Income Tax Officer Ward-1(2)(3), Bangalore V. Shri.Erappa Krishnappa , Bnagalore

ITA 247/BANG/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8494 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 11-02-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R PRATHIBHA
• Assessee Lawyers: MUZAFFAR HUSSAIN
• Keywords: Set aside
• Section: 40A(3)

Judgement Text

ITA NO.247 /BANG/2019 SHRI ERAPPA KRISHNAPPA, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.247/BANG/2019 ASSESSMENT YEAR : 2011-12 ITO WARD-1(2)(3) BANGALORE VS. SHRI ERAPPA KRISHNAPPA ADAKAMARANAHALLI, MAKALI POST 21 ST KM, TUMKUR ROAD NELAMANGALA TALUK BANGALORE NORTH BANGALORE PAN NO : AFFPK2791A APPELLANT RESPONDENT APPELLANT BY : SMT. R. PRATHIBHA, A.R. RESPONDENT BY : SHRI MUZAFFAR HUSSAIN, D.R. DATE OF HEARING : 12.01.2021 DATE OF PRONOUNCEMENT : 12.01.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 26.11.2018 PASSED BY LD. CIT((A)-2, BENGALURU AND IT RELATES TO THE ASSESSMENT YEAR 2011-12. THE REVENUE IS AGG RIEVED BY THE DECISION OF LD. CIT(A) IN GRANTING RELIEF IN RESPEC T OF THE FOLLOWING ISSUES:- A) DISALLOWANCE OF DEVELOPMENT CHARGES - RS.4,33,15,19 3/- B) DISALLOWANCE OF PAYMENT FOR PURCHASE OF LAND - RS.1,27,50,000/- ITA NO.247 /BANG/2019 SHRI ERAPPA KRISHNAPPA, BANGALORE PAGE 2 OF 6 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FILM PRODUCTION AND ALSO IN REAL ESTATE ACTIVITIES. THE ABOVE SAID TWO ISSUES RELATE TO REAL ESTATE ACTIVITIES CARRIED ON BY THE ASSESSEE. 3. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF D EVELOPMENT CHARGES - RS.4,33,15,193/-. THE A.O. NOTICED THAT T HE ASSESSEE IS CARRYING ON REAL ESTATE ACTIVITY UNDER THE NAME E. K. LAND DEVELOPMENTS. THE AO NOTICED THAT THE ASSESSEE HA S CLAIMED DEDUCTION OF RS.4,33,15,193/- AS DEVELOPMENT EXPENS ES DURING THE YEAR UNDER CONSIDERATION. THE A.O. FURTHER NOTICED THAT THE ASSESSEE HAD SHOWN DEVELOPMENT CHARGES OF RS.7,74,0 5,400/- IN THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2010-11. IN THE ABSENCE OF DETAILS RELATING TO DEVELOPMENT EXPENSES, THE A. O. HAD DISALLOWED THE ABOVE SAID AMOUNT IN ASSESSMENT YEAR 2010-11 AN D THE ASSESSEE HAD CHALLENGED THE SAME BY FILING APPEAL B EFORE LD. CIT(A) AND THE SAME IS PENDING. IT IS NOTICED THAT THE AS SESSEE HAS PAID A SUM OF RS.3,16,05,400/- BY WAY OF CASH OUT OF THE A BOVE SAID AMOUNT OF RS.7,44,05,400/-. ACCORDINGLY, THE OUTST ANDING BALANCE TOWARDS DEVELOPMENT CHARGES PAYABLE WAS SHOWN AT RS.4,58,00,000/- AS ON 31.3.2011. 4. THE A.O. NOTICED THAT THE AMOUNT OF RS.4,33,1 5,193/- CLAIMED AS DEDUCTION DURING THE YEAR UNDER CONSIDERATION FO RMED PART OF THE EXPENDITURE OF RS.7,74,05,400/- DISALLOWED IN A .Y. 2010-11. SINCE THE ASSESSEE DID NOT FURNISH ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM TO PROVE THE GENUINENESS, THE A.O. DISALLOWED THE SAME. THE A.O. ALSO HELD THAT THE PROVISIONS O F SECTION 40A(3) OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT] IS ALSO APPLICABLE, SINCE THE ASSESSEE HAS MADE THE PAYMENT EXCEEDING R S.20,000/- BY WAY OF CASH. ACCORDINGLY, HE DISALLOWED THE SUM OF RS.4,33,15,193/- ON BOTH GROUNDS. ITA NO.247 /BANG/2019 SHRI ERAPPA KRISHNAPPA, BANGALORE PAGE 3 OF 6 5. THE LD. CIT(A) NOTICED THAT APPEAL RELATING TO A SSESSMENT YEAR 2010-11 HAS SINCE BEEN DISPOSED OF BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE, I.E., IT WAS SUBMITTED BEFORE THE TRIBUNA L THAT THE ASSESSEE HAD NOT CLAIMED LAND DEVELOPMENT EXPENSES OF RS.7,74,05,400/- AS EXPENDITURE IN ASSESSMENT YEAR 2010-11. IT WAS SUBMITTED BEFORE THE TRIBUNAL THAT THE LAND DEV ELOPMENT EXPENSES WILL BE CLAIMED PROPORTIONATELY IN THE SUB SEQUENT YEARS IN PROPORTION TO SALE OF SITES. THE TRIBUNAL ACCEPTED THE EXPLANATIONS OF THE ASSESSEE AND ACCORDINGLY DELETED THE DISALLO WANCE OF RS.7.74 CRORES MADE IN AY 2010-11. 6. THE LD. CIT(A) APPRECIATED THAT THE ASSESSEES CLAIM OF RS.4,33,15,193/- AS DEVELOPMENT EXPENSES DURING THE YEAR UNDER CONSIDERATION IS THE PROPORTIONATE EXPENDITURE CLAI MED BY THE ASSESSEE IN RESPECT OF SALE OF SITES EFFECTED DURIN G THE YEAR. THE LD. CIT(A) ALSO NOTICED FROM THE LEDGER EXTRACT THAT THE INDIVIDUAL PAYMENTS MADE TOWARDS LAND DEVELOPMENT EXPENSES WAS LESS THAN RS.20,000/-. ACCORDINGLY, HE HELD THAT THE PROVISI ONS OF SECTION 40A(3) OF THE ACT ARE NOT ATTRACTED AND ACCORDINGLY DELETED THE ADDITION. 7. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED T HE RECORD. AS NOTICED EARLIER, THE A.O. HAD MADE THE DISALLOWA NCE OF RS.4,33,15,193/- ON TWO GROUNDS, VIZ., (A) ABSENCE OF DOCUMENTARY EVIDENCE IN SUPPORT OF E XPENSES AND (B) CONTRAVENTIONS OF PROVISIONS OF SECTION 40A(3) OF THE ACT. HOWEVER, THE LD. CIT(A) HAS ADDRESSED THE ISSUE OF CONTRAVENTION OF PROVISIONS OF SECTION 40A(3) OF THE ACT, THAT TOO O N EXAMINING THE LEDGER EXTRACTS. IT IS NOT CLEAR AS TO WHETHER THE DOCUMENTARY ITA NO.247 /BANG/2019 SHRI ERAPPA KRISHNAPPA, BANGALORE PAGE 4 OF 6 EVIDENCES WERE EXAMINED BY LD. CIT(A), SINCE NO OBS ERVATION WAS MADE BY LD CIT(A) IN THAT REGARD IN HIS ORDER. WE ARE OF THE VIEW THAT THE APPLICABILITY OF PROVISIONS OF SEC.40A(3) COULD WELL BE APPRECIATED ONLY IF THE DOCUMENTARY EVIDENCES WERE ALSO EXAMINED, BESIDES THE LEDGER EXTRACTS. WE HAVE EARLIER NOTICE D THAT THE ASSESSEE HAS NOT FURNISHED DOCUMENTARY EVIDENCES BE FORE A.O. AND HENCE THE APPLICABILITY OF PROVISIONS OF SECTION 40 A(3) OF THE ACT WAS ALSO NOT ACTUALLY EXAMINED BY THE A.O. 8. WE ALSO NOTICE THAT THE EXPENDITURE OF RS.4,33,1 5,193/- CLAIMED BY THE ASSESSEE FORMED PART OF RS.7,74,05,4 00/-, WHICH WAS INCURRED BY THE ASSESSEE DURING THE YEAR RELEVA NT TO THE ASSESSMENT YEAR 2010-11. AS NOTICED EARLIER, THE A SSESSEE HAS CLAIMED PROPORTIONATE EXPENDITURE RELATING TO THE W HOLE OF SITES AFFECTED BY IT. SINCE THE ASSESSEE HAS CLAIMED THE EXPENDITURE DURING THE YEAR UNDER CONSIDERATION, IT IS THE DUTY OF THE ASSESSEE TO PROVE THE EXPENDITURE BEFORE THE A.O. BY FURNISH ING RELEVANT DOCUMENTARY EVIDENCES. SINCE THE LD. CIT(A) HAS AL SO NOT EXAMINED THE DOCUMENTARY EVIDENCES, WE ARE OF THE V IEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE A.O. WITH REGARD TO BOTH THE ISSUES, VIZ., THE GENUINENESS OF THE E XPENSES AND APPLICABILITY OF SECTION 40A(3) OF THE ACT. 9. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE A.O. FOR EXAMINING IT AFRESH. 10. THE NEXT ISSUE RELATES TO DISALLOWANCE OF LAND PURCHASE EXPENSES OF RS.1,27,50,000/- U/S 40A(3) OF THE ACT. THE A.O. NOTICED THAT THE ASSESSEE HAS DEBITED A SUM OF RS.6 ,40,46,399/- TOWARDS COST OF LAND. THE A.O. NOTICED FROM THE DE TAILS FURNISHED ITA NO.247 /BANG/2019 SHRI ERAPPA KRISHNAPPA, BANGALORE PAGE 5 OF 6 BY THE ASSESSEE THAT THE ASSESSEE HAS PAID A SUM OF RS.1,27,50,000/- BY WAY OF CASH TOWARDS PURCHASE OF LAND. SINCE THE LAND FORMED TRADING STOCK OF THE ASSESSEE, THE A.O. DISALLOWED THE ABOVE SAID PAYMENT BY INVOKING THE PROVISIONS O F SECTION 40A(3) OF THE ACT. 11. BEFORE LD. CIT(A), THE ASSESSEE SUBMITTED THAT THE LANDS WERE PURCHASED FROM AGRICULTURIST FROM PLACES, WHERE NO BANKING FACILITY IS AVAILABLE AND HENCE THE ABOVE SAID PAYMENTS ARE COVERED BY EXCEPTIONS GIVEN UNDER RULE 6DD OF THE I.T. RULES. ACCEPTING THE ABOVE SAID EXPLANATION OF THE ASSESSEE, THE LD. CIT (A) DELETED THE ADDITION. 12. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. WE NOTICED EARLIER THAT THE ASSESSEE DID NOT OFFER ANY EXPLANATION BEFORE A.O. WITH REGARD TO THE PAYMENT MADE BY WAY OF CASH TOWARDS PURCHASE OF LAND. HOWEVER, BEFORE LD. CIT( A), THE ASSESSEE HAS TAKEN SUPPORT OF PROVISIONS OF RULE 6DD AND THE LD. CIT(A) HAS ALSO GRANTED RELIEF WITHOUT PROPERLY EXAMINING THE CLAIM OF THE ASSESSEE. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THIS ISSUE ALSO REQUIRES FRESH EXAMINATION AT THE END OF THE A .O. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE A.O. FOR EXAMIN ING THE CLAIM OF THE ASSESSEE AFRESH. ITA NO.247 /BANG/2019 SHRI ERAPPA KRISHNAPPA, BANGALORE PAGE 6 OF 6 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JAN, 2021 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 12 TH JAN, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.