ACIT, CHENNAI V. M/s. Srinivasa Foundatiion, CHENNAI

ITA 1325/CHNY/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51716 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 12-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K ME GHANATH CHOWHAN
• Assessee Lawyers: J K REDDY
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 1325/MDS/2010 ASSESSMENT YEAR : 2007-08 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-III(1), CHENNAI. V. M/S. SRINIVASA FOUNDATION, 7, VIDYODAYA FIRST CROSS STREET, T. NAGAR, CHENNAI-600 017. (PAN : ABAFS7944N) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. MEGHANATH CHOWHAN, JCIT RESPONDENT BY : SHRI J.K. REDDY, CA DATE OF HEARING : 10-08-2011 DATE OF PRONOUNCEMENT : 12/08/2011 O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LEARNED CIT(APPEALS)-II, CHENNAI IN ITA NO. 161/08-09 DATED 23-04-2010 FOR THE ASSESSMENT YEAR 2007-08. I.T.A. NO.1325/MDS/2010 2 2. SHRI K. MEGHANATH CHOWHAN, JCIT REPRESENTED ON B EHALF OF THE REVENUE AND SHRI J.K. REDDY, CA REPRESENTED ON BEHA LF OF THE ASSESSEE. 3. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1.A ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION A MOUNTING TO ` 9,80,000 MADE BY THE A.O. U/S 40A(3), BY OBSERVING THAT THE COMMISSION AGENT HAS ACTED AS AN AGENT ON BEHALF OF THE SELLER AND PURCHASER BOTH. 1.B THE LEARNED CIT(A) HAS FAILED TO NOTE THAT THE RE IS NO EVIDENCE EITHER IN THE FORM OF POWER OF ATTORNEY OR OTHERWISE TO THE EFFECT THAT SRI B. BABU WAS AUTHORIZED TO AC T AS AGENT OF THE ASSESSEE FIRM. 1.C THE LEARNED CIT(A) HAS FAILED TO APPRECIATE TH AT THE SALE DEED DOES NOT REVEAL ANYTHING ABOUT THE ROLE OF SRI B. BABU AS AN AGENT. 1.D THE LEARNED CIT(A) HAS FAILED TO NOTE THAT THE CASH TRANSACTION IS NOT SUPPORTED BY ASSESSEES BOOKS OR VOUCHERS. 1.E THE LEARNED CIT(A) HAS FAILED TO NOTE THAT RUL E 6DD(K) CANNOT BE APPLIED TO THIS CASE. 2. THE APPLICANT CRAVES LEAVE TO, ADD TO AMEND OR ALTER THE ABOVE GROUNDS OF APPEAL AS MAY BE DEEMED NECESSARY. 4. IT WAS SUBMITTED BY THE LEARNED DR THAT IN THE C OURSE OF SEARCH ON THE PREMISES OF THE ASSESSEE IT WAS NOTICED THAT TH E ASSESSEE HAD PAID ` 49 LAKHS IN CASH TO THE SELLERS OF THE LAND AT KOLA THUR VILLAGE, CHENGALPATTU I.T.A. NO.1325/MDS/2010 3 TK., KANCHEEPURAM DISTRICT. IT WAS THE SUBMISSION THAT THE TOTAL CONSIDERATION WAS AN AMOUNT OF ` 50 LAKHS AND ` 1 LAKH HAD BEEN PAID BY DD IN FAVOUR OF ONE OF THE SELLERS AND THE BALANCE OF ` 49 LAKHS HAD BEEN PAID IN CASH THROUGH AN AGENT OF THE ASSESSEE FOR T HE PURCHASE OF THE LAND. IT WAS THE SUBMISSION THAT COMMISSION HAD ALSO BEEN PAID TO THE SAID AGENT ON WHICH TDS HAD BEEN DEDUCTED. IT WAS THE S UBMISSION THAT THE ASSESSEE HAD CLAIMED THAT THE PROVISIONS OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961 WOULD NOT APPLY IN VIEW OF THE PROVIS IONS OF RULE 6DD(K) OF THE INCOME TAX RULES, 1962 INSOFAR AS THE CASH HAD BEEN PAID TO THE AGENT OF THE ASSESSEE WHO HAD PAID THE SELLERS OF THE LAN D. IT WAS THE SUBMISSION THAT WHEN THE DD OF ` 1 LAKH COULD HAVE BEEN PAID, THERE WAS NO REASON WHY ` 49 LAKHS COULD NOT HAVE BEEN PAID BY WAY OF DD. I T WAS THE SUBMISSION THAT IT WAS NOT AS IF WHAT WAS PURCH ASED WAS TRANSFERABLE BY POSSESSION. IT WAS THE SUBMISSION THAT THE ITEM PURCHASED WAS LAND WHICH COULD BE TRANSFERRED ONLY THROUGH A REGISTERE D SALE DEED. IT WAS THE SUBMISSION THAT THE SALE WAS ALSO DONE BY ENTERING INTO A SALE AGREEMENT. IT WAS THE FURTHER SUBMISSION THAT THE LEARNED CIT( A) HAD DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY INVOK ING THE PROVISIONS OF SECTION 40A(3) BY HOLDING THAT THE PAYMENT HAD BEEN MADE THROUGH AN AGENT AND THE PROVISIONS OF RULE 6DD(K) OF THE INCO ME TAX RULES WOULD APPLY. I.T.A. NO.1325/MDS/2010 4 5. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). IT WAS THE SUBMIS SION THAT THE PAYMENT HAD BEEN MADE FOR THE PURCHASE OF LAND AND THE AGEN T DEALT WITH THE SELLERS OF THE LAND. IT WAS THE SUBMISSION THAT TH E SELLERS OF THE LAND WERE NOT READY TO ACCEPT CHEQUE OR DD. IT WAS THE FURTH ER SUBMISSION THAT THE PAYMENT HAD BEEN MADE THROUGH THE AGENT OF THE ASSE SSEE AND THE AGENT HAD APPEARED BEFORE THE ASSESSING OFFICER AND HAD A LSO ACCEPTED THAT HE HAD TAKEN THE MONEY AND MADE THE PAYMENT. IT WAS T HE SUBMISSION THAT THE ORDER OF THE LEARNED CIT(A) WAS LIABLE TO BE SU STAINED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE F ACTS IN THE PRESENT CASE CLEARLY SHOW THAT AN AMOUNT OF ` 1 LAKH HAD BEEN PAID BY WAY OF DD TO THE SELLERS OF THE LAND. IF THE SELLERS WERE WI LLING TO TAKE DD FOR ` 1 LAKH WHAT STOPPED THE ASSESSEE FROM MAKING THE BALANCE O F ` 49 LAKHS BY DD? THE PROVISIONS OF SECTION 40A(3) IS NOT FOR QUESTIO NING THE GENUINENESS OF THE TRANSACTION. IT IS FOR STOPPING THE PAYMENT BY WAY OF CASH IN SUCH TRANSACTIONS. A PERUSAL OF THE SALE DEED AND THE S ALE AGREEMENT DOES NOT TALK OF THE BROKER, SHRI B.BABU. A PERUSAL OF THE DETAILS OF THE PAYMENTS MADE TO SHRI BABU SHOWS THAT THE PAYMENTS HAD BEEN MADE ON 15-09- 2006, 20-11-2006 AND 10-02-2007. A PERUSAL OF THE SALE AGREEMENT SHOWS THAT THE AGREEMENT HAS BEEN MADE ON 19-07-2006 AND THE PAYMENTS HAVE ALSO BEEN MADE ON THE SAME DATE. THIS WOULD CLEARL Y SHOW THAT THE CLAIM I.T.A. NO.1325/MDS/2010 5 OF THE ASSESSEE THAT THE PAYMENT HAD BEEN MADE THRO UGH SHRI BABU, AGENT OF THE ASSESSEE IS AN AFTER-THOUGHT. THIS IS BECAU SE THE PAYMENT TO SHRI BABU HAS TAKEN PLACE MUCH LATER TO THE ACTUAL TRANS ACTION AND THERE IS NO AGREEMENT WITH THE SAID AGENT, WHICH HAS BEEN PLACE D BEFORE THE LOWER AUTHORITIES OR BEFORE US. EVEN IN THE WITNESS COLUM N SHRI BABUS NAME DOES NOT APPEAR. IN FACT NOTHING HAS BEEN PRODUCED TO SHOW THAT SHRI BABU WAS INVOLVED IN THE SAID TRANSACTION. A PERUS AL OF THE BANK ACCOUNT OF THE ASSESSEE SHOWS THAT THE AMOUNT OF ` 49 LAKHS HAD BEEN DRAWN BY WAY OF CASH. THE SAME TRANSACTION ALSO SHOWS THAT OTHER TRANSACTION OF LARGE AMOUNTS BEING AMOUNTS OF ` 20 LAKHS AND ` 25 LAKHS WHICH ARE TO PERSONS SPECIFIC. THUS IT IS NOT AS IF THE ASSESSE E DOES NOT KNOW THAT CASH TRANSACTIONS ARE NOT TO BE DONE AS THERE WOULD BE V IOLATION OF SEC. 40A(3) OF THE ACT. A PERUSAL OF THE CONFIRMATION LETTER O F SHRI BABU SHOWS THAT HE HAS MENTIONED THAT THE CASH WAS TO SETTLE ONE OF TH E FAMILY MEMBERS BY WAY OF CASH PAYMENT. HOWEVER, WHO THE SAID FAMILY MEMBER WAS, IS NOT COMING OUT OF THE LETTER. IN FACT, THE PROPERTY BE LONGED NOT TO VARIOUS FAMILY MEMBERS BUT TO ONE MR. CHITTI BABU, MRS. PAR VATHA KUMARI, WIFE OF SHRI CHITTI BABU AND SHRI SELVAJOTHILINGAM, SON OF MR. CHITTI BABU. NO DISPUTES HAVE BEEN SHOWN TO EXIST BETWEEN THESE THR EE PERSONS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) IS ERRONEOUS AND THE PAYMENT BY WAY OF CASH BY THE ASS ESSEE OF AN AMOUNT I.T.A. NO.1325/MDS/2010 6 OF ` 49 LAKHS FOR THE PURCHASE OF THE LAND IS NOT PROTE CTED BY THE PROVISIONS OF RULE 6DD(K) OF THE INCOME TAX RULES AND IS IN VI OLATION OF THE PROVISIONS OF SECTION 140A(3). IN THE CIRCUMSTANCES, THE FIND ING OF THE LEARNED CIT(A) ON THIS ISSUE STANDS REVERSED AND THAT OF THE ASSES SING OFFICER RESTORED. IN THE CIRCUMSTANCES, THE APPEAL OF THE REVENUE IS ALL OWED. 7. THE ORDER WAS PRONOUNCED IN THE COURT ON 12/08/2 011. SD/- SD/- (N. S. SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 12 TH AUGUST, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE