Padmawati Enterprises, Muzaffarnagar V. ITO, Muzaffarnagar

ITA 1663/DEL/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3094 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 25-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: V RAJA KUMAR ADVS
• Keywords: Capital asset; Revenue expenditure
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SHRI R.K.PANDA , ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 1663 /DEL/201 3 A.Y.: 2009 - 10 PADMAWATI ENTERPRISES MANGAL SEN JAIN MARKET BHAGAT SINGH ROAD MUZAFFARNAGAR PAN: AAKFP 7009A VS . ITO, WARD 2(3) MUZAFFARNAGAR (APPELLANT) (RESPONDENT) APPELLANT BY SH. K.SAMPATH & SH. V.RAJAKUMAR, ADVS. RESPONDENT BY SH. ATIQ AHMED, SR.DR DATE OF HEARING 12.02.2018 DATE OF PRONOUNCEMENT 15.03.2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER T HE PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED FOR DECEMBER 2012 PASSED BY LD. CIT (A), MUZAFFARNAGAR FOR ASSESSMENT YEAR 2009 - 10 ON THE FOLLOWING GROUNDS OF APPEAL: (I) THAT THE AUTHORITIES BELOW HAVE ERRED IN LAW IN MAKING THE ADDITION OFRS.65, 02,500 / - U /S 40A(3) OF THE I . T. ACT, PAYMENT MADE TO THE AGRICULTURIST IN TERM OF CASH FOR PURCHASE OF THEIR AGRICULTURE LAND. (2) THAT THE PREJUDICIAL OBSERVATIONS CONTAIN ED IN THE ASSESSMENT ORDER PASSED U /S 143(3) ON 14112/2011 BY THE LEARNED INCOME TAX OFFICER, WARD 2(2), MUZAFFARNAGAR AND THE APPELLATE ORDER PASSED U / S 250 OF THE ACT ON 04/12/2012 BY THE LEARNED C.I.T APPEAL, MUZAFFARNAGAR ARE EITHER UNFOUNDED OR THE SA ME ARE NOT SUSCEPTIBLE OF GIVING RISE TO ANY ADVERSE CONCLUSION. ITA 1663/DEL/2013 A.Y.:2009 - 10 PADMAWATI ENTERPRISES VS. ITO 2 (3) THAT THE ASSESSEE HAS NOT MADE ANY TRADING BUSINESS DURING THE YEAR AND ONLY INVESTMENT HAS BEEN MADE IN THE PURCHASE OF AGRICULTURAL LAND FROM THE AGRICULTURIST AND ALL THE PAYMENT HAS BEEN MADE IN THE PRESENCE OF THE SUB - REGISTRAR AT THE TIME OF REGISTRY OF THE SALE DEED AND ARE GENUINE PAYMENT. THE LEARNED AUTHORITIES BELOW HAVE MADE A MISTAKE IN HOLDING THE PAYMENT AS DISALLOWABLE U/S 40A (3) OF THE ACT. (4) THAT THE LEARNED C.I.T. A PPEAL HAS NOT ACTED IN ACCORDANCE WITH THE LAW IN HOLDING THE INVESTMENT MADE IN THE PURCHASE OF AGRICULTURAL LAND AND DISALLOWED THE SAME U/S 40A (3) OF THE ACT. WHILE THE APPELLANT HAS NEVER MADE ANY TRADING TRANSACTION WHAT SO EVER DURING THE YEAR. 2. BRIEF FACTS OF THE CASE ARE AS UNDER : A SSESSEE IS A FIRM CARRYING ON THE BUSINESS OF PURCHASE AND SALE OF PROPERTIES. THE PARTNERSHIP DEED WAS FIRST INSTITUTED ON 01/01/08 WHICH WAS LATER MODIFIED AND NEWLY CONSTITUTED F I RM WITH EFFECT FROM 01/04/08 AND THE NEW PARTNERSHIP DEED WAS EXECUTED ON 22 ND OF M AY , 2009. THE RETURN OF INCOME WAS FILED ON 01/02/10 SHOWING NIL INCOME FOR THE YEAR UNDER CONSIDERATION. DURING THE ASSESSMENT PROCEEDINGS LD. AO OBSERVED THAT ASSESSEE ENTERED INTO SALE DEEDS FOR PURCHA SE OF LAND. IT WAS OBSERVED THAT ASSESSEE PURCHASED 3.32315 H ECTARE OF LAND FROM 12 PARTIES AND MADE PAYMENTS IN CASH EXCEEDING RS. 20,000 TO THEM ON VARIOUS DATES AS UNDER: S . NO. NAME OF PARTY AMOUNT DATE THROUGH (RS.) PAID 1 . SH. JAI NARAIN AND SMT . SHA S HI 28 , 50 , 000/ - 01 - 08 - 2008 (FRIDA Y) AT CASH DEVI THE TIME OF RE G I S TR Y BO O K 2. SH . RAM PRAKASH AND SH . JAI 13 , 15 , 0 00 / - 08 - 09 - 2008( MONDAY) CASH PRAKASH AT THE TIME OF RE G ISTR Y BOOK 3. SH . JAGJIT 16 , 62 , 000/ - 07 - 10 - 2008 (TUESDAY) CASH AT THE TIME OF REGISTRY BOOK 4. SH . BAL CHAND 32,000/ - 22 - 10 - 2008 CASH (WEDNESDAY) AT THE BOOK TIME OF REGISTRY 5. SH. RAR SHA R AN 10, 5 0,500/ - 29 - 12 - 2 008 (MONDAY) CASH AT THE TIME OF REGISTRY B OOK ITA 1663/DEL/2013 A.Y.:2009 - 10 PADMAWATI ENTERPRISES VS. ITO 3 6. SHANTI DEVI, LOKESH AND RAKESH 60 , 000/ - 19 - 03 - 2009 (TH U RSDAY) CASH AT THE TIME OF REGISTRY BOOK 7 . - DO - 1 , 68,000/ - 19 - 03 - 2009 (THURSDAY) CASH AT THE TIME OF REGISTRY BOOK TOTAL 65 , 02 , 5 0 0/ - 2.1. BEFORE LD. AO ASSESSEE TOOK A PLEA THAT DEFINITION OF GOODS IN THE CONTEXT OF GOODS AS PER SECTION 2 (M) OF UTTAR PRADESH VALUE ADDED TAX ACT ( UPVAT ACT ) AND SECTION 2 (7) OF THE S ALE OF G OODS A CT, 1930 IS EVERY KIND OF MOVABLE ARTICLES OR PROPERTIES , IN THE NATURE OF GOODS WHICH COULD ONLY BE PURCHASED AND SOLD AND NOT IMMOVABLE PROPERTY. ASSESSEE RELIED UPON RULE 6 DD (J) OF I NCOME T AX R ULES ON THE GROUND THAT THE PAYMENTS WERE MADE TO CULTIVATORS WHO DID NOT HAVE BANK ACCOUNTS AND IT W AS NOT MADE FOR AGRICULTURAL PURPOSES. LD. AO CALLED UPON ASSESSEE TO PRODUCE PARTIES TO WHOM THE PAYMENTS WERE MADE IN CASH FOR VERIFYING THE TRANSACTION S WHICH ASSESSEE WAS UNABLE TO PRODUCE. LD. AO THUS REJECTED THE SUBMISSIONS ADVANCED BY ASSESSEE. 2.2. THE TOTAL PURCHA SES IN CASH AMOUNTED TO RS. 65,02, 500/ - AND AS THE ENTIRE PAYMENT WAS MADE IN CASH T HE SAME WAS DISALLOWED BY LD. A O UNDER SECTION 40A(3) OF THE A CT AS ASSESSEE HAD NOT SUBSTANTIATED /JUSTIFIED THE URGENCY /NEED FOR MAKING PAYMENTS IN CASH. 2. 3 . AGGRIEVED BY THE ORDER OF LD. AO ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A). 2. 4 . LD.CIT(A) AFTER CONSIDERING THE SUBMISSIONS MADE BY ASSESSEE, REMAND REPORT BY AO AS WELL AS THE REJOINDER OF ASSESSEE GRANTED PART RELIEF TO THE EXTENT OF RS. 2,19,450/ - BEING DISALLOWANCE OF INTEREST ON THE GROUND THAT THE SUM WAS PAID BY ITA 1663/DEL/2013 A.Y.:2009 - 10 PADMAWATI ENTERPRISES VS. ITO 4 ASSESSEE TO A PERSON CALLED SH. ASOKA KUMAR JAIN WITHOUT DEDUCTION OF TDS AND IT WAS OBSERVED BY LD.CIT(A) THAT THE SAID SH. ASOKA KUMAR JAIN HAD PRODUCED FORM 15 H. HOWEVER L D. CIT (A) CATEGORICALLY OBSERVED THAT ASSESSEE IS CARRYING ON THE BUSINESS OF SALE AND PURCHASE OF PROPERTIES AND THEREFORE THE SAID PROPERTIES PUR CHASED BY ASSESSEE CANNOT BE CONSIDERED TO BE IN THE NATURE OF CAPITAL ASSET. 3. AGGRIEVED BY THE ORDER OF LD. CIT (A) ASSESSEE IS IN APPEAL BEFORE US NOW. 3.1. BEFORE US THE LD. C OUNSEL PRIMARILY SUBMITTED THAT THE PURCHASE OF LAND DID NOT REPRESENT GOODS AS PER SECTION 2 (M) OF THE UPVAT ACT, AND SECTION 40 A (3) OF THE I NCOME T AX A CT WERE NOT ATTRACTED TO SU CH GOODS. HE PLACED RELIANCE UPON THE DECISION OF HON BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF SHRI LAXMI SATYANARAYANA OIL MILLS VS. CIT REPORTED IN 367 ITR 200 AND DECISION OF HON BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS . RAJ PAL AUTOMOBILES R EPORTED IN 320 ITR 185. 3.2. ON THE CONTRARY LD.DR PLACED RELIANCE UPON THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 4.1. IT IS OBSERVED THAT ASSESSEE HAS NOT ESTABLISHED THE CIRCUMSTANCES UNDER WHICH THE PAYMENTS HA VE TO BE MADE IN CASH. FURTHER LD. CIT (A) HAS OBSERVED THAT TO 7 PARTIES PAYMENT HA S BEEN MADE BY CHE QUE , THUS THE TOTAL PAYMENT MADE BY ASSESSEE TO ALL 12 PARTIES AMOUNTED TO RS.1,15,77,00/ - OUT OF WHICH SUM OF RS.65,02,500/ - WAS MADE IN CASH. THUS THE ITA 1663/DEL/2013 A.Y.:2009 - 10 PADMAWATI ENTERPRISES VS. ITO 5 ARGUMENT ADVANCED BY LD. C OUNSEL THAT THE TRANSACTIONS COULD ONLY BE POSSIBLE IN CASH IS NOT ACCEPTED. 4. 2 . FURTHER DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE WAS ASKED BY LD. AO TO PRODUCE THE PERSONS TO WHOM SALE PROCEEDS WERE MADE IN CASH. ASSESSEE NEITHER IN THE COURSE OF ASSESSMENT PROCEEDINGS NOR AT THE APPELLATE STAGE , PRODUCED THE SE PERSONS FOR EXAM INATION AND THUS THE O NUS UPON THE ASSESSEE TO DISCHARGE THE GENUINENESS OF THE TRANSACTION HAS REMAINED TO BE ESTABLISHED. THE DECISION RELIED UPON BY LD.COUNSEL IN CASE OF SHRI LAXMI SATYANARAYANA OIL MILLS VS. CIT (SUPRA) CANNOT BE APPLICABLE TO THE FA CTS OF THE CASE AS THEREIN ASSESSEE HAD ESTABLISHED THE NEED TO MAKE THE PAYMENT IN CASH AND HON BLE COURT HAS OBSERVED AS UNDER: ONCE AN ASSESSEE FURNISHES THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A (3) WAS NOT PRAC TICABLE OR WOULD HAVE CAUSED GENUINE PROBLEMS, THE PROVISO, AND THEREBY THE RULE 6DD, GET ATTRACTED. THE PARLIAMENT DID NOT INTEND THAT PAYMENT OF RS.2,500/ - , OR MORE, MUST BE MADE ONLY THROUGH THE CROSSED CHEQUE. THIS IS EVIDENT FROM THE PROVISO TO SECTIO N 40A(3), RULE 6DD, AND THE CIRCULARS ISSUED FROM TIME TO TIME. CLAUSE (J)(2) OF RULE 6 DD TAKE IN THEIR FOLD, ALL THE CIRCUMSTANCES, UNDER WHICH AN ASSESSEE FACES IN THE COURSE OF HIS BUSINESS. PARAGRAPH 3(VI) OF THE CIRCULAR OF THE CBDT HAS FURTHER WIDEN ED THE SCOPE OF THE RULE, BY MENTIONING THAT IF THE PAYMENT, OTHERWISE THAN THROUGH CHEQUE WAS MADE, ON BEING PROMISED AND SPECIFIC DISCOUNT BY THE SELLER, THE RIGOR OF SECTION 40A(3) DOES NOT APPLY. (PARA21) THAT IT HAD TO MAKE THE PAYMENT FOR PURCHASE OF THE GROUND - NUT, IN CASH, BECAUSE THE SELLER NOT ONLY INSISTED ON THAT, BUT ALSO GAVE INCENTIVES, SUCH AS FACILITY OF PAYMENT WITHIN ONE WEEK, AND DISCOUNT. THE CERTIFICATE ISSUED BY M/S SATYANARAYANA TRADING COMPANY SUPPORTED THIS. THE QUESTION AS TO WHET HER THERE WAS JUSTIFICATION ON THE PART OF THE SELLER OF THE GOODS IN IMPOSING SUCH CONDITIONS IS OUTSIDE THE SCOPE OF THE ENQUIRY. AS A MATTER OF FACT, ITA 1663/DEL/2013 A.Y.:2009 - 10 PADMAWATI ENTERPRISES VS. ITO 6 THERE EXISTED SOME JUSTIFICATION FOR THE TRADERS, AT LEAST AT THE RELEVANT POINT OF TIME, IN INSISTING THE PAYMENT OF AMOUNTS, IN CASH. 4.3 . ALSO IN CASE OF CIT VS . RAJ PAL AUTOMOBILES (SUPRA) RELIED UPON BY LD.COUNSEL, HON BLE COURT OBSERVED AS UNDER : 8. THE RESPONDENT - ASSESSEE THEREAFTER HAD FILED AN APPEAL BEFORE THE LEARNED TRIBUNAL, WHEREIN THE FINDINGS OF THE ASSESSING AUTHORITY AS WELL AS THE APPELLATE AUTHORITY WERE REVERSED AND THE TRIBUNAL HAS HELD THAT THE ASSESSEE HAS FULLY EXPLAINED THE DETAILS OF PAYMENT MADE IN CASH. THE ENTIRE EVIDENCE IN THE FORM OF BILLS, CASH MEMOS, ETC., HAS ALSO B EEN FURNISHED BY THE ASSESSEE. LOOKING INTO THE BUSINESS OF THE ASSESSEE AND ALSO THE NATURE OF ITEMS PURCHASED, IT CANNOT BE DISPUTED THAT THE ASSESSEE HAD TO MAKE THE PAYMENTS IN CASH UNDER UNAVOIDABLE AND EXCEPTIONAL CIRCUMSTANCES. THE DEPARTMENTAL AUTH ORITIES HAVE NOT DISPUTED THE GENUINENESS OF THE TRANSACTIONS NOR THE IDENTITY OF THE PERSON/SELLER TO WHOM THE PAYMENTS HAD BEEN MADE. IN SUCH CIRCUMSTANCES, IF THE PAYMENTS ARE MADE IN CASH, THE SAME SHALL FALL WITHIN THE EXCEPTION PROVIDED UNDER R. 6DD OF THE IT RULES AND SUCH TRANSACTIONS COULD NOT BE DISALLOWED. 11. WE FIND THAT THE TRIBUNAL HAS CONSIDERED THE RELEVANT MATERIAL FACTS RELATING TO VARIOUS TRANSACTIONS MADE IN CASH BY THE RESPONDENT - ASSESSEE AND HAS COME TO THE CONCLUSION THAT UNDER EXCEP TIONAL CIRCUMSTANCES, THE RESPONDENT - ASSESSEE HAD MADE THE SAID CASH TRANSACTIONS, WHICH ARE COVERED WITHIN THE EXCEPTION PROVIDED IN R. 6DD OF THE IT RULES AND THE SAME CANNOT SAID TO BE COVERED UNDER S. 40A(3) OF THE ACT. THE HON'BLE APEX COURT IN THE CA SE OF ATTAR SINGH GURMUKH SINGH ETC. VS. ITO (1991) 97 CTR (SC) 251 : (1991) 191 ITR 667 (SC) HAS OBSERVED THAT (PAGE 673) : 'THE TERMS OF S. 40A(3) ARE NOT ABSOLUTE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE AO THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN S. 40A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE.' ITA 1663/DEL/2013 A.Y.:2009 - 10 PADMAWATI ENTERPRISES VS. ITO 7 12. RELYING ON THE AFORESAID JUDGMENT, THE DIVISION BENCH OF THIS COURT IN THE CASE OF CIT VS. CHAUDHARY & CO. (1995) 129 CTR (ALL) 101 : (1996) 217 ITR 431 (ALL) HAS HELD THAT THE OBJECT OF S. 40A(3) OF THE IT ACT , 1961, IS THAT A FICTITIOUS AMOUNT SHOULD NOT BE CLAIMED AS REVENUE EXPENDITURE. THE INTENTION OF S. 40A(3) WAS NOT THAT CASH PAYMENT CAN NEVER BE ALLOWED AS A DEDUCTION. THE TERMS OF S. 40A(3) ARE NOT ABSOLUTE. 13. THE LEARNED TRIBUNAL LOOKING INTO THE EXCEPTIONAL CIRCUMSTANCES HAS RIGHTLY ALLOWED THE CASH PAYMENTS TO BE INCLUDED WITHIN THE PURVIEW OF R. 6DD OF THE IT RULES. IN THE PRESENT CASE, THE NATURE OF BUSINESS OF THE RESPONDENT - ASSESSEE AND THE CASH TRANSACTIONS MADE WITH RESPECT TO THE EXPENDITU RE INCURRED DURING THE SAID BUSINESS AS WELL AS THE EVIDENCE ADDUCED BEFORE THE LEARNED TRIBUNAL WITH REGARD TO THE CASH TRANSACTIONS CLEARLY GO TO SHOW THAT THE CASE OF THE ASSESSEE - RESPONDENT IS COVERED UNDER R. 6DD OF THE IT RULES. 4. 4 . THUS IN OUR CON SIDERED OPINION THE ABOVE DECISIONS ARE OF NO HELP TO ASSESSEE AS ON THE FACTS OF THE PRESENT CASE ASSESSEE HAS NOT BROUGHT OUT ANY EVIDENCE ON RECORD TO PROVE EITHER THE GENUINENESS OF THE TRANSACTION OR THE NEED THAT EMERGED TO MAKE THE PAYMENTS IN CASH EXCEEDING RS. 20,000 / - TO THE SELLERS. 4. 5 . WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT (A) AND THE SAME IS UPHELD. 5. IN THE RESULT APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 5 . 0 3 . 2 0 1 8 . S D / - S D / - ( R.K.PANDA ) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 5 T H MARCH , 2018. *MV ITA 1663/DEL/2013 A.Y.:2009 - 10 PADMAWATI ENTERPRISES VS. ITO 8 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, DELHI BENCHES, NEW DELHI