ASHTAVINAYAK DEVELOPERS, Nagpur V. A.C.I.T.CIRCLE- 1, Nagpur

ITA 249/NAG/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2139 (ITAT-NAGPUR)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 03-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Question of law
• Section: 40A(3); 260A

Judgement Text

1 ITA NO. 249/NAG/2015. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO. 249 /NAG/201 5 . ASSESSMENT YEAR : 200 9 - 10 . ASHTAVINAYAK DEVELOPERS, ASSTT. COMMISSIONER OF INCOME - TAX, NAGPUR. VS. CIRCLE - 1, NAGPUR. PAN AAKFA9217D. APPELLANT. RESPONDENT. A PPELLANT BY : NONE. RESPONDENT BY : SHRI A.R. NINAWE. DATE OF HEARING : 11 - 07 - 2016 DATE OF PRONOUNCEMENT : 12 TH JULY, 2016 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 30 - 06 - 2015 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND : PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE IN THIS CASE. THE ASSESSING OFFICE HAS ERRED BY DISALLOWING RS.2250000/ - U/S 40A(3) OF THE INCOME - TAX ACT, 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE BEING A BUILDER AND DEVELOPER PURCHASED LAND FROM SHRI SUBHAM RAMRAO KALAWADE FOR RS.30 LAKHS AND MADE CASH PAYMENT OF RS.10 LAKHS TO THE SELLER ON 23 - 07 - 2008. THE ASSESSEE ALSO PURCHASED ANOTHER LAND FROM VIDYBAI RAMPRASSAD TAMHANPURE OF KOLAR FOR TOTAL CONSIDERATION OF RS.40 LAKHS, OUT OF WHICH RS.12,50,000/ - WAS PAID IN CASH. IN EXPLANATION TO THE PAYMENT IN CASH THE ASSESSEE SUBMITTED THAT THE LANDS WERE PURCHASED AS AGRICULTURAL LANDS FROM F ARMERS OF KHARDA AND 2 ITA NO. 249/NAG/2015. KOLAR VILLAGES AND SINCE THE FARMERS DID NOT HAVE ANY BANK ACCOUNT THEREFORE, INSISTED FOR CASH PAYMENT AND IT IS BUT FOR THIS REASON THAT INITIALLY THE FIRST INSTALMENTS WERE PAID IN CASH AND THE BALANCE AMOUNTS WERE PAID BY ACCOUNT P AYEE CHEQUES WHEN THE FARMERS OPENED THE BANK ACCOUNTS. THE ABOVE CONTENTION WAS NOT ACCEPTED BY THE AO. HE OPINED THAT THE PROVISIONS OF SECTION 40A(3) ARE ATTRACTED. 3. UPON ASSESSEES APPEAL, LEARNED CIT(APPEALS) ALSO CONFIRMED THE AOS ACTION. 4. AGAINS T THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. I HAVE HEARD THE LEARNED D.R. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, UPON CAREFUL CONSIDERATION I AM OF THE OPINION THAT THE MATTER MAY BE DISPOSED BY HEARING THE LEARNED D.R A ND PERUSING THE RECORDS. 6. UPON CAREFUL CONSIDERATION I FIND THAT THE ASSESSEE IN THIS CASE HAS MADE CERTAIN CASH PAYMENTS BEING PURCHASE PRICE OF LANDS. THERE IS NO DISPUTE IN THIS CASE THAT THE PAYMENTS IN CASH WERE MADE TO ACTUALLY IDENTIFIED RECIPIENT LAND OWNERS FROM WHOM PURCHASES WERE MADE BY DULY REGISTERED PURCHASE DEED WITH THE IDENTITY OF EACH SELLER ESTABLISHED BEYOND DOUBT AND THE GENUINENESS OF THE PAYMENT ALSO CONFIRMED BY THE REGISTERED DEED. THE ASSESSEES CONTENTION THAT FARMERS INITIALLY DID NOT HAVE BANK ACCOUNT, HENCE THE INITIAL PAYMENT WAS MADE IN CASH AND SUBSEQUENTLY WHEN THEY