Income Tax Officer, Ward-16(2), Hyderabad V. Padmasri Townships Private Limited, , Hyderabad

ITA 1658/Hyd/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7656 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 11-05-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 14-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Unexplained expenditure; Period of limitation; Assessment record; Time period of passing order; TDS
• Section: 69C; 40A(3); 37(1); 191; 13; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 1658/HYD/2019 ASSESSMENT YEAR: 2014-15 INCOME TAX OFFICER, WARD-16(2), HYDERABAD VS M/S.PADMASRI TOWNSHIPS PRIVATE LIMITED, HYDERABAD [PAN: AADCP9596L] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI ROHIT MUJUMDAR, DR FOR ASSESSEE : SHRI P.MURALI MOHANA RAO, AR DATE OF HEARING : 11-05-2021 DATE OF PRONOUNCEMENT : 25-08-2021 O R D E R PER S.S.GODARA, J.M. : THIS REVENUES APPEAL FOR AY.2014-15 ARISES FROM THE CIT(A)-4, HYDERABADS ORDER DATED 06-08-2019 PASSED IN CASE NO.10456 / 16-17 / ITO,WD.16(1) / CIT(A)-4 / HYD / 19-20, IN PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961 [I N SHORT, THE ACT]. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE REVENUES FIRST SUBSTANTIVE GROUND RAISED IN THE INSTANT APPEAL SEEKS TO REVERSE THE CIT(A)S ACTION DELE TING SECTION 40A(3) DISALLOWANCE OF RS.3,38,29,360/- MAD E IN THE COURSE OF ASSESSMENT FRAMED ON 30-12-2016 AS UNDER: 11. AFTER HAVING GONE THROUGH THE ASSESSMENT ORDER , GROUND OF APPEAL AND SUBMISSIONS OF THE APPELLANT, REMAND REP ORT OF THE AO ITA NO. 1658/HYD/2019 :- 2 -: AND ARS COMMENTS ON THE REMAND REPORT, THE ISSUE I NVOLVED IN THE APPEAL IS DECIDED AS UNDER: 11.1 THE ISSUE INVOLVED IN THIS APPEAL IS WITH REGA RD TO AO'S ADDITION BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE APPELLANT IS FOUND TO HAVE MADE PAYMENTS IN CASH WHILE PURCHA SING THE LAND FROM THE SELLERS OVER AND ABOVE RS.20,000/-, AGGREG ATING OF SUCH AMOUNTS WORKS OUT TO RS.3,65,29,360/- (RS.3,38,29,3 60 + RS.27,00,000) AND DISALLOWED THE 100% OF SUCH AMOUN T FOR THE YEAR UNDER CONSIDERATION. 11.2 IN THIS REGARD, THE FACTS OF THE CASE ARE REQU IRED TO BE ANALYSED. BEFORE THAT, THE AO'S OBSERVATIONS DURING THE COURS E OF ASSESSMENT PROCEEDINGS AND DURING THE COURSE OF REMAND PROCEED INGS ARE TO BE SEEN. ON GOING THROUGH THE ASSESSMENT ORDER AND REM AND REPORT, -IT IS MADE CLEAR BY THE AO THAT THE APPELLANT WAS NOT PREVENTED BY SUFFICIENT REASON IN MAKING PAYMENTS BY CASH OVER A ND ABOVE RS.20,000/- TO THE AGRICULTURISTS, FARMERS AND LAND LORDS AS THE CASE MAY BE. THE AO OF THE VIEW THAT THE APPELLANT SHOUL D HAVE MADE CASH PAYMENTS WHEN THE BANK WAS CLOSED BECAUSE OF G ENERAL HOLIDAYS OR THE BUYERS DID NOT HAVE ANY BANK ACCOUN T PER SE. THE AO AFTER SEEING THE FACTS OF THE CASE HAS CONCLUDED TH AT THE ABOVE ADDITION IS MADE AS THE APPELLANT WAS FOUND TO HAVE MADE CASH PAYMENTS DURING THE WORKINQ DAYS OF THE BANK AS WEL L AS THE SELLERS HAVE GOT THEIR BANK ACCOUNTS. UNDER THESE CIRCUMSTA NCES, THE AO HAD CATEGORICALLY STATED THAT THE NO IMMUNITY IS AVAILA BLE UNDER RULE 6DD(J) AND, HENCE, THE ADDITION SO MADE OF RS.3,38, 29,360/- U/S 40A(3) IS TO BE SUSTAINED. 