M/S. DIVINE CIETY PVT. LTD., Ujjain V. THE DCIT 2(1), Ujjain

ITA 161/IND/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5973 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 16-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K G GOYAL
• Assessee Lawyers: S S DESHPANDE
• Keywords: Unexplained cash credit; Business income; Opportunity of being heard
• Section: 40A(3); 68

Judgement Text

DIVINE CITY 161 OF 2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER ITA NO.161/IND/2015 A.Y. 2010-11 M/S. DIVINE CITY P. LTD., UJJAIN PAN AACCD 4627 M :: APPELLANT VS DCIT-2(1), UJJAIN :: RESPONDENT ASSESSEE BY SHRI S.S. DESHPANDE, CA RESPONDENT BY SHRI K.G. GOYAL, DR DATE OF HEARING 12.1.2017 DATE OF PRONOUNCEMENT 12.1.2017 O R D E R PER SHRI D.T. GARASIA, JM THE ABOVE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LEARNED CIT(A)-UJJAIN DATED 26.12.2014. 2. SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN BUSINESS OF REAL ESTATE. THE ASSESSING OFFICER MADE ADDITION OF RS.3 3 LACS ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AND DISAL LOWANCE OF RS.19,20,000 DIVINE CITY 161 OF 2015 2 ON ACCOUNT OF DISALLOWANCE U/S 40A(3) OF THE ACT5 A ND ADDITION OF RS.17,99,483/- ON ACCOUNT OF NON-DEDUCTION OF TDS. 3. WITH REGARD TO FIRST ISSUE, THE ASSESSEE HAS IN THE BALANCE-SHEET HAS SHOWN THE PAID UP CAPITAL WAS INCREASED FROM RS.1 L AC TO 60,60,000/- AND SHARE PREMIUM OF RS.47,34,000 IN ASSESSMENT YEAR 20 10-11. THE ASSESSING OFFICER FOUND THAT SHARES TO BALBIR SIHNGH SAHANI, BALBIR SINGH HUF, MANOJ TIWARI AND MANOJ TIWARI HUF AND SMT. ANJANA TIWARI WERE ALLOTTED A FACE VALUE OF RS.10/SHARE AND PREMIUM VALUE OF RS.30 PER SHARE. HOWEVER, 6600 SHARES WERE ALLOTTED TO INDORE PETRO CHEMICALS LTD. AT THE FACE VALUE 10 PER SHARE AND PREMIUM VALUE OF 40 PER SHARE, THEREFORE, ASSESSING OFFICER MADE AN INQUIRY FROM INDORE PETRO CHEMICALS LTD. THAT TH EY HAVE MADE PAYMENTS FOR ACQUIRING SHARES OR NOT. SIMILARLY, ASSESSEE HA S ALLOTTED SHARES TO BALBIR SINGH, BALBIR SINGH HUF, THE SHARES WERE ALLOTTED A T FACE VALUE OF 10 PER SHARE AND PREMIUM VALUE OF 30 PER SHARE. THE ASSESS EE FAILED TO PROVIDE ANY DETAIL BEFORE THE ASSESSING OFFICER WHY THE SHARES WERE ALLOTTED AT HIGHER VALUE TO THE INDORE PETRO CHEMICALS LTD. THE ASSESS EE FAILED TO PROVE THE SAME BEFORE THE ASSESSING OFFICER AND LEARNED CIT(A ), THEREFORE, THE ASSESSEE IS BEFORE US. DIVINE CITY 161 OF 2015 3 4. DURING COURSE OF HEARING, LEARNED COUNSEL FOR TH E ASSESSEE SUBMITTED THAT HE IS READY TO GO BACK TO THE ASSESSING OFFICE R AND READY TO SUBMIT THE DETAILS REGARDING ALLOTMENT OF SHARES AND HE IS REA DY TO PRODUCE THE NAMES OF SHAREHOLDERS, CONTACT NOS. AND ADDRESS OF INDORE PETRO CHEMICALS BEFORE THE ASSESSING OFFICER, THEREFORE, THE MATTER MAY BE REMANDED TO THE ASSESSING OFFICER. LD. DR HAD NO OBJECTION IF THE M ATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 5. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER AND THE ASSESSEE IS DIRECTED TO P ROVIDE THE DETAILS IN RESPECT OF INDORE PETRO CHEMICALS LTD. MOREOVER, TH E ASSESSEE IS DIRECTED TO GIVE ADDRESSES OF BUSINESS ACTIVITY, NAMES OF DIREC TORS AND ADDRESS OF INDORE PETRO CHEMICALS. THE ASSESSING OFFICER IS AT LIBERT Y TO CALL FOR DIRECTORS OF INDORE PETRO CHEMICALS LTD. AND DECIDE THE MATTER A FRESH. IF THE ASSESSEE FAILED TO GIVE THE ADDRESS OF INDORE PETRO CHEMICAL S P. LTD. THEN ASSESSING OFFICER IS AT LIBERTY TO REPEAT THE ADDITION BY PAS SING THE ORDER AS PER LAW. 6. WITH REGARD TO THE SECOND ISSUE, THE ASSESSEE HA S PURCHASED THE LAND OF 1.47 HEC AT THE COST OF RS.28,80,000/-. FROM PER USAL OF SALE DEED, THE DIVINE CITY 161 OF 2015 4 ASSESSING OFFICER FOUND THAT ASSESSEE HAS MADE PAYM ENT OF RS.9,60,000/- THROUGH CHEQUES AND REST OF RS.19,20,000/- THROUGH CASH. THEREFORE, ASSESSEE HAS VIOLATED THE PROVISIONS OF SEC. 40A(3) OF THE ACT. THEREFORE, HE HAS MADE ADDITION. 