DCIT, Cir.-1, Nashik V. Praveen Vasantrao Jaikrishna, Nashik

ITA 1284/PUN/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 66843 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 13-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K OJHA
• Keywords: Cost of acquisition; Commercial expediency
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA.NO.1284/PN/2011 (ASSESSMENT YEAR 2008-09) DCIT, CIRCLE-1, NASHIK. .. APPELLANT VS. PRAVEEN VASANTRAO JAIKRISHNA, 39, ADITYA, NER CHANDAK CIRCLE, NASHIK .. RESPONDENT PAN NO.ACSPJ 1038P ASSESSEE BY : SHRI KISHOR PHADKE REVENUE BY : SHRI K.K. OJHA DATE OF HEARING : 12-04-2013 DATE OF PRONOUNCEMENT : 19-04-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 09-08-2011 OF THE CIT(A)-I, NASHIK RELATING TO ASSE SSMENT YEAR 2008-09. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE, THE LD.CIT(A)-1, NASHIK WAS JUSTIFIED IN DELETING THE ADDITION OF RS . 1500,0007- MADE ON ACCOUNT OF DISALLOWANCE U/S 40A(3) OF THE INCOME TAX ACT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE, THE LD.CIT(A)-1, NASHIK WAS JUSTIFIED IN HOLDING THAT THE PAYMENT OF RS. 1500,0007- WAS COVERED UNDER THE EXCEPTIONAL CLAUSE OF RULE 6DD (J) OF THE IT RULE 1962. 3. THE APPELLANT PRAYS THE ORDER OF THE ASSES SING OFFICER MAY BE RESTORED. 4. THE APPELLANT PRAYS TO ADDUCE SUCH FURTHER EVIDENCE TO SUBSTANTIATE HIS CASE. 5. THE APPELLANT PRAYS LEAVE TO ADD, ALTER, C LARIFY, AMEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN THE OCCASION DEMANDS. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF LAND DEVELOPMENT THROUGH HIS PROPRIETARY CONCERN M/S. RISHIKESH DEVELOPERS. THE ASSESSEE FI LED HIS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.46,94,900/- ON 29-09-2 008. DURING THE COURSE 2 OF ASSESSMENT PROCEEDINGS THE AO WHILE GOING THROUG H THE PURCHASES DEBITED TO THE PROFIT AND LOSS ACCOUNT NOTED THAT T HE FOLLOWING PAYMENTS MADE FOR PLOT PURCHASES ARE IN CASH, THE DETAILS OF WHICH ARE AS UNDER : SR.NO. NAME OF THE SELLER AND ADDRESS DETAILS OF LAND SOLD DATE OF PAYMENT AMOUNT OF PAYMENT (RS.) 1 SHRI ARUN S. NERKAR & ORS. NASHIK S.NO.85, 86, 307 CHINCHOLI/MOH. TQ. SINNAR, DT. NASHIK 30/12/2007 15,00,000/- 2 SHRI VITTHOBA N. KADAN & ORS. NASHIK S.NO.638, ADGAON TA & DT. NASHIK 22/11/2005 50,000/- 3 SHRI VIJAY SITARAM NAGLA, TQ & DT. JALGAON S.NO.469 TQ & DT. NASHIK 29/08/2001 84,000/- TOTAL 16,34,000/- SINCE THE ABOVE PAYMENTS HAVE BEEN MADE BY THE ASSE SSEE IN CASH AND THE SAME IS CLAIMED AS AN EXPENDITURE FOR COMPUTING HIS INCOME FROM BUSINESS THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT OF RS.16,34,000/- SHOULD NOT BE DISALLOWED AND ADDED T O THE TOTAL INCOME OF THE ASSESSEE FOR CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3) OF THE INCOME TAX ACT. 4. THE ASSESSEE IS HIS SUBMISSION STATED THAT HE HA S PURCHASED LAND BOTH AGRICULTURE AND NON-AGRICULTURE FROM FARMERS AND OT HER DEVELOPERS. IN A.Y. 2008-09 THE LAND COST DEBITED TO THE PROFIT AND LOS S ACCOUNT IS FOR PURCHASE OF LAND FROM FARMERS. SINCE THE FARMERS HAVE INSIST ED ON CASH PAYMENTS, THEREFORE, THE ASSESSEE HAD NO OPTION BUT TO MAKE S UCH PAYMENTS IN CASH. VARIOUS JUDICIAL DECISIONS WERE ALSO CITED BEFORE T HE AO FOR THE ABOVE PROPOSITION. 3 5. HOWEVER, THE AO WAS NOT CONVINCED WITH THE EXPL ANATION GIVEN BY THE ASSESSEE. HE NOTED THAT SHRI ARUN S. NERKAR AN D OTHERS OF NASHIK TO WHOM AN AMOUNT OF RS. 15 LAKHS HAS BEEN PAID IN CAS H ARE NOT FARMERS AND THEY ARE REPUTED LAND DEVELOPERS OF NASHIK. SIMILA RLY, SHRI VITTOBHA N. KADAM AND SHRI VIJAY SITARAM NAGALA ARE RESIDENTS O F NASHIK AND JALGAON RESPECTIVELY AND THE LAND SOLD BY THEM ARE ALSO IN THE AREA OF NASHIK MUNICIPAL CORPORATION. THEREFORE, THE PAYMENTS MAD E TO THE ABOVE PARTIES CANNOT COME UNDER THE EXCEPTIONS PROVIDED IN RULE 6 DD OF THE INCOME TAX RULES, 1962. 5.1 SO FAR AS THE CLAIM OF THE ASSESSEE THAT HE HAS PAID CASH IN EXCEPTIONAL CIRCUMSTANCES AS MENTIONED IN RULE 6DD (G) OF THE I.T. RULES 1962 HE NOTED THAT THE SAME IS APPLICABLE ONLY IF T HE PAYMENTS HAVE BEEN MADE IN VILLAGES AND TOWNS WHICH ON THE DATE OF SUC H PAYMENTS ARE NOT SERVED BY ANY BANK AND TO ANY PERSON WHO ORDINARILY RESIDES OR IS CARRYING OUT BUSINESS/PROFESSION OR VACATION IN SUCH VILLAGE /TOWN. HOWEVER, IN THE INSTANT CASE THE TOWNS ARE HAVING BANK FACILITIES. THEREFORE, THE ASSESSEE CANNOT TAKE PROTECTION OF RULE 6DD (G). DISTINGUIS HING THE VARIOUS DECISIONS CITED BEFORE HIM AND REJECTING THE EXPLAN ATION GIVEN BY THE ASSESSEE THE AO MADE ADDITION OF RS.16,34,000/- U/S . 40A(3) OF THE INCOME TAX ACT. 6. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE PAYM ENTS WERE MADE IN CASH AND THE SAME ARE REFLECTED IN THE CASH BOOK AN D THEIR GENUINENESS HAVE NOT BEEN DOUBTED BY THE ASSESSING OFFICER. IT WAS SUBMITTED THAT THE AMOUNT OF RS.15 LAKHS PAID IN CASH TO SRI ARUN S. N ERKAR AND OTHERS FOR THE PURCHASE OF LAND AT SURVEY NO.86, 86 AND 307, CHINC HOLI NEAR NASHIK WAS 4 OUT OF BUSINESS EXIGENCY ON 3012-2007 WHICH WAS A S UNDAY AND ON WHICH DATE THE BANKS WERE CLOSED ON ACCOUNT OF HOLIDAY. THEREFORE, THIS PAYMENT IS COVERED BY THE EXCEPTIONS PROVIDED UNDER RULE 6D D(J) OF THE I.T. RULES. 6.1 SO FAR AS THE OTHER 2 PAYMENTS OF RS.50,000/- A ND RS. 84,000/- ARE CONCERNED IT WAS SUBMITTED THAT THESE PAYMENTS WERE TO THE SELLERS WHO ARE FARMERS AND THEY INSISTED ON CASH PAYMENTS AND THER EFORE THESE ARE ALSO COVERED UNDER EXCEPTIONS PROVIDED UNDER RULE 6DD. 7. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD. CIT(A) CONFIRMED THE ADDITION U/S.40A(3) ON ACCOUNT OF PAY MENT OF RS.50,000/- TO SHRI VITTHOBA N. KADAM AND OTHERS, RS.84,000/- TO S HRI VIJAY SITARAM NAGLA. HOWEVER, HE DELETED THE ADDITION OF RS.15 L AKHS PAID TO SRI ARUN S. NERKAR AND OTHER BY HOLDING AS UNDER : 7. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE RIVAL SUBMISSIONS AND HAVE APPLIED MY MIND TO THE POSITIO N OF LAW ON THIS ISSUE. ADMITTEDLY THE ABOVE CASH PAYMENTS OF RS.16,34,000/ - WAS MADE BY THE APPELLANT IN EXCESS OF THE LIMITS PRESCRIBED U/S 40A(3). THE APPELLANT HAS MADE THESE PAYMENTS AS EXPENDITURE FOR THE PURCHASE OF AGRICUL TURAL LAND, THEREFORE, IT IS NOT AN INVESTMENT. THE PLOTS OF LAND THAT WERE PURC HASED IN THE EARLIER YEARS WERE SOLD DURING THE PREVIOUS YEAR, RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. HENCE THE PURCHASE COST WAS DEBITED TO THE PROFIT & LOSS A/C UNDER THE HEAD PURCHASES, THEREFORE, THESE TRANSACTIONS FALL WITHIN THE PURVIEW OF SECTION 40A(3). THERE IS NO DISPUTE ON THESE FACTS. IT IS S ETTLED POSITION OF LAW THAT SECTION 40A(3) DOES NOT PUT A BLANKET BAN ON ALLOWANCE OF A LL CASH PAYMENTS OVER RS.20,000/- TO A CONCERN. THE ASSESSEE CAN SHOW PRE CISELY UNAVOIDABLE AND EXCEPTIONAL CIRCUMSTANCES UNDER WHICH HE WAS COMPEL LED TO MAKE THE CASH PAYMENT. IF FROM THE FACTS PRESENTED BY THE ASSESSE E, IT IS NOTICED THAT THE PAYMENT BY WAY OF CHEQUE WAS NOT POSSIBLE ON ACCOUN T OF THE EXCEPTIONAL CIRCUMSTANCES AS GIVEN IN RULE 6DD OF THE I.T. RULE S, THE HAS TO BE EXAMINED FROM A COMMERCIAL POINT OF VIEW. IN EVERY CASE, THEREFORE, HAS TO FIRST SHOW THAT TH E CONDITIONS OF AN ALLOWANCE ARE FULFILLED AND HIS VE RSION REGARDING ACTUAL PAYMENT IS CORRECT. THEREAFTER, IT IS FOR THE ASSESSING OFF ICER TO SHOW HOW THE CONDITIONS ARE NOT FULFILLED AND THAT THE EVIDENCE PRODUCED IS INS UFFICIENT OR UNRELIABLE. WITH REGARD TO THE PAYMENT OF RS.15,00,000/- ON 30/12/2007, IT IS SEEN THAT THE DAY HAPPENS TO BE A SUNDAY ON WHICH THERE WAS A BANK HO LIDAY AND THE APPELLANT WAS REQUIRED TO MAKE THE PAYMENT TO THE SELLERS. THE SA ID DATE OF PAYMENT HAS BEEN VERIFIED FROM THE CASH BOOK BEARING VOUCHER NO. 258 BY THE ASSESSING OFFICER AND ACCEPTED AS CORRECT. ON THESE GIVEN FACTS, IT IS CL EAR THAT THE SAID PAYMENT OF 5 RS.15,00,000/- IS COVERED UNDER THE EXCEPTIONAL CIR CUMSTANCES GIVEN UNDER RULE 6DD(J) WHICH READS THAT 'WHERE THE PAYMENT WAS REQUIRED TO BE MADE ON A DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE' ; IN VIEW OF THE ABOVE FACTS AND THE CIRCUMSTANCES, I T IS HELD THAT THE DISALLOWANCE OF RS.15,00,000/- U/S 40A(3) CANNOT BE SUSTAINED, AS IT IS ESTABLISHED THAT THERE EXISTED EXCEPTIONAL AND UNAVOIDABLE CIRC UMSTANCES THAT THE IMPUGNED PAYMENT WAS REQUIRED TO BE MADE IN CASH ON SUNDAY W HICH WAS A BANK HOLIDAY. FURTHER, THERE IS NO DOUBT REGARDING THE GENUINENES S OF THE SAID PAYMENT AND THE SAME HAS BEEN FOUND TO BE PROPERLY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND EXPLAINED. UNDER THESE CIRCUMSTANCES THE DISALLOWAN CE OF RS.15,00,000/- WAS NOT REQUIRED TO BE MADE, THE IMPUGNED DISALLOWANCE IS, THEREFORE, DELETED. 7.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 8. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY OBJ ECTED TO THE ORDER OF THE CIT(A). HE SUBMITTED THAT THERE WAS NO EXIGENC Y ON THE PART OF THE ASSESSEE TO MAKE PAYMENTS IN CASH ON A SUNDAY WHERE THE PLACE IS HAVING ADEQUATE BANKING FACILITIES AND HE COULD HAVE MADE THE PAYMENTS EITHER ON THE NEXT DAY OR ON THE PREVIOUS DAY. HE ACCORDINGLY SU BMITTED THAT MERELY BECAUSE THE PAYMENT WAS MADE ON A SUNDAY CANNOT ABS OLVE THE ASSESSEE FROM THE VIOLATION OF PROVISIONS OF SECTION 40A(3). THE ASSESSEE HAS NOT PROVED WITH ANY CORROBORATIVE EVIDENCE REGARDING THE UNAVO IDABLE CIRCUMSTANCE FOR WHICH THE CASH HAS TO BE PAID ON SUNDAY. HE ACCORD INGLY SUBMITTED THAT THE ORDER OF THE LD. CIT(A) BE REVERSED AND THAT OF THE ORDER OF THE AO BE RESTORED. HE ALSO RELIED ON THE FOLLOWING DECISIONS : 1. ITO VS. NAM ESTATE PVT. LTD. 31 TAXMANN.COM 156 2. JHUNJHUN WALA & CO. VS. CIT 167 TAXMANN 58 3. T.G. MUTHA VS. ITO 54 ITD 460 (PUNE) 9. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE GENUINE NESS OF PAYMENT OF RS.15 LAKHS IS NOT DOUBTED. THE ONLY DISPUTE IS REGARDIN G ALLOWABILITY OF THE SAME 6 U/S.40A(3) OF THE ACT. HE SUBMITTED THAT THE DATE OF PAYMENT, I.E.30-12-2007 WHICH IS A SUNDAY IS ALSO NOT DISPUTED BY THE REVEN UE. HE DREW THE ATTENTION OF THE BENCH TO THE PROVISIONS OF RULE 6DD(J) ACCOR DING TO WHICH NO DISALLOWANCE U/S.40A(3) SHALL BE MADE WHERE THE PAY MENT WAS REQUIRED TO BE MADE ON A DAY ON WHICH BANKS WERE CLOSED EITHER ON ACCOUNT OF A HOLIDAY OR STRIKE. SINCE THE ASSESSEE FALLS UNDER THE EXCEPTI ONS PROVIDED UNDER RULE 6DD(J), THEREFORE, HE SUBMITTED THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE AO U/S.40A(3) OF THE I NCOME TAX ACT. 9.1 SO FAR AS THE VARIOUS DECISIONS RELIED ON BY TH E LD. DEPARTMENTAL REPRESENTATIVE HE SUBMITTED THAT THOSE ARE DISTINGU ISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT AN AMOUNT OF RS.15 LAKHS WAS PAID IN CASH TO SHRI ARUN S. NERKAR AND OTHERS OF NASHIK ON 30-12-2007. THERE IS ALSO NO DISPUTE TO THE FACT THAT 30-12-200 7 WAS A SUNDAY AND THEREFORE THE BANKS WERE CLOSED ON THAT DAY DUE TO HOLIDAY. THEREFORE, THE CASE OF THE ASSESSEE FALLS UNDER THE EXCEPTIONS PRO VIDED IN RULE 6DD(J) AND THEREFORE NO DISALLOWANCE IS CALLED FOR U/S.40A(3) OF THE INCOME TAX ACT. 10.1 SO FAR AS THE ARGUMENTS OF THE LEARNED DEPARTM ENTAL REPRESENTATIVE THAT THERE WAS NO UNAVOIDABLE CIRCUMSTANCES AND THE ASSE SSEE COULD HAVE WAITED TO MAKE THE PAYMENT BY CHEQUE OR DD ON THE NEXT DAY WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DELAY IN MAKING THE PAYMENT ON THE DATE AND TIME SPECIFIED BY THE SELLE R MAY AMOUNT TO 7 TERMINATION OF THE DEAL AND THE ASSESSEE MAY INCUR LOSS DUE TO CANCELLATION OF THE TRANSACTION AND THEREFORE, THE PAYMENT MADE ON SUNDAY WAS FOR COMMERCIAL EXPEDIENCY. THE VARIOUS DECISIONS RELIE D ON BY THE LD. DEPARTMENTAL REPRESENTATIVE ARE NOT APPLICABLE TO T HE FACTS OF THE PRESENT CASE AND ARE DISTINGUISHABLE ON FACTS. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN VIEW OF THE ELABORATE DISCUSSION BY THE LD. CIT(A) WE FIND NO INFIRMITY IN HIS ORDER DELETING THE DISALLOWANCE OF RS.15 LAKHS MADE BY THE AO U/S. 40A(3) OF THE ACT. WE THEREFORE UPHOLD THE SA ME. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 19 TH DAY OF APRIL, 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, DATED THE 19 TH APRIL 2013. COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-I, NASHIK 4. THE CIT-I, NASHIK 5. THE DR B BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // PRIVATE SECRETARY, INCOME TAX APPELLATE T RIBUNAL, PUNE.