11.3 I HAVE PERUSED THE ASSESSMENT RECORD AS WELL A S AO'S COMMENTS AND THE SUBMISSIONS OF THE AR FURNISHED FR OM 'TIME TO TIME AND ALSO FOLLOWING RELEVANT CASE LAWS RELIED UPON T HE AR IN THIS REGARD. (A) SRI K. PHANIKUMAR VS. ACIT, CENTRAL CIRCLE, VIJ AYAWADA 100 TAXMANN.COM 438 (VSKP. TRIB) (2018) (B) ITO VS. MADAN LAL MITTAR ITAT DELHI E BENCH IN ITA NO. 2940/DEL/2002 DATED 19.5.2006 (C) KGL NETWORK P LTD. VS. ACIT CIR-14(2), NEW DELH I (97 TAXMANN.COM 400 (DELHI TRIB.) 2018) (D) SURYA MERCHANTS LTD. VS. DCIT CENTRAL CIRCLE, G AZIABAD 101 TAXMANN.COM 16 (DELHI-TRIB.) (E) CIT VS. SINGAMSETTY SUBBA RAO IN THE HIGH COURT OF AP 40 TAXMANN.COM 107 (AP). ITA NO. 1658/HYD/2019 :- 3 -: 11.4 IT IS SEEN FROM THE FACTS THAT THE APPELLANT I S IN THE REAL ESTATE DEVELOPMENT I.E, BUYING LAND IN ACRES AND PLOTTING THEM AND CONVERTING THE SAME INTO STOCK IN TRADE, THEREAFTER SELLING THE PLOTS TO THE CUSTOMERS. THE MAIN POINT IS THAT THE MODE OF P AYMENT MADE BY THE APPELLANT FOR ACQUIRING/PURCHASING THE LANDS FR OM THE SELLERS IS BY WAY OF CASH IN EXCESS OF RS.20,000/-. IT IS SEEN FROM THE PURCHASES MADE BY THE APPELLANT THAT DURING THE YEA R UNDER APPEAL, THE APPELLANT HAS MADE INVESTMENT/PURCHASES TO THE TUNE OF RS.5,91,37,570/- AND PERUSAL OF THE BOOKS OF ACCOUN T IT IS SEEN THAT ALMOST ALL THE PURCHASES ARE MADE BY CASH ONLY. FOR SOME OF THE PURCHASES I.E. ABOUT 40% OF TOTAL PURCHASES, PAYMEN TS WERE MADE BY CHEQUES. IT IS TO BE NOTED THAT IT IS THE GENERAL P RACTICE PREVAILING IN THIS LINE OF ACTIVITY THAT THE SELLER OF THE LAND I NSISTS ALWAYS CASH PAYMENTS ONLY, SINCE THE CASH IS IMMEDIATELY REALIZ ED. 11.5 IT IS TO BE NOTED THAT AO ALSO ACCEPTED THE GE NERAL PRACTICE OF MAKING PAYMENT BY WAY OF CASH PREVAILING IN THIS LI NE OF BUSINESS IN THE REMAND REPORT. THE AO IN HIS COMMENTS STATED TH AT MANY OF THE SELLERS ARE RESIDING IN URBAN AREAS AND HAVING KNOW LEDGE OF BANKING. FURTHER, IT WAS OBSERVED BY THE AO THAT MANY ARE HA VING BANK ACCOUNTS. HOWEVER, THE AO HAS NOT MADE ANY COMMENTS ON THE APPELLANT'S SUBMISSION THAT STRIKE WAS GOING ON IN THE BANKS ON THE DAY OF MAKING PAYMENT TO SELLERS AND THE APPELLANT WAS COMPELLED TO MAKE PAYMENTS FOR THE EXIGENCY OF THE BUSINESS. FRO M THE REPORTS OF THE AO, IT IS UNDISPUTED FACT THAT THE PAYMENTS WER E GENUINE AND ALL THE SELLERS ARE IDENTIFIED. MOST OF THE SELLERS ARE AGRICULTURISTS. 11.6 IN THIS REGARD, RELIANCE IS PLACED ON THE HON' BLE VISAKHAPATNAM TRIBUNAL DECISION IN THE CASE OF SRI CH. HANUMANTHA RAO VS. ITO WARD-2(2), GUNTUR IN ITA NO.81 TAXMANN.COM 421 (201 7) WHEREIN IT WAS HELD THAT WHERE THERE EXIST A BUSINESS EXPEDIEN CY AND OTHER RELEVANT FACTORS AND ALSO THE PAYMENTS ARE GENUINE, THEN THE ACTS PROVIDE FOR IMMUNITY FROM DISALLOWANCE OF EXPENDITU RE, IF THE APPELLANT PROVES TO THE SATISFACTION OF THE AO THAT THERE EXISTS A BUSINESS EXPEDIENCY IN MAKING THE CASH PAYMENTS. IN THIS CASE, THE APPELLANT HAS FILED NECESSARY EVIDENCES TO PROVE TH AT THE IMPUGNED LAND HAS BEEN ACQUIRED AS AN INVESTMENT AND SUBSEQU ENTLY CONVERTED INTO STOCK IN TRADE OF HIS BUSINESS. THER EFORE, WE ARE OF THE VIEW THAT THE AO WAS ERRED IN DISALLOWING CASH PAYM ENTS BY INVOKING PROVISIONS OF SECTION 40A(3) OF THE ACT. 11.7 IN THE PRESENT CASE, THE AO DID NOT DISPUTE TH E GENUINENESS OF PAYMENTS. FURTHER, EACH AND EVERY PAYMENT IN CASH A RE NOT AUTOMATICALLY GET DISALLOWED U/S 40A(3) OF THE ACT. IN A PARTICULAR CASE WHERE THERE EXIST A BUSINESS EXPEDIENCY AND OT HER RELEVANT FACTORS AND ALSO THE PAYMENTS ARE GENUINE, THEN THE ACTS PROVIDE FOR IMMUNITY FROM DISALLOWANCE OF EXPENDITURE, IF THE A PPELLANT PROVES TO ITA NO. 1658/HYD/2019 :- 4 -: THE SATISFACTION OF THE AO THAT THERE EXISTS A BUSI NESS EXPEDIENCY IN MAKING THE CASH PAYMENTS. THE APPELLANT'S CONTENTIO N IS THAT THE VENDORS HAVE INSISTED FOR CASH PAYMENT. IF CASH PAY MENTS ARE NOT MADE, IT WILL NOT BE POSSIBLE TO MAKE THEM TO COME FOR REGISTRATION AND SIGN THE SALE DEED. THE APPELLANT WILL BE IN HA RDSHIP IF THE VILLAGERS DID NOT TURN UP FOR REGISTRATION ON SPECI FIED DATE. THERE WAS COMPULSION TO THE APPELLANT TO MAKE THE PAYMENT ON ACCOUNT OF BUSINESS EXPEDIENCY AND SINCE THE REALIZATION OF CH EQUES AND DDS TAKE LONGER TIME, THE APPELLANT WAS FORCED TO MAKE CASH PAYMENTS TO THE LANDOWNERS TO DRIVE THEM TO COME FOR REGISTRATI ON. THESE PAYMENTS CANNOT BE CONSIDERED UNDER THE PROVISIONS OF SECTION 40A(3) OF THE ACT. IN THIS CASE, THE APPELLANT PROV ED THAT SINCE THERE WAS A STRIKE IN THE BANKS THERE WAS A NEED TO MAKE THE PAYMENTS IN CASH WHICH IS BUSINESS EXPEDIENCY ONLY. FURTHER, TH E EXCEPTIONS CONTAINED IN RULE 6DD ARE NOT EXHAUSTIVE AND THAT T HE SAID RULE MUST BE INTERPRETED LIBERALLY. 12. TO SUM UP - SINCE THE PURCHASES MADE BY THE APPELLANT HAVE BEEN EVIDENCED WITH THE REGISTERED SALE DEEDS WHEREIN THE IDENTITY OF THE SELLER AND GENUINENESS OF THE PAYMENT TO THE SELLER IS ESTABLI SHED. FURTHER, THE APPELLANT HAS MADE THE PAYMENTS THROUGH BOOKS OF AC COUNT AND HENCE, THE SOURCE FOR MAKING PAYMENTS TO THE SELLER S IS ALSO ESTABLISHED. IN THE CASE OF TOSHIKA REAL ESTATE P L TD., JAIPUR IN ITA NO. 26/JP/2015, THE HON'BLE JAIPUR BENCH HELD THAT IF THE PAYMENTS ARE GENUINE AND IF THE BUSINESS EXPEDIENCY SO REQUI RES AND THE APPELLANT MAKES THE PAYMENTS IN CASH, THE TECHNICAL REQUIREMENT SHOULD NOT COME IN THE WAY OF CLAIMING IT AS EXPEND ITURE IN VIEW OF THE PROVISO TO SECTION 40A(3) OF THE ACT. 12.1 AS THE INTENTION OF THE LEGISLATURE BEHIND THE INTRODUCTION OF THE SECTION 40A(3) OF THE ACT WAS TO ARREST THE CIRCULA TION OF THE BLACK MONEY IN RESPECT OF EXPENDITURE INCURRED. WHEN THE MAIN PURPOSE OF ENACTING THE PROVISIONS OF SECTION 40A(3) (I.E. CUR BING THE INVOLVEMENT OF BLACK MONEY) IS NOT DEFEATED, IN SO FAR AS THE A PPELLANT HAS FILED THE BANK STATEMENT SHOWING THE WITHDRAWAL OF MONEY FOR THE PURPOSE OF MAKING CASH PAYMENTS; MAKING DISALLOWANC E MECHANICALLY WOULD TANTAMOUNT TO VIOLATION OF NATUR AL JUSTICE. 12.2 AS THE THREE INGREDIENTS WHICH ARE REQUIRED TO I.E. IDENTITY, GENUINENESS AND SOURCES OF FUNDS TO THE ABOVE TRANS ACTIONS HAVE BEEN SATISFIED, APPLYING THE RULE 6DD(J) IN STRICT MANNER WOULD NOT SERVE THE DESIRED PURPOSE OF THE LEGISLATURE. THE H ON'BLE RAJASTHAN HIGH COURT IN THE CASE OF HARSHITA CHORDIA (298 ITR 349) HAS HELD THAT EXCEPTIONS CONTAINED IN RULE 6DD(J) ARE NOT EX HAUSTIVE AND THESE RULES SHOULD BE CONSTRUED LIBERALLY AND SHOULD BE T AKEN AS GUIDE TO APPRECIATE THE CIRCUMSTANCES THAT COMPEL AN ASSESSE E TO MAKE ITA NO. 1658/HYD/2019 :- 5 -: CERTAIN PAYMENTS IN CASH, AND SHOULD NOT AMOUNT TO VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. 12.3 IT IS ALSO SEEN FROM THE FACTS THAT THE LANDS PURCHASED BY THE APPELLANT ARE BASICALLY AGRICULTURAL LANDS AND HENC E, THE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE. 12.4 ON VERIFICATION OF THE BOOKS OF ACCOUNT, IT IS SEEN THAT THE APPELLANT HAS MADE PAYMENTS BY CASH IN EXCESS OF TH E PRESCRIBED LIMITS OF RS.20,000/- AND ABOVE WAS DONE AS THE APP ELLANT IS INVOLVED IN REAL ESTATE BUSINESS AND THE APPELLANT WAS FORCED TO MAKE PAYMENTS IN THE ABOVE SAID MANNER. FOR MAKING THIS PAYMENT THE APPELLANT HAD MADE A WITHDRAWAL OF CASH FROM HI S BANK ACCOUNT. THE APPELLANT HAS AMPLY PROVED THE CIRCUMSTANCES, W HICH COMPELLED IT TO MAKE THE CASH PAYMENTS AND SO THIS MATTER IS ALSO COVERED BY THE SUBMISSIONS GIVEN AS REGARDS THE APPLICABILITY OF RULE 6DD. FURTHER, THIS FACT OF RECEIPT OF CASH IS ALSO MENTI ONED IN THE SALE DEED OF THE LAND. COMMERCIAL/BUSINESS EXPEDIENCY WARRANT ED THE APPELLANT TO MAKE PAYMENT IN CASH, AS THE SELLERS I NSIST FOR THE SAME. 12.5 IN THIS REGARD RELIANCE IS PLACED ON THE DECIS ION IN THE CASE OF M/S. TIRUPATI CONSTRUCTIONS VS. CIT IN ITA NO. 420/ 2014 DATED 30.09.2015 (ITAT, INDORE) WHEREIN IT WAS HELD THAT 'IN THE APPELLANT'S CASE TRANSACTION WAS GENUINE, THE CONVEYANCE DEED W AS EXECUTED BEFORE THE REGISTRAR, THE NAME AND ADDRESS OF THE S ELLER WAS MENTIONED IN THE SALE DEED ITSELF, THE IDENTITY OF THE PERSONS WAS NOT IN DOUBT. IN THESE CIRCUMSTANCES, THE AO MUST HAVE COME TO THE CONCLUSION THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT WERE NOT APPLICABLE. CONSIDERING ALL THESE ASPECTS, WHERE GE NUINENESS OF TRANSACTION IS NOT IN QUESTION, THE IDENTITY OF PAY EES IS ALSO WELL ESTABLISHED THE PAYMENTS HAVE BEEN MADE TO THE SELL ER OF THE LAND IN RURAL AREAS, IN OUR VIEW, THE AO RIGHTLY ACCEPTED T HE CLAIM OF THE APPELLANT AND FOUND THAT THE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE IN THE CASE OF PURCHASE OF LAND BY THE A PPELLANT EVEN IF IT WAS ACQUIRED AS A STOCK IN TRADE. 13. THEREFORE, THE ACTION OF THE AO IS NOT JUSTIFIE D IN MAKING THE DISALLOWANCE OF RS.3,38,29,360/- U/S 40A(3) OF THE ACT. RESPECTFULLY FOLLOWING THE ABOVE JUDICIAL DECISIONS, THE ADDITIO N MADE U/S 40A(3) OF THE ACT AMOUNTING TO RS.3,38,29,260/- IS DIRECTE D TO BE DELETED AND HENCE, THE GROUND RAISED IN THIS REGARD IS ALLO WED. 3. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTENDED DURING THE COURSE OF HEARING THAT THE ASSESSIN G OFFICER HAD RIGHTLY INVOKED THE IMPUGNED CASH PAYMENT S DISALLOWANCE U/S.40A(3) OF THE ACT AS THE ASSESSEE HAD FAILED ITA NO. 1658/HYD/2019 :- 6 -: TO PROVE THE CORRESPONDING EXIGENCY(IES) IN ITS MADE TO VARIOUS LAND OWNERS IN REAL ESTATE BUSINESS. HE FURTHER QUOTED HON'BLE APEX COURTS LANDMARK DECISION IN ATTAR SINGH GURMUKH SINGH VS. ITO (1991) 191 ITR 667 (SC) THAT THIS STATUTORY PROVI SION COMES INTO PLAY SO AS TO PREVENT UN-ACCOUNTED CASH FROM BEING PLOUGHED IN THE SYSTEM. WE FIND NO MERIT IN THE REVENUES FOREGOING ARGUMENTS. THIS IS INTER ALIA FOR THE REASON(S) THAT THE ASSESSING OFFICER HAD HIMSELF MADE IT CLEAR IN THE CORRESPONDING REMAND REPORT DT.10-06-2019 (SUPR A) THAT THE ASSESSEE COULD NOT PROVE ITS VENDORS AS HAVING NO BANK ACCOUNTS. THE LEARNED ASSESSING OFFICER APPEAR S TO HAVE SHIFTED A NEGATIVE BURDEN ON THE ASSESSEE WHEREIN HE S IMPLY COULD NOT FIND AS TO WHETHER THE VENDORS HAD BANK ACCO UNTS OR NOT? COUPLED WITH THIS, THIS TRIBUNALS CO-ORDINATE BENCH DECISION IN M/S. TIRUPATI CONSTRUCTIONS (SUPRA) HAS A LSO DEALT WITH IDENTICAL ISSUES OF SECTION 40A(3) DISALLOWANCE THAT THE SAME DOES NOT APPLY IN SUCH CASES OF REGISTERED SALE DEEDS PROVING GENUINENESS OF THE TRANSACTING PARTIES. AND A LSO THAT CASE LAW HARSHITA CHORDIA (298 ITR 349) AND ANUPAM T ELECOM SERVICES VS. ITO (2014) 366 ITR 122 (GUJ) HOLD THAT TH E EXIGENCIES TAKEN INTO CONSIDERATION IN RULE 6DD ARE NO T SELF- EXHAUSTIVE WHEREIN OVERWHELMING GENUINE BUSINESS TRANSACTIONS ARE ALWAYS PROTECTED. WE THUS DECLINE THE REVENUES INSTANT FIRST AND FOREMOST SUBSTANTIVE GRIEVA NCE. THE CIT(A)S ACTION UNDER CHALLENGE STANDS AFFIRMED. ITA NO. 1658/HYD/2019 :- 7 -: 4. NEXT COMES SECTION 69 UN-EXPLAINED EXPENDITURE ADDITION OF RS.27 LAKHS. THE CIT(A)S DETAILED DISCUS SION DELETING THE SAME READS AS FOLLOWS: 14. NEXT ISSUE RELATES TO AO'S ACTION IN MAKING AN ADDITION OF RS.27,00,000/- TOWARDS UNACCOUNTED EXPENDITURE U/S 69C OF THE ACT. AO'S OBSERVATIONS IN THIS REGARD ARE AS UNDER: IT IS SEEN FROM NOTE 17 TO THE PROFIT & LOSS ACCOUN T RELATING TO COST OF MATERIALS CONSUMED (DIRECT EXPENSES) THAT THE AS SESSEE HAS DEBITED AN AMOUNT OF RS.5,91,37,5701- TOWARDS PURCH ASE OF LAND. HOWEVER, ON VERIFICATION OF SALE DEEDS (FOR PURCHAS E), IT IS NOTICED THAT THE PURCHASE CONSIDERATION AS PER THE SALE DEE D REGISTERED VIDE DOCUMENT NO.5814/ 13 IS RS.3-0, 00, 0001 _ BUT THE SAME HAS BEEN ACCOUNTED AS RS.3, 00, 0001 - IN THE BOOKS OF ACCOUNT. THE TOTAL CONSIDERATION FOR PURCHASE OF THIS LAND WAS PAID IN CASH. THUS, THERE IS A DIFFERENCE OF RS.27,00,0001- IN PURCHASE OF THIS LAND WAS PAID IN CASH. THUS, THERE IS A DIFFERENCE OF RS.27, 00, 0001 _ IN PURCHASES WHICH WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND ACCORDINGLY, SOURCES FOR THE SAME ARE UNEXPLAINED. ACCORDINGLY, THE SAID AMOUNT OF RS.27,00,000/- IS TREATED AS UNEXPLA INED EXPENDITURE AND BROUGHT TO TAX. 14.1 ON THE OTHER HAND, AR DURING APPELLATE PROCEED INGS SUBMITTED AS UNDER: THE SOURCE OF THE UNACCOUNTED PURCHASES OF RS.27,00 ,000/- HAS BEEN EXPLAINED TO THE AO DURING THE ASSESSMENT PROCEEDIN GS. THE ASSESSEE HAS ENOUGH RESERVES AND CASH FLOW TO MAKE THE PURCHASE. THE JAIPUR BENCH OF ITAT RULING IN 31 DTR 456 - NIS RAJ REAL ESTATE HELD THAT UNACCOUNTED PURCHASES MADE BY ASSESSEE COULD NOT BE TREATED AS UNEXPLAINED EXPENSE U/S 69C AND NO ADDITION CAN BE MADE THEREOF U/S 69C PROVISO THERE UNDER - AS ONCE SALES WERE MADE BY AS SESSEE, PURCHASES WERE OBVIOUSLY MADE. 14.2 FURTHER, DURING REMAND PROCEEDINGS ON THIS ISS UE, AO FURTHER COMMENTED AS UNDER: THE LAST POINT FOR CONSIDERATION FOR REMAND REPORT IS THE ADDITION MADE OF RS.27,00,000/- ON ACCOUNT OF THE PURCHASE MADE WITH OUT ANY SOURCES. FOR THIS GROUND ALSO THE ASSESSEE NEITHER FURNISHED ANY INFORMATION NOR ANY EVIDENCE IN ITS SUPPORT. HENCE, THIS GROUND MAY PLE ASE BE DISMISSED. 14.3 IN RESPONSE TO THE COMMENTS OF THE AO, AR FURN ISHED REJOINDER ON THIS ISSUE AS UNDER: ITA NO. 1658/HYD/2019 :- 8 -: OUT OF THE TOTAL PURCHASES DISCLOSED, THERE IS ONE PARTICULAR TRANSACTION OF RS.30,00,000/- WHICH WAS WRONGLY RECORDED AS RS.3,0 0,000/- DUE TO AN ERROR OF COMMISSION AND WHICH GOT ADJUSTED IN BOOKS OF ACCOUNTS AT THE TIME OF FINALIZATION, WHICH WERE PRODUCED ALONG WIT H THE PROOF IN THE FORM OF SALE DEEDS FOR PURCHASES TO THE AO DURING ASSESS MENT PROCEEDINGS. IN THIS REGARD, THE AR ALSO PLACED ON RELIANCE ON THE JAIPUR BENCH OF ITAT RULING IN 31 DTR 456 - NISRAJ REAL ESTATE HELD THAT UNACCOUNTED PURCHASED MADE BY ASSESSEE COULD NOT BE TREATED AS UNEXPLAINE D EXPENSE U/S 69C AND NO ADDITION CAN BE MADE THEREOF U/S 69C OF THE ACT PROVISO THERE UNDER - AS ONCE SALES WERE MADE BY ASSESSEE, PURCHA SES WERE OBVIOUSLY MADE. 14.4 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND AR'S SUBMISSIONS IN THIS REGARD. IT IS SEEN FROM THE ASS ESSMENT ORDER THAT THE AO DURING SCRUTINY PROCEEDINGS, ON VERIFICATION OF SALE DEEDS (FOR PURCHASES) NOTICED THAT THE PURCHASE CONSIDERATION AS PER THE SA~ REGISTERED VIDE DOCUMENT NO. 5814/13 IS RS.30,00,00 0/- BUT THE SAME HAS BEEN ACCOUNTED AS RS.3,00,000/- IN THE BOO KS OF ACCOUNT. THE TOTAL CONSIDERATION FOR PURCHASE OF THIS LAND W AS PAID IN CASH. THUS, THERE IS A DIFFERENCE OF RS.27,00,000/- IN PU RCHASES WHICH WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THEREFOR E, THE SAID AMOUNT OF RS.27,00,000/- IS TREATED AS UNEXPLAINED EXPENDI TURE AND BROUGHT TO TAX AS THE APPELLANT FAILED TO EXPLAIN THE SOURC ES FOR THE SAME DURING SCRUTINY. 14.5 HOWEVER, DURING THE APPELLATE PROCEEDINGS, THE AR OF THE APPELLANT HAS FURNISHED THE AGREEMENT OF SALE-CUM- GENERAL POWER OF ATTORNEY (WITH POSSESSION)' FOR A CONSIDERATION OF RS.30,00,000/- FOR VERIFICATION AND THE SAME IS VERIFIED AND FOUND COR RECT. OUT OF THE TOTAL PURCHASES DISCLOSED, WHICH WAS WRONGLY RECORD ED AS RS.3,00,000/- DUE TO AN ERROR OF COMMISSION AND WHI CH GOT ADJUSTED IN BOOKS OF ACCOUNT AT THE TIME OF FINALIZATION, WH ICH WERE PRODUCED ALONG WITH THE PROOF IN THE FORM OF SALE DEEDS FOR PURCHASES TO THE AO DURING ASSESSMENT PROCEEDINGS. THEREFORE, THE ACTIO N OF THE AO IS NOT CORRECT TO TREAT THE PURCHASE WHICH WAS NOT UNACCOU NTED FOR IN THE BOOKS OF ACCOUNT. HENCE, THE AO IS DIRECTED TO DELE TE THE ADDITION OF RS.27,00,000/- AS THE AR SUBSTANTIATES WITH COGENT EVIDENCE DURING APPEAL PROCEEDINGS AS WELL. AS THE RESULT, THE GROU ND RAISED IN THIS REGARD IS ALLOWED. 4.1. SUFFICE TO SAY, IT HAS COME ON RECORD THAT THE ACTU AL AMOUNT AS PER SALE AGREEMENT WAS RS.30 LAKHS WHICH HA D BEEN WRONGLY TAKEN AS RS.3 LAKHS ONLY IN BOOKS OWING TO A CLERICAL ERROR. NEEDLESS TO SAY, THE ASSESSEE HAS DU LY PROVED ITA NO. 1658/HYD/2019 :- 9 -: THE FORMER SUM AS RECORDED IN THE CORRESPONDING SALE DEED(S) AS WELL. WE CONCLUDE IN THIS ASPECT THAT CIT(A) HAS RI GHTLY DELETED THE IMPUGNED ADDITION MADE U/S.69 OF THE ACT. 5. LASTLY COMES THE ISSUE OF DISALLOWANCE OF COMMISSI ON AND SITE MAINTENANCE CHARGES OF 45,24,605/- MADE IN TH E COURSE OF ASSESSMENT AND DELETED IN THE LOWER APPELLA TE DISCUSSION AS FOLLOWS: 15. GROUND NOS. 5, 6 & 7 ARE WITH REGARD TO ADDITI ON OF RS.45,24,605/- (RS.33,58,955 + RS.11,65,650) TOWARD S EXPENSES U/S 37(1) OF THE ACT. THE AO'S OBSERVATIONS IN MAKI NG THE SAID ADDITION ARE AS UNDER: THE ASSESSEE CLAIMED AN AMOUNT OF RS. 7,62,01,166/- TOWARDS DIRECT EXPENSES IN THE PROFIT AND LOSS ACCOUNT WHICH INCLU DES SITE DEVELOPMENT EXPENSES OF RS.1,70,63,596/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH THE RELEVANT DETAILS. ACCORDINGLY, THE ASSESSEE FURNISHED THE SAME. IN TH IS REGARD, THE ASSESSEE HAS STATED THAT TAX HAS BEEN DEDUCTED AT S OURCE ON ALL THE PAYMENTS WHEREVER APPLICABLE AND THE SAME COVERS SU BSTANTIAL PORTION OF THE SAID EXPENDITURE. THE ASSESSEE WAS ASKED TO PRO DUCE BILLS/ VOUCHERS IN SUPPORT OF THE EXPENDITURE CLAIMED, AS SPECIFIED . ACCORDINGLY, THE ASSESSEE PRODUCED THE SAME. IT IS NOTICED THAT THE BILLS/ VOUCHERS FOR A PORTION OF THE EXPENDITURE IS NOT MAINTAINED PROPER LY. IN THIS REGARD, THE AR INFORMED THE DUE TO THE NATURE OF THE BUSINESS O F THE ASSESSEE, THE EXPENSES ARE INCURRED IN SITES AND THERE MAY BE SOM E DEFICIENCIES IN THE VOUCHERS MAINTAINED. THE AMOUNT FOR WHICH NO PROPER BILLS/ VOUCHERS WERE MAINTAINED AND INCURRED IN CASH IS ARRIVED AT RS.11,65, 650/ -. THUS THE AMOUNT OF RS.11,65,650/ - IS DISALLOWED IN THE ASSESSMENT AND ADDED TO THE RETURNED INCOME. FURTHER, IT IS SEEN FROM NOTE 21 TO THE PROFIT AND LOSS ACCOUNT RELATING TO 'OTHER EXPENSES' THAT THE ASSESSEE CLAIMED AN AMOUN T OF RS.3,35, 89, 552/ TOWARDS COMMISSION. THE ASSESSEE WAS ASKED TO FURNI SH COMPLETE DETAILS OF PAYMENT OF THE SAME ALONG WITH BASIS FOR PAYMENT AND TO PRODUCE NECESSARY EVIDENCE IN SUPPORT OF THE EXPENDITURE CL AIMED. ACCORDINGLY, THE ASSESSEE FURNISHED THE DETAILS OF COMMISSION PA ID AGENT-WISE. AS PER THE DETAILS SUBMITTED, THE ASSESSEE HAS DEDUCTED TD S IN RESPECT OF 161 AGENTS TO WHOM A TOTAL AMOUNT OF RS.2,94,41,361/- H AS BEEN PAID. THE ASSESSEE HAS FURNISHED THE QUARTER WISE COMMISSION PAID ALONG WITH THEIR PANS. THE BALANCE COMMISSION OF RS.41,47,921/- CONS TITUTE COMMISSION PAYMENTS BELOW RS.5000/ -. ON TEST CHECK OF THE VOU CHERS RELATE TO THESE ITA NO. 1658/HYD/2019 :- 10 -: PAYMENTS, IT WAS NOTICED THAT SOME OF THE CASH VOUC HERS ARE NOT MAINTAINED PROPERLY. IN THIS REGARD, THE AR INFORME D THAT DUE TO THE NATURE OF THE BUSINESS OF THE ASSESSEE, AND DUE TO LARGE V OLUME OF PAYMENTS, THERE MAY BE SOME DEFICIENCIES IN THE VOUCHERS MAIN TAINED. CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE AND THE FACT S OF THE CASE, AND AFTER DISCUSSION WITH THE AR IN THIS REGARD, 10% OF THE C OMMISSION OF RS.3,35,89,552/- IS DISALLOWED ON AN ESTIMATE BASIS . ACCORDINGLY, THE DISALLOWANCE OF RS.33,58,955/ - IS ADDED TO THE RET URNED INCOME. 15.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E AR SUBMITTED AS UNDER: THE GENUINENESS OF THE TRANSACTIONS AND IDENTITIES OF THE RECEIVERS OF THE SALE CONSIDERATION CAN BE EASILY ESTABLISHED FROM T HE SALE DEEDS (PURCHASE DOCUMENTS) ENTERED BY THE ASSESSEE WITH T HE VENDORS OF THE LANDS WHICH ARE REGISTERED WITH THE CONCERNED OFFIC ES OF THE SUB- REGISTRARS BY PAYING STAMP DUTIES. THE AO HAS ERRED IN DISALLOWING SITE DEVELOPMENT EX PENDITURE OF RS.11,65,650/- WITH A REASON THAT THE PRODUCED BILL S/ VOUCHERS FOR A PORTION OF THE EXPENDITURE IS NOT MAINTAINED PROPERLY AND I NCURRED IN CASH. ALL THE BILLS/VOUCHERS ARE SUBMITTED DURING SCRUTINY PROCEE DINGS AND WITH REGARD TO PAYMENTS INCURRED IN CASH, IT WAS EVIDENT FROM T HE BILLS/ VOUCHERS THEY ARE OF LESS THAN RS.20,000/- EACH AND DOES NOT REQU IRE ANY TAX TO BE DEDUCTED. THE ASSESSEE HAS CLAIMED RS.3,35,89,552/- TOWARDS COMMISSION, OUT OF WHICH THE TDS WAS DEDUCTED ON RS .2,94,41,361/-, FOR WHICH THE AO WAS SATISFIED. THE AO MUST HAVE DISALL OWED THE 10% OF THE BALANCE COMMISSION I.E. 10% OF RS.41,48,191/- BUT T HE AO HAS ERRED IN MAKING THE DISALLOWANCE ON THE ENTIRE AMOUNT OF RS. 3,35,89,552/-. 15.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER, GROUNDS OF APPEAL AND AR'S SUBMISSIONS IN THIS REGARD. IT IS S EEN FORM THE ASSESSMENT ORDER THAT THE AO HAS MADE ADDITION OF R S.45,24,605/- (RS.11,65,650 + RS.33,58,955) TOWARDS DIRECT EXPENS ES U/S 37(1) OF THE ACT. HOWEVER, THE AR CONTENDED THAT THE APPELLA NT HAS CLAIMED RS.3,35,89,552/- TOWARDS COMMISSION, OUT OF WHICH T HE TDS WAS DEDUCTED ON RS.2,94,41,361/- FOR WHICH THE AO HAS B EEN SATISFIED. THE AO MUST HAVE DISALLOWED THE 10% OF THE BALANCE COMMISSION I.E. 10% ON RS.41,48,191/-. SINCE THE APPELLANT HAS DEDU CTED TDS ON RS.2,94,41,361/- AND THE SAME IS ALSO CONFIRMED BY THE AD IN THE ASSESSMENT ORDER, THE ACTION OF THE AO IN MAKING TH E 10% COMMISSION ON ENTIRE AMOUNT OF RS.3,35,89,552/- TOW ARDS DIRECT EXPENSES U/S 37(1) OF THE ACT IS NOT CORRECT AND, H ENCE, DIRECTED TO BE RESTRICTED TO 10% ON THE BALANCE AMOUNT OF RS.41,48 ,191/- ONLY. AS THE RESULT, THE GROUND RAISED IN THIS REGARD IS ALL OWED. ITA NO. 1658/HYD/2019 :- 11 -: 15.3 REGARDING THE ADDITION OF RS.11,65,650/- THE A O STATED THAT OUT OF THE APPELLANT'S CLAIM OF SITE DEVELOPMENT EXPENS ES OF RS.1,70,63,596/-, THE EXPENDITURE TO THE TUNE OF RS .11,65,650/- WAS NOT PROPERLY SUPPORTED BY BILLS/VOUCHERS. DURING TH E APPELLATE PROCEEDINGS ALSO, THE AR HAS NOT FURNISHED THE SAME , HENCE, THE ACTION OF THE AO IS JUSTIFIED AND THE ADDITION OF R S.11,65,650/- MADE BY THE AO IS HEREBY CONFIRMED. AS THE RESULT, THE G ROUND RAISED IN THIS REGARD IS DISMISSED. 5.1. IT IS CLEAR FROM A PERUSAL OF THE CIT(A)S ORDER THAT HE HAS HIMSELF CONFIRMED THE LATTER COMPONENT OF SITE DEVELOPME NT EXPENSES OF RS.11,65,650/-. THE REVENUE CANNOT BE H ELD TO BE AN AGGRIEVED PARTY THEREFORE. COMING TO THE FORMER COMPONENT OF COMMISSION DISALLOWANCE, IT FAILS TO DISP UTE THAT THE ASSESSING OFFICER HAD HIMSELF ACCEPTED THE ASSESS EES CLAIM TO THE TUNE OF RS.2,94,41,361/- WHICH HAD ALSO B EEN SUBJECTED TO TDS DEDUCTION. IT IS IN THIS FACTUAL BAC KDROP ONLY THAT THE CIT(A)S DETAILED DISCUSSION HAS RESTRICTED THE IMPUGNED DISALLOWANCE TO 10% OF THE REMAINING COMPONE NT OF RS.41,48,191/- ONLY. WE THEREFORE FIND NO MERIT IN THE REVENUES INSTANT SUBSTANTIVE GRIEVANCE. 5.2. LEARNED DEPARTMENTAL REPRESENTATIVE LASTLY ARGUED TH AT IT WAS AN AGREED DISALLOWANCE AS PER ASSESSMENT FINDING S IN PARA 6.2 OF THE ASSESSMENT ORDER. WE DO NOT SEE ANY SU CH SACROSANCT CONCESSION COMING FROM THE ASSESSEES SIDE IN THE CASE FILE. THIS INSTANT LAST ARGUMENT IS ALSO DECLINE D THEREFORE. NO OTHER ARGUMENT HAS BEEN RAISED BEFORE US. 6. WE LASTLY ACKNOWLEDGE THAT ALTHOUGH THE INSTANT LIS IS BEING DECIDED AFTER A PERIOD OF 90 DAYS FROM THE DATE OF HEARING AS PER RULE 34(5) OF THE IT(AT) RULES 1963, THE SAME HOWEVER, DOES NOT APPLY IN THE COVID LOCKDOWN SITUATI ON AS PER ITA NO. 1658/HYD/2019 :- 12 -: HON'BLE APEX COURTS RECENT DIRECTIONS DATED 27-04-2021 IN M.A.NO.665/2021 IN SM(W)C NO.3/2020 IN RE COGNIZANCE FOR EXTENSION OF LIMITATION MAKING IT CLEAR THAT IN SUCH CASES WHERE THE LIMITATION PERIOD (INCLUDING THAT PRESCRIBED FOR INS TITUTION AS WELL AS TERMINATION) SHALL STAND EXCLUDED FROM 14 TH OF MARCH, 2021 TILL FURTHER ORDERS. 7. THIS REVENUES APPEAL IS DISMISSED IN ABOVE TERMS . ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH AUGUST, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 25-08-2021 TNMM ITA NO. 1658/HYD/2019 :- 13 -: COPY TO : 1.INCOME TAX OFFICER, WARD-16(2), HYDERABAD. 2.M/S.PADMASRI TOWNSHIPS PRIVATE LIMITED, H.NO.3-6- 114, OPP. TELEPHONE EXCHANGE, L.B.NAGAR, HYDERABAD. 3.CIT(APPEALS)-4, HYDERABAD. 4.PR.CIT-4, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.