Appeal details
Counselvise Citation
[2015] 134 COUNSELVISE.COM (IT) 0176 (ITAT-VISAKHAPATNAM)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 7 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
11-12-2015
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB
Next Hearing Date
18-11-2015
Assessment Year
2008-2009
Appeal Filed On
06-05-2013
Judgement Text
ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , . . . . , $ $ $ $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.242/VIZAG/2012 ( / ASSESSMENT YEAR : 2009-10 ) DCIT CIRCLE - 2(1) GUNTUR VS. KALLAM HOUSING & REAL ESTATES (PVT.) LTD. GUNTUR [ PAN: AABCK 6024G] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) ./ I.T.A.NO.316/VIZAG/2013 ( / ASSESSMENT YEAR : 2008-09 ) KALLAM HOUSING & REAL ESTATES (PVT.) LTD. GUNTUR VS. DCIT CIRCLE - 2(1) GUNTUR ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) C.O. NO.28/VIZAG/2012 (ARISING OUT OF I.T.A.NO.242/VIZAG/2012) ( / ASSESSMENT YEAR : 2009-10 ) DCIT CIRC LE - 2(1) GUNTUR VS. KALLAM HOUSING & REAL ESTATES (PVT.) LTD. GUNTUR ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 2 & ) / APPELLANT BY : SHRI M. NARAYANA RAO & SHRI TH. LUCAS PETER, CIT(DR) '(& ) / RESPONDENT BY : SHRI G.V.N. HARI, AR ) - / DATE OF HEARING : 18.11.2015 ) - / DATE OF PRONOUNCEMENT : 11/12/2015 / O R D E R PER BENCH: THESE CROSS APPEALS FILED BY THE REVENUE AS WELL A S ASSESSE, FOR THE ASSESSMENT YEAR 2009-10 ARE DIRECTED AGAINST TH E ORDER OF CIT(A), GUNTUR DATED 3.4.2012 AND ALSO APPEAL FILED BY THE ASSESSE, IS DIRECTED AGAINST THE ORDER OF CIT U/S 263 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) FOR THE ASSESSMEN T YEAR 2008-09. SINCE, THE ISSUE INVOLVED IN THESE APPEALS IS COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF BY WAY OF THIS COMMON ORDE R FOR THE SAKE OF CONVENIENCE. ITA 242/VIZAG/2012 & CO 28/VIZAG/2012: 2. THE BRIEF FACTS OF THE CASE, ARE THAT THE ASSESS EE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPME NT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 11.9.2009 , DECLARING A LOSS OF RS.11,12,943/-. THE CASE WAS SELECTED FOR SCRUT INY UNDER CASS AND ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 3 ACCORDINGLY NOTICE U/S 143(2) & 142(1) OF THE ACT W ERE ISSUED. IN RESPONSE TO NOTICE, THE ASSESSEE AUTHORIZED REPRESE NTATIVE SRI Y. EASWAR RAO, CA APPEARED AND FURNISHED THE REQUIRED INFORMATION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. NOTICED THAT THE ASSESSEE HAS INCURRED AN AMOUNT OF RS.96,10,935/- T OWARDS PURCHASE OF LAND AND THE PAYMENT WAS MADE BY CASH. THEREFORE, T HE A.O. ISSUED A SHOW CAUSE NOTICE AND ASKED THE ASSESSE, AS TO WHY THE PROVISIONS OF SECTION 40A(3) OF THE ACT, SHALL NOT BE INVOKED TO DISALLOW THE AMOUNT PAID TO WARDS PURCHASE OF LAND IN CASH. THE ASSESS E, IN REPLY TO THE SHOW CAUSE NOTICE ISSUED BY THE A.O., SUBMITTED THA T IT HAS PURCHASED THE LANDS FROM THE SMALL FARMERS AND THESE FARMERS ARE SITUATED IN A REMOTE PLACE WHERE THE BANKING FACILITIES ARE NOT A VAILABLE. THE ASSESSEE FURTHER SUBMITTED THAT THE VENDOR BEING SM ALL FARMERS DOES NOT HAVE ANY BANK ACCOUNT, HAVE INSISTED FOR CASH PAYME NTS. THEREFORE, CONSIDERING THE BUSINESS EXPEDIENCY AND ALSO THE FA CT THAT THERE IS NO BANKING FACILITY AVAILABLE IN THE LOCALITY, IT HAS PAID THE CASH FOR PURCHASE OF THE LANDS. THE ASSESSEE FURTHER SUBMITTED THAT THOUGH THE CASH PAYMENTS ARE MADE FOR PURCHASING THE LANDS, THE PAY MENTS ARE GENUINE AND ALL THE PAYMENTS WERE DECLARED IN THE BOOKS OF ACCOUNT. THEREFORE, FROM THIS FACT, IT IS VERY CLEAR THAT THE ASSESSEE DOES NOT HAVE ANY INTENTION OF AVOIDING TAX BY MAKING CASH PAYMENT. THE ASSESSE FURTHER ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 4 CONTENDED THAT THERE IS A BUSINESS EXPEDIENCY IN MA KING THE CASH PAYMENTS, AS THE VENDORS DID NOT ACCEPT CHEQUES OR DEMAND DRAFTS, BECAUSE WE ARE NEW TO THEM, THEREFORE, DISALLOWANCE U/S 40A(3) OF THE ACT COULD NOT BE APPLIED. THE A.O., HOWEVER, DID N OT CONVINCED WITH THE REPLY FURNISHED BY THE ASSESSE, HELD THAT THE ASSES SEE COULD NOT PROVE THAT THERE IS NO BANK ACCOUNTS IN THE NAME OF THE V ENDORS AND ALSO THERE WAS NO BANKING FACILITY AVAILABLE IN THE AREA , WHERE THE TRANSACTION TOOK PLACE. THE A.O. FURTHER OBSERVED THAT THE LAND S ARE SITUATED AT PIDUGURALLA VILLAGE, WHERE THE BANKING FACILITIES A RE VERY MUCH AVAILABLE. THEREFORE, THE ASSESSEE CASE IS NOT COMING WITHIN T HE EXCEPTIONS PROVIDED UNDER RULE 6DD(G) OF THE INCOME TAX RULES, 1962. HENCE, DISALLOWED THE CASH PAYMENTS U/S 40A(3) OF THE ACT. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE CONTENDED THAT IT HAS MADE THE CASH PAYMENT FOR PURCHASE OF L ANDS UNDER EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES, BECAUSE THE VENDORS ARE SMALL AND ILLITERATE FARMERS AND THEY HAVE INSISTED FOR CASH PAYMENTS. THE ASSESSEE FURTHER CONTENDED THAT THE LANDS PURCH ASED ARE SITUATED IN A REMOTE VILLAGE I.E. PIDUGURALLA/MACHERLA, WHERE T HERE IS NO BANKING FACILITY IS AVAILABLE. THE ASSESSEE FURTHER CONTEND ED THAT, IT HAS FURNISHED ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 5 CONFIRMATION LETTERS OBTAINED FROM THE VENDORS, WHE REIN THEY HAVE STATED THAT THEY HAVE RECEIVED THE MOANY AND ALSO I NSISTED FOR CASH PAYMENTS, BECAUSE THEY DO NOT HAVE ANY BANK FACILIT Y. THE ASSESSEE FURTHER SUBMITTED THAT THE A.O. HAS NOT DOUBTED THE GENUINENESS OF THE TRANSACTIONS AND ALSO PAYMENT, BUT HE IS ONLY ON TH E POINT THAT THE CIRCUMSTANCES UNDER WHICH THE CASH PAYMENTS WERE MA DE ARE NOT COMING UNDER ANY EXCEPTION PROVIDED UNDER RULE 6DD( G) OF INCOME -TAX RULES. THE CIT(A), AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSE, HELD DELETING THE ADDITIONS MADE BY THE A.O., THAT THE ASSESSEE HAS PURCHASED AGRICULTURAL LANDS FROM SMALL AND ILLITER ATE FARMERS/AGRICULTURAL LABOURERS. THE CIT(A) FURTHER HELD THAT THESE VEND ORS ARE RESIDING IN A VILLAGE, WHERE THERE IS NO BANKING FACILITIES ARE A VAILABLE AND ALSO THE FACT THAT THE VENDORS HAVE INSISTED FOR CASH PAYMEN TS WHICH IS EVIDENT FROM THE LETTERS FILED BY THEM, STATING THAT THEY H AVE INSISTED ONLY CASH PAYMENTS FOR SELLING THE LANDS. WITH THESE OBSERVAT IONS, THE CIT(A), DELETED THE ADDITIONS MADE BY THE A.O. AGGRIEVED B Y THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. D.R. SUBMITTED THAT THE CIT(A) WAS ERRED IN DELETING THE ADDITIONS MADE BY THE A.O., AS THE IMPUGNED PAYMENT S ARE MADE IN CASH FOR PURCHASING THE AGRICULTURAL LANDS. THE LD . D.R. FURTHER ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 6 SUBMITTED THAT THE ASSESSEE CLEARLY VIOLATED THE PR OVISIONS OF SECTION 40A(3) OF THE ACT, BY MAKING CASH PAYMENTS AND ALSO SUBMITTED THAT THE ASSESSEE CASE DOES NOT COME UNDER EXCEPTIONS PROVID ED UNDER RULE 6DD(G) OF THE INCOME-TAX RULES. THE LD. D.R. FURTH ER SUBMITTED THAT THE VENDORS ARE RESIDING IN PIDUGURALLA AND MACHERL A VILLAGES OF GUNTUR DISTRICT, WHERE THE BANKING FACILITIES ARE VERY MUC H AVAILABLE. THEREFORE, THE CIT(A), WAS NOT CORRECT IN HOLDING THAT THERE I S NO BANKING FACILITIES AVAILABLE WHERE, THE VENDORS ARE RESIDING. THEREFO RE, REQUESTED TO UPHOLD THE ASSESSMENT ORDER. 5. ON THE OTHER HANDS, THE A.R. OF THE ASSESSE SUBM ITTED THAT THE ASSESSEE HAS PURCHASED THE AGRICULTURAL LANDS FROM SMALL FARMERS, WHERE THERE IS NO BANKING FACILITY IS AVAILABLE. THE A.R . FURTHER SUBMITTED THAT THE ASSESSEE WAS UNDER OBLIGATION TO MAKE THE CASH PAYMENTS, AS THE VENDORS HAVE INSISTED FOR CASH PAYMENTS. THE A.R. F URTHER SUBMITTED THAT THE ASSESSE WAS UNDER COMPULSION TO BUY THESE LANDS UNDER ANY CIRCUMSTANCES, BECAUSE IT HAS INVESTED HUGE AMOUNT IN THE PROJECT. UNLESS, THESE LANDS ARE PURCHASED, ITS PROJECT CANN OT BE COMPLETED AND THE AMOUNT INVESTED WOULD BE A TOTAL LOSS, THEREFOR E, THERE IS BUSINESS EXPEDIENCY IN MAKING THE CASH PAYMENTS. UNDER THES E CIRCUMSTANCES, THE A.O. WAS NOT RIGHT IN DISALLOWING THE AMOUNTS B Y INVOKING THE ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 7 PROVISIONS OF SECTION 40A(3) OF THE ACT. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS FURNISHED THE CONFIRMATION LETTERS OBTAINED FROM THE VENDORS, WHEREIN THE VENDORS CLEARLY STATED THAT TH EY ARE NOT HAVING ANY BANK ACCOUNTS AND ALSO THERE IS NO BANKING FACILITY AVAILABLE IN THE AREA, WHERE THEY ARE RESIDING. THE A.R. FURTHER SUBMITTE D THAT THE ASSESSEE IS A REAL ESTATE DEVELOPER, PURCHASED THE LANDS FIRST TIME FROM THESE FARMERS. SINCE, WE ARE NEW TO THEM THEY ARE NOT RE ADY TO ACCEPT CHEQUES OR DEMAND DRAFTS, BECAUSE THEY ARE DEALING FIRST TIME WITH THE ASSESSEE COMPANY. THE ASSESSE, HAVING NO OPTION, M ADE THE CASH PAYMENT, AS IT HAS ALREADY INVESTED HUGE AMOUNT IN THIS PROJECT AND WITHOUT THESE LANDS, THE ASSESSEE PROJECT COULD NOT BE COMPLETED. THEREFORE, THERE IS A BUSINESS EXPEDIENCY IN MAKING THE CASH PAYMENTS, HENCE, DISALLOWANCE U/S 40A(3) CANNOT BE MADE. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. IN THIS CASE, THE CIT(A) DELE TED THE ADDITION ON THE REASON THAT THE PAYMENTS WERE MADE TO THE SMALL FAR MERS IN THE PLACES WHERE THERE IS NO BANKING FACILITIES AVAILABLE. TH E FACTS OF THE CASE UNDER CONSIDERATION, NEED TO BE EXAMINED IN THE LIG HT OF THE FACT THAT WHETHER THERE EXIST ANY BUSINESS EXPEDIENCY AND ALS O WHETHER THERE IS ANY BANKING FACILITY AVAILABLE WHERE THE TRANSACTIO N TOOK PLACE. AS ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 8 STATED IN THE EARLIER PARAGRAPHS, THE ASSESSEE COMP ANY IS IN THE BUSINESS OF REAL ESTATE DEVELOPMENT PURCHASED LANDS FOR DEVELOPMENT OF FLATS. IT IS A COMMON KNOWLEDGE THAT IN GENERAL, I N VILLAGES GENERALLY THE TRANSACTIONS ARE MADE BY CASH NOT BECAUSE OF THE RE ASON THAT THE TRANSACTIONS ARE NOT GENUINE OR THEY WANT TO AVOID BANKS BUT, BECAUSE IT IS STILL A CONVENIENT MODE OF TRANSACTION AND PEOPL E ARE MORE COMFORTABLE IN DEALING WITH CASH. IN THE PRESENT C ASE ON HAND, THE ASSESSEE CONTENTION IS THAT IT HAS PURCHASED THE LA NDS FROM THE FARMERS AND THEY ARE RESIDING IN REMOTE PLACES WHERE THERE IS NO BANKING FACILITY AVAILABLE AND ALSO THEY HAVE INSISTED FOR CASH PAYM ENTS. THE ASSESSEE HAS FURNISHED ALL THE DETAILS STATING THAT THE VILL AGES WHERE THE FARMERS ARE RESIDING DO NOT HAVE ANY BANK FACILITY. THE ASS ESSEE ALSO FILED A CONFIRMATION LETTER FROM THE FARMERS AND THEY HAVE CONFIRMED THAT THEY HAVE RECEIVED THE AMOUNT IN CASH AND ALSO INSISTED FOR CASH PAYMENTS ONLY. THE OBSERVATION OF THE ASSESSING OFFICER IS THAT IN THE VILLAGES WHERE THE LANDS WERE PURCHASED, THE BANKING FACILIT IES ARE VERY MUCH AVAILABLE IS ONLY BASED ON ASSUMPTIONS. 