Jitendra Joshi, Dehradun V. DCIT, Circle- 1, Dehradun

ITA 1363/DEL/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9055 (ITAT-DEHRADUN)
• Duration Of Justice: 2 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 18-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 40A(3); 191; 192

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN BENCH, NEW DELHI Before Sh. Amit Shukla, Judicial Member Dr. B. R. R. Kumar, Accountant Member (Through Video Conferencing) ITA No. 1363/Del/2019 : Asstt. Year : 2012-13 Sh. Jitendra Joshi C/o. M/s. RRA TAXINDIA D-28, South Extension, Part-I, New Delhi-110049 Vs DCIT Circle-1, Dehradun (APPELLANT) (RESPONDENT) PAN No. AETPJ3092C Assessee by : Sh. Somil Agarwal, Adv. Revenue by : Sh. N. S. Jangpangi, CIT DR Date of Hearing: 12.11.2021 Date of Pronouncement: 10.02.2022 ORDER Per Dr. B. R. R. Kumar, Accountant Member: This appeal has been filed by the assessee against the order of the ld. CIT(A), Haldwani dated 14.12.2018. 2. The only issue involved in this appeal pertains to disallowance of Rs. ******** u/s 40A(3) on account of cash payment made for purchase of land. The assessee has purchased land from one person namely, Sh. Hukum Singh and paid an amount of Rs. 47,00,000/- in cash against the purchase of the said land. ITA No. 1363/Del/2019 Jitendra Joshi 2 Excerpts from the Assessment Order: 3. A copy of letter alleged to be written by Shri Hukam Singh has also been produced. But the fact remains as to whether there is any such person in the name of Shri Hukam Singh at the given address. In this regard, the ld. A.R. for the assessee has tried to establish the existence of Shri Hukam Singh, but the fact that on the address given in the transfer deed purported to have been registered by Shri Hukam Singh along with two other co-owners, summons were sent through Speed Post on 31.08.2016 to Shri Hukam Singh but the same who returned unserved with the remark ‘No such person on this address returned to sender’, even the Inspector of Income tax who was deputed to serve the summons to Shri Hukam Singh at his known address i.e. s/o Shri Asha Ram, R/o 87, Jiwanimai Road, Rishikesh, could not serve the notice at the given address. He has submitted in his report that the address mentioned in the summons could not be traced out as house numbers at Jiwanimai Road, Rishikesh are hot in sequence and nobody knows to Shri Hukam Singh. He also made enquiries from nearby shopkeepers and other residential persons but nobody knows to Shri Hukam Singh. Inspector again tried to gets the where about of the persons occupying the House No. 87, Jiwanimai Road, Rishikesh, Distt. Dehradun and came to know that one Shri Ravi Raj Makhija is occupying the House No. 87, Jiwanimai Road, Rishikesh. Shri Ravi Raj Makhija who was contacted by the Inspector has denied having known any such person in the name of Shri Hukam Singh for long time. This shows that there is no such person in the name of Shri Hukam Singh at the given address i.e. 87, Jiwanimai Road, Rishikesh. ITA No. 1363/Del/2019 Jitendra Joshi 3 All this goes to show that there is no such person in the name of Shri Hukam Singh, S/o Shri Asha Ram, r/o 87, Jiwanimai Road, Rishikesh. 4. In this context, it is also worth-while to mention that the land in question was shown to have been purchased by Shri Hukam Singh on 14.06.2006 from Shri Mahesh Rana and Smt. Sita Devi for a sale/purchase consideration of Rs. 7,76,000/- and the address given in this purchase deed by the so called Shri Hukam Singh is the same as that s/o Shri Asha Ram, r/o 87, Jiwanimai Road, Rishikesh, Dehradun. Mode of payment for purchase of this land was also cash payment. The person who has purchased land for Rs. 7,76,000/- in the year 2006 and sold the same land in the year 2012 has not filed any return of income showing long term capital gain arose on the sale of the land in question. Even he has no Permanent Account Number, which is evident from the fact that in the sale deed executed on 06.02.2012, he has given his Form No.60 and Voter ID Card No.VID-UP/01/423/654593 for his ID proof and no PAN is given in the same. CBN enquiry also reveals that there is no PAN is allotted to any such person in the name of Shri Hukam Singh, S/o Shri Asha Ram, R/o. 37, Jiwanimai Road, Risnikesh. Moreover, on verification from Uttarakhand Electoral web-site voter ID given in the sale deed is found to be incorrect. 5. All these facts demonstrate that there is no such person in the name of Shri Hukam Singh and it is the assessee only who has purchased the land in the year 2006 in the name of any fictitious person under the name of Shri Hukam Singh and has now transferred the same in his own name in the ITA No. 1363/Del/2019 Jitendra Joshi 4 year 2012, again using that fictitious person for the purpose of transfer. It is assessee’s own land since 2006 and now transferred, in his own name, the sale consideration claimed to have been paid in cash to Shri Hukam Singh remained with the assessee only. 6. Moreover, without prejudice to the observations made above, even if it is accepted that Shri Hukam Singh is an existing person, in that circumstances also payment claimed to have been made to Shri Hukam Singh for purchase of land is an expenditure in contravention of the provisions of section 40A(3) of the IT Act, as the assessee is engaged in the business of real estate since long and the payment, if any made otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. The assessee has made payment in cash for the purchase of the land and has debited as expenses on account of purchases in the P&L account and the said land has been shown as stock-in-trade of his business which is clearly, in contravention to the provisions of Sec. 40A(3) of the I.T. Act 1961. 7. All the above discussion evidently prove that the payment of Rs. 47,00,000/-in cash is in violation of the provisions of Sec. 40A(3) of the I.T. Act, 1961 and the assessee is not entitled for any relief in this regard. Accordingly, this payment of Rs.47,00,000/- made in cash for purchase of property from the so called person namely Shri Hukam Singh who is actually a fictitious person is not an admissible expenditure. Therefore, an amount of ITA No. 1363/Del/2019 Jitendra Joshi 5 Rs.47,00,000/- is being disallowed and added to the total income of the assessee. 8. Aggrieved, the assessee filed appeal before the ld. CIT(A) who has affirmed the action of the Assessing Officer on the grounds that the case of the assessee do not fall under the exceptions provided under Rule 6DDJ of the Income Tax Rules, 1962. The Rule 6DDJ stands as on the date applicable to the relevant assessment year as under: Excerpts from the order of the CIT(A): 9. Now, it is to be borne in mind that the circumstances which have to be considered have been laid out in Rule 6DD of Income Tax Rules, 1962. It is pertinent to point out that the word 'prescribed' in proviso to section 40A(3) of the I.T. Act, 1961, has been used prior to ‘........having regard to the nature and extent of banking facility available, consideration of business expediency and other relevant factors:]’. (The entire proviso has been reproduced above for immediate reference). 10. Thus, the conditions prescribed for the last limb of the proviso of the section 40A(3) of the I.T. Act, 1961 are prescribed in the Income Tax Rules and the positioning of the word 'prescribed' makes it incumbent for the reader to read the conditionality prescribed in the Rules along with last limb of the proviso and not before completing the proviso itself. 11. Now, it is to be noted that prior to 1.12.1995 Rule 6DDJ read as under: ITA No. 1363/Del/2019 Jitendra Joshi 6 “(1) "in any other case, where the assessee satisfies the "[Assessing Officer] that the payment could not be made by a crossed cheque drawn on a bank or by a crossed bank draft- due to exceptional or unavoidable circumstances1, or (2) because payment in the manner aforesaid was not practicable, or would have caused genuine difficulty to the payee, having regard to the nature of the transaction and the necessity for expeditious settlement thereof, and also furnishes evidence to the satisfaction of the 2[Assessing Officer] as to the genuineness of the payment and the identity of the payee.]" And thereafter after 01.12.1995 Rule 6DDJ has changed totally in scope and content which now reads as under: "where the payment is made by an assessee by way of salary to his employee after deducting the income -tax from salary in accordance with the provisions of section 192 of the Income - tax Act, 1961 and when such employee- (A) is temporarily posted for a continuous period of fifteen days or more in a place other than his normal place of duty or on a ship; and (B) does not maintain any account in any bank at such place or ship; (k) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike; ITA No. 1363/Del/2019 Jitendra Joshi 7 (I) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person.]" 12. From the bare perusal of the amended Rule 6DDJ applicable in the case of the assessee, it becomes abundantly clear that the scope and nature of the said Rule has changed completely and the judgments referred are in the context of the old Rule, which is not in existence anymore. 13. The matter under appeal pertains to Assessment Year 2012-13 for which issues of genuineness of payment, identity of the payee on even exceptional circumstances does not hold good as the law has changed and the present judgments relied upon is based on old Rule 6DDJ that was subject matter before the Hon. Supreme Court decision of Attar Singh Gurmukh Singh Reported in 191 ITR 667 (SC). 14. The present Rule 6DDJ in no way comes to the rescue of the assessee as it does not prescribe the exceptions of genuineness of the business transactions or even where the identity of the payee stand established. The legislature in its wisdom has done a complete overhaul of Rule 6DDJ as can be seen from the amended provisions which became applicable with effect from 01.12.1995. Thus the entire exercise done fry the Ld. counsel does not in any way rescue the appellant as there is n o doubt that the Appellant has violated the provision of section 40A(3) by making a payment of Rs. 47,00,000/- in cash for purchase of land which is his stock in trade. In view of the foregoing discussions the present appeal fails. ITA No. 1363/Del/2019 Jitendra Joshi 8 15. Before us, Ld. AR argued that where the payment is genuine in the identity of the receiver is established which has been claimed to have been in the present case. It was argued that Sh. Hukam Singh was available before the Registrar on 06.02.2012 and the payment for withdrawal made from the bank on the same date. The purchase deed dated 14.06.2006 was in favour of Sh. Hukam Singh. 16. The ld. DR relied on the order of the authorities below. 17. In this case, we find that the AO had made disallowance of cash payment made to Sh. Hukam Singh u/s 40A(3) owing to non-availability of Sh. Hukam Singh after due enquiries. The AO has also held that the Sh. Hukam Singh is a fictitious person. The ld. CIT(A) confirmed the action of the AO u/s 40A(3). The argument of the assessee was that this amount of Rs.47,00,000/- is not forming the part of total transaction value of Rs.94,00,000/- and has not been claimed as deduction in computing the total income whereas the AO held that the assessee has purchased land as stock in trade in the business of the assessee. Thus, the only issue simmers down to, is whether the provisions of Section 40A(3) is invited in claim of capital expenditure or revenue expenditure. Before us, none of the parties could conclusively bring on record whether the land purchased was a part of the stock in trade or part of investments of the assessee. This can only be examined by going through the P&L account and computation of income. Hence, we hereby lay down the principle that the provisions of Rule 8DD(j) are not applicable to the assessee and Section 40A(3) are attracted only if the payments are claimed in the ITA No. 1363/Del/2019 Jitendra Joshi 9 P&L account (Being pre 2018 amendment). With these directions, we remand the matter to the file of the AO to examine the issue, with instructions to the assessee to furnish the relevant financials before the Assessing Officer. 18. In the result, the appeal of the assessee is allowed for statistical purpose. Order Pronounced in the Open Court on 10/02/2022. Sd/- Sd/- (Amit Shukla) (Dr. B. R. R. Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 10/02/2022 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT Assistant Registrar