OPENED THE ACCOUNTS, THE REMAINING PAYMENTS WERE MADE BY CHEQUE, HAS ALSO CONSIDERABLE COGENCY. IN THESE CIRCUMSTANCES, IN MY CONSIDERED OPINION, THE ASSESSEE CANNOT BE VISITED WITH THE RIGOURS OF SECTION 40A(3). FOR THIS PROPOSITION, I REFER TO HONBLE CHHATISGARH HIGH COURT DECISION IN THE CASE OF ACIT VS. M/S R.P. REAL ESTATE PVT. LTD. IN TAX CASE (INCOME TAX APPEAL) NO. 13 OF 2016 VIDE ORDER DATED 01 - 03 - 201 6. I MAY GAINFULLY REFER TO THE HONBLE HIGH COURTS ADJUDICATION AS UNDER : 2. LEARNED COUNSEL FOR THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER IMPOSED LIABILITY TO TAX ON ~61,06,OOOI - APPLYING SECTION 40A(3) 3 ITA NO. 249/NAG/2015. OF THE INCOME TAX ACT (HEREINAFTER REFE RRED TO AS 'THE ACT') WHICH PROVIDES THAT ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND R UPEES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. IT WAS AN ADMITTED POSITION ON BEHALF OF THE ASSESSEE THAT PAYMENTS TO THE EXTENT OF ~61,06,OOOI - HAD BEEN MADE IN CASH TO FOUR DIFFERENT PERSONS TOWARDS PAYMENT OF PURCHASE PRICE FOR LANDS AS THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEALINGS AND CONSTRUCTION OF MULTISTORIED BUILDINGS. THE ASSESSING OFFICER HAS RECORDED HIS SATISFACTION THAT NO PLAUSIBLE EXPLANATION WAS GIVEN WHY PAYMENTS WERE MADE IN CASH CONTRARY TO L AW. THE ASSESSEE WAS DULY NOTICED UNDER SECTION 143(2) OF THE ACT AND WAS HEARD IN THE MATTER. 3. THE COMMISSIONER INCOME TAX (APPEALS) AFTER HEARING THE ASSESSEE AND THE DEPARTMENTAL REPRESENTATIVE CONCLUDED THAT PAYMENTS WERE MADE IN CASH TO ACTUAL IDENTIFIED RECIPIENT LAND OWNERS FROM WHOM PURCHASE WAS MADE BY DULY REGISTERED PURCHASE DEED WITH THE IDENTITY OF EACH SELLER ESTABLISHED BEYOND DOUBT AND THE GENUINENESS OF THE PAYMENTS ALSO CONFIRMED BY THE REGISTE RED DEEDS. THE APPELLATE AUTHORITY DWELT INTO THE INTRODUCTION OF SECTION 40A(3) OF THE ACT BY CIRCULAR DATED 6.7.1968 IN THE FINANCE ACT, 1968 WITH EFFECT FROM 1.4.1969 HOLDING THAT THE PURPOSE OF INSERTING THE PROVISION IN THE ACT WAS NOT TO PENALISE A B ONAFIDE ASSESSEE FOR MAKING CASH PAYMENT ABOVE THE PRESCRIBED LIMIT THE PURPOSE OF PREVENTIVE TO CHECK EVASION OF TAX AND FLOW OF UNACCOUNTED MONEY OR TO CHECK TRANSACTIONS WHICH WERE NOT GENUINE AND WHICH MAY BE A CAMOUFLAGE TO EVADE TAX BY SHOWING FICT ITIOUS AND FALSE TRANSACTIONS. IN SUPPORT OF HIS CONCLUSIONS THE APPELLATE AUTHORITY RELIED UPON IN 1999 240 ITR 902 GAUHATI [WALFORD TRANSPORT (EASTERN INDIA V. CIT). THE PAYMENT COULD BE ALLOWED TOWARDS EXPENDITURE IF CIRCUMSTANCES SO WARRANTED KEEPING I N MIND CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS AS MAY BE PERMISSIBLE UNDER THE RULES. THE APPELLATE AUTHORITY THEREFORE ARRIVED AT THE CONCLUSION THAT IN THE FACTS OF THE CASE THE ASSESSING OFFICER HAD ACTED MECHANICALLY WITHOUT DU E AND PROPER APPLICATION OF MIND TO STATUTORY PROVISIONS. 4. IN APPEAL BEFORE THE TRIBUNAL, THE DEPARTMENTAL REPRESENTATIVE IN A RHETORICAL MANNER SIMPLY RELIED UPON THE ORDER OF THE ASSESSING OFFICER WITHOUT ANY GROUND TO ASAIL THE ORDER OF THE COMMISSIO NER OF INCOME TAX (APPEALS). THE TRIBUNAL AGAIN NOTICED THAT FULL PAYMENT HAD BEEN MADE TO THE SELLER UNDER THE REGISTERED DEEDS WAS NOT DISPUTED BY THE ASSESSING OFFICER AND NEITHER WAS THE IDENTITY OR GENUINENESS OF THE SELLERS IN DISPUTE OR THE CONTENTI ON OF THE ASSESSEE THAT THE SELLERS BEING VILLAGERS HAD NO BANK ACCOUNTS AND THEREFORE INSISTED ON CASH PAYMENT. THE TRIBUNAL HELD THAT PAYMENT IN CASH WAS OUT OF BUSINESS COMPULSION AND NOT OPTIONAL. THE TRIBUNAL HELD THAT THE FACTS OF THE CASE WERE IN PA RI MATERIAL WITH SARASWATI HOUSING & DEVELOPERS V. ADDITIONAL COMMISSIONER OF INCOME TAX (2013) 142 ITD 0198, DELHI BENCH (G). REFERENCE MAY ALSO BE MADE TO RULE 6DD(G) & (J) PERMITTING CASH PAYMENTS OR REASONS SPECIFIED AND WHICH READS AS FOLLOWS: - 6DD . NO DISALLOWANCE UNDER SUB - SECTION (3) OF SECTION 40A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR 4 ITA NO. 249/NAG/2015. PROFESSION UNDER SUB - SECTION (3A) OF SECTION 40A WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A D AY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES IN THE CASES AND CIRCUMSTANCES SPECIFIED HEREUNDER, NAMELY: - XXX XXX XXX (G) 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 ON ANY BUSINESS, PROFESSION OR VOCATION, IN ANY SUCH VILLAGE OR TOWN; XXX XXX XXX (J) WHERE THE PAYMENT WAS REQUIRED TO BE MADE ON A DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE. 5. THE TRIBUNAL HAS INTERPRETED THE AFORESAID TO HOLD THAT CASH PAYMENTS ABOVE TWENTY THOUSAND RUPEES COULD BE ACCEPTED IF THE CONDITIONS PRESCRIBED IN THE RULES WERE FULFILLED T O THE SATISFACTION OF THE AUTHORITY CONCERNED. THE REASONING OF THE TRIBUNAL AND THE INTERPRETATION BY IT OF SECTION 40A(3) AND RULE 6DD(G) SUPPORTED BY JUDICIAL PRECEDENTS HAVE NOT BEEN ASSAILED IN THIS APPE A L AND NO SUBMISSION HAS BEEN MADE BEFORE US WIT H REGARD TO THE SAME. WE ARE SATISFIED THAT THE APPEAL OUGHT NOT TO HAVE FILED AND RAISES NO SUBSTANTIAL QUESTION OF LAW FOR DETERMINATION UNDER SECTION 260A OF THE ACT. 7. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENT AND DISCUSSION, I AM OF THE OPINION T HAT THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT ARE NOT ATTRACTED ON THE FACTS OF THE CASE. ACCORDINGLY I SET ASIDE THE ORDER OF LEARNED CIT(APPEALS) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 8. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF JULY,2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. NAGPUR, DATED: 12 TH JULY, 2016. 5 ITA NO. 249/NAG/2015. COPY FORWARDED TO : 1. ASHTVINAYAK DEVELOPERS, 5 TH FLOOR, LAKSHMISADA APARTMENTS, CHHATRAPATI SQUARE, NEAR SAI MANDIR , WARDHA ROAD, NAGPUR 440015. 2. A.C.I.T. CIRCLE - 1, NAGPUR. 3. C.I.T. - I, NAGPUR. 4. CIT(APPEALS), - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.