7. DURING COURSE OF HEARING, THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT DECISION OF HON'BLE JURISDICTIONAL H IGH COURT OF MP 218 ITR 46 IN THE CASE OF CIT VS. AACHAL ALLOYS WHEREIN THE HIGH COURT HAS HELD THAT WHERE PAYMENTS IN CASH WERE DULY SIGNED BY PAYEES A ND INSISTENCE ON MAKING CASH PAYMENTS WAS FOUNDED ON FULCRUM THAT PA YEES DID NOT HAVE ANY BANK ACCOUNT AND, BEING ILLITERATE, THEY REQUIR ED PAYMENT IN CASH, NO DISALLOWANCE COULD BE MADE U/S 40A(3). THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT LAND IS SITUATED AT VILLAGE PITHA PIPLAI AND TWO PERSONS ONE LADY AND ONE KAMAL MOHAN LAL DO NOT HAV E BANK ACCOUNTS, THEREFORE, PAYMENT HAS BEEN MADE IN CASH. THEREFORE , NO ADDITION CAN BE MADE. ON THE OTHER HAND, LD. DR RELIED UPON THE ORD ERS OF THE REVENUE AUTHORITIES. 8. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSU E IN CONTROVERSY IS COVERED DIVINE CITY 161 OF 2015 5 BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COUR T OF MP IN CASE OF CIT VS. ACHAL ALLOYS (P) LTD. (SUPRA) WHEREIN IT IS HELD TH AT WHERE PAYMENTS IN CASH WERE DULY SIGNED BY PAYEES AND INSISTENCE ON MAKING CASH PAYMENTS WAS FOUNDED ON FULCRUM THAT PAYEES DID NOT HAVE ANY BAN K ACCOUNT AND, BEING ILLITERATE, THEY REQUIRED PAYMENT IN CASH, NO DISAL LOWANCE COULD BE MADE U/S 40A(3). IN THE INSTANT CASE, THE PAYMENT HAS BEEN M ADE TO LANDOWNERS AND THEY HAVE GIVEN AFFIDAVITS THAT TWO PERSONS ARE LAD IES AND ONE SHRI KAMAL MOHAN DO NOT HAVE BANK ACCOUNTS IT IS ON PAGES NOS. 16 AND 17 OF PAPER BOOK, THEREFORE, WE ARE OF THE VIEW THAT THAT REVEN UE AUTHORITIES ARE NOT JUSTIFIED IN MAKING THE ADDITION OF RS.19,20,000/- U/S 40A(3) ON ACCOUNT OF CASH PAYMENT MADE FOR PURCHASE OF AGRICULTURAL LAND STATING IS IT STOCK-IN- TRADE, THEREFORE, WE DELETE THE ADDITION. 9. WITH REGARD TO THE LAST ISSUE, THE ASSESSING OFF ICER FOUND THAT ASSESSEE HAS DEBITED 17,99,483/- AGAINST A PARTY WITH THE NA ME OF AJANTA BARBER WIRES AND FABRICATION WORKS UNDER THE HEAD PAYMENT SIGHT DEVELOPMENT EXPENSES. THEREFORE, ASSESSEE IS REQUIRED TO DEDUCT A TDS FOR SUPPLY AND INSTALLATION OF THE MAIN GATE OF REAL ESTATE PROJEC T, THEREFORE, ASSESSING DIVINE CITY 161 OF 2015 6 OFFICER HAS MADE THE ADDITION. THE LEARNED CIT(A) C ONFIRMED THE ACTION OF THE ASSESSING OFFICER. NOW, THE ASSESSEE IS BEFORE US. 10. DURING COURSE OF HEARING, THE LEARNED COUNSEL F OR THE ASSESSEE SUBMITTED THAT PAYMENT HAS BEEN MADE TO AJANTA WIRE S AND FABRICATION AND IT HAS CONFIRMED THAT IT HAS RECEIVED THE PAYMENT F ROM THE ASSESSEE. THEREFORE, THIS MATTER MAY BE RESTORED TO THE ASSES SING OFFICER TO VERIFY THE SAME. IF THE PAYEE HAS ACCOUNTED THE MONEY IN HIS R ETURN OF INCOME THEN NO DEDUCTION ON ACCOUNT OF NON-DEDUCTION OF TDS CAN BE MADE UNDER 40A(IA) OF THE ACT. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE REVENUE AUTHORITIES. 11. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS PER THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP PRI VATE LIMITED, 377 ITR 635 (DEL) HAS CATEGORICALLY HELD THAT SECOND PROVISO TO SECTION 40A(IA) IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPE CTIVE EFFECT FROM IST APRIL, 2005. WE, THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR THE PURPOSE OF LIMITED DIVINE CITY 161 OF 2015 7 VERIFICATION ON THE ASPECT AS TO WHETHER THE CONCER NED HAS INCLUDED THE RECEIPT IN ITS PROFIT AND LOSS ACCOUNT IN COMPUTING THE BUSINESS INCOME OFFERED TO TAX AND IF IT IS FOUND TO BE SO, THE ASS ESSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE. NEEDLESS TO SAY THAT THE A SSESSING OFFICER SHALL PROVIDE ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THEREFORE, THIS ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED UNDER THE TERMS AS INDICATED HEREINABOVE. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 12.1.2017 . SD/- SD/- (O.P. MEENA) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12.1.2017