7. IT IS AN ADMITTED FACT THAT SECTION 40A(3) OF TH E ACT, PROVIDES FOR DISALLOWANCE, WHERE THE ASSESSE INCURS ANY EXPENDIT URE IN RESPECT OF WHICH ANY PAYMENT IS MADE TO ANY PERSON IN CASH IN EXCESS OF RS. ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 9 20,000/- IN A SINGLE DAY. SIMILARLY, RULE 6DD PROVI DES FOR CERTAIN EXCEPTION FOR CASH PAYMENTS. AS PER RULE 6DD(G), S PECIFIC EXEMPTION IS PROVIDED FOR PAYMENTS IN CASH, WHERE THERE IS NO BA NKING FACILITIES ARE AVAILABLE IN A VILLAGE OR TOWN ON THE DATE OF SUCH PAYMENT. IN THE PRESENT CASE, FROM THE FACTS, IT IS VERY CLEAR THAT THERE IS NO BANKING FACILITY IS AVAILABLE IN THE PLACES WHERE THE FARME RS ARE RESIDING. IT IS ALSO AN UNDISPUTED FACT THAT THE VENDORS ARE INSIST ED FOR CASH PAYMENTS. THE A.O. DISBELIEVED THE FACT THAT THE VILLAGES DO NOT HAVE BANK FACILITY WITHOUT ANY INDEPENDENT ENQUIRY, ON THE ASSUMPTION THAT EVERY VILLAGE SHOULD HAVE BANKS. 8. COMING TO THE OTHER ASPECT OF THE CASE, I.E. WHE THER ALL CASH PAYMENTS ARE AUTOMATICALLY GETS DISALLOWED U/S 40A( 3), THE MOMENT IT EXCEEDS THE THRESH HOLD LIMIT OR DOES EXISTS ANY SC OPE FOR PAYMENTS WHERE THERE WAS A BUSINESS EXPEDIENCY IN MAKING THE CASH PAYMENTS. THE ASSESSEE CONTENTION IS THAT THE VENDORS HAVE IN SISTED FOR CASH PAYMENTS, UNLESS THE CASH PAYMENTS ARE MADE IT WILL BE UNDER GREAT FINANCIAL HARDSHIP BECAUSE IT HAS ALREADY INVESTED HUGE AMOUNTS IN THE PROJECT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSE SSE. IN THE PRESENT CASE, IT IS VERY CLEAR THAT PAYMENTS ARE GENUINE AN D THE PARTIES ARE IDENTIFIED. IT IS ALSO NOT IN DISPUTE THAT THE VEND ORS HAVE DEMANDED FOR ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 10 CASH PAYMENTS AND FILED NECESSARY CONFIRMATION LETT ERS. THEREFORE, WHERE THE PURCHASER DOES NOT ACCEPT PAYMENT BY CHEQ UE, SUCH CIRCUMSTANCES CAN BE CONSIDERED AS THE EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES AS HELD BY HONBLE KARNATAKA HIGH COU RT IN THE CASE OF TAM TAM PEDDA GURUVA REDDY VS. JCIT (2006) 97 CTR. THEREFORE, CONSIDERING THE FACTUAL CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THERE IS BUSINESS EXPEDIENCY IN MAKING THE CAS H PAYMENT, AS THE VENDORS HAVE INSISTED FOR CASH PAYMENTS AND ALSO FA CT THAT THEY DO NOT HAVE ANY BANK ACCOUNT AND ALSO THERE IS NO BANKING FACILITY IS AVAILABLE IN THE AREA WHERE THE VENDORS ARE RESIDING. UNDER T HESE CIRCUMSTANCES, THE A.O. WAS NOT RIGHT IN COMING TO THE CONCLUSION THAT THERE IS A VIOLATION OF SECTION 40A(3) OF THE INCOME TAX ACT. 9. THE ASSESSING OFFICER DID NOT DOUBT THE GENUINEN ESS OF THE TRANSACTION OR THE IDENTITY OF THE SELLERS. IF THE PAYMENTS ARE GENUINE AND IF THE BUSINESS EXPEDIENCY SO REQUIRES THE PAYM ENTS IN CASH, THEN THE TECHNICAL REQUIREMENT SHOULD NOT COME IN THE WA Y OF CLAIMING IT AS EXPENDITURE IN VIEW OF THE PROVISO TO SECTION 40A(3 ) OF THE ACT. AS NOTED FROM THE ASSESSMENT ORDER, THE ASSESSEE HAS S UBMITTED CONFIRMATION FROM THE VENDORS STATING THAT THEY DO NOT HAVE ANY BANK ACCOUNTS AND ALSO THERE IS NO BANKING FACILITIES AV AILABLE IN THE AREA ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 11 WHERE THEY ARE RESIDING. BUT, THERE IS NOTHING ON RECORD TO SHOW THAT THE A.O. HAD MADE ANY ENQUIRIES TO FIND OUT WHETHER THE CLAIM MADE BY THE ASSESSE IS FACTUALLY INCORRECT. THEREFORE, WE A RE OF THE OPINION THAT THE A.O. HAS DISALLOWED THE AMOUNTS WITHOUT CONSIDE RING THE FACT THAT THERE IS NO BANKING FACILITY AVAILABLE IN THE AREA WHERE THE VENDORS ARE RESIDING. UNLESS, THE A.O. DO SOME EXERCISE WITH RE GARD TO THE VERIFICATION THAT WHETHER BANKING FACILITY IS AVAIL ABLE OR NOT, MERELY ON SUSPICIOUS AND SURMISE, HE CANNOT DISALLOW THE AMOU NT BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE PRIMAR Y OBJECT OF INSERTION OF SECTION 40A(3) IS TO CURB THE USE OF BLOCK MONEY WITH A INTENTION TO AVOID TAX. IN THE PRESENT CASE ON HAND, ON-GOING TH ROUGH THE FACTS WE FIND THAT THERE IS NO ELEMENT OF AVOIDANCE ANY TAX BY PAYING THE CASH, AS THE ASSESSE HAS DECLARED THE FULL CONSIDERATION OF RS. 95,30,000/- PAID FOR PURCHASE OF LAND, EVEN THOUGH THE PROPERTY VALUE WAS FIXED BY THE GOVT. IS AT RS. 5,56,000/-. 10. THE PROVISIONS OF SECTION 40A(3), READ WITH RUL E 6DD, MAKES IT CLEAR THAT DISALLOWANCE IS NOT AUTOMATIC IN ALL CAS ES, WHERE THE PAYMENTS EXCEEDS RS. 20,000/-. THE PROVISO APPENDED TO SECTI ON 40A(3), SPECIFICALLY EXEMPTS THE PAYMENTS, IN SUCH CASES AN D UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED, HAVING REGARD T O THE NATURE AND ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 12 EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATI ON OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. IN THE PRESE NT CASE, THE ASSESSE WAS OBLIGED TO MAKE THE CASH PAYMENTS AT THE INSTAN CE OF SELLERS THAT THEY DO NOT HAVE ANY BANK ACCOUNT AND ALSO THERE IS NO BANKING FACILITY AVAILABLE IN THE AREA WHERE THEY ARE RESIDED. FURTH ER, THE ASSESSE WAS FORCED TO MAKE THE CASH PAYMENTS FOR PURCHASE OF TH ESE LANDS, BECAUSE, UNLESS THESE LANDS ARE ACQUIRED, IT CANNOT COMPLETE ITS PROJECT, THEREBY THE TOTAL AMOUNT INVESTED IN THE PROJECT WOULD BE L OSS. THEREFORE, TAKING INTO ACCOUNT OF THE TOTALITY OF THE FACTS AND CIRCU MSTANCES OF THE CASE, WE ARE OF THE OPINION THAT, THERE WAS A BUSINESS EX PEDIENCY FOR MAKING THE CASH PAYMENTS, HENCE, THE SAME CANNOT BE DISALL OWED U/S 40A(3) OF THE ACT. 11. IT IS PERTINENT TO MENTION THE CASE LAWS RELIED UPON BY THE PARTIES. THE ASSESSEE RELIED UPON THE ITAT, HYDERABAD BENCH DECISION IN THE CASE OF DCIT VS. ABHINANDAN HOUSING PVT. LTD, (2014 ) 42 CCH 75, WHEREIN UNDER SIMILAR SET OF FACTS, THE COORDINATE BENCH OF THIS TRIBUNAL HELD THE ISSUE IN FAVOUR OF THE ASSESSEE AS UNDER: 12. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER S OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. 'BOTH THE LEARN ED AR AND ID; DR AGREED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISIO N OF ITAT, HYDERABAD BENCH IN ASSESSEE'S OWN CASE FOR AY 2009-10 IN ITA NO.695/HY D/2012 AND 612/HYD/2013 DATED 12/02/2014. AS CAN BE *SEEN FROM THE FACTS AN D MATERIALS ON' RECORD ASSESSEE CLAIMED THAT NO' DISALLOWANCE, CAN BE MADE OF THE CASH PAYMENTS AS THEY COME' WITHIN THE EXCEPTIONS PROVIDED UNDER DIFFEREN T CLAUSES OF RULE 6DD. AS FAR AS ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 13 CASH PAYMENTS OF RS 18,62,375 MADE TO PERSONS IN PL ACES WHERE NO BANKING FACILITY IS AVAILABLE; ASSESSEE CLAIMED THAT IT IS COMING WI THIN THE EXCEPTION PROVIDED UNDER RULE 6DD(G). SIMILARLY, CASH PAYMENTS OF RS. 22,20, 000 WAS CLAIMED TO HAVE BEEN MADE ON DAYS WHEN THE BANKS, WERE CLOSED ON ACCOUNT OF HOLIDAY,' HENCE, SUCH PAYMENTS COME. WITHIN THE EXCEPTION OF 'RULE 6DD(J) . SIMILARLY, 'PAYMENTS MADE, THROUGH AGENTS OF RS. 36,53,097 WERE 'CLAIMED TO BE COMING WITHIN THE EXCEPTION OF RULE 6DD(K). PAYMENTS OF R$. 49,04,500 RELATING TO PURCHASES OF EARLIER YEARS WERE ALSO 'CLAIMED TO BE COVERED UNDER AFORESAID CLAUSES OF RULE 6DD. IT IS TO BE NOTED THAT SIMILAR DISALLOWANCES MADE IN AY 2009-10, CAME UP FOR CONSIDERATION BEFORE THE COORDINATE BENCH OF -THIS TRIBUNAL, 'IN ITA NO. 695/HYD/13 (SUPRA).'THE TRIBUNAL AFTER CONSIDERING THE SUBMISSIONS-OF ASSESSEE ARID, EXAMINING FACTUAL DETAILS, UPHELD ASSESSEE'S CONTENTION THAT CASH PAYMENTS MADE ARE C OVERED BY EXCEPTIONS PROVIDED UNDER DIFFERENT CLAUSES OF RULE 6DD, HENCE, NO , DISALLOWANCE CAN BE MADE UNDER 'SECTION 40A(3). THE FINDING OF THE COORDINATE BENC H IS EXTRACTED HEREUNDER FOR CONVENIENCE: '6. WE HAVE HEARD BOTH THE PARTIES AND 'PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE' CIT(A) DELETED THE ADDITION OF RS. 4,45,20,449 ON THE REASON THAT THE PAYMENTS WERE MADE IN THE PLACES 'WHERE THERE IS NO BANKING FACILITY AVAILABLE. THE FACTS OF THE CASE UNDER CONSIDERATION NEED TO BE EXAMINED AS STATED EARLIER THE ASSESSEE COMPANY IS IN THE BUSINESS 'OF REAL ESTATE PURCHASI NG BULK LANDS AND DEVELOPING 'THEM INTO PLOTS AND SELLING' OF THE SAME. IT IS COM MON KNOWLEDGE THAT IN VILLAGES GENERALLY: THE TRANSACTIONS ARE BY CASH NOT BECAUSE THE TRANSACTIONS ARE NOT GENUINE OR THEY WANT TO AVOID BANKS BUT BECAUSE IT IS STILL A CONVENIENT MODE OF TRANSACTION AND PEOPLE ARE MORE COMFORTABLE IN DEALING, WITH CA SH. THIS' WILL NOT' GIVE IMMUNITY TO THE TRANSACTIONS IN VILLAGES BUT IT HELPS IN UND ERSTANDING THE REASON WHICH WILL HELP IN APPRECIATING THE FACTS OF THE CASE THE ASSE SSEE HAS FURNISHED, ALL THE DETAILS STATING THAT THE SAID VILLAGES DID NOT HAVE BANKING FACILITIES. THE ASSESSEE FILED CONFIRMATIONS FROM THE VILLAGE SURPANCHES WHO CERTI FIED THAT THERE WERE NO BANKING FACILITIES IN THE VILLAGES CONCERNED AND THE ASSESS EE HAS ALSO PRODUCED CONFIRMATIONS FROM THE VILLAGE SURPANCHES CONFIRMING THE IDENTITY OF THE SELLERS OF THE LAND. THE OBSERVATION OF THE ASSESSING OFFICER THAT KRISHNA A ND GUNTUR DISTRICTS ARE MOST DEVELOPED DISTRICTS IN THE. STATE AND ALMOST ALL TH E VILLAGES IN THESE DISTRICTS ARE COVERED BY BANKING FACILITIES IS ONLY BASED ON HIS ASSUMPTIONS BUT THE VILLAGE SURPANCHES WHO ARE THE RESPONSIBLE PERSONS OF THE V ILLAGES HAVE CONFIRMED THAT THERE WERE NO BANKING FACILITIES IN THE SAID VILLAG ES. IT' IS NOT PROPER TO DISBELIEVE THE CONFIRMATIONS FILED BY RESPONSIBLE VILLAGE OFFICERS AND PROCEED ON ASSUMPTION THAT THERE SHOULD BE BANKS IN THE SAID VILLAGES DESPITE ALL THE PROGRESS THERE ARE SOME VILLAGES IN ANDHRA PRADESH WHICH ARE NOT CONNECTED BY. PROPER BANKING FACILITIES. IT MAY BE NOTED THAT RULE 6DD(G) SAYS SECTION 40A(3) DISALLOWANCE CANNOT BE 'MADE WHERE T HE 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 RES IDES, OR IS CARRYING ON ANY BUSINESS, PROFESSION OR. VOCATION, IN ANY SUCH VILLAGE OR TOWN' WHICH SHOWS THAT THE SAID RULE DOES NOT MAKE ANY QU ALIFYING EXEMPTION AND IF THERE ARE NO BANKS AT THE PLACE OF TRANSACTION NO D ISALLOWANCE CAN BE MADE ON' ACCOUNT OF CASH PAYMENTS. MADE TO , THE PERSONS RESIDING IN SUCH PLACE I.E., VILLAGE ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 14 OR TOWN. 7. THE CONTENTION OF THE ASSESSING OFFICER THAT SO ME PAYMENTS WERE MADE IN CASH AND SOME WERE MADE BY CHEQUE TO THE VERY SA ME PERSON WAS NOT SUPPORTED BY ANY SPECIFIC INSTANCES. THE ASSESSING OFFICER DID NOT DOUBT THE GENUINENESS OF THE TRANSACTION OR THE IDENTITY OF THE SELLERS. IF THE PAYMENTS ARE GENUINE AND IF THE BUSINESS EXPEDIENCY SO REQUIRES AND THE ASSESSEE MAKES THE PAYMENTS IN CASH, THE TECHNICAL REQUIREMENT SHOULD NOT COME IN THE WAY OF CLAIMING IT AS EXPEND ITURE IN VIEW OF THE PROVISO TO SECTION 40A(3). AS NOTED FROM THE ASSESS MENT ORDER THAT THE ASSESSEE SUBMITTED CONFIRMATIONS FROM THE SURPANCHS OF THE VILLAGES WITH REGARD TO NON4AVAILABILITY OF BANKING FACILITIES IN THE SAID VILLAGES ALONG WITH THE CONFIRMATION OF THE ADDRESSES OF THE SELLE R4FARMERS. THERE IS NOTHING ON RECORD TO SHOW THAT THE AO HAD MADE ANY ENQUIRIES IN THIS REGARD. ACCORDINGLY, AS DECIDED BY THE TRIBUNAL JAI PUR 'B' BENCH IN THE CASE 'OF SRI SALASAR OVERSEAS PVT. LTD. VS. DECIDED, (SUPRA) WHERE IT HAS BEEN HELD THAT THE ASSESSEE HAVING MADE CASH PAYMENTS FO R PURCHASING LAND FROM FARMERS RESIDING IN VILLAGES WHERE THERE IS NO BANKING FACILITY, THE DISALLOWANCE CASH PAYMENT U/S. 40A(3) READ WITH RUL E 6DD(G) IS NOT WARRANTED. 8. FURTHER WE CAME ACROSS A DECISION OF THE CO-ORDI NATE BENCH IN THE CASE OF SAHITYA HOUSING PVT. LTD. VS. DCIT IN ITA NO 246/HYD/2011. THE TRIBUNAL VIDE ORDER DATED 24.1.2014 HELD AS UNDER: '13. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES,, PERU SED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE REVENUE AUTHORITIES. SEC 40A(3) READS AS UNDER: PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS O R PROFESSION UNDER SUB SECTION (3) AND THIS SUB SECTION WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OT HERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOU NT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED HAVING REGA RD TO THE NATURE AND EXTENT OF . BANKING FACILITIES AVAILABLE CONSIDERATIONS OF BUSINESS EXPENDITURE AND OTHER RELEVANT FACTORS. 14. THE EXCEPTIONS TO THE APPLICATION OF SEC 40A(3) IS , LAID DOWN IN RULE 6DDJ. RULE 6DD AFTER ITS AMENDMENT FROM 1995, READS AS UNDER: RULE 6DD PRIOR TO 25.7.1995, CLAUSE (J) OF RULE 6DD OF THE I T RULES READ AS FOLLOWS: 6DD. I) IN ANY OTHER CAUSE, WHERE THE ASSESSEE SATISFIES THE ASSESSING OFFICER THAT THE PAYMENT COULD NOT BE MADE BY A CRO SS CHEQUE DRAW ON A BANK OR BY A DRAWN ON A BANK OR BY A CROSSED B ANK DRAFT.. (1) DUE TO EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES OR ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 15 (2) BECAUSE PAYMENT IN THE MANNER AFORESAID WAS NOT PRA CTICABLE, OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE, HAVING REGARD TO THE NATURE OF THE TRANSACTION AND THE NEC ESSITY FOR EXPEDITIOUS SETTLEMENT THEREOF. AND ALSO FURNISHES EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER AS TO THE GENUINENESS OF THE PAYMENT AND ID ENTITY OF THE PAYEE'. THE ABOVE CLAUSE (J) OF RULE 6DD HAS BEEN OMITTED B Y THE IT (FOURTEENTH AMENDMENT) RULES 1995 W.E.F. 27.5.1995. IT IS PERTINENT TO REFER AT THIS JUNCTURE, TO THE DECISION OF HON'B LE ANDHRA PRADESH HIGH COURT IN THE CASE OF SMT. CH. MANGAYAMMA VS. U NION OF INDIA AND OTHERS (239 ITR 687), WHEREIN CONSIDERING THE C ONSTITUTIONAL VALIDITY OF THE PROVISIONS OF S.40A(3) OF THE ACT I N THE LIGHT OF THE ABOVE AMENDMENT MADE TO RULE 6DD OF THE IT RULES, T HE HON'BLE HIGH COURT OBSERVED AND HELD AT PAGE 693 OF THE REP ORTS (239 ITR) AS FOLLOWS: 'IN VIEW OF THE AFORESAID PRINCIPLES AS LAID DOWN AN D THE OBJECT AS SOUGHT TO BE ACHIEVED U/S 40A(3) OF THE ACT, ANY CH ANGES MADE IN THE SUBORDINATE LEGISLATION WOULD NOT IN ANY WAY AF FECT THE SUBSTANTIVE PROVISION. MOREOVER, BY DELETING THE CIRCUMSTANCES AS CONTEMPL ATED EARLIER, VIZ., SUB CLAUSES (1) AND (2) OF RULE 6DD( J) THE OBJECTS OF CURBING THE CIRCULATION OF BLACK MONEY AND REGULATI NG THE BUSINESS TRANSACTIONS BECOME MORE STRENGTHENED AND IT AVOIDS ANY UNDUE ADVANTAGE B6ING -TAKEN BY UNSCRUPULOUS ASSESSEES OR LITIGATION BEING MULTIPLIED. AS THE POSITION STANDS NOW 20% OF THE CASH TRANSACTIONS EXCEEDING RS. 20,000 ARE DISALLOW ED IN COMPUTING THE BUSINESS EXPENDITURE BUT NOT THE ENTIRE RS.. 20 ,000/- WHILE THE AMENDED PROVISION CONFERS ADVANTAGE TO THE ASSESSEE , TO THIS EXTENT, THE CIRCUMSTANCES PERMITTED TO BE TAKEN. INTO ACCOU NT BY THE. ASSESSING AUTHORITY ARE NO LONGER AVAILABLE BY REAS ON OF DELETION OF OLD RULE 6DD(J) BUT THAT BY ITSELF DOES NOT MAKE SECTION 40A(3) ARBITRARY AND UNCONSTITUTIONAL. ONE CANNOT P LEAD IGNORANCE OF LAW AND MAKE CASH. PAYMENTS CONTRARY TO LAW. IT I S TOO LATE IN THE DAY TO ACCEPT ANY SUCH PROPOSITION. FURTHERMORE, IN THE PRESENT DAY BANKING SCENARIO, THE MODE OF PAYMENT BY WAY OF CROSSED CHEQUES OR DEMAND DRAFTS . CANNOT BE SAID TO BE ONEROUS . DUTY: CASE ON AN.ASSESSEE WHICH CAN BE' MADE A FOUNDATION FOR ATTACKING THE VALIDITY OF THE SAID SECTION. THEREFORE, 'IT IS NOT OPEN FOR ATTACKING THE PROVISION AS VIOLATIVE OF ANY PROVISION OF THE. CONSTITUTION. THERE IS NO ARBITRARINESS OR DISCRIMINATION IN THE SAID PROVISI ON. WARRANTING INTERFERENCE BY THIS COURT UNDER THE CIR CUMSTANCES. IN VIEW OF THE ABOVE THERE IS ABSOLUTELY NO MERITS I N THE CHALLENGE MADE AS TO THE VALIDITY OF SECTION 40A(3) OF THE AC T BY MERE DELETION OF SUB CLAUSES (1) AND (2) OF RULE 6DD(J). THE SAID - PROVISION IS PERFECTLY' VALID., AND WE MAY HASTEN T O ADD THAT THE DELETION OF SUB CLAUSES (1) AND (2) OF RULE 6DD(J) IS' ONLY A STEP FORWARD IN THE ACHIEVEMENT OF THE -AVOWED OBJECT EN VISAGED U/S ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 16 40A(3) OF THE ACT. 15. THEREFORE THE ONLY EXCEPTION THAT THE ASSESSEE CAN CLAIM IS WHEN PAYMENTS ARE REQUIRED TO BE MADE ON DAYS WHEN THE BANKS WERE CLOSED ON ACCOUNT OF HOLIDAYS OR STRIKE. TRANSACTIONS AFTER THE BANKING HOURS IN THE COURSE OF REGULAR BUSINESS WILL NOT FALL WITHIN THIS EXCEPTION. :IN T HOSE TRANSACTIONS, THE PAYMENT IS NOT REQUIRED TO BE' MA DE WHEN THE BANKS 'ARE CLOSED I.E. AFTER BANKING HOURS. FURTHER THE PURPOSE OF THE DISALLOWANCE U/S 40A (3) IS TO DISSUADE TRAN SACTIONS BY CASH. 16. SEC 40A(3) ITSELF PROVIDES THAT THE EXCEPTIONS WILL HAV E TO BE PRESCRIBED HAVING REGARD TO .THE NATURE AND, EXT ENT OF BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUS INESS EXPEDIENCY AND OTHER RELEVANT FACTORS. TAKING ALL T HESE, FACTORS, CONSIDERING THE NATURE OF ACTIVITY OF THE ASSESSEE , AND THE NECESSITY FOR 'THEM TO. PAY CASH TO THE LAND OWNERS WE ARE OF. THE OPINION THAT THE CONDITION UNDER RULE 6DD FOR E XEMPTION VIZ., TRANSACTIONS SHOULD HAVE TAKEN PLACE ON BANK HOLIDA YS SHOULD BE READ DOWN IN THE CASE OF THE 'ASSESSEE. 17. IN THE CASE UNDER CONSIDERATION, NO BANKING FACILITY' IS AVAILABLE : WHERE THE PROPERTIES WERE PURCHASED BY ASSESSEE, THEREFORE*,.THERE WAS NO CHOICE FOR THE ASSESSEE EX CEPT TO MAKE THE PAYMENTS IN CASH DUE TO EXCEPTIONAL OR UNAVOIDA BLE CIRCUMSTANCES AS PROVIDED UNDER RULE 6DD. IN VIEW O F THE ABOVE DISCUSSION, WE SET ASIDE THE ORDER OF CIT(A) AND DE LETE THE ADDITION. OF RS. 4,09,98,105/- MADE U/S 40A(3) OF T HE ACT.' 9. IN VIEW OF THE ABOVE DISCUSSION, SINCE, THERE IS 'NO EVIDENCE BROUGHT ON RECORD ' BY THE AO TO SUGGEST THE AVAILABILITY OF BANKING FA CILITY IN THE PLACE WHERE THE PROPERTIES WERE PURCHASED BY THE ASSESSEE, , THEREFORE, IN VIEW OF RULE 6DD(G) THE DISALLOWANCE CANNOT BE MADE U/S. 40A(3). HENCE, THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION.' 10. REGARDING PAYMENT ON HOLIDAY AT RS. 69,29,000, THE DEPARTMENT CANNOT HAVE ANY GRIEVANCE ON THIS ISSUE AS THE CIT(A) DIRECTED THE AO TO VERIFY 'WHETHER CASH PAYMENTS DISALLOWED BY THE AO WERE MADE ON PUBLIC HOLIDAY AND IF IT IS SO TO ALLOW THE EXPENDITURE AS PER RULE 6DDU) OF THE IT R ULES ACCORDINGLY, THIS GROUND OF THE REVENUE IS REJECTED 11. NOW COMING TO SUSTAINING ADDITION OF RS. 3,15,65,26 3 WHERE PAYMENTS WERE MADE TO AGENTS. THE LEARNED AR SUBMITTED THAT DURIN G THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS SUMMONED THE AGENTS FOR 'VERIFICATION.. OUT OF 7 AGENTS 6 HAVE APPEARED BEFORE HIM (SEVENTH ONE COULD NOT APPEAR BECAUSE OF ILLNESS) AND CONFIRMED THAT THEY HAD ARR ANGED THE SALE TRANSACTION FOR THE ASSESSEE COMPANY, AND THE SELLERS INSISTED ON CASH PAYMENT. THEY HAVE ALSO CONFIRMED THAT THEY HAVE RECEIVED COMMISSION F ROM THE ASSESSEE COMPANY FOR THE SERVICES RENDERED, ON WHICH. TDS WAS ALSO MADE. ,THE ASSESSING, OFFICER HELD THAT THE 'SAID. AGENTS . ARE ONLY 'BROKERS AND A BROKER ' CANNOT BE TREATED AS AN AGENT AND THE EXEMPTION UNDER RULE GDD IS AVAILABLE ONLY IN RESPECT OF ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 17 PAYMENTS MADE THROUGH AN AGENT OF THE PARTY CONCERN ED.- . THE AO WAS OF THE VIEW THAT THE AGENTS UTILISED THE VEHICLES, PROVIDE D BY THE COMPANY TO HAND OVER THE CASH TO THE INTENDED AGRICULTURISTS WHICH GOES TO PROVE THAT THEY WERE ACTING ONLY AS MESSENGERS OF THE EMPLOYEES OF THE ASS COMP ANY. 12. THE AR-SUBMITTED. THAT AS PER RULE 6DD(K)'WHICH SAY S !'WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO' MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON' EXE MPTION . IS AVAILABLE FOR CASH 'PAYMENTS U/S. 40A(3). THE REQUIREMENT IS THE PAYME NT SHOULD HAVE BEEN MADE TO AN AGENT WHO IS REQUIRED TO MAKE . PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF THE PERSON FOR WHOM HE IS ACTING AS AN AGENT. IT MAY BE NOTED THAT THE EXEMPTION UNDER RULE 6DD(K) IS AVAILABLE ONLY IN RE SPECT OF CASH PAYMENTS MADE TO AN 'AGENT, HENCE, IT IS IMPORTANT TO KNOW THE MEANIN G OF 'AGENT' YIS4A4VIS 'BROKER'. THE WORDS 'AGENT' & 'BROKER' ARE NOT DEFINED IN THE IT ACT. THERE IS NO DEFINITION OF THE TERM 'AGENT' IN SECTION 40(A)(3) OR IN SECTION 2 OF THE ACT. AS PER WELL SETTLED PRINCIPLES, WHEN THERE IS NO STATUTORY DEFINITION O F A WORD, THE MEANING OF THE TERM SHOULD BE ASCERTAINED BY APPLYING COMMON PARLANCE T EST VIZ., AS THE . WORD IS UNDERSTOOD IN THE POPULAR SENSE I.E., THE MEANING A TTACHED TO SUCH . EXPRESSION IN THE PARTICULAR TRADE CIRCLE INSTEAD OF ATTACHING A TECHNICAL MEANING. 13. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THA T THE DIFFERENCE IN THE MEANING OF 'AGENT' AND 'BROKER' IS VERY, THIN AND THE EXPRE SSION 'AGENT' USED IN RULE 6DD(K) CONNOTES TO AGENTS OF THE COMPANY BUT IN THE PRESEN T CASE THE ASSESSEE USED THE SERVICES OF LOCAL VILLAGERS / -AGRICULTURISTS TO BR OKER THE DEAL BETWEEN THE COMPANY AND THE SELLERS AND THEREFORE, THE SAID PEOPLE CANN OT BE TERMED AS AGENTS OF THE COMPANY. IT IS COMMON KNOWLEDGE THAT EMPLOYING BROKE RS IS A COMMON PRACTICE AMONG REAL ESTATE DEALS AND IF THE INTENTION OF THE LEGISLATURE IS TO EXEMPT CASH PAYMENTS MADE THROUGH MIDDLEMEN FROM THE PURVIEW OF SECTION 40A(3) THEY WOULD HAVE INDICATED ACCORDINGLY. THE FACT THAT RULE 6DD( K) SPECIFICS PAYMENTS MADE THROUGH AGENTS IT IS IMPORTANT TO EXAMINE THE' SERV ICES RENDERED. BY THE 7 PERSONS TO COME TO THE CONCLUSION WHETHER THEY ARE AGENTS OF T HE COMPANY OR BROKERS WHO RENDERED SERVICES FOR COMMISSION. HE DREW OUR ATTEN TION TO THE STATEMENTS GIVEN BY THE 6 'PERSONS AND . THE RELEVANT QUESTIONS AND ANSWERS ARE REPRODUCED A S UNDER: 'SWORN STATEMENT OF TADIBONDA VENKATESWARA RAO, OCC UPATION SHOWN US AGRICULTURIST AND REAL ESTATE AGENT. Q.7 PLEASE EXPLAIN THE MODUS OPERANDI OF SERVICES R ENDERED? A..7 ABHINANDANA PEOPLE APPROACHED ME JAR ACQUIRING OF LAND. I INTRODUCE THE COMPANY'S PEOPLE TO THE INTERESTED FARMERS AND I ACTED AS AGENT BETWEEN THE TWO PARTIES. I PARTICIPATE IN THE NEGOTI ATION PROCESS ALSO. MY RESPONSIBILITY ENDS WITH REGISTRATION. BECAUSE I AM ILLITERATE, I TAKE SUPPORT FROM MY NEPHEW, G. SRINIVASA RAO. Q. 15 ON YOUR OWN, DID YOU MAKE ANY ADVANCES TO THE LANDLORDS? A.15 NO. I DID NOT MAKE ANY PAYMENTS TO FANNERS ON BEHALF OF ABHINANDANA. Q. 16 SO, YOU ARE NOT INVOLVED IN PAYING ANY AMOUNT S TO LANDLORDS? A. 16 ON MY OWN, I DID NOT GIVE ANY AMOUNTS. AFTER D EAL STRUCK, CASH WILL BE WILL BE PAID BY ABHINANDANA TO THE FARMERS THROUGH ME. IF THERE ' IS BIG AMOUNT, FARMERS WILL COME TO THE COMPANY. IF THERE ARE LITTLE AMOUNTS, I TAKE THE MONEY FROM ABHINANDANA AND THE SAME ARE PA ID TO THE FARMERS. EVERY TRANSACTION WAS ROUTED THROUGH BY ME ONLY. AS SUBMITTED EARLIER, IN ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 18 ALL THESE TRANSACTIONS, I USE TO TAKE SUPPORT FROM MY NEPHEW. Q. 22 AT ANY TIME, DID ABHINANDANA PAY THE AMOUNT TOWARDS COST OF LAND BY CHEQUES INTO YOUR ACCOUNT? A. 22 NO, ALL THE AMOUNTS PAID IN CASH ONLY TO ME, TOWARD S COMMISSION INCOME. Q. 23 HAVE YOU GIVEN ANY RECEIPTS IN RESPECT OF CAS H RECEIVED BY YOU ON BEHALF OF LANDLORDS? A. 23 . I GIVE RECEIPTS TO ABHINANDANA IN PROOF OF CASH TAKEN BY ME. AFTER RECEIPT FROM THE LANDLORDS, I TAKE BACK THE INITIAL RECEIPT GIVEN BY ME' TO ABHINANDANA. Q..28 THOUGH YOU HAVE GOT TDS; YOU HAV E NOT FILED YOUR IT RETURNS. A. 28, I DO NOT KNOW ABOUT THESE PROCEDURES HENCE THE FAILUR E TO SUBMIT THE ROI SWORN STATEMENT OF SRI M. RAJA VENKATESWARA RAO . Q. 3 PLEASE EXPLAIN THE FULL DETAILS OF BROKERAGE I NCOME? A. 3 I USE TO BROKERAGE LANDS FOR ABHINANDANA. IN VERY FEW CASES, I DID SO FOR OTHERS. PER YEAR, THE INCOME ON BROKERAGE WILL BE A ROUND RS. 2 TO 2.5 LAKHS. I USE TO GET AT LEASE RS. 5,000 PER ACRE, AND UP TO R S. 35,000. I ASSISTED IN PURCHASING LAND FOR ONE MR. SUSHIL KUMAR WHO RESIDE S IN USA. ANOTHER PERSON WAS C. RAVI KUMAR, WHO RESIDES AT CHENNAI. Q. 6 PLEASE FURNISH FULL DETAILS OF 4'OUR BROKERAGE INCOME. WHAT WAS THE BASIS OF DETERMINATION OF BROKERAGE INCOME AND WHAT ARE T HE DUTIES AND RESPONSIBILITIES AS COMMISSION AGENT? A. 6 I AM ACTING AS BROKERAGE AGENT FOR PURCHASE OF LAND FOR THE LAST 7 YEARS. I HAVE BEEN RELATED TO ABHINANDANA HOUSING P VT. LTD. FOR THE LAST 5 YEARS. THERE IS NO RATE OF FIXED-RATE OF COMMISSION I GOT THEY USE TO GIVE ON A RANDOM BASIS AS THERE IS NO INVESTMENT ON MY SIDE , I USE TO TAKE WHATEVER THE COMMISSION INCOME AS MY EXTRA INCOME O NLY. WE IDENTIFY PROSPECTIVE FARMERS WHO ARE WILLING TO SELL LAND AN D INTRODUCE THE SAME TO THE COMPANY. I USE TO ACT AS MEDIATOR FROM THE AGRE EMENT STAGE TILL THE REGISTRATION. Q . 11 ON YOUR OWN, DID YOU MAKE ANY ADVANCES TO THE LAND LORDS? A. 11 NO. I DID NOT MAKE ANY PAYMENTS TO FARMERS ON BEHALF OF ABHINANDANA. Q.12 SO, YOU ARE NOT INVOLVED IN PAYING .ANY AMOUNT S TO LANDLORDS? A. 12 ON MY OWN, I DID NOT . GIVE ANY AMOUNTS; AFTER DEAL STRUCK, CASH WILL BE PAID BY ABHINANDANA. TO THE FANNERS THROUGH .ME. I TAKE THE MONEY FROM ABHINANDANA AND THE SAME ARE PAID TO THE FARMERS. E VERY TRANSACTION WAS ROUTED THROUGH BY ME ONLY. THE COMPANY USED TO PROV IDE VEHICLE(S) FOR THESE TRANSACTIONS. SWORN STATEMENT OF SRI K. SURESH KUMAR. Q. 6 PLEASE FURNISH FULL DETAILS OF YOUR COMMISSION INCOME. WHAT WAS THE. BASIS OF DETERMINATION OF COMMISSION INCOME AND WHAT ARE THE DUTIES AND RESPONSIBILITIES AS COMMISSION AGENT? A. 6 I ' AM ACTING AS COMMISSION AGENT . FOR PURCHASE OF LAND FOR SINCE THE YEAR 2005 FOR 'ABHINANDANA HOUSING PUT. LTD. THERE IS NO RATE OF FIXED RATE OF COMMISSION, I GOT. THEY USE TO GIVE ON A R ANDOM BASIS. AS THERE IS NO INVESTMENT ON MY SIDE, I USE TO TAKE WHATEVER THE CO MMISSION INCOME AS MY EXTRA INCOME ONLY. WE IDENTIFY PROSPECTIVE FARMERS WHO ARE WILLING TO SELL LAND AND INTRODUCE THE SAME TO THE COMPANY. 1 USE TO ACT US MEDIATOR FROM THE ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 19 AGREEMENT STAGE TILL THE REGISTRATION. SWORN STATEMENT OF MUNNANGI SIVA SESHAIAH Q . 6. PLEASE EXPLAIN THE MODUS OPERANDI OF SERVICES R ENDERED? A 6 ABHINANDANA PEOPLE APPROACHED ME FOR ACQUIRING OF LAND I INTRODUCE THE COMPANY'S PEOPLE TO THE INTERESTED FARMERS AND 'I A CTED AS AGENT BETWEEN THE TWO PARTIES. I PARTICIPATE IN THE NEGOTIATION P ROCESS ALSO. SWORN STATEMENT OF BASHYAM HARI BABU. Q . .5 PLEASE FURNISH THE DETAILS OF SOURCE OF YOUR IN COME. A. 5 I CULTIVATE ON BEHALF OF, MY OWN AND MY . DECE ASED BROTHER-IN-LAW'S AGRICULTURAL LAND. OUT OF THE SAME, 1 ACRE ON MY WI FE'S NAME. MY ANOTHER SOURCE OF INCOME IS COMMISSION OF REAL ESTATE BROKI NG DURING THE YEAR 2008-09, 1 EARNED ABOUT RS. 1.30 LAKHS. IN THE PREV IOUS YEARS, IT WAS ABOUT RS. 40 TO 50 THOUSAND. IN 2010, I TOOK RS. 37,000/- A ND IN 2011 TILL TODAY,. 1 GOT AROUND RS.20,000/- Q. 6 PLEASE FURNISH FULL DETAILS OF YOUR COMMISSION INCOME. WHAT WAS THE BASIS OF DETERMINATION OF COMMISSION INCOME AND WHAT ARE THE DUTIES AND RESPONSIBILITIES AS COMMISSION AGENT? A. 6 1 AM DOING REAL ESTATE WORKS SINCE, 2004. I OF FER SERVICES ONLY FOR ABHINANDANA. IN VERY FEW CASES, I OFFERED TO PRIV ATE PARTIES. PER ACRE I EARN UP TO RS. 20,000, MEKALA SRINIVASA RAO (KUNCHA NAPALLI), THOTAKURA SRINIVAS (PORANKI) (TO MY MEMORY GOES). 14. THE DR SUBMITTED THAT FROM THE ABOVE STATEMENTS IT IS APPARENT THAT THE ABOVE SAID PARTIES ARE NOT THE AGENTS OF THE COMPANY BUT THEY WORKED AS MIDDLEMEN AND OFFERED THE SERVICES TO OTHER PARTIES AS WELL AND T HIS DISTINGUISHES THE BROKERS FROM THE AGENTS AND HENCE, THE CONTENTION. OF THE ASSESS ING OFFICER THAT THE ALLEGED, AGENTS WERE JUST MIDDLE MEN/BROKER PROVIDING SERVIC ES FOR COMMISSION BUT NOT AGENTS AND HENCE, THE EXEMPTION CLAUSE (K) . UNDER RULE 6DD OF IT RULES DOES NOT APPLY, APPEARS CORRECT. ACCORDINGLY, THE CASH PAYME NTS MADE THROUGH THIRD PARTIES CANNOT BE BROUGHT UNDER THE EXEMPTION CLAUSE AND TH E ASSESSING OFFICER IS JUSTIFIED IN DISALLOWING THE PAYMENT MADE IN CASH IN CONTRAVE NTION OF THE PROVISIONS OF SECTION 40A(3) AND, THEREFORE, THEDISALLOWANCE OF R S. 3,15,65,263 IS JUSTIFIED. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATERIAL ON RECO RD. THE STRONG CONTENTION OF THE DEPARTMENT IS THAT THE ABO VE 'AGENTS WORKED FOR OTHER PERSONS AS AGENTS AND THEY CANNOT BE AGENTS TO THE ASSESEE. THERE IS NO PROHIBITION OR RESTRICTION ON A MIDDLEMAN TO WORK A S AGENT OF DIFFERENT PARTIES, IF HE WAS ACTING ON BEHALF OF THE ASSESSEE AS AGENT THE A SSESSEE'S CASE FALLS UNDER THE PURVIEW OF CLAUSE 6DD(K) OF IT RULES, 1962. BEING S O, EXEMPTION IS TO BE GIVEN AND ADDITION CANNOT BE MADE U/S. 40A (3)' OF THE ACT. T HE REASONS ADVANCED' BY THE DEPARTMENT ARE NOT APPROPRIATE. ACCORDINGLY, WE AR E INCLINED TO ALLOW THE CLAIM OF THE ASSESSEE AT RS. 3,15,65,263. 16 REGARDING THE BALANCE AMOUNT OF RS. 4,25,000, THE ASSESSEE CANNOT HAVE ANY GRIEVANCE, SINCE THE ASSESSEE BEFORE THE C IT(A) SUBMITTED THAT THIS ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 20 PAYMENT OF RS. 4,25,000 PERTAINS TO THE VILLAGE OF PEDAVADLAPDI AND IT WAS WRONGLY CLAIMED BY THE ASSESSEE THAT NO BANKING FACILITY WA S AVAILABLE IN THAT VILLAGE. BUT, IN FACT, THERE IS BANKING FACILITIES AVAILABLE IN THAT VILLAGE. BEING SO, THIS PAYMENT CANNOT BE COVERED BY RULE 6DD(G)' OF IT RUL ES. ACCORDINGLY, TO THAT EXTENT, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. IT IS AL SO NOTED THAT THE AMOUNT MENTIONED BY THE ASSESSEE IN ITS APPEAL AT RS. 3,21 ,65,268 IS NOT CORRECT. INSTEAD, IT SHOULD BE RS. 3,19,90,263 AS IT COMPRISES OF ONE AM OUNT OF RS. 3,15,65,263 AND ANOTHER AMOUNT OF RS. 4,25,000, AS DISCUSSED ABOVE. APPEAL OF THE ASSESSEE IS PARTLY ALLOWED.' AS FACTS IN THE PRESENT APPEAL ARE MATERIALLY SAME AND THE DEPARTMENT HAS FAILED TO BRING ANY. MATERIAL ON RECORD TO SHOW THAT FACTS IN THE IMPUGNED ASSESSMENT YEAR ARE IN ANY WAY DIFFERENT FROM FACTS CONSIDERED BY THE COORDINATE BENCH, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF TH E COORDINATE BENCH, WE UPHOLD THE ORDER OF ID. CIT(A) AND DISMISS THE GROUNDS RAI SED BY REVENUE IN THIS REGARD . 12. THE HONBLE GUJARAT HIGH COURT, IN THE CASE OF ANUPAM TELE SERVICES VS. ITO, REPORTED IN 366 ITR 122 HELD AS U NDER: THE PARAMOUNT CONSIDERATION OF SECTION 40A(3) IS T O CURB AND REDUCE THE POSSIBILITIES OF BLACK MONEY TRANSACTION S. SECTION 40A(3) DOES NOT ELIMINATE CONSIDERATIONS OF BUSINESS EXPED IENCIES. IN THE PRESENT CASE, THE APPELLANT ASSESSEE WAS COMPELLED TO MAKE CASH PAYMENTS ON ACCOUNT OF PECULIAR SITUATION. SUCH SIT UATIONS WERE AS FOLLOWS: [I] THE PRINCIPAL COMPANY, TO WHICH THE AS SESSEE WAS A DISTRIBUTOR, INSISTED THAT CHEQUE PAYMENT FROM A CO OPERATIVE BANK WOULD NOT DO, SINCE THE REALIZATION TAKES A LONGER TIME; [II] THE ASSESSEE WAS, THEREFORE, REQUIRED TO MAKE CASH PAYMENTS ONLY ; