M/s Asmi Construction Company, Siliguri V. JCIT, RG-1, SILIGURI, Siliguri

ITA 1256/KOL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4303 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 02-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 06-10-2015
• Court: TRIBUNAL
• Department Lawyers: SUBHRA DAS
• Section: 40A(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENC H KOLKATA BEFORE SHRI K. NARASIMHA CHARY, JM & DR. A.L.SAINI , AM ./ ITA NO.1256/KOL/2015 ( / ASSESSMENT YEAR :2011-2012) M/S ASMI CONSTRUCTION COMPANY, GROUND FLOOR, GULMOHAR APARTMENT, GURUNANAK SARANI, PUNJABIPARA, NEAR SHIV MANDIR, SILIGURI-734001, DISTRICT DARJEELING (WB) VS. JCIT, RANGE-1, AAYAKAR BHAWAN, MATIGARA, SILGURI- 734010 (WB) ./ ./PAN/GIR NO. : AALFA 6864 H ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI SUBASH AGARWAL, ADVOCATE /REVENUE BY : SHRI SUBHRA DAS, JCIT / DATE OF HEARING : 07/10/2016 /DATE OF PRONOUNCEMENT 21/10/2016 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAIN ING TO THE ASSESSMENT YEAR 2011-2012, IS DIRECTED AGAINST AN O RDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-SILIGURI, IN A PPEAL NO.45/CIT(A)/SLG/2014-2015, DATED 05.08.2015, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER (AO) UN DER SECTION.143(3) OF THE INCOME TAX ACT 1961, (IN SHORT THE ACT), DATE D 25.03.2014. 2. THE FACTS OF THE CASE QUA THE ASSESSEE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.03.2012 DECLARING TOTAL INCOME OF RS.2,91,670/- . THE RETURN OF INCOME OF THE ASSESSEE WAS PROCESSE D U/S.143(1) OF THE I.T.ACT. SUBSEQUENTLY, ASSESSEES CASE WAS SELECTED FOR SCRUTINY ITA NO.1256/15 2 U/S.143(3) OF THE ACT AND THE AO HAS COMPLETED THE ASSESSMENT BY OBSERVING THAT ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 40A(3) OF THE ACT. LD. AO OBSERVED THAT ASSESSEE HAS PAID CAS H OF RS.37,07,000/- WHICH IS IN VIOLATION OF SECTION 40A(3) OF THE ACT R.W.RULE 6DD OF THE ACT. AGGRIEVED FROM THE ORDER OF ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO HAS ALSO CONFIRMED TH E ACTION OF AO OBSERVING THE FOLLOWINGS :- 3.4. IT IS TO BE SEEN WHETHER THE CASH PAYMENTS MA DE BY THE APPELLANT WERE COVERED BY THE CONDITIONS AND CIRCUM STANCES LAID DOWN IN RULE 6DD(J) OF THE INCOME TAX RULE 1962. SU B RULE (J) OF RULE 6DD PROVIDES AS FOLLOWS: '(J) IN ANY OTHER CASE, WHERE THE ASSESSEE SATISFIE S THE INCOME-TAX OFFICER THAT THE PAYMENT COULD NOT BE MADE BY CROSS ED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT- , (1) DUE TO EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES , OR (2) BECAUSE PAYMENT IN THE MANNER 'AFORESAID WAS NO T PRACTICABLE, OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYE E, HAVING REGARD TO THE NATURE OF THE TRANSACTION AND THE NECESSITY FOR EXPEDITIOUS SETTLEMENT THEREOF ALSO FURNISHES EVIDENCE TO THE SATISFACTION OF THE INCOME-TAX OFFICER AS TO THE GENUINENESS OF THE PAYMENT AND THE IDENTI TY OF THE PAYEE.' THE BOARD, VIDE CIRCULAR NO. 220/1977, CLARIFIED TH E PROVISIONS OF SECTION 40A (3) AS WELL AS RULE 6DD (J). IT HAS BEE N PROVIDED AS FOLLOWS: '4. ALL THE CIRCUMSTANCES IN WHICH THE CONDITIONS L AID DOWN IN RULE 6DD (J) WOULD BE APPLICABLE CANNOT BE SPELT OUT. HO WEVER, SOME OF THEM WHICH WOULD SEEM TO MEET THE REQUIREMENTS OF T HE SAID RULE ARE: (I) THE PURCHASER IS NEW TO THE SELLER; OR (II) THE TRANSITIONS ARE MADE AT A PLACE WHERE EITH ER THE PURCHASER OR THE SELLER DOES NOT HAVE A BANK ACCOUNTS; OR ITA NO.1256/15 3 (III) THE TRANSACTIONS AND PAYMENTS ARE MADE ON A B ANK HOLIDAYS; OR (IV) THE SELLER IS REFUSING TO ACCEPT THE PAYMENT B Y WAY OF CROSSED CHEQUE/DRAFT AND THE PURCHASERS BUSINESS INTEREST W OULD SUFFER DUE TO NON-AVAILABILITY OF GOODS OTHERWISE THAN FROM TH IS PARTICULAR SELLER; OR (V) THE SELLER, ACTING AS A COMMISSION AGENT, IS RE QUIRED TO PAY CASH IN TURN TO PERSONS FROM WHOM HE HAS PURCHASED THE GOODS; OR (VI) SPECIFIC DISCOUNT IS GIVEN BY THE SELLER FOR P AYMENT TO BE MADE BY WAY OF CASH. 3.5. THE LD. AR TAKEN PLEA THAT THE PAYMENTS OF RS. 19,00,000/- WERE MADE TO SMT. KALPANA RANI SAHA AND OTHERS AS T HE RECIPIENTS WERE NOT CONVERSANT WITH BANKING PRACTICE AND THEY ARE WIDOW AND HOUSEWIVES. FOR THE OTHER CASH PAYMENTS OF RS.18,07 ,000/- TO MANIK SARKAR AND OTHERS, SIMILAR REASONS HAVE BEEN TAKEN AND ALSO STATED THAT THE LAND IN QUESTION WAS ENCROACHED UPO N BY OTHERS AND THE SELLERS WERE REQUIRED TO PAY CASH OF RS.8.00 LA KHS TO REMOVE THE ENCROACHMENT. THESE CONDITIONS ARE NOT COVERED BY CONDITIONS AND CIRCUMSTANCES LAID DOWN IN RULE 6DD(J). IT APPE ARS THAT THE APPELLANT PLACED FULL EMPHASIS ON CONDITION (IV) AB OVE THAT SELLERS REFUSED TO ACCEPT PAYMENTS BY ACCOUNT PAYEE CHEQUES OR DRAFTS AND THEREFORE, APPELLANT MADE CASH PAYMENTS FOR BUS INESS INTEREST. HOWEVER, GOING BY THE NATURE OF BUSINESS OF THE APP ELLANT AS WELL AS NATURE OF TRANSACTIONS INVOLVED, APPELLANT'S CAS E DOES NOT QUALIFY TO TAKE SHELTER UNDER CONDITION (IV) ABOVE. 3.6. THE APPELLANT IS A BUILDER AND DEVELOPERS. BOT H PLOTS IN QUESTION, ARE LOCATED IN SILIGURI. BOTH PURCHASER A ND SELLERS ARE RESIDENTS OF SILIGURI. THERE ARE MORE THAN HUNDRED BANK BRANCHES IN SILIGURI. BEING TRANSACTIONS IN LANDED PROPERTIES, BOTH PURCHASER AND SELLERS GOT SUFFICIENT TIME TO NEGOTIATE AND FINALI ZE THE DEALS. APPELLANT HAS NOT MENTIONED IN HIS SUBMISSION THAT NONE OF THE SELLERS WERE HAVING BANK ACCOUNT AT THE TIME OF PAY MENTS. IN ANY CASE, ONE COULD HAVE OPENED A BANK ACCOUNT DURING T HIS SPAN OF TIME. IT IS ALSO NOT THE CASE THAT APPELLANT PURCHA SED THOSE TWO PLOTS IN LESSER THAN THE MARKET PRICE. AGAIN IT ALSO CANN OT BE SAID THAT THERE WERE NO OTHER PLOTS FOR SALE IN SILIGURI. THU S, APPELLANT'S CASE IS NOT AT ALL COVERED BY THE CONDITION (IV) ABOVE. FURTHER, THE FACTS OF THIS CASE ARE CLEARLY DISTINGUISHABLE FROM THE FACT S OF PLETHORA OF CASE LAWS CITED BY THE LD. AR. IN THOSE CASES, CASH PAYMENTS BY THE CONTRACTORS IN A REMOTE PLACE, CASH PAYMENTS FO R 'NUT' PURCHASES, FOR RAW HIDE PURCHASES, CASH PAYMENTS FO R SLM CARD PURCHASES, CASH PAYMENTS WHERE BANKING FACILITY IS NOT AVAILABLE ETC. HAVE BEEN DEALT WITH. NONE OF THE CASE LAW CIT ED BY THE APPELLANT COVERS CASH PAYMENTS FOR PURCHASES OF PLO TS BY THE BUILDER. HERE IS A CASE WHERE A BUILDER MADE CASH P AYMENTS TO SELLERS FOR PURCHASE OF LANDED PROPERTIES IN A CITY CALLED SILIGURI WHERE MORE THAN HUNDRED BANK BRANCHES WERE FUNCTION AL. THUS, IT ITA NO.1256/15 4 IS HELD THAT EVEN THE PAYMENTS WERE. GENUINE, APPEL LANT INDEED VIOLATED THE PROVISIONS OF SECTION 40A(3) OF THE AC T AND GOING BY THE FACTS AND CIRCUMSTANCES OF THE CASE AND SUCH PAYMEN TS WERE NOT COVERED UNDER THE EXCEPTIONAL CONDITIONS PROVIDED I N RULE 6DD(J) OF THE L.T. RULE, 1962. THE ADDITION OF RS.37,07,000/- IS THEREFORE, UPHELD. 4. NOT BEING SATISFIED WITH THE ORDER OF CIT(A), TH E ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. IN THIS APPEAL, THE ASSESSEE HAS RAISED FOUR GRO UNDS OF APPEAL, BUT AT THE TIME OF HEARING THE MAIN GRIEVANCE OF THE AS SESSEE HAS BEEN CONFINED TO GROUND NO.2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IN GROUND NO.2 IS THAT THE AO HAD MADE ADDITION TO THE EXTENT OF RS.37,07,000/- INVOKING THE PROVISIONS OF SECTION 40A(3). 5. LD. AR FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT CASH PAYMENT MADE TO ILLITERATE WIDOW WOMAN AND OTHER PERSONS IS GENUINE. HOWEVER, LD. CIT(A) HELD THAT CASH PAYMENT IS NOT COVERED IN EXCEPTION UNDER RULE 6DD(J) OF THE I.T.RULES, 1962. LD. AR HAS POINTED O UT THAT THE ASSESSEE UNDER CONSIDERATION IS IN THE REAL ESTATE BUSINESS AND HE PAID THE CASH IN THE GENUINE CIRCUMSTANCES WHICH CAN BE VERIFIABLE W ITH THE HELP OF AGREEMENT. THE ASSESSEE HAS SUBMITTED THE COPY OF A GREEMENT TO WHOM THE CASH HAS BEEN PAID AND HAVE BEEN CLEARLY WRITTE N THEREIN THE AGREEMENT. THE PAYMENT IN CASH WAS MADE IN GENUINE CIRCUMSTANCES AND CONSIDERING THE BUSINESS EXPEDIENCY. SINCE ASSE SSEE UNDER CONSIDERATION HAS PURCHASED THE LAND AND IT IS A GE NUINE TRANSACTION AND HE HAS PAID ONLY 17% PAYMENT IN CASH, AND OTHER PA YMENT HE MADE THROUGH CHEQUE. THEREFORE, CONSIDERING THE SIZE OF THE DEAL/TRANSACTION 17% PAYMENT IN CASH IN NOT A MATERIAL. LD. AR ALSO SUBMITTED THAT ITA NO.1256/15 5 PAYMENTS MADE BY CASH IN VIOLATION OF SECTION 40A(3 ) OF THE ACT HAVE BEEN DULY ACKNOWLEDGED BY THE RECIPIENT AND MOREOV ER THERE IS AN AGREEMENT. HENCE, GENUINENESS OF THE PAYMENTS MADE BY THE ASSESSEE STANDS CLEARLY ESTABLISHED BEYOND DOUBT. THE ASSESS EE MADE THESE PAYMENTS FOR THE PURPOSE OF BUSINESS. MOREOVER, THE PAYMENTS OF CASH WAS SUPPORTED BY RELEVANT DOCUMENTS AND WITNESSES. LD. AR ALSO POINTED OUT THAT THE PURPOSE OF SECTION 40A(3) OF THE ACT I S TO CURB THE EXPENDITURE IN CASH AND TO COUNTER EVASION. THE CBD T CIRCULAR NO.6-P DATED 6.1.1968 REITERATED THIS VIEW THAT THIS PROVI SION IS DESIGNED TO COUNTER EVASION OF TAX THROUGH CLAIMS FOR EXPENDITU RE SHOWN TO HAVE BEEN INCURRED IN CASH WITH A VIEW TO FRUSTRATING PROPER INVESTIGATION BY THE DEPARTMENT, AS TO THE IDENTITY OF THE PAYEE AND THE REASONABLENESS OF THE PAYMENT. THIS PROVISION DOES NOT RESTRICT THE FUNDA MENTAL RIGHT TO CARRY ON THE BUSINESS. THERE IS NO RESTRICTION IN ASSESSEE I N HIS TRADING ACTIVITIES. IN ADDITION TO THIS, LD. AR FOR THE ASSESSEE HAS RELIE D ON THE FOLLOWING JUDGMENTS :- I) SMT. SRABANI CHAKRABORTY VS. ITO, ITA NO.1724/KO L/2012, ORDER DATED 27.03.2014: II) M/S SAMAR BIRI FACTORY VS. ACIT, ITA NO.8/KOL/2 013, ORDER DATED 5.12.2014; III) ANUPAM TELE SERVICES VS. ITO, TAX APPEAL NO.55 6 OF 2013, DATED 22.1.2014 (GUJARAT HIGH COURT) IV) SHRI MANORANJAN RAHA VS. ITO, ITA NO.1448/KOL/2 011, ORDER DATED 18.11.2015; AND V) CIT VS. CPL TANNERY, 175 TAXMAN 316 (CALCUTTA HI GH COURT) THE SUM AND SUBSTANCE OF THE ABOVE CITED JUDGMENTS ARE THAT EXCEPTION CONTAINED IN RULE 6DD IS NOT EXHAUSTED AND SAID RUL E MUST BE INTERPRETED LIBERALLY. HOWEVER, THE GENUINENESS AND BONAFIDE NA TURE OF TRANSACTION OF ITA NO.1256/15 6 THE ASSESSEE ARE NOT DISPUTED AND ASSESSEE IS ABLE TO SHOW THAT THERE WAS BUSINESS EXPEDIENCY. AS ALSO BUSINESS EXPEDIENC Y FOR THE REQUIREMENTS OF PAYING CASH FOR THE PURPOSE OF GOOD S NECESSARY FOR THE BUSINESS, THEREFORE, THE ASSESSEE WOULD BE ENTITLED TO GET THE RELIEF FROM THE APPLICABILITY OF SECTION 40A(3) OF THE IT ACT, 1961. 6. ON THE OTHER HAND, LD. DR FOR THE REVENUE HAS PR IMARILY REITERATED THE STAND TAKEN BY THE AO, WHICH WE HAVE ALREADY NO TED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREV ITY. 7. HAVING HEARD THE RIVAL CONTENTIONS, VARIOUS MATE RIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THERE IS A MERIT IN THE SUBMISSIONS OF THE ASSESSEE, AS THE PROPOSITION CANVASSED BY THE LD. A R FOR THE ASSESSEE ARE SUPPORTED BY THE ABOVE CITED JUDGMENTS AND FACT S NARRATED BY HIM. AS HE HAS EXPLAINED BEFORE US THAT IN THE PRESENT CASE CLEARLY THE AO HAS NOT DISPUTED THE GENUINENESS OR BONAFIDE OF THE TRANSAC TION IN RESPECT OF PAYMENT MADE BY THE ASSESSEE TO PURCHASE THE LAND. THE PERSON FROM WHOM THE ASSESSEE PURCHASED THE LAND/ASSET CAN BE I DENTIFIED AND GENUINENESS CAN ALSO BE PROVED. THE AGREEMENT WITH THE PURCHASER ALSO SHOWS THE GENUINENESS AND THE ASSESSEE MADE THE PAY MENT FOR THE PURPOSE OF BUSINESS/BUSINESS EXPEDIENCY. THEREFORE, ALL THE CONDITIONS REQUIRED FOR SHOWING THE BUSINESS EXPEDIENCY, AND B ONAFIDE AND MOREOVER THE TRANSACTIONS HAVE BEEN DONE AS PER TH E WRITTEN AGREEMENT. HENCE, IT IS PROVED BY THE LD AR THAT PAYMENT BY CA SH IS IN GENUINE CIRCUMSTANCES. THEREFORE, WE ARE OF THE VIEW THAT C ASH PAYMENT MADE BY THE ASSESSEE FOR THE PURPOSE OF PURCHASING LAND/ASS ETS WOULD NOT BE HIT ITA NO.1256/15 7 BY THE PROVISIONS OF SECTION 40A(3) OF THE I.T.ACT, 1961. THEREFORE, THE ADDITION MADE BY THE AO AND AS CONFIRMED BY THE LD. CIT(A) ON THIS ISSUE STANDS DELETED. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21/10 /2016. SD/ - (NARASIMHA CHARY) SD/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; $% DATED 21/10/2016 & ()* /PRAKASH MISHRA , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) & ' , / ITAT, 1. / THE APPELLANT ITO WARD-1(1), KOLKATA 2. / THE RESPONDENT.-M/S ABHAY CARRIER PRIVATE LTD. 3. 4 ( ) / THE CIT(A), KOLKATA. 4. 4 / CIT 5. 56 7 8 , 8 , / DR, ITAT, KOLKATA 6. 7 9 / GUARD FILE. 5 //TRUE COPY//