OTHER EVIDENCE WHICH THE AO MAY G ATHER), THE AO SHOULD AVOID MAKING FURTHER ADDITION TO SUCH INCOME SIMPLY BECAUSE SUCH INCOME/EXPENDITURE WAS NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT. FURTHER ADDITION IS WARRANTED ONLY IF THE AO HAS MATERIAL/E VIDENCE UNEARTHED DURING SEARCH SUGGESTING THAT THE ACTUAL INCOME EARNED BY THE ASSESSEE WAS MORE THAN WHAT WAS DISCLOSED BY THE LATTER IN COURSE OF THE S EARCH AND SUBSEQUENTLY IN HIS RETURNS, HOWEVER, WE FIND THAT NO SUCH EVIDENCE WAS BROUGHT ON RECORD BY THE AO TO JUSTIFY THE AD HOC DISALLOWANCE. WE AGREE WIT H THE LD. CIT (A) THAT THE ADDITION WAS MADE SIMPLY BECAUSE THE ASSESSEE HAD N OT MAINTAINED REGULAR BOOKS OF ACCOUNT AND THE REQUIRED DOCUMENTS IN RESP ECT OF SUCH INCOME. ESTIMATION OF INCOME SHOULD NOT BE CAPRICIOUS OR WH IMSICAL AS HELD BY THE HONBLE APEX COURT AND HIGH COURTS IN PLETHORA OF J UDGMENTS. BEFORE THE AO, THE ASSESSEE HAS CLAIMED TO HAVE FURNISHED HIS INCO ME AND EXPENDITURE ACCOUNT AS WELL AS STATEMENT OF HIS ASSETS AND LIABILITY YE AR AFTER YEAR, INCORPORATING THE 8 ITA NO.1137/DEL/2012 FINDINGS RELATING TO UNDISCLOSED INCOME AND ASSETS DURING THE SEARCH. WE ALSO TAKE NOTE OF THE FACT THAT THE ASSESSEE HAD SHOWN T HE ADDITIONAL INCOME IN THE RETURNS FURNISHED BY HIM AND HIS SON AND THE AO HAD NOT RECORDED ANY FINDING THAT THERE WAS ANY EVIDENCE OF ANY UNEXPLAINED EXPE NDITURE/ INVESTMENT OR ANY INCOME WHICH WAS NOT COVERED IN THE ADDITIONAL INCO ME DISCLOSED BY THE ASSESSEE. IN THE LIGHT OF THE ABOVE FACTS, WE ARE O F THE VIEW THAT THE LD. CIT (A) HAS RIGHTLY HELD THAT THERE WAS NO JUSTIFICATION FO R MAKING AD HOC DISALLOWANCE OF 10% OUT OF THE EXPENDITURE CLAIMED TO HAVE BEEN INCURRED BY THE ASSESSEE IN CONSTRUCTION BUSINESS. WE AGREE WITH THE LD. CIT(A) THAT WHETHER THE ASSESSEE WAS A BUILDER/DEVELOPER OR A CIVIL CONTRACTOR IS NO T RELEVANT AND ONLY THE ISSUE IS ESTIMATION OF REASONABLE NET PROFIT OF THE ASSESSEE 'S BUSINESS. IN ANY CASE, SECTION 44AD OF THE ACT IS NOT APPLICABLE IN THE AS SESSEES CASE BECAUSE THE TURNOVER OF THE BUSINESS EXCEEDED RS.40,00,000/-. WHEN THE ASSESSEE IS A BUILDER/DEVELOPER AND IS ENGAGED IN CONSTRUCTION AC TIVITIES, AND THE ASSESSEE HAD SHOWN A NET PROFIT RATE OF 10% OF HIS GROSS RECEIPT , WHEREAS THE RATE OF 8% IS GIVEN IN SECTION 44AD FOR CIVIL CONTRACTOR IS TO BE TAKEN ONLY AS A BENCHMARK FOR THE PURPOSES OF ESTIMATION OF NET PROFIT IN SUCH CA SES. THEREFORE, WE CONCUR WITH THE LD CIT(A) THAT THE AD HOC DISALLOWANCE WAS NOT WARRANTED AND WE FIND NO MERITS IN THIS GROUND OF APPEAL OF THE DEPARTMENT. IN VIEW OF THE ABOVE, WE HOLD THAT THE LD. CIT (A) RIGHTLY DELETED THE ADDITION A ND ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. CIT (A) ON THIS ADDITION. THIS GR OUND FAILS. 9 ITA NO.1137/DEL/2012 9. GROUND NO.2 IS AGAINST THE DELETION OF ADDITION OF RS.1 LAKH MADE BY THE AO ON ACCOUNT OF CASH EXPENDITURE EXCEEDING RS.20,0 00/-. 10. THE AO OBSERVED THAT THE ASSESSEE HAD MADE CASH PURCHASES EXCEEDING RS. 20000/- IN THE LAND PURCHASE ACCOUNT AND THE TO TAL OF THIS EXPENDITURE WAS RS.5,00,000/-. HE TOOK NOTE OF THE FACT THAT THE A SSESSEE WAS ENGAGED IN THE BUSINESS OF A REAL ESTATE DEVELOPER AND ACCORDINGLY , THESE PURCHASES WERE HIT BY THE PROVISIONS OF SECTION 40A(3) OF THE ACT. ACCORD INGLY, THE AO MADE DISALLOWANCE OF 20% OF SUCH EXPENSES BEING IN VIOLA TION OF PROVISIONS OF SECTION 40A(3) AND THUS MADE AN ADDITION OF RS.1 LA KH. 11. IN THE APPEAL BEFORE THE LD. CIT (A), THE LD. C IT (A), AFTER TAKING NOTE OF THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT AS R EGARDS THE PAYMENTS MADE TO STAMP VENDORS, THE LATTER ACTED AS THE AGENTS OF TH E GOVERNMENT FOR SELLING STAMP PAPERS, HENCE, HE HELD THAT SUCH PAYMENTS WERE COVE RED UNDER THE EXCEPTION PROVIDED IN RULE 6DD(B) AND THE SAID PAYMENTS WERE DULY VOUCHED BY THE PHYSICAL EXISTENCE OF STAMP PAPERS IN QUESTION WHIC H WERE ACTUALLY UTILIZED FOR PURPOSE OF ACQUIRING THE LAND IN QUESTION. CONSEQUE NTLY, THE LD. CIT (A) DELETED THE ADDITION. 12. LD. DR, WHILE RELYING ON THE ORDER OF THE AO, S UBMITTED THAT THE LD. CIT (A) DELETED THE ADDITION WITHOUT APPRECIATING THE F ACT THAT THE PAYMENT OF STAMP DUTY WAS NOT COVERED UNDER THE EXCEPTION PROVIDED I N RULE 6DD OF THE INCOME- TAX RULES, 1962 (HEREINAFTER THE RULES) AND NEITH ER THE EXPENDITURE MADE ON 10 ITA NO.1137/DEL/2012 ACCOUNT OF SELLERS WAS COVERED UNDER THE EXCEPTION OF RULE 6DD OF THE RULES. HE ACCORDINGLY PLEADED TO SET ASIDE THE ORDER OF TH E LD. CIT (A) AND RESTORE THE ORDER OF THE AO ON THIS ISSUE. 13. LD. AR REITERATED THE SUBMISSIONS MADE BEFORE T HE LD. CIT (A) AND SUBMITTED THAT THE ASSESSEE HAD INCURRED TOTAL EXPE NDITURE OF RS.84,04,300/- ON PURCHASE OF LAND WHICH INCLUDED COST OF LAND (RS.77 ,10,000/-), PAYMENT OF STAMP DUTY (RS.6,21,000/-) AND REGISTRATION EXPENSE S (RS.73,300/-). HE SUBMITTED THAT THE EXPENDITURE INCURRED IN CASH REF ERRED TO BY THE AO WAS INCURRED ON PAYMENT OF STAMP DUTY AND REGISTRATION EXPENSES. HE FURTHER SUBMITTED THAT THE STAMP DUTY HAD BEEN PAID TO THE GOVERNMENT AUTHORITY THROUGH THE STAMP VENDORS AND THE REGISTRATION EXPE NSES WERE PAID TO ADVOCATE'S HEAD CLERK WHICH ACCORDING TO HIM WERE NOT HIT BY T HE MISCHIEF OF 40A(3) OF THE ACT. LD. AR SUBMITTED THAT THE LAND PURCHASED BY TH E ASSESSEE WAS SITUATED AT VILLAGE BANJARAWALA IN DEHRADUN DISTRICT. HE SUBMIT TED THAT THE SELLERS OF THE LAND AS WELL AS THE ASSESSEE'S OFFICE WERE SITUATED AT BANJARAWALA WHERE NO BANKING FACILITIES WERE AVAILABLE AND THE PERSONS F ROM WHOM THE LAND WAS PURCHASED ARE FARMERS TO WHOM THE STATE GOVERNMENT HAD ALLOTTED AGRICULTURAL LAND ON THEIR REHABILITATION PURSUANT TO ACQUISITIO N OF THEIR LAND AT TEHRI FOR PURPOSES OF BUILDING TEHRI DAM. LD.AR SUBMITTED TH AT A PHOTO COPY OF A CERTIFICATE ISSUED BY THE HEAD OF THE GRAM PANCHAYA T, BANJARAWALA WAS FURNISHED IN SUPPORT THE AFORESAID FACTS. LD. AR R ELIED ON VARIOUS JUDICIAL 11 ITA NO.1137/DEL/2012 PRONOUNCEMENTS, WHICH ARE PLACED AT PAGE 4 OF THE L D. CIT (A)S ORDER, TO SUPPORT HIS CONTENTION THAT THE PROVISION OF SECTIO N 40A(3) SHOULD NOT BE INTERPRETED IN A RESTRICTIVE MANNER, SO AS TO DISCO URAGE BUSINESS TRANSACTIONS. ACCORDINGLY, HE PLEADED THAT THE LD. CIT (A) HAS RI GHTLY DELETED THE ADDITION AND THE SAME MAY BE UPHELD. 14. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD. WE FIND THAT THE PAYMENTS WERE MADE IN CASH TO STAMP V ENDORS WHO ACTED AS THE AGENTS OF THE GOVERNMENT FOR SELLING STAMP PAPERS, HENCE, SUCH PAYMENTS WERE COVERED UNDER THE EXCEPTION PROVIDED IN RULE 6DD(B) . WE FURTHER FIND THAT THESE PAYMENTS WERE DULY VOUCHED BY THE PHYSICAL EX ISTENCE OF STAMP PAPERS IN QUESTION WHICH WERE ACTUALLY UTILIZED FOR PURPOSE O F ACQUIRING THE LAND IN QUESTION. THEREFORE, WE UPHOLD THE ORDER OF THE LD . CIT (A) DELETING THE ADDITION OF RS.1 LAKH MADE BY THE AO. ACCORDINGLY, WE FIND NO MERITS IN THIS GROUND OF THE REVENUE AND THUS THIS GROUND FAILS. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF NOVEMBER, 2015. SD/- SD/- (PRASHANT MAHARISHI) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 10 TH DAY OF NOVEMBER, 2015 TS 12 ITA NO.1137/DEL/2012 COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A)-I, DEHRADUN. 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI