Assistant Commissioner of Income Tax-1(2), RAIPUR V. R.P.Real Estate Private Limited, RAIPUR

ITA 173/BIL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94026 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 01-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K JAIN
• Assessee Lawyers: R B DOSHI
• Keywords: Reasonable cause; Competent authority
• Section: 40A(3); 133A

Judgement Text

1 ITA NO.173/BLPR/2011 IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T. A. NO. 173/BLPR/2011 ASSESSMENT YEAR : 2008-09. ASSTT. COMMISSIONER OF INCOME-TAX, R.P. REAL ESTATE PVT. LTD. CIRCLE-1(2), RAIPUR. V/S. B-62, KHAMARDIH. SHANKAR NAGAR, VIP ESTATE, NEAR VIP CLUB, RAIP UR. PAN AACCR5112K (APPELLANT) RESPONDENT. APPELLANT BY : SHRI D.K. JAIN. RESPONDENT BY : SHRI PRAVEEN JAIN AND SHRI R.B. DOSHI. DATE OF HEARING : 15-06-2015 DATE OF PRONOUNCEMENT : 17 TH JULY, 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS), RAIPUR DATED 29-04-2011 AND PERTAINS TO ASSESSMENT YEAR 2008-09. THE GROUND RAISED BY THE REVENUE READS AS UNDER : WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF TH E CASE, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF ` .61,06,000/- MADE BY THE AO APPLYING THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT. 2 ITA NO.173/BLPR/2011 2. IN THIS CASE THE ASSESSING OFFICER MADE THE IMPU GNED DISALLOWANCE BY OBSERVING AS UNDER : THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEALINGS AND CONSTRUCTION OF MULTISTORIED BUILDINGS. SURVEY U/S 133A OF THE INCOME-TAX ACT WAS CONDUCTED DURING THE RELEVANT ASSESSMENT Y EAR AND THE ASSESSEE HAS OFFERED AN AMOUNT OF ` .1.66 CRORES TOWARDS DISCREPANCIES FOUND DURING SURVEY, WHICH WAS FOUND OFFERED TO TAX IN THE RETU RN FILED SUBSEQUENTLY. DURING THE COURSE OF VERIFICATION, IT IS FOUND THA T THE ASSESSEE HAS PURCHASED LAND FROM THE PARTIES MENTIONED BELOW AND MADE PAY MENTS EXCEEDING ` .20,000/- AGAINST PROVISIONS OF SECTION 40A(3):- SL NAME AMOUNT IN ` . 1. SHRI ROMNATH NISHAD & OTHERS 32,16,000/- 2. SHRI DWARIKA NISHAD 24,25,000/- 3. SHRI BISAHER FAGUVA 2,50,000/- 4. SHRI RADHASHYAM VISHRAM. 2,15,000/- TOTAL 61,06,000 THE LAND BEING STOCK IN TRADE THE EXPENDITURE WAS O F REVENUE IN NATURE. THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN WHY D ISALLOWANCE OF THE ABOVE EXPENDITURE SHOULD NOT BE MADE BEING PAID IN VIOLA TION TO PROVISION OF SECTION 40A(3) OF THE ACT. NO PLAUSIBLE EXPLANATIO N WAS GIVEN. ACCORDINGLY, AGGREGATE OF THE ABOVE SUM AT ` .61,06,000/- IS DISALLOWED U/S 40A(3) OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. BEFORE THE LEARNED CIT(APPEALS) THE ASSESSEE SUB MITTED THAT THE SELLER SHRI BISAHER AND SHRI RADHESHYAM ARE VILLAGERS AND DO NO T HAVE ANY BANK ACCOUNT AND THUS, FULL PAYMENT OF PURCHASE CONSIDERATION WAS MA DE IN CASH BEFORE THE REGISTRAR, THE COMPETENT AUTHORITY AND THEREFORE, T HE SAID CASH PURCHASES ARE FULLY COVERED BY RULE 6DD; THAT THE IDENTITY OF ALL THE S ELLERS WAS ESTABLISHED ALONG WITH THEIR PHOTOGRAPHS, ADDRESS, PERSONAL PRESENCE AT TH E TIME OF PAYMENT BEFORE THE 3 ITA NO.173/BLPR/2011 REGISTRAR, A COMPETENT AUTHORITY ALONG WITH WITNESS ES; THAT AS PER THE PRACTICE FOLLOWED IN REGISTRAR COURT, THE REGISTRAR PERSONAL LY CONFIRMS FROM THE VILLAGERS THAT WHETHER THEY HAVE RECEIVED THE SAID AMOUNT FRO M THE BUYER AND UPON TOTAL SATISFACTION OF THE IDENTITY, TITLE OF THE PROPERTY AND AMOUNT OF TRANSACTION, THE REGISTRAR MAKES THE REGISTRATION. THUS, THE CASH P URCHASES WERE MADE IN EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES OF THE BU SINESS EXIGENCIES, CONVENIENCE OF SECURITY OF THE SUBJECT PROPERTY. TH E APPELLANT PLACED RELIANCE ON FOLLOWING CASE LAWS: CIT V/S. BRIJ MOHAN SINGH & CO. (1994) 117 CTR (P &H) 391 : (1994) 209 ITR 753 (P&H) : (1994) 74 TAXMAN 0385 GIRDHARILAL GOENKA V/S. CIT (1989) 80 CTR (CAL) 1 40 : (1989) 179 ITR 122 (CAL). THE JANAMBHUMI V/S. CIT (1997) 141 CTR (GAU) 518 : 1997) 225 ITR 517 (GAU) : (1998) 99 TAXMAN 451 HASANAND PINJOMAL V/S. CIT (1997) CTR (GUJ) 486 : (1978) 112 ITR 134 (GUJ). D.B. LATE V/S. ITO (1983) 16 TTJ (PUNE) 136. JANTA RICE MILL V/S. ITO (2007) 110 TTJ (LUCKNOW) 357. RAJ NARAIN BHAJAN LAL V/S. ITO (1977) 4 TTJ (DEL) 1157. ITI V/S. JANKI DASS CHATUR BHU (1977) 04 TTJ (DEL ) 1145. ASHOK KUMAR & BROS. V/S. ITO (1988) 31 TTJ (DEL) 353. 4. CONSIDERING THE ABOVE, LEARNED CIT(APPEALS) DELE TED THE ADDITION HOLDING AS UNDER : 3.3 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. IT IS NOT IN DISP0UTE THAT THE PAYM ENT WAS MADE IN CASH FOR PURCHASE OF LAND. I FIND THAT THE PURCHASES MADE BY THE APPELLANT ARE 4 ITA NO.173/BLPR/2011 SUPPORTED BY DULY REGISTERED PURCHASE DEEDS IN ALL THE CASES. I FIND FORCE IN THE SUBMISSIONS OF THE APPELLANT THAT IDENTITY OF THE PERSONS TO WHOM PAYMENT WAS MADE FOR PURCHASE OF LAND HAS BEEN EST ABLISHED BEYOND DOUBT AND GENUINENESS OF THE PAYMENT IS ALSO NOT IN DISP UTE AS THE SAME HAS BEEN WITNESSED AND AUTHENTICATED BY THE REGISTERED SALE DEEDS. AT THIS JUNCTURE, IT IS IMPERATIVE TO GO BACK TO THE LEGISLATIVE HISTOR Y AND OBJECT BEHIND INSERTION OF SECTION 40A(3) IN THE STATUTE BOOK. 3.4 SUB-SECTION (3) WAS INSERTED BY THE FINANCE AC T, 1968, WITH EFFECT FROM 1 APRIL, 1969; THE OBJECT OF THE INTRODUCTION OF THIS SUB-SECTION WAS EXPLAINED IN A CIRCULAR NO. 6P, DATED 6 TH JULY, 1968. 76. SUB-SECTION (3) OF NEW SECTION 40A MAKES A P ROVISION OF THE DISALLOWANCE OF EXPENDITURE INCURRED IN BUSINESS AND PROFESSION FOR WHICH PAYMENT IS MADE IN AN AMOUNT EXCEEDING ` .2,500/-, OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR A CRO SSED BANK DRAFT. THIS PROVISION WILL APPLY I9N RESPECT OF PAYMENTS MADE AFTER A DATE TO BE NOTIFIED BY THE GOVERNMENT BEING A DATE NOT LA TER THAN 31 MARCH, 1969. THIS PROVISION IS DESIGNED TO COUNTER EVAS ION OF A TAX THROUGH CLAIMS FOR EXPENDITURE SHOWN TO HAVE BEEN INCURRE D IN CASH WITH A VIEW TO FRUSTRATING PROPER INVESTIGATION BY THE D EPARTMENT AS TO THE IDENTITY OF THE PAYEE AND THE REASONABLENESS OF T HE PAYMENT. 3.5 THE OBJECTIVE OF SECTION 40A(3) REQUIRING SUCH PAYMENT TO BE MADE BY CROSSED CHEQUE OR DRAFT HAS BEEN REPEATEDLY STR ESSED BY THE COURT, AS FOR EXAMPLE, IN WALFORD TRANSPORT (EASTERN INDIA) V/S. CIT AS UNDER : FROM A PERUSAL OF DECISION OF DIFFERENT HIGH COU RTS REFERRED TO ABOVE, IT CLEARLY EMERGES THAT THE PURPOSE OF SEC TION 40A(3) OF THE ACT IS NOT TO PENALIZE THE ASSESSEE FOR MAKING CASH P AYMENT OF AN AMOUNT OF ` .2,500 OR ABOVE. THE PURPOSE IS ONLY PREVENTIVE AND TO CHECK EVASION OF TAX AND FLOW OF UNACCOUNTED MONEY OR T O CHECK TRANSACTIONS WHICH ARE NOT GENUINE AND MAY BE PUT AS CAMOUFLAGE TO EVADE TAX BY SHOWING FICTITIOUS OR FALSE TRANSACT IONS. IT IS FOR THE PURPOSE OF ENSURING CHECK OF ACCOUNT S THAT SUCH A PROVISION HAS BEEN ENACTED REQUIRING ROUTING OF TRANSACTIONS THR OUGH A BANK. 5 ITA NO.173/BLPR/2011 3.6 SUB-SECTION (3) EMPOWERS THE ASSESSING OFFICER STO DISALLOW, AS A DEDUCTION, ANY EXPENDITURE IN RESPECT OF WHICH PAY MENT IS MADE OF ANY SUM EXCEEDING ` .20,000 OTHERWISE THAN THE CROSSED CHEQUE OR CROSSE D BANK DRAFT, UNLESS THE PAYMENT IS MADE UNDER THE CIRCUMSTANCES WHICH MAY BE PRESCRIBED BY THE RULES, HAVING REGARD TO THE NATU RE AND EXTENT OF THE BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUSINESS E XPEDIENCY AND OTHER RELEVANT FACTORS. THE OBJECT OF THE PROVISION IS PATENTLY A ND CLEARLY DISCERNIBLE ON THE FACE OF THE PROVISION ITSELF. IT IS OBVIOUSLY DESI GNED TO CHECK TAX EVASION BY CLAIMS OF CASH EXPENDITURE WHICH ARE DIFFICULT OF PROPER INVESTIGATION BY THE REVENUE. 3.7 FOR THE REASONS MENTIONED ABOVE AND RATIO DECI DED IN THE JUDGMENTS REFERRED ABOVE, I AM OF THE CONSIDERED OPINION THA T THE AO HAS APPLIED THE PROVISIONS OF SECTION 40A(3) IN A MECHANICAL MANN ER WITHOUT APPRECIATING AND GETTING IN TO OBJECTS BEHIND THE INSERTION OF SECTION 40A(3) IN THE INCOME TAX ACT, 1961. THE AO FAILED TO APPRECIATE THAT THE PROVISO TO SECTION 40A(3) WHICH HAS BEEN SUBSTITUTED B Y THE FINANCE ACT, 2007 W.E.F. 1 ST APRIL 2008 PROVIDES THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE PROFITS AND GAINS BUSINESS O R PROFESSION WHERE ANY PAYMENT EXCEEDING ` .20,000/- IS MADE IN SUCH CASES AND SUCH CIRCUMSTAN CES AS MAY BE PRESCRIBED HAVING RECORD TO THE NATURE A ND EXTENT OF BANKING FACILITIES, AVAILABLE, CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. IN MY CONSIDERED VIEW, THE AO HAS ERRED IN INVOKING THE PROVISIONS OF SECTION 40A(3) AS THE TRANSACTION OF PURCHASES ARE GENUINE AND HAVE NOT BEEN PROVED AS FALSE OR A MERE COLORABLE DEVICE TO EVADE TAX. HENCE, THE DISALLOWANCE MADE BY THE AO IS DELETED. 5. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BE FORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. LEARNED D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER. HE SU BMITTED THAT THE ASSESSEE HAD PURCHASED THE LAND BY PAYMENT IN CASH. HENCE THE DI SALLOWANCE UNDER SECTION 40A(3) HAS BEEN RIGHTLY MADE. SUBMISSIONS OF THE L EARNED COUNSEL OF THE ASSESSEE IN THIS REGARD ARE SUMMARIZED AS UNDER : 6 ITA NO.173/BLPR/2011 A. THE BRIEF FACTS OF THE CASE ARE AS UNDER : A. THE FACT THAT THE SELLERS ARE ILLITERATE VILLA GERS HAS NOT BEEN DOUBTED BY THE DEPARTMENT AND SAME IS EVIDENT FROM SALE DEEDS. B. THE FACT THAT THE FULL PAYMENT HAS BEEN MADE TO THE SELLERS FOR THE PURCHASE OF LAND IS ALSO NOT DOUBTED BY THE LD. A. O. C. THE LD. A.O. HAS NOT DOUBTED THE GENUINENESS/ID ENTITY OF THE SELLERS. D. THE SELLERS ARE NEW TO THE ASSESSEE THUS DEMAND ED PAYMENTS IN CASH FOR THE PURPOSE OF THEIR SECURITY. THEY INTIMATED ASS ESSEE THAT THEY DO NOT POSSESS ANY BANK ACCOUNT. E. IN CASE OF PURCHASES UNDER CONSIDERATION : I) IT IS WORTHWHILE TO NOTE THAT OUT OF TOTAL PUR CHASES OF ` .5,40,31,391/- DURING THE YEAR, PAYMENT FOR SUM OF ` .61,06,000/- (11.305) HAS BEEN MADE IN CASH. THE ASSESSEE STRIVES TO MAKE ALL THE PAYM ENT THROUGH ACCOUNT PAYEE CHEQUES. HOWEVER SINCE THE VILLAGERS ARE ILLITERAT E, THEY SOMETIMES FORCE FOR CASH PAYMENT. USUALLY THE ASSESSEE MAKES CHEQUE PA YMENT BUT IF THE SELLER DO NOT AGREE, PAYMENT IN CASH OUT OF BUSINESS COMP ULSION HAS TO BE MADE. II) BUSINESS COMPULSION ALL THE 4 PURCHASES ARE PART OF KHASRA NO. 7, THE MAJOR PORTION OF KH. NO. 7 HAD ALREADY BEEN ACQUIR ED/UNDER PROCESS OF ACQUISITION BY THE ASSESSEE FOR ITS HOUSING PROJEC T. THIS FACT CAN BE VERIFIED FROM THE SALE DEEDS WHICH ARE ALREADY ON THE RECOR DS OF LD. A.O. SINCE THE ASSESSEE WANTED TO ACQUIRE ALL THE A DJOINING LANDS IN THE VICINITY FOR THE LAUNCH OF ITS PROJECT IT WAS UNDER COMPULS ION TO PURCHASE THESE PARTICULAR LAND ON THE TERMS OF THE SELLERS, OTHER WISE IT WOULD HAVE HAMPERED ITS BUSINESS. THUS THE INSTANCES OF PAYMENT IN CAS H WAS OUT OF BUSINESS COMPULSION AND NOT OPTIONAL. ALTHOUGH THE ASSESSEE HAVE STRIVED TO MAKE MAJOR PURCHASE IN CHEQUES, SOMETIMES DUE TO UNAVOI DABLE CIRCUMSTANCES IT WAS IMPERATIVE TO MAKE CASH PAYMENT TO THE SELLERS . III) THE SELLER REFUSED TO ACCEPT THE PAYMENT BY W AY OF CROSSED CHEQUE/DRAFT AND THUS THE ASSESSEE MADE CASH PAYMENTS AS ITS BU SINESS INTEREST WOULD HAVE SUFFER DUE TO NON AVAILABILITY OF THE SAID LA ND. 7 ITA NO.173/BLPR/2011 IV) IN PRESENT CASE IT IS NOT IN DISPUTE THAT TH E PAYMENT WAS MADE IN CASH FOR PURCHASE OF LAND. PURCHASE MADE ARE DULY SUPPO RTED BY DULY REGISTERED PURCHASE DEED IN ALL THE CASES. THE SELLERS HAVE A PPEARED BEFORE THE SUB REGISTRAR AT THE TIME OF REGISTRATION. AS PER GENE RAL PARALANCE SUB-REGISTRAR SATISFIES HIMSELF ABOUT THE IDENTITY OF THE SELLER TO ENSURE THAT THE PAYMENT HAS BEEN MADE TO THE RIGHT PERSON. SUB REGISTRAR A LSO ASKS THE SELLERS WHETHER FULL SUM HAS BEEN RECEIVED BY THEM, THEN ONLY HE R EGISTERS THE SALE DEED. V) MOREOVER, THE PHOTOS OF THE SELLERS DULY SIGN ED BY THEM AT THE TIME OF THE REGISTRY, FORMS PART OF THE SALE DEED WHICH WA S REGISTERED BEFORE THE SUB- REGISTRAR. THUS THE IDENTITY AND GENUINENESS OF TH E SELLERS IS BEYOND ANY DOUBT NOT QUESTIONED BY THE DEPARTMENT. VI) NOT ONLY THE SALE DEED SPECIFIED THE CASH PAY MENT, BUT EVEN EACH AND EVERY DATE OF CASH PAYMENTS HAVE ALSO BEEN MENTION ED IN THE SALE DEED FOR REGISTRATION BEFORE THE SUB REGISTRAR WHICH WAS AV AILABLE ON RECORD AT THE TIME OF THE SCRUTINY. VII) IT CAN BE REFERRED IN THE 1 ST PURCHASE FROM SHRI ROMNATH NISHAD & OTHERS PAYMENTS WERE MADE FROM YEAR 2005 TO 2008 TO THE SELLERS. THE SELLERS INTIMATED THE ASSESSEE THAT THEY DO NOT MA INTAIN ANY BANK ACCOUNT, THUS PAYMENTS TILL 2007 WERE MADE TO THEM IN CASH, SINCE THE ASSESSEE WAS NOT LEFT WITH ANY OTHER CHOICE. HOWEVER WHEN THE P URCHASER GAVE DETAILS OF HIS BANK ACCOUNT IN THE YEAR 2008 ALL THE SUBSEQUE NT PAYMENTS WERE MADE IN CHEQUES. VIII) IN CASE OF 4RD AND 4 TH PURCHASE FROM SHRI BISAHER FAGUVA & SHRI RADHESHYAM VISHRAM , IT IS UNDISPUTED THAT THE SEL LERS ARE SMALL VILLAGERS AND DO NOT HAVE BANK ACCOUNT, THUS FULL PAYMENT OF PURCHASE CONSIDERATION WAS MADE IN CASH BEFORE THE COMPETENT AUTHORITY, T HUS COVERED BY RULE 6DD. THUS CASH PAYMENT WERE MADE IN EXCEPTIONAL A ND UNAVOIDABLE CIRCUMSTANCES OF THE BUSINESS EXIGENCY, CONVENIENC E OF SECURITY OF THE SUBJECT PROPERTY. F. DISALLOWANCE OF EXPENSES PAID IN CASH, MECHANIC ALLY AND AUTOMATICALLY IN A BLANKET MANNER WOULD LEAD TO GROSS RECEIPTS BEIN G TAXED AS INCOME WHICH CANNOT BE JUSTIFIED. THE INCOME-TAX ACT IS INTENDE D ONLY TO LEVY TAX ON THE 8 ITA NO.173/BLPR/2011 CORRECT INCOME BEING THE REAL INCOME AND NOT IMAGI NARY SUMS ASSUMED BY THE REVENUE TOWARDS GROSS RECEIPTS BY DISALLOWING EXPENSES. B. PRESENT CASE IS PARI MATERIAL SITY THE CASE OF SARASWATI HOUSING & DEVELOPERS V/S. ADDITIONAL COMMISSIONER OF INCOME- TAX (2013) 142 ITD 0198 ITAT DELHI BENCH G C. IT IS ALSO WORTHWHILE TO LOOK INTO THE OBJECT B EHIND INSERTION OF SEC. 40A(3); 76. SUB-SECTION (3) OF NEW SECTION 40A MAKES A PR OVISION FOR THE DISALLOWANCE OF EXPENDITURE INCURRED IN BUSINESS A ND PROFESSIONS FOR WHICH PAYMENT IS MADE IN AN AMOUNT EXCEEDING ` .2,500, OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR A CROSSED BANK D RAFT. THIS PROVISION WILL APPLY IN RESPECT OF PAYMENTS MADE AFTER A DATE TO BE NOTIFIED BY THE GOVERNMENT, BEING A DATE NOT LATER THAN 31-3-1969. THIS PROVISION IS DESIGNED TO COUNTER EVASION OF A TAX THROUGH CLAIM S FOR EXPENDITURE SHOWN TO HAVE BEEN INCURRED IN CASH WITH A VIEW TO FRUST RATING PROPER INVESTIGATION BY THE DEPARTMENT AS TO THE IDENTITY OF THE PAYEE AND THE REASONABLENESS OF THE PAYMENT. THE OBJECTIVE OF SEC. 40A(3) REQUIRING SUCH PAYMEN T TO BE MADE BY CROSSED CHEQUE OR DRAFT HAS BEEN REPEATEDLY STRESSED BY TH E COURT, AS FOR EXAMPLE IN THE CASE OF WALFORD TRANSPORT (EASTERN INDIA) V/S. CIT 1999 240 ITR 902 GAUHATI AS UNDER : FROM A PERUSAL OF THE DECISIONS OF DIFFERENT HIGH COURTS REFERRED TO ABOVE, IT CLEARLY EMERGES THAT THE PURPOSE OF SECTION 40A(3) OF THE ACT IS NOT TO PENALIZE THE ASSESSEE FOR MAKING CASH PAYMENT AS A N AMOUNT OF ` .2,500 OR ABOVE. THE PURPOSE IS ONLY PREVENTIVE AND TO CHECK EVASION OF TAX AND FLOW OF UNACCOUNTED MONEY OR TO CHECK TRANSACTIONS WHIC H ARE NOT GENUINE AND MAY BE PUT AS CAMOUFLAGE TO EVADE TAX BY SHOWING F ICTITIOUS OR FALSE TRANSACTIONS. 4. AMONGST OTHERS, THE ASSESSEE PLACES RELIANCE ON FOLLOWING: A. SARASWATI HOUSING & DEVELOPERS V/S. ADDITIONAL COMMISSIONER OF INCOME TAX (2013) 142 ITD 0198, DELHI BENCH G. 9 ITA NO.173/BLPR/2011 B. CIT V/S. SITARAM ANILKUMAR IT REF NO. 102 OF 1999, ORDER DT. 23.08.2011. C. PACL INDIA NLTD. V/S. ASSISTANT COMMISSIONER OF INCOME-TAX (2010) 38 DTR 0001 ITAT, JAIPUR A BENCH. D. GIIRDHARILAL GOENKA V/S. COMMISSIONER OF INCOME -TAX (1989) 80 CTR 0140- HIGH COURT OF CALCUTTA. E. WALFORD TRANSPORT (EASTERN INDIA) V/S. CIT 1999 240 ITR 902 GAUHATI. F. CIRCULAR NO. 220 DATED 31 ST MAY, 1977. 7. UPON CAREFUL CONSIDERATION, WE FIND THAT IT IS U NDISPUTED THAT THE ASSESSEE HAS PURCHASED THE LAND FROM SELLERS WHO WERE ILLIT ERATE VILLAGERS. IT IS ALSO NOT DOUBTED THAT THE PAYMENT HAS BEEN M ADE FOR THE PURCHASE OF LAND. THERE IS NO DOUBT ABOUT THE GENUINENESS AND IDENTIT Y OF THE SELLERS. OUT OF THE TOTAL PURCHASE OF ` .5,40,31,391/- DURING THE YEAR, PAYMENT OF ` ,51,06,000/- I.E. ONLY 11.30% HAS BEEN MADE IN CASH. THE ASSESSEES PLEA F OR PAYMENT IN CASH IS THAT THE VILLAGERS FROM WHOM THE LAND HAS BEEN PURCHASED ARE ILLITERATE AND SOME TIMES INSISTS ON CASH PAYMENT. IT HAS BEEN CLAIMED THAT I T WAS THE BUSINESS COMPULSION OF THE ASSESSEE THAT THE ASSESSEE HAD TO ACCEPT THE IN SISTENCE OF THE VILLAGERS AS THE ASSESSEE HAS PURCHASED A LARGE CHUNK OF LAND AND WA NTED TO ACQUIRE THE ADJACENT LAND IN VICINITY FOR LAUNCH OF ITS PROJECT. IT HAD TO AGREE TO SOME OF THE VILLAGERS IN THEIR DEMAND OF CASH PAYMENTS ALTHOUGH THE ASSESSEE WAS ABLE TO MAKE MAJOR PURCHASES BY CHEQUE. MOREOVER IT IS ALSO ON RECORD THAT PHOTOS OF SELLERS DULY SIGNED BY THEM ARE RECORDED ON THE SALE DEED WHICH WAS REGISTERED BEFORE THE SUB REGISTRAR. HENCE THERE IS NO IOTA OF DOUBT ABOUT TH E GENUINENESS OF PAYMENT AND THE IDENTITY OF PERSONS RECEIVING THE PAYMENTS. THE CASH PAYMENTS ALONG WITH THE DATES ARE ALSO MENTIONED IN THE SALE DEED. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION THERE IS CONSIDERABLE FORCE IN THE ASSESSEE S SUBMISSION THAT THERE WAS REASONABLE CAUSE FOR THE ASSESSEES FAILURE TO MAKE PAYMENT OTHERWISE THAN BY 10 ITA NO.173/BLPR/2011 CROSSED CHEQUES. IN THIS REGARD WE FIND THAT SIMILA R ISSUE WAS CONSIDERED BY ITAT, DELHI BENCH IN THE CASE OF SARASWATI HOUSING AND DE VELOPERS V/S. ADDL. CIT 142 ITD 198. THE TRIBUNAL IN THAT CASE HAS REFERRED TO A DECISION OF PACL INDIA LTD. V/S. ACIT OF ITAT, JAIPUR. THE CONCLUSION BY THE IT AT IS AS UNDER : 10. THE FACTUAL MATRIX OF THE PRESENT CASE IS PAR A MATERIAL WITH THE CASE OF PACL LTD. V/S. ACIT BECAUSE IN THE PRESENT CASE, T HE ASSESSEE HAS MADE PAYMENT TO VARIOUS VILLAGERS FOR PURCHASE OF AGRIC ULTURAL LAND. NORMALLY ILLITERATE POOR FARMERS WOULD INSIST ON C ASH PAYMENTS, SPECIALLY WHEN SUCH PAYMENTS INVOLVE HUGE AMOUNTS AT THE PLA CE OF THEIR RESIDENCE FOR THE SIMPLE REASON THAT THEY WOULD LIKE TO AVOID TH E RISK OF RECEIVING CASH AT TOWN WHERE THE SALE DEED IS TO BE REGISTERED BEFOR E SUB-REGISTRAR AND WHICH MAY BE FAR WAY FROM THE SELLERS VILLAGE. IN THIS SITUATION, THE SELLER HAS TO CONFIRM BEFORE THE SUB-REGISTRAR THAT FULL PAYMENT AS PER RECITAL OF THE SALE DEED HAS BEEN RECEIVED BY HIM. AT THE SAME TIME, T HE GOVERNMENT AUTHORITY I.E. SUB-REGISTRAR SATISFIED HIMSELF UPON THE IDE NTITY OF THE SELLER TO ENSURE THAT THE PAYMENT HAS BEEN MADE TO THE RIGHT PERSON . FOR THE SAKE OF CONVENIENCE IN THE RECEIPT, THE PLACE IS MENTIONED AS THE TOWN WHERE THE DOCUMENT IS REGISTERED. FROM THE ASSESSMENT ORDER WE OBSERVE THAT THE ASSESSING OFFICER HAS NOT MADE ANY EFFORT TO EXAM INE THE VERY FACT WHETHER THE PAYMENTS WERE MADE AND RECEIVED BY THE SELLERS AT THEIR VILLAGES OR AT THE TOWN WHERE THE SALE DEED WAS REGISTERED. 11. CONSIDERING THE ENTIRE FACTS AND PROPOSITION T HAT THE PAYMENTS WERE MADE AT VILLAGES WHERE BANKING FACILITIES DID NOT EXIST IS ACCEPTED. AFTER CAREFUL CONSIDERATION OF PRACTICAL SITUATION, WE ALSO OBSERVE THAT EVEN IT IS ASSUMED THAT PAYMENTS WERE MADE AT A TOWN WHERE BA NKING FACILITIES WERE AVAILABLE, THE CASE OF THE APPELLANT COMPANY WOULD STILL FALL UNDER THE EXCEPTION OF RULE 6DD(H). WE FURTHER OBSERVE THAT RULE 6DD(H) OF THE RULES HAS TO BE INTERPRETED LIBERALLY SO AS NOT TO FRUSTRATE THE OBJECT OF THE LEGISLATURE. THE OBJECT OF S. 40A(3) IS NOT TO DIS ALLOW GENUINE PAYMENTS AND R. 6DD HAS TO BE INTERPRETED KEEPING IN VIEW THE O BJECT OF THE MAIN PROVISION. THE SECOND PROVISO TO S. 40A(3) REFERS TO THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BU SINESS EXPEDIENCY AND OTHER 11 ITA NO.173/BLPR/2011 RELEVANT FACTORS, WHICH MEANS THAT THE OBJECT OF THE LEGISLATURE IS NOT MAKE DISALLOWANCE OF SUCH CASH PAYMENTS WHICH HAVE TO B E COMPULSORILY MADE BY THE ASSESSEE IN VIEW OF ABSENCE OF BANKING FACILIT IES AT THE PLACE OF PAYMENT. AS PER SUBMISSIONS OF THE DR IF IT IS ASSUMED THA T THE PAYMENT WAS MADE AT THE TEHSIL AND DISTRICT HEADQUARTER, THE ADMITTED POSITION IS THAT THE SELLERS DID NOT HAVE ANY BANK ACCOUNTS AT SUCH TOWN AND THEY D ID NOT RESIDE OR CARRY ON ANY BUSINESS OR FARMING ACTIVITY AT SUCH TOWN. THE AO AND THE LEARNED CIT(A) HAVE OBSERVED THAT THE APPELLANT COMPANY C OULD HAVE OPENED BANK ACCOUNTS AT SUCH TOWN IN THE NAME OF THE SELLERS. IN OUR VIEW, IT WOULD BE TOO MUCH TO EXPECT THAT THE APPELLANT COMPANY WOULD BE ABLE TO COMPEL THE VILLAGERS TO OPEN BANK ACCOUNTS AT THE TOWN WHICH ULTIMATELY THEY WILL NOT BE ABLE TO OPERATE AS THEY DO NOT RESIDE AT SUCH TOWN . 12. IF SUCH A MYOPIC VIEW IS TAKEN REGARDING THE I NTERPRETATION OF R. 6DD(H), IN OUR VIEW, THE VERY OBJECT OF THE LEGISLATURE WO ULD BE FRUSTRATED. THERE IS NO DISPUTE REGARDING THE IDENTITY OF THE PAYEES AN D THE GENUINENESS OF THE LAND TRANSACTION IN RESPECT OF WHICH PAYMENTS HAVE BEEN MADE. AT THIS POINT, IT IS NOTABLE THAT R. 6DD(K) PROVIDES AN EXCEPTION IN RESPECT OF CASH PAYMENTS WHICH ARE MADE ON A DAY ON WHICH THE BANK S WERE CLOSED. THIS EXCEPTION PROVIDES THAT THE OBJECT OF THE LEGISLAT URE IS TO PROVIDE AN EXCEPTION IN RESPECT OF SUCH PAYMENT WHICH IS REQU IRED TO BE MADE IN CASH FOR ABSENCE OF BANKING FACILITIES. THEREFORE, WE H OLD THAT IN THE PRESENT CASE, THE ASSESSEE MADE CASH PAYMENT TO THE AGRICULTURAL LAND SELLER VILLAGERS WHICH ARE COVERED UNDER SECOND PROVISO TO SECTION 40A(3) OF RULE 6DD(H) OF THE RULES. 13. ON THE BASIS OF DISCUSSIONS MADE HEREINABOVE W E FINALLY HOLD THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF ` .3,27,488 BEING THE DISALLOWANCE AT 20 PERCENT OF C ASH PAYMENTS TO THE LAND SELLER VILLAGERS OF ` .16,36,440 IN EXCESS OF ` .20,000 AND THE DISALLOWANCE MADE U/S 40A(3) OF THE ACT UNDER APPEAL IS FOUND TO BE UNJUST, PERVERSE WHICH IS NOT SUSTAINABLE IN THE BACKDROP OF STATUT ORY PROVISIONS. ACCORDINGLY, IMPUGNED ORDER IS SET ASIDE AND DISAL LOWANCE AND ADDITIONS MADE THEREUNDER ARE HEREBY DELETED. 12 ITA NO.173/BLPR/2011 8. WE FIND THAT THE ABOVE CASE LAW IS APPLICABLE ON THE FACTS OF THE CASE. PAYEES IN THIS CASE ALSO ARE ILLITERATE VILLAGERS WHO WANT ED SOME OF THE PAYMENTS TO BE DONE IN CASH. THERE IS NO DISPUTE REGARDING IDENTI TY OF THE PAYEES AND GENUINENESS OF THE TRANSACTION. MOREOVER THE ABOVE OBSERVATIONS OF THE TRIBUNAL ARE SQUARELY APPLICABLE ON THE FACTS OF THE CASE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HAVE NO REASON TO DIFFER FROM THE VIEW TAKEN BY THE TRIBUNAL AS ABOVE WHICH ARE DIRECTLY APPLICABLE ON THE FACTS OF THE PRESENT CAS E. THE HONBLE APEX COURT IN THE CASE OF HONDA CIEL POWER PRODUCTS, CIVIL APPEAL N O. 5412 OF 2007 HAS HELD THAT LACK OF CONSIDERATION OF A COORDINATE BENCH D ECISION CAN RENDER THE ORDER OF THE TRIBUNAL LIABLE FOR RECTIFICATION OF A MISTAKE UNDER SECTION 254 OF THE I.T. ACT. IN THIS VIEW OF THE MATTER, IN THE BACKGROUND OF AF ORESAID DISCUSSION AND PRECEDENT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNE D CIT(APPEALS). ACCORDINGLY, WE UPHOLD THE SAME. 9. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JULY, 2015. SD/- SD/- (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. DATED: 17 TH JULY, 2015. 13 ITA NO.173/BLPR/2011 COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, 5. THE D.R., ITAT, RAIPUR. 6. GUARD FILE. T RUE COPY. BY ORDER WAKODE ASSISTANT REGISTRAR, ITAT, NAGPUR