ACIT Non Corporate Circle 4, Coimbatore V. Sri Balaji Real Estates, Pollachi

ITA 2545/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6587 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 31-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIR S BHARATH IRS
• Assessee Lawyers: D ANAND
• Keywords: Income from undisclosed sources; Reasonable cause; Difference of opinion; Assessment record; Change of opinion; Set aside
• Section: 40A(3); 143(3); 133A; 191; 131; 263; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NOS.397/CHNY/2016, 2544, 2545 & 3148/2018 ! / ASSESSMENT YEARS :2011-12, 2011-12, 2012-13 & 2 012-13 THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 4, COIMBATORE. VS. M/S. SRI BALAJI REAL ESTATES, 7, KUPPUSAMY STREET, POLLACHI 642 001. [PAN ABVFS 1678J] ./I.T.A. NOS.1237 & 1238/CHNY/2017. ! / ASSESSMENT YEARS : 2012-13 & 2011-2012. M/S. SRI BALAJI REAL ESTATES, 7, KUPPUSAMY STREET, POLLACHI 642 001. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE WARD I, COIMBATORE. [PAN ABVFS 1678J] ( / APPELLANT) ( /RESPONDENT) ASSESSEE BY : SHRI. D. ANAND, ADVOCATE DEPARTMENT BY : SHIR. S. BHARATH, IRS, CIT. ' # $ % /DATE OF HEARING : 31-07-2019 &'! $ % /DATE OF PRONOUNCEMENT : 24-10-2019 ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 2 -: / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THESE ARE APPEALS AND CROSS APPEALS FILED BY TH E REVENUE AS WELL AS ASSESSEE DIRECTED AGAINST DIFFE RENT ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, COI MBATORE (HEREINAFTER CALLED AS CIT(A)) DATED 17.11.2015 & 12.06.2018 AND LD. PRINCIPAL COMMISSIONER OF INCOME TAX -2, (HEREINAF TER CALLED AS PCIT) DATED 24.03.2017 FOR ASSESSMENT YEARS 2011- 12 AND 2012- 2013. 2. SINCE, THE IDENTICAL FACTS AND ISSUES ARE INVOLVED IN THESE APPEALS, WE PROCEED TO DISPOSE THE SAME VIDE THIS C OMMON ORDER. 3. FOR THE SAKE OF CONVENIENCE AND CLARITY THE FACTS R ELEVANT TO THE APPEAL IN ITA NO.397/CHNY/2016 FOR ASSESSMENT YEAR 2011-12 ARE STATED HEREIN. 4. THE DEPARTMENT RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. THE ORDER OF THE LEARNED CIT(A) IS NOT ACCEPTA BLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) HAS ERRED IN LAW, IN DELETING THE DISALLOWANCE ON CESSATION OF LIABILITY. 3. THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE FACT THE MAJOR PORTION OF PAYMENTS FOR PURCHASING A PROPERTY CANNO T BE MADE IN TWO YEARS AFTER THE REGISTRATION WHEN THERE WAS ANOTHER PARTY WHO HAD ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 3 -: MADE MAJOR PAYMENT AS ADVANCE TOWARDS THE PURCHASE OF THE PROPERTY. 4. THE [EARNED CIT(A) HAS ERRED IN STATING THAT HE AO IS CONTRADICTING THE PAYMENT OF EXTRA CONSIDERATION OVER AND ABOVE T HAT IN THE REGISTERED DOCUMENT FOR WHICH EVIDENCE WAS FOUND DU RING SURVEY WHEREIN THE AO HAS ONLY HELD THAT THE ENTIRE PAYMEN TS WERE MADE ON OR BEFORE THE DATE OF REGISTRATION AND NOT IN DEFER RED IN MANNER. 5. THE LEARNED CIT(A) HAS ERRED IN STATING THAT THE ASSESSMENT ORDER DOES NOT MENTION ANYTHING ABOUT RELIABILITY OF PAYM ENT OF RS.6,50,00,000/- LATER AS AO HAS CLEARLY BROUGHT IN THE ORDER THAT ABOVE PAYMENT HAS NOT BEEN MADE IN DEFERRED MANNER AS CLAIMED BY THE ASSESSEE. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE CIT(A) MAY BE CANCELLED A ND THAT OF THE ASSESSING OFFICER RESTORED. 5. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT -ASSESSEE NAMELY SRI BALAJI REAL ESTATES IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF REAL E STATES. THE RETURN OF INCOME FOR THE AY 2011-12 WAS NOT FILED UNDER THE PROVISIONS OF SECTION 139 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). SUBSEQUENTLY, THE ASSESSING OFFICER HAD COME TO KNO W THAT ASSESSEE FIRM HAD PURCHASED LAND FOR CONSIDERATION OF H7,98, 70,000/-. BASED ON THIS INFORMATION, HE FORMED AN OPINION THAT INCOME ESCAPED ASSESSMENT AND ACCORDINGLY ISSUED NOTICE U/S.148 O F THE AC ON 12.11.2013. IN RESPONSE TO THE SAID NOTICE, ASSESSE E FILED RETURN OF INCOME FOR THE ASST. YEAR 2011-12 ON 16.11.2013 ELE CTRONICALLY DISCLOSING NIL INCOME. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER A T TOTAL INCOME OF ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 4 -: H6,50,00,00/- VIDE ORDER DATED 29.03.2015 PASSED U/ S.147 R.W.S. 144 OF THE ACT. WHILE DOING SO, THE ASSESSING OFFICER MADE ADDITION OF H6,50,00,000/- BEING AMOUNT PAYABLE TO MR. KANAKAR AJ AND MR. SENTHIL VADIVAL ON PURCHASE OF THE PROPERTY DISBELI EVING EXISTENCE OF THE LIABILITY. 6. THE FACTS AS SET OUT BY THE ASSESSING OFFICER IS EX TRACTED BELOW:- A SURVEY ACTION 133A WAS CONDUCTED IN THE PREMISE S OF M/S KWALITY SPINNING MILLS PVT LTD, POLLACHI ON 04-09-2 013. DURING THE COURSE OF SURVEY ACTION IT CAME TO LIGHT THAT M/S. KWALITY SPINNING MILLS PRIVATE LTD HAD SOLD 16.39 ACRES OF LAND (OLD CHITTA NO -53; NEW CHITTA NO-169; S.F NO 23/B AND 40/1) TO SH. KAN AKARAJ AND SH. R.M.SENTHIL VADIVEL OF M/S VANJIAMMAN FINANCE & REAL ESTATES, POLLACHI. THIS PROPERTY IN TURN WAS SOLD T O ASSESSEE, M/S BALAJI REAL ESTATE ON 27-12-2010 FOR VALUE OF RS.61 ,62,502/- VIDE REGISTERED SALE DEED DATED: 27-12-2010, DOCUMENT NO 10563/2010 AND RS.19,57,498/- VIDE REGISTERED SALE DEED DATED : 27-12-2010 , DOCUMENT NO 10564/2010. HOWEVER SOME UNREGISTERED DOCUMENTS WERE RECOVERED DURING THE SU RVEY PROCEEDINGS. AS PER ONE OF THE DOCUMENT THE PROPERT Y HAD BEEN SOLD TO ASSESSEE FIRM FOR RS.7,98,70,000/- VIDE UNR EGISTERED DOCUMENT DATED: 25-11-2010. IN ORDER TO VERIFY THE TRUE NATURE OF THE TRANSACTIONS, STATEMENT U/S 131 OF THE IT ACT W ERE RECORDED UNDER OATH FROM SH. KANAKARAJ AND SB. R.M.SENTHIL V ADIVEL ON 05- 09-2013. IN THE STATEMENT SH. KANAKARAJ AND SB. R.M .SENTHIL ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 5 -: VADIVEL, BOTH ADMITTED ON OATH THAT THE PROPERTY WA S REGISTERED AT A LOWER VALUE , BUT THE ACTUAL SALE CONSIDERATIO N RECEIVED WAS RS.7,98,70,000/- FROM M/S BALAJI REAL ESTATES. BASED ON THE ABOVE INFORMATION, THE ASSESSING OFFI CER FORMED AN OPINION THAT INCOME HAD ESCAPED ASSESSMENT AND ACC ORDINGLY ISSUED NOTICE U/S.148 OF THE ACT DATED 12.11.2013 AND DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUN D THAT OUT OF TOTAL CONSIDERATION OF H7,98,70,000/- PAID TO SELLERS NAM ELY MR. KANAKARAJ AND MR. SENTHIL VADIVAL, FOUND THAT SOURCE OF INVE STMENT FOR PURCHASE OF PROPERTY FOR H1,48,70,000/- WAS EXPLAINED. HOWE VER, FOR THE BALANCE AMOUNT OF H6,50,00,000/- WHEN REQUIRED BY THE ASSESSING OFFICER TO EXPLAIN THE SOURCE OF INVESTMENT, IT WAS EXPLAINED THAT BALANCE AMOUNT WAS PAID IN SUBSEQUENT TWO YEARS IN CASH. THE ASSESSING OFFICER DISBELIEVED THE EXPLANATION OF T HE ASSESSEE AND HELD THAT BALANCE CONSIDERATION OF H6,50,00,000/- W AS PAID AT THE TIME OF REGISTRATION OF THE SALE DEED BY PLACING RELIAN CE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT, 214 ITR 801 BY HOLDING THAT THE LIABILITY IS NOT EXISTING A ND BROUGHT TO TAX A SUM OF H6,50,00,000/-. ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 6 -: 7. BEING AGGRIEVED BY THE ABOVE ADDITION, AN APPEAL WA S PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDE R DELETED THE ADDITION TAKING INTO CONSIDERATION THE FOLLOWING S ET OF FACTS. (A) IT HAS NOT BEEN ESTABLISHED THAT THE PAYMENT IS NOT MADE IN FINANCIAL YEARS 2011-12 AND 2012-13. (B) THE PARTIES IN THEIR STATEMENTS HAVE NOT GIVEN ANY PROOF FOR THE RECEIPT OF PAYMENT BEFORE REGISTRATION. (C) THE ASSESSMENT ORDER DOES NOT MENTION ANYTHING ABOUT THE RELIABILITY OF PAYMENT OF RS. 6,50,00,000/- LATER. (D) THE ASSESSING OFFICER BY STATING CESSATION OF L IABILITY IS CONTRADICTING THE PAYMENT OF EXTRA CONSIDERATION OV ER AND ABOVE THAT IN THE REGISTERED DOCUMENT FOR WHICH EVIDENCE WAS FOUND DURING THE COURSE OF SURVEY U/S 133A. (E) THERE IS NO COGENT REBUTTAL OF THE APPELLANTS ARGUMENT THAT THE PAYMENT WAS DEFERRED AS THERE WAS LEGAL DISPUTE OVER THE PROPERTY. 8. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), TH E REVENUE IS IN APPEAL BEFORE US IN ITA NO.397/CHNY/2016 FOR ASSESSMENT YEAR 2011-12. IT IS CONTENDED BEFORE US THAT THE LD. CIT (A) OUGHT NOT HAVE DELETED THE ADDITION CONSIDERING THE CIRCUMSTANTIAL EVIDENCE, SUCH AS STATEMENT OF THE PARTNERS AND HAVING REGARD TO THE PREVAILING PRACTICE IN THE REAL ESTATE BUSINESS OUGHT TO HAVE HELD TH AT ON MONEY WAS PAID AT THE TIME OF PURCHASE OF LAND FOR WHICH THE SOURCE REMAINED UNEXPLAINED. ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 7 -: 9. ON THE OTHER HAND, LD. AUTHORISED REPRESENTATIVE SU BMITTED THAT BALANCE OF CONSIDERATION OF H6,50,00,000/- WA S PAID DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEARS 2012-201 3 AND 2013-14 AND HAVING REGARD TO THE OBSERVATION MADE BY THE AS SESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE YEAR 2012-2013, AND ASSESSING OFFICER HAVING HAD RECORDED A FINDI NG THAT THE VENDORS OF THE PROPERTY I.E. MR. KANAKARAJ AND MR. SENTHIL VADIVAL, HAD ADMITTED ON OATH ON 05.09.2013 THAT THE ENTIRE SA LE CONSIDERATION WAS RECEIVED, HE CANNOT RESORT TO MAKING ADDITION ON A CCOUNT OF CESSATION OF LIABILITY. 10. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. DURING THE PREVIOUS YEAR RELEVANT TO ASSESS MENT YEAR UNDER CONSIDERATION, RESPONDENT ASSESSEE BROUGHT 16.39 ACRES OF LAND AT POLLACHI FROM MR. KANAKARAJ AND MR. SENTHIL VADIV AL. THIS PROPERTY WAS PURCHASED BY THE SALE DEED DATED 27.12.2010 VI DE DOCUMENT NO.10563/2010 FOR H61,62,502/- AND DOCUMENT NO.1056 4/2010, DATED 27.12.2010 FOR H19,57,498/-. HOWEVER, IT WAS AN ADM ITTED FACT THAT TOTAL CONSIDERATION PAID ON PURCHASE OF SAID LAND WAS H7,98,70,000/-, OUT OF WHICH A SUM OF H6,50,00,000/- WAS SHOWN PAY ABLE TO THE SELLER OF THE PROPERTY AS ON 31.03.2011 WAS DISBELIEVED BY THE ASSESSING OFFICER AND BROUGHT TO TAX AS NON EXISTING LIABILIT Y. ON APPEAL BEFORE THE LD. CIT(A), THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 8 -: ASSESSING OFFICER. FROM THE PERUSAL OF PARA 1.5 O F THE ASSESSMENT ORDER, IT IS CLEAR THAT THE ASSESSING OFFICER HAD R ECORDED STATEMENT FROM MR. SENTHIL VADIVAL, WHO IS THE SELLER OF THE POPERY, CONFIRMED THE FACTUM OF RECEIPT OF BALANCE CONSIDERATION OF H 6,50,00,000/- IN CASH DURING THE PREVIOUS YEAR RELEVANT TO ASSESSME NT YEARS 2012-13 AND 2013-14 AND HE ALSO EXPLAINED BEFORE THE ASSESS ING OFFICER, THE CIRCUMSTANCES UNDER WHICH THE BALANCE CONSIDERATIO N WAS ACCEPTED IN CASH. HOWEVER BASED ON THE PLAINTIFF FILED BY ONE SHRI. VARADHARAJ IN THE CIVIL SUIT, WHO IS THE PARTNER OF M/S. VANJIAMM AN FINANCE AND REAL ESTATES THAT A SUM OF H4,00,00,000/- WAS RECEIVED IN CASH HAD CONCLUDED THAT THERE WAS NO MONEY PAYABLE ON ACCO UNT OF PURCHASE OF PROPERTY. THE ALLEGATION OF SHRI. VARADHARAJ RE QUIRED TO BE PROVEN, IN A COURT OF LAW. THE OUTCOME OF CIVIL SUIT WAS NOT BROUGHT ON RECORD BY THE ASSESSING OFFICER. IN THE CIRCUMSTA NCES, IT CANNOT BE SAID THAT IT IS A CONCLUSIVE PROOF OF PAYMENT OF H4,00,00,000/- BY THE RESPONDENT ASSESSEE FIRM TO THE VENDORS. IN ANY EVENT THERE IS NO MATERIAL ON RECORD SUGGESTING PAYMENT OF H6,50,00, 000/- ON THE DATE OF PURCHASE OF PROPERTY. FURTHER, THE ASSESSING OF FICER HAD NOT BROUGHT EVIDENCE IN REBUTTAL OF THE EXPLANATION O F THE ASSESSEE THAT THE BALANCE CONSIDERATION OF H6,50,00,000/- WAS PAI D DURING THE PREVIOUS YEARS RELEVANT TO ASSESSMENT YEARS 2012-13 AND 2013-14. IN THE CIRCUMSTANCES, IT CANNOT BE SAID THAT THERE IS A CESSATION OF ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 9 -: LIABILITY OF H6,50,00,000/- AS ON 31.03.2008, THERE FORE NO ADDITION ON ACCOUNT OF CESSATION OF LIABILITY IS WARRANTED IN THE HANDS OF THE RESPONDENT ASSESSEE FIRM. THEREFORE, WE DO NOT FIN D ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). THE APP EAL FILED BY THE REVENUE STANDS DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.397/CHNY/2016 FOR ASSESSMENT YEAR 2011-12 STANDS DISMISSED. 12. NOW, WE TAKE UP APPEAL OF THE ASSESSEE IN ITA NO.1238/CHNY/2017 FOR ASSESSMENT YEAR 2011-2012 FO R ADJUDICATION. 13. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF LD. PRINCIPAL COMMISSIONER OF INCOME TAX -2, COIMBATORE (IN SHORT LD. PCIT) PASSED U/S.263 OF THE ACT DATED 24.03.2017 FOR ASSESSMENT YEAR 2011-2012. 14. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL . 1. THE ORDERS OF PRCIT ARE OPPOSED TO ON LAW AND FACTS OF THE CASE. 2. THE PRCIT OUGHT TO HAVE APPRECIATED THAT HE ERRE D IN PASSING ORDERS U/S 263 IN THIS CASE 3. THE PRCIT OUGHT TO HAVE HELD THAT THE SECTION 26 3 DOES NOT CONFER POWERS OF REVISION IN THIS CASE 4. THE PRCIT OUGHT TO HAVE FOUND THAT THE ASSESSING OFFICER IN HIS ORDER DATED (NOW SET ASIDE) HAS DECLARED THAT THE L IABILITY HAS CEASED TO EXISTS. NOW THE ORDER U/S 263 IS ON THE M ODE OF REPAYMENT OF THE VERY SAME LIABILITY WHICH THE ASSE SSING OFFICER DECLARES DOES NOT EXISTS ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 10 -: 5. THE PRCIT OUGHT TO HAVE DROPPED PROCEEDINGS U/S 263 WHEN THE DEPARTMENT HAS FILED AN APPEAL QUESTIONING THE ORDERS OF CIT (A) ON THE CESSATION OF THE LIABILITY (ITA 397/2016 WITH ITAT CHENNAI A BENCH) 6. THE PRCIT OUGHT TO HAVE HELD THAT WITH THE APPEA L FIELD BY DEPARTMENT ON THE ISSUE, THE STAND TAKEN IN REVISIO N U/S 263 AMOUNTS TO CHANGE OF OPINION AND CONTRARY TO THE ST AND OF THE DEPARTMENT TAKEN BEFORE ITAT 7. THE PRCIT OUGHT TO HAVE FOUND THAT THE PROPOSAL U/S 263 TO QUESTION THE MODE OF DISCHARGE OF LIABILITY (VIOLAT IONS OF 40A(3) ) BECOMES RELEVANT ONLY WHEN THE DEPARTMENT ACCEPT TH E ORDER OF CIT(A) HOLDING NO CESSATION HAS TAKEN PLACE AND WIT HDRAWS APPEAL BEFORE ITAT (ITAT 397 /20 16 WITH ITAT CHENN AI A BENCH). 8. THE PRCIT OUGHT TO HAVE FOUND THAT THE APPELLANT HAD REASONABLE CAUSE FOR MAKING PAYMENT BY CASH AND THI S HAS BEEN EXAMINED IN DETAILS BY THE ASSESSING OFFICER AND AC CEPTED BY HIM 9. THE PRCIT HAS FAILED TO APPRECIATE THAT THERE EX ISTED PECULIAR CONDITIONS IN THE TRANSACTION LIKE COURT CASE PROBL EMS IN PARTNERSHIP ETC WARRANTING SOME SPECIAL ARRANGEMENT S IN THIS CASE. 10. FOR THESE AND OTHER GROUNDS TO BE SUBMITTED AT THE TIME OF HEARING THE APPELLANT PRAYS FOR CANCELLING THE ORDE RS OF PRCIT MADE U/S 263 11. THE APPELLANT RESERVES THE RIGHT OF ADDING TO O R OTHERWISE MODIFYING THE GROUNDS AS MAY BE ADVISED. 15. ON THE VERIFICATION OF THE ASSESSMENT RECORD OF M/S . SRI BALAJI REAL ESTATES, THE LD. PRINCIPAL COMMISSIONER OF I NCOME TAX ( IN SHORT THE LD. PCIT)-2, COIMBATORE NOTICED THAT ASSESSEE MADE CASH PAYMENTS OF H2,20,000/- ON 14.11.2010 AND H67,50,00 0/- ON ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 11 -: 21.11.2010 TOWARDS PURCHASE OF LAND WHICH WAS SHOWN AS STOCK IN TRADE IN THE BOOKS OF ACCOUNTS. THEREFORE, THE LD. PCIT HAD OPINED THAT SUCH CASH PAYMENTS ATTRACTED DISALLOWANCE U/S.40A( 3) OF THE ACT FOR FAILURE OF THE ASSESSING OFFICER TO MAKE DISALLOWA NCE U/S.40A(3) OF THE ACT, THE ASSESSMENT ORDER PASSED BY THE ASSESSING O FFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACC ORDINGLY, HE ISSUED SHOW CAUSE NOTICE U/S.263 OF THE ACT ON 29.06.2016. IN RESPONSE TO WHICH, IT WAS SUBMITTED THAT THE ORDER OF THE ASSE SSING OFFICER IS SUBJECT MATTER OF APPEAL BEFORE THE LD. CIT(A) AND THE LD. PCIT CANNOT EXERCISE THE POWER OF REVISION. IT WAS FURTHER CON TENDED THAT CASH PAYMENTS ARE COVERED BY ONE OF THE EXCEPTIONS CARV ED OUT UNDER THE PROVISIONS OF RULE 6DD AND THE QUESTION OF DISALLOW ANCE DOES NOT ARISE. HOWEVER, THE LD. PCIT HAD OBSERVED THAT AS SESSING OFFICER HAD NOT APPLIED HIS MIND ON THE ISSUE AND ACCORDINGLY P ASSED ORDER OF REVISION U/S.263 OF THE ACT SETTING ASIDE THE ASSE SSMENT ORDER TO THE ASSESSING OFFICER FOR DENOVO ASSESSMENT IN ACCORDAN CE WITH LAW. 16. BEING AGGRIEVED BY THE ORDER OF THE LD. PCIT U/S.26 3 OF THE ACT, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. AUTHORISED REPRESENTATIVE CONTENDED THAT THE ISSUE WHICH IS SOUGHT TO BE REVISED BY THE LD. PICIT, IS EXAMINED BY THE ASSE SSING OFFICER AND TOOK ONE OF THE POSSIBLE VIEW AND THEREFORE THE AS SESSMENT ORDER CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 12 -: REVENUE. LD. AUTHORISED REPRESENTATIVE SHRI. D. AN AND PLACED RELIANCE ON THE JUDGMENT OF HON'BLE SUPREME COURT I N THE CASES OF MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 8 3 (SC) AND C IT VS. MAX INDIA LTD, (2007) 295 ITR 282. 17. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE OPPOSED THE SUBMISSIONS MADE ON BEHALF OF THE ASSES SEE. 18. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ONLY ISSUE INVOLVED IN THE PRESENT APPE AL IS WHETHER OR NOT THE ORDER OF REVISION PASSED U/S.263 OF THE ACT BY THE LD. PCIT IS VALID UNDER LAW. ADMITTEDLY, THE FACTUM OF PAYMENT OF CO NSIDERATION IN CASH FOR PURCHASE OF PROPERTY WAS ON RECORD. BUT THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSING OFFICER HAD APPLIED HIS MIND AS TO APPLICABILITY OF PROVISIONS OF SECTION 40A(3) OF TH E ACT. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSING OFFICER TOOK ONE OF THE POSSIBLE VIEWS. THEREFORE, THE PROPOSITION OF LAW LAID DON E BY HON'BLE SUPREME COURT IN THE CASES OF MALABAR INDUSTRIAL CO. LTD (SUPRA) AND MAX INDIA LTD (SUPRA) HAD NO APPLICATION TO THE FA CTS OF THE PRESENT CASE. THE ARGUMENT OF THE LD. AUTHORISED REPRESENT ATIVE THAT THE ORDER OF THE ASSESSING OFFICER IS SUBJECT MATTER O F APPEAL BEFORE THE LD. CIT(A) CANNOT BE ACCEPTED, IN AS MUCH AS, THE ISSUE OF DISALLOWANCE U/S.40A(3) OF THE ACT IS NOT SUBJECT O F MATTER OF APPEAL ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 13 -: BEFORE THE LD. CIT(A). IT IS EQUALLY SETTLED POSITI ON OF LAW THAT NON APPLICATION OF MIND ON THE ISSUES WHICH ARE SOUGHT TO BE REVISED BY THE ASSESSING OFFICER RENDERS THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREF ORE, WE UPHOLD THE ORDER OF REVISION U/S.263 OF THE ACT. THUS, THE AP PEAL FILED BY THE ASSESSEE STANDS DISMISSED. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.1238/CHNY/2017 FOR ASSESSMENT YEAR 2011-12 STAND S DISMISSED. 20. NOW, WE TAKE UP APPEAL OF THE REVENUE IN ITA NO.2544/CHNY/2018 FOR ASSESSMENT YEAR 2011-2012 FOR ADJUDICATION. 21. THE ASSESSING OFFICER PASSED ORDER CONSEQUENT TO T HE ORDER PASSED BY THE LD. PCIT-2, COIMBATORE U/S.263 OF THE ACT DATED 24.03.2017 AFTER MAKING DISALLOWANCE OF H69,70,00 0/- U/S.40A(3) OF THE ACT REJECTING THE CONTENTION OF THE ASSESSEE T HAT CASH PAYMENTS WERE MADE ON SUNDAYS AND BANK HOLIDAY AND THEREFORE NO DISALLOWANCE CAN BE MADE. 22. BEING AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER HAD DELETED THE ADDITION PLACING RELIANCE ON THE DECISIONS OF HON'BLE SUPREME COURT IN THE CASE OF ATTAR SINGH GURUMUKH SINGH VS. ITO, 191 ITR 667 AN D JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CHROME LEATHER C OMPANY PRIVATE ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 14 -: LTD, 235 ITR 708, WHEREIN IT WAS HELD THAT NO DISAL LOWANCE CAN BE MADE U/S.40A(3) OF THE ACT IN CASE IF THE GENUINEN ESS OF THE PAYMENT IS ESTABLISHED. 23. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), TH E REVENUE IS IN APPEAL BEFORE US. THE LD. DEPARTMENTAL REPRE SENTATIVE ARGUED THAT THE LD. CIT(A) OUGHT NOT HAVE HELD THE PAYMENT ARE GENUINE, IN AS MUCH AS, THE PAYMENTS HAVE BEEN MADE INTENTIONALLY ON HOLIDAYS JUST TO AVOID THE CONSEQUENCE OF DISALLOWANCE. 24. ON THE OTHER HAND, THE LD. AUTHORISED REPRESENTATIV E PLACED RELIANCE ON THE ORDER OF THE LD. CIT(A). 25. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. ADMITTEDLY, THE CASH PAYMENTS ARE MADE TOWA RDS PURCHASE OF PROPERTY, WHICH IS STOCK IN TRADE IN THE HANDS OF T HE ASSESSEE FIRM. THE PROVISIONS OF SECTION 40A(3) OF THE ACT STATES THAT ANY EXPENDITURE INCURRED IN CASH AGGREGATING TO THE SUM OF H20,000/ - ON A SINGLE DAY SHALL BE DISALLOWED EXCEPT UNDER THE CIRCUMSTANCES MENTIONED UNDER RULE 6DD. IT IS A MATTER OF RECORD THAT BOTH THE A SSESSEE, AS WELL AS THE PAYEES ADMITTED CASH PAYMENTS AND THE SAME WAS DULY REFLECTED IN THE RESPECTIVE BOOKS. THUS, THE GENUINENESS OF THE EXPENDITURE IS ESTABLISHED BEYOND DOUBT, NO DISALLOWANCE CAN BE M ADE U/S.40A(3) OF THE ACT IN THE LIGHT OF THE OF THE JUDGMENT OF HON' BLE SUPREME COURT IN ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 15 -: THE CASE ATTAR SINGH GURUMUKH SINGH (SUPRA) WHEREIN IT WAS HELD AS FOLLOWS:- SECTION 40A(3) ONLY EMPOWERS THE ASSESSING OFFICE R TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RE SPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED CHEQUE OR CROS SED BANK DRAFT. THE PAYMENT BY CROSSED CHEQUE OR CROSSE D BANK DRAFT IS INSISTED ON TO ENABLE THE ASSESSING AUTHOR ITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHE R IT WAS OUT OF THE INCOME FROM UNDISCLOSED SOURCES. THE TERMS OF SECTION 40A(3) ARE NOT ABSOLUTE. CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. GENUINE AND BONA FIDE TRANSACTIONS ARE NO T TAKEN OUT OF THE SWEEP OF THE SECTION. THUS, THE DELETION MADE BY THE LD. CIT(A) IS BASED ON LAW LAID BY HON'BLE SUPREME COURT IN THE CASE OF ATTAR SINGH GURUMUKH SINGH (SUPRA). WE DO NOT FIND ANY REASON TO INTERFERE WI TH THE ORDER OF THE LD. CIT(A). THE APPEAL FILED BY THE REVENUE STANDS DISM ISSED. 26. IN THE RESULT, T HE APPEAL FILED BY THE REVENUE IN ITA NO.2544/CHNY/2018 FOR ASSESSMENT YEAR 2011-2012 STA NDS DISMISSED. 27. NOW, WE TAKE UP ASSESSEES APPEAL IN ITA NO.1237/CHNY/2017 FOR ASSESSMENT YEAR 2012-2013 FO R ADJUDICATION. 28. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012- 2013 WAS FILED ELECTRONICALLY ON 28.09.2013 DISCLOSING A T TOTAL INCOME OF H2,52,32,670/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 16 -: WAS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCO ME TAX, NON CORPORATE CIRCLE-4, COIMBATORE VIDE ORDER D ATED 27.03.2015 PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (F OR SHORT THE ACT) AT TOTAL INCOME OF H2,72,95,903/- AFTER MAKING ADD ITION OF H20,63,233/- ON ACCOUNT OF DISALLOWING IMPROVEMENT EXPENDITURE FOR WANT OF EVIDENCE. WHILE THE MATTER STOOD THUS, THE LD. PCIT-2, COIMBATORE ON SUO-MOTU EXAMINATION OF ASSESSMENT RECORDS HAD COME TO CONCLUSION THAT THE ASSESSING OFFICER HAD FAILED TO CONSIDER THE APPLICABILITY OF PROVISIONS OF SECTION 40A(3) O F THE ACT TO THE CASH PAYMENTS OF H3,50,00,000/- MADE DURING THE FINANCI AL YEAR RELEVANT TO ASSESSMENT YEAR 2012-2013 TOWARDS PURCHASE OF LAND, WHICH IS STOCK IN TRADE. ACCORDINGLY, THE LD. PCIT ISSUED SHOW C AUSE NOTICE UNDER THE PROVISIONS OF SECTION 263 OF THE ACT ON 29.06.2 016 CALLING UPON THE ASSESSEE TO SHOW CAUSE WHY THE ASSESSMENT ORDER S HOULD NOT BE REVISED FOR THE ABOVE REASONS. IN RESPONSE TO THE SHOW CAUSE NOTICE, ASSESSEE FILED DETAILED SUBMISSIONS CONTENDING THA T THE ISSUE WHICH IS SOUGHT TO BE REVISED IS SUBJECT MATTER OF APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2011-2012 AND THEREFORE IT IS CONTENDED THAT JURISDICTION U/S.263 OF THE ACT CANNOT BE INVOKED. EVEN ON MERITS, IT WAS CONTENDED THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT HAVE NO APPLICATION TO THE IMPUGNED PAYMENTS AS THE CAS H PAYMENTS WERE MADE ON BANK HOLIDAYS AND THE PAYMENTS WERE GENUINE . LD. PCIT ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 17 -: AFTER DULY CONSIDERING THE SUBMISSIONS HELD THAT T HE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, ACCORDINGLY SET ASIDE THE ASSESSMENT ORDER TO THE ASSESSING OFFICER FOR DENOVO ASSESSMENT AFTER GIVING AN OPPORTUNITY O F HEARING TO THE ASSESSEE FIRM. 29. BEING AGGRIEVED BY THE ORDER OF THE LD. PCIT, ASSE SSEE IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. IT IS CO NTENDED THAT THE VERY SAME ISSUE WHICH IS SOUGHT TO BE REVISED UNDER THE PROVISIONS OF SECTION 263 OF THE ACT IS A SUBJECT MATTER OF APPEA L BEFORE THE LD. CIT(A) IN THE PRECEDING ASSESSMENT YEAR 2011-2012. IT IS FURTHER CONTENDED THAT LD. PCIT CANNOT EXERCISE THE POWERS OF REVISION U/S.263 OF THE ACT ON DEBATABLE ISSUES. IT IS FURTHER CON TENDED THAT IN ANY CASE, WHERE THE ASSESSING OFFICER ADOPTED ONE OF T HE POSSIBLE VIEWS, THE POWER OF REVISION CANNOT BE EXERCISED U/S.263. PLACED RELIANCE ON THE DECISIONS OF HON'BLE SUPREME COURT IN THE CASES MALABAR INDUSTRIAL CO. LTD. (SUPRA) AND MAX INDIA LTD, (SUPRA). 30. EVEN ON MERITS, IT IS SUBMITTED THAT ONCE GENUINE NESS OF THE CASH PAYMENTS IS ESTABLISHED, THE DISALLOWANC E U/S.40A(3) OF THE ACT DOES NOT ARISE. IN SUPPORT OF THIS, LD. AUTHOR ISED REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF CO-ORDINATE BENC H OF THE TRIBUNAL IN THE CASE OF M.R. CHENDILNATHAN VS. ACIT IN ITA NO.2 010/CHNY/2017 ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 18 -: AND 1893/CHNY/2017, DATED 23.05.2019 FOR ASSESSMENT YEAR 2011- 2012. 31. ON THE OTHER HAND, THE LD. CIT- DEPARTMENTAL REPRES ENTATIVE PLACED RELIANCE ON THE ORDER OF THE LD. PCIT. 32. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE SOLITARY ISSUE INVOLVED IN THE PRESEN T APPEAL RELATES TO THE VALIDITY OF ASSUMPTION OF JURISDICTION U/S.263 OF T HE ACT. IN THIS CASE, ORIGINAL ASSESSMENT ORDER WAS COMPLETED ON 27.03.20 15. AT THE TIME OF COMPLETION OF ORIGINAL ASSESSMENT, FACTUM OF PA YMENT OF CONSIDERATION OF H3,50,00,000/- IN CASH IS WITHIN T HE KNOWLEDGE OF THE ASSESSING OFFICER. HOWEVER, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ENTIRE CONSIDERATION WAS DISCHARGED DURIN G THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2011-2012 AND THE BALA NCE CONSIDERATION SHOWN AS PAYABLE, HE HELD IT TO BE FICTITIOUS AN D ACCORDING CHOSE TO MAKE ADDITION ON ACCOUNT OF CESSATION OF LIABILITY. THE ADDITION WAS CONTESTED BY THE ASSESSEE IN ASSESSMENT YEAR 2011-2 012 AND THE LD. CIT(A) HAD DELETED THE ADDITION. ON FURTHER APPEAL BEFORE THIS TRIBUNAL, THE DELETION OF ADDITION WAS CONFIRMED B Y THE TRIBUNAL VICE PARA 10 ABOVE (SUPRA). IN THE BACKDROP OF THESE F ACTS, THE ISSUE THAT COMES UP FOR CONSIDERATION IS WHETHER THE EXERCIS ING THE REVISIONARY POWERS U/S.263 OF THE ACT HOLDING THE ASSESSMENT O RDER ERRONEOUS FOR ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 19 -: FAILURE OF THE ASSESSING OFFICER TO CONSIDER THE AP PLICABILITY OF SECTION 40A(3) OF THE ACT TO THE CASH PAYMENTS MADE IS CORR ECT OR NOT. FROM THE PERUSAL OF THE ASSESSMENT ORDERS FOR THE YEARS 2011-2012 AND 2012-2013, IT WOULD DEMONSTRATE THAT THE ASSESSING OFFICER HAD REJECTED THE CONTENTION OF THE ASSESSEE THAT CASH P AYMENTS WERE MADE IN THE SUBSEQUENT ASSESSMENT YEARS I.E. 2012-1 3 AND 2013- 2014. ACCORDINGLY, THE ASSESSING OFFICER HAD NOT CHOSEN RESORT TO THE DISALLOWANCE U/S.40A(3) OF THE ACT. THE COURSE OF ACTION ADOPTED BY THE ASSESSING OFFICER IS INCONSONANCE WITH THE AP PROACH ADOPTED BY HIM IN THE PRECEDING ASSESSMENT YEAR WHICH IS ONE O F THE POSSIBLE VIEW. THE VIEW OF THE ASSESSING OFFICER IS BEING CH ALLENGED BY THE ASSESSEE, BEFORE LD. CIT(A) WHEN RELIEF WAS GRANT ED BY THE CIT(A), THE MATTER WAS BEING CHALLENGED IN FURTHER APPEAL B EFORE THE TRIBUNAL. THIS WOULD GO TO SHOW THAT THE ASSESSING OFFICER I S OF THE OPINION THAT COURSE OF ACTION ADOPTED BY HIM IS CORRECT AND TH E LD. PCIT CANNOT REVISE THE ASSESSMENT ORDER ON THE GROUND THAT ASSE SSING OFFICER SHOULD HAVE ADOPTED DIFFERENT VIEW IN RESPECT OF V ERY SAME ISSUE WHICH IS NOT PERMISSIBLE IN VIEW OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA). THE RELEVANT P ARA IS ABSTRACT HEREUNDER:- THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REV ENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY TH E ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 20 -: THE REVENUE. FOR EXAMPLE, WHEN AN INCOME-TAX OFFICE R ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULT ED IN LOSS OF REVENUE ; OR WHERE TWO VIEWS ARE POSSIBLE AND THE I NCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME-TA X OFFICER IS UNSUSTAINABLE IN LAW. IT HAS BEEN HELD BY THIS COUR T THAT WHERE A SUM NOT EARNED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERING, THE ORDER PASSED BY THE ASSESSING OFFICER ACCEPTING THE SAME AS SUCH WILL BE ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. RAMPYARI DEVI SARAOGI V. CIT [1968] 67 ITR 84 (SC) AND IN SMT. TARA DEVI AGGARWAL V. CIT [1973] 88 ITR 323 (S C). APPLING THE PRINCIPLE ENUNCIATED ABOVE TO THE FACT S OF THE CASE, WE ARE OF THE OPINION THAT THE ORDER OF REVISION BY T HE LD. PCIT IS NOT VALID IN LAW AND THEREFORE WE QUASH THE REVISIONARY PROC EEDINGS U/S.263 OF THE ACT. 33. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I N ITA NO.1237/CHNY/2017 FOR ASSESSMENT YEAR 2012-2013 IS ALLOWED. 34. NOW, WE TAKE UP APPEALS OF THE REVENUE IN ITA NOS. 2545 & 3148/CHNY/2018 FOR ASSESSMENT YEAR 2012-2013 FOR AD JUDICATION. 35. SINCE WE HAD ALREADY HELD THAT THE REVISION ASSES SMENT U/S.263 OF THE ACT IS INVALID IN LAW OF PARA 32 A BOVE, THE CONSEQUENT ASSESSMENT ORDER DOES NOT SURVIVE. THEREFORE, TH E APPEALS FILED BY THE REVENUE IN ITA NOS.2545 & 3148/CHNY/2018 ARE DI SMISSED AS INFRUCTUOUS. ITA NOS.397/16, 1237 & 1238/17, 2544 & 2545/18 :- 21 -: 36. TO SUMMARIZE THE RESULTS, THE APPEALS FILED BY THE ASSESSEE IN ITA NO.1238/CHNY/2017 FOR ASSESSMENT YEAR 2011-2 012 STANDS DISMISSED WHEREAS ITA NO.1237/CHNY/2017 FOR ASSES SMENT YEAR 2012-2013 IS ALLOWED. APPEALS OF THE REVENUE IN ITA NOS. 397/CHNY/2016 AND 2544/CHNY/2018 FOR ASSESSMENT YEA R 2011-2012 AND ITA NOS.2545 & 3148/CHNY/2018 FOR ASSESSMENT YE AR 2012-2013 STAND DISMISSED. ORDER PRONOUNCED ON 24TH DAY OF OCTOBER, 2019, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER ( # / CHENNAI ) / DATED:24TH OCTOBER, 2019. KV $ +%,- .-!% / COPY TO: 1 . /0 / APPELLANT 3. ' 1% () / CIT(A) 5. -4 +%5 / DR 2. +6 /0 / RESPONDENT 4. ' 1% / CIT 6. 7 8# / GF