M/s Ajay Sangari and Co., Chandigarh V. DCIT, C-3(1), Chandigarh

ITA 1225/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4514 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 20-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH GUPTA
• Assessee Lawyers: ABHEY SETHI; S K MUKHY
• Keywords: Business income; Opportunity of being heard; Set aside
• Section: 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH . . , , BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO. 1225/CHD/2018 ! / ASSESSMENT YEAR : 2013-14 M/S AJAY SANGARI AND COMPANY, 1240, SECTOR 22-B, CHANDIGARH VS. '# THE DCIT, CC-I, CHANDIGARH $ % ./PAN NO: AABFA7186L $&/ APPELLANT ()$& /RESPONDENT *+ , - /ASSESSEE BY : SH. ABHEY SETHI, ADVOCATE & SH. S.K. MUKHY, ADVOCATE , - / REVENUE BY : SH. ASHISH GUPTA, CIT DR . / , +0% /DATE OF HEARING : 14.05.2019 12! , +0% / DATE OF PRONOUNCEMENT : 21.05.2019 / ORDER PER N.K. SAINI, VICE PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 17.07.2018 OF COMMISSIONER OF INCOME TAX (APPEALS) -1, CHANDIGARH. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L:- 1. THAT THE ORDER OF LD. CIT (A) IS ERRONEOUS, ILLEGAL AND UNJUSTIFIED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND THUS NEEDS TO BE SET ASIDE. 2. THAT THE ORDER OF LD. CIT(A)IS ERRONEOUS, ILLEGAL AND UNJUSTIFIED IN CONFIRMING THE ADDITION OF ITA NO. 1225-C-2018- SH. AJAY SANGARI, CHANDIGARH 2 5,17,000/- U/S 40A(3) OF THE INCOME TAX ACT, 1961 UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND AND DELETE ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DISPOSAL OF THE PRESENT APPEAL. 2. FROM THE ABOVE GROUNDS, IT IS GATHERED THAT THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO THE CONFIRMA TION OF ADDITION OF 5,17,000/- MADE BY THE ASSESSING OFFICER U/S 40A(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 18.9.2013 DECLARING AN INCOME OF 41,37,356/-. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE LEDGER ACCOUNT OF THE ASSESSEE REVEALED THAT A PAYMENT OF 5,17,000/- WAS MADE ON VARIOUS DATES WHICH WERE MORE THAN 20,000/- BY A MODE OTHER THAN BY WAY OF ACCOUNT PAYEE CHEQUES OR BANK DRAFT. HE ALSO OBSER VED THAT THE SAID PAYMENT DID NOT FALL UNDER ANY CIRCUMSTANCES MENTIO NED IN RULE 6DD OF THE INCOME TAX RULES. HE, THEREFORE, DISALLOWED THE SUM OF 5,17,000/-. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER:- ITA NO. 1225-C-2018- SH. AJAY SANGARI, CHANDIGARH 3 THAT AS REGARDS THE LAST PART OF GROUND OF APPEAL NO. 2, THE ID A.O.. HAS MADE DISALLOWANCE OF CASH PAYMENTS MADE U /S 40A(3) R.W.R. 6DD OF THE AMOUNT OF RS 5,17,000/- BEING PAY MENTS MADE FOR PURCHASE OF THREE PROPERTIES AS MENTIONED IN PA RA 4.2 OF THE A.O., ORDER AT PAGE 2 WITHOUT APPRECIATING THE FACT S AND CIRCUMSTANCES OF THE PRESENT CASE AS DETAILED PARTICULARS AMOUNT (RS) HOUSE NO 1354 SECTOR 40B CHANDIGARH 3,00,000 HOUSE NO 185 SECTOR 9A CHANDIGARH 1,65,000 HOUSE NO 750 SECTOR 22 A CHANDIGARH 52,000 TOTAL 517000 THAT THE ASSESSES FIRM IS IN THE BUSINESS OF PURCHA SE AND SALE OF PROPERTIES, ITS DEVELOPMENT AND ITS CONSTRUCTION ET C. HAD PURCHASED THESE PROPERTIES BY PAYING EARNEST MONIES IN CASH AT THE TIME OF AGREEMENT TO PURCHASE PROPERTY. THAT AS A PRUDENT BUSINESSMAN AND TO AVOID FALLING OFF OF THE DEAL TH E APPELLANT PAID THE EARNEST MONIES IN CASH AT THE TIME OF NEGO TIATIONS AS OTHER MODE THAN CASH FOR PAYMENTS ARE SOME TIME NOT ACCEPTABLE BY THE SELLERS. SIR NO DISALLOWANCE U/S 40A(3) COULD BE MADE UNLESS PRIMA FACIE THE GENUINENESS OR THE IDENTITY OF THE PAYEE IS DISPUTED WHICH IS ALSO MISSING IN THE PRESENT CASE AND THE T RANSACTIONS BEING IN THE RUNNING ACCOUNT WITH THE SAME PERSON F OR WHICH THE BOOKS OF ACCOUNTS ALONGWITH CONFIRMED COPY OF A CCOUNTS AND REGISTERED SALE DEEDS HAVING BEEN PRODUCED BEFO RE THE ID A.O., ITSELF THE VERY INVOKING OF THE PROVISIONS OF SECTION 40A(3) AND THE IMPUGNED ADDITION OF RS 5,70,000/- T O INCOME OF THE APPELLANT IS BAD IN LAW.' 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE SUSTAINED THE ADDITION BY OBSERVING IN PARA 5.2 OF THE IMPUGNED ORDER AS UNDER:- ITA NO. 1225-C-2018- SH. AJAY SANGARI, CHANDIGARH 4 5.2 I HAVE PERUSED THE ORDER OF THE ASSESSING OFFICER AND EXAMINED REPLY OF THE ASSESSEE. THE APPELLANT IS IN THE BUSINESS OF SALE & PURCHASE OF PROPERTY AND THE CASH PAYMENTS MADE ON ACCOUNT OF PURCHASE OF PROPERTY REPRESENTS ITS PURCHASE OF STO CK IN TRADE. AS PER SECTION 40A(3) OF THE ACT EXPENSES INCURRED OTHERWISE THEN THROUGH BANKING CHANNEL ARE NOT DEDUCTIBLE AS EXPENDITURE WHILE COMPUTING INCOM E UNDER THE HEAD OF BUSINESS INCOME. THE APPELLANT IS ALSO NOT COVERED IN ANY OF THE EXCEPTION MENTIONED IN RU LE 6DD OF THE INCOME TAX RULES, 1962. THEREFORE, THESE CASH PAYMENTS ARE NOT ALLOWABLE AS PER SECTION 40A(3) OF THE AN THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY MADE ADDITION OF RS. 5,17,000/-, HENCE, IS UPHELD. 6. NOW THE ASSESSEE IS IN APPEAL. LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE PROPERTY PURCHASED BY THE ASSESS EE WAS STOCK IN TRADE AND THE PAYMENTS WERE MADE TO VARIOUS PERSONS WHICH WERE BELOW 20,000/- PER DAY PER PERSON. A REFERENCE WAS MADE TO PAGE NOS. 50 TO 53 OF THE ASSESSEES PAPER BOOK WHEREIN THE PAYMENT S ON VARIOUS DATES HAD BEEN SHOWN TO DIFFERENT PERSONS IN THEIR LEDGER ACCOUNTS. IT WAS CONTENDED THAT NEITHER THE ASSESSING OFFICER NOR TH E LD. CIT(A) APPRECIATED THE FACTS IN RIGHT PERSPECTIVE AND CONS IDERED THE CONSOLIDATED AMOUNT OF THE CASH PAYMENT AS A VIOLAT ION TO THE PROVISIONS OF SECTION 40A(3) OF THE ACT. HOWEVER, THE INDIVIDU AL PAYMENTS ON DIFFERENT DATES TO DIFFERENT PERSONS WERE BELOW 20,000/-, SO, THERE WAS NO VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER AND SUST AINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. ITA NO. 1225-C-2018- SH. AJAY SANGARI, CHANDIGARH 5 7. IN HIS RIVAL SUBMISSIONS, THE LD. DR STRONGLY SU PPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, THE MAIN CONTENTION OF THE LD. COUNSEL FOR TH E ASSESSEE WAS THAT INDIVIDUAL PAYMENT ON A SINGLE DAY WAS BELOW 20,000/-. HE ALSO PLACED RELIANCE ON THE VARIOUS LEDGER ACCOUNTS OF T HE DIFFERENT PERSONS WHICH ARE PLACED ON RECORD. WE, THEREFORE, BY CONSI DERING THE TOTALITY OF THE FACTS DEEM IT APPROPRIATE TO REMAND THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY FROM THE RECORD AS TO W HETHER THE INDIVIDUAL PAYMENT ON A SINGLE DATE TO DIFFERENT PERSONS WAS B ELOW 20,000/- OR NOT AND AS TO WHETHER THERE WAS ANY VIOLATION OF T HE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE ASSESSING OFFICER IS DIRECTED TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER PROVI DING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE COURT ON 21.05.2019) SD/- SD/- . . ! (SANJAY GARG ) (N.K. SA INI) ' #/ JUDICIAL MEMBER %&' / VICE PRESIDENT DATED : 21.05.2019 .. ITA NO. 1225-C-2018- SH. AJAY SANGARI, CHANDIGARH 6 3 , (+45 65!+ / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. ()$& / THE RESPONDENT 3. . 7+ / CIT 4. . 7+ ( )/ THE CIT(A) 5. 58 (+9 , 0 9 , :;<= / DR, ITAT, CHANDIGARH 6. < >/ / GUARD FILE 3 . / BY ORDER, ? / ASSISTANT REGISTRAR