Suryakant Dnyaneshwar Katale, Latur V. Pr. Commissioner of Income-Tax-2, Aurangabad

ITA 231/PUN/2020

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0067 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 09-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Set aside
• Section: 148; 263; 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER ITA No. 231/PUN/2020 नधा रण वष / Assessment Year : 2011-12 Suryakant Dnyaneshwar Katale, C/o. R.N. Laturkar, ‘Padmanabh”, Shramsafalya Housing Society, Sham Nagar, Opp. Shanti Hospital, Latur – 413 512 Maharashtra PAN : ANGPK0360E Vs. Pr.CIT-2, Aurangabad Appellant Respondent आदेश / ORDER PER R.S. SYAL, VP : This appeal by the assessee arises out of the order dated 25-03-2019 passed by the Pr. CIT(A)-2, Aurangabad u/s.263 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2011-12. 2. Briefly stated, the facts of the case are that the assessee is a land developer who filed his return on 31-03-2013 declaring total income of Rs.34,58,070/-. The assessment was completed u/s.143(3) on 21-03-2014 wherein the total income was assessed Assessee by Shri Girish Ladda Revenue by Shri Sardar Singh Meena Date of hearing 06-06-2022 Date of pronouncement 06-06-2022 ITA No. 231/PUN/2020 Suryakant D. Katale 2 at Rs.39,65,910/-. Thereafter, the AO found that the assessee had paid purchase consideration in contravention of section 40A(3) of the Act. The case was re-opened by means of a notice u/s.148. The assessment was completed u/s.143(3) r.w.s. 147 on 29-12-2016 determining total income of Rs.50,65,910/-. The ld. Pr. CIT observed that in the assessment made u/s.143(3) r.w.s. 147, the Assessing Officer (AO) did not disallow Rs.1,06,72,500/- u/s.40A(3) of the Act but settled the disallowance only at Rs.11.00 lakh. That is how, he opined that remaining cash payments also ought to have been disallowed. He, therefore, invoked section 263 and passed the impugned order remitting the matter to the file of the AO for examining afresh the question of disallowance u/s.40A(3) of the Act. The assessee has come up in appeal before the Tribunal. 3. Having heard the rival submissions and perused the relevant material on record, it is observed that the AO initiated re- assessment proceedings on the strength of cash payments amounting to Rs.1,06,72,500/- made by the assessee in violation of section 40A(3) of the Act, as under : ITA No. 231/PUN/2020 Suryakant D. Katale 3 Sr. No. Name of party Cash payment as per Notice u/s.263 Actual cash payment Amount already disallowed by AO Balance cash payment allowed by AO after verification of affidavits of payee, ID proofs 1 Hasan Md. Pathan, Pakahrsangvi 412500 412500 0 412500 2 Rajan Jaganth Sutar, Khandgaon 1600000 1600000 0 1600000 3 Kondabai Dongare, Khandgaon 3230000 3230000 0 3230000 4 Sheelabai Dongare & Others, Khandgaon 1230000 1230000 0 1230000 5 Sumanbai Raut & Others 162500 330000 330000 0 6 Ramprabhu V. Dhumal & others 130000 162500 162500 0 7 Ananat Gulabrao Salunke 302500 130000 130000 0 8 Suryakant K. Salunke 1400000 302500 302500 0 9 Dattatray B. Dongare, Khandgaon 200000 0 0 0 10 Geeta Ananat Salunke, Khandgaon 1500000 200000 0 200000 11 Chandrahagabai Dongare, Khandgaon 1500000 1500000 0 1500000 12 Chandrakant G. More 175000 175000 175000 0 13 Shivaji Salunke, Khandgaon 0 400000 0 400000 Total Rs. 11842500 9672500 1100000 8572500 Total wrongly mentioned in Notice u/s.163 10672500 ITA No. 231/PUN/2020 Suryakant D. Katale 4 4. While finalizing the assessment u/s.143(3) rw.s.147, the AO disallowed the transactions at Sl. Nos. 5,6,7, 8 and 12 totalling to Rs.11.00 lakh only. The assessee stated before the ld. Pr.CIT that the remaining persons, to whom the cash payments were made, were residing in two villages, namely, (1) Pakahrsangvi and (2) Khandgaon, which were not served by any bank. In support of this contention, the assessee produced certificates dated 22-12-2016 from Gram Panchayat (Local Govt. authority) to the effect these villages were not served by any bank. Copies of such certificates were also provided to the A.O. during the assessment proceedings. Section 40A(3) provides for disallowance where the assessee incurs any expenditure in respect of which payments are made otherwise than by an account payee cheque drawn on a bank or bank draft etc. in excess of Rs.10,000/-. Rule 6DD provides exceptions to the payments in certain circumstances in contravention of section 40A(3), in which the disallowance will not be made. Clause (g) of Rule 6DD provides that ; “Where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying of any business, profession or vocation, in any such village or town”. Thus, it is apparent that if the payment ITA No. 231/PUN/2020 Suryakant D. Katale 5 is made to a person otherwise than through the modes prescribed in the section and the recipient is residing in any village or town, not served by any bank, then no disallowance shall be made u/s.40A(3) of the Act. The assessee furnished certificates dated 22-12-2016 from Gram Panchayat (Local Govt. authority) that the two villages namely (1) Pakahrsangvi and (2) Khandgaon were not served by any bank. All the payments under consideration have been made to the residents of these villages as have been admitted by the ld. Pr.CIT as well. Not only such certificates were produced before the AO during the course of assessment proceedings on the basis of which he got satisfied and did not make any disallowance, these were also filed before the ld. Pr.CIT in the revision proceedings. He did not find anything amiss in them and still preferred to direct the AO to verify their veracity. Under such circumstances, we fail to comprehend as to how the assessment order can be termed as erroneous and prejudicial to the interest of revenue. The position would have been different if the AO had accepted the contention of the assessee of being covered under rule 6DD(g) without any support of the certificates. Here is a case in which the assessee furnished necessary certificates from Gram Panchayat (Local Govt. authority) ITA No. 231/PUN/2020 Suryakant D. Katale 6 indicating that the recipients under consideration were living in two villages which were not served by any bank and the AO accepted genuineness of the certificates. In that view of the matter, we do not find any infirmity in the order of the AO in not making disallowance in respect of the payments made to the residents of these two villages. The impugned order is set aside to this extent. 5. The only other issue on the basis of which the ld. Pr.CIT invoked his revisionary jurisdiction is non-verification of advances from the customers. He observed that the assessee claimed to have received advances from 66 customers totaling to Rs.89,60,500. As the AO did not examine the genuineness of the receipt of advances and their set off against the actual sales, the ld. Pr.CIT held the assessment order to be erroneous and prejudicial to the interests of Revenue. He, therefore, directed the AO to verify this aspect. 6. Having heard the rival contentions and perused the record, it is observed that the original assessment order in this case was passed on 21.03.2014. Thereafter, the AO issued notice u/s 148 of the Act on the ground that the assessee violated the provisions of section 40A(3) of the Act. This was the only subject matter of ITA No. 231/PUN/2020 Suryakant D. Katale 7 the re-assessment. In the assessment order passed u/s 147 of the Act, the AO made addition of Rs.11 lacs, being, the amount which, in his opinion, contravened the provisions of section 40A(3). Thus, it is apparent that the question of verification of advances from customer totaling to Rs.89,60,500 was not the subject matter of re-assessment concluded by means of an order on 29.12.2016. Once the issue of advances from customers is held to be not a part of re-assessment proceedings, naturally, it will pertain to the original assessment proceedings. 7. The limitation for revision is contained in sub-section (2) of section 263 of the Act, being, a period of two years from the end of financial year in which the order sought to be revised was passed. Thus, an order u/s 263 is required to be passed within a period of two years from the end of financial year in which the order sought to be revised is passed. The impugned order u/s 263 has been passed in this case on 25.03.2019. Though the re- assessment order was passed on 29.12.2016, the relevant assessment order for the purposes of advances from customers is the original assessment order, which was passed on 21.03.2014. The period of two years from the end of financial year in which the order was passed, came to end on 31.03.2016. As the ITA No. 231/PUN/2020 Suryakant D. Katale 8 impugned order has been passed in the year 2019, it is therefore, held to be barred by limitation on the issue of advances from customers. We, therefore, set aside the impugned order on this score as well. 8. In the result, the appeal is allowed. Order pronounced in the Open Court on 06 th June, 2022. Sd/- Sd/- (S.S.VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT प ु णे Pune; दनांक Dated : 06 th June, 2022 Satish आदेश क त ल प अ े षत/ Copy of the Order is forwarded to: 1. अपीलाथ / The Appellant; 2. यथ / The Respondent; 3. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, पुणे “B” / DR ‘B’, ITAT, Pune 4. गाड फाईल / Guard file आदेशान ु सार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune ITA No. 231/PUN/2020 Suryakant D. Katale 9 Date 1. Draft dictated on 06-06-2022 Sr.PS 2. Draft placed before author 06-06-2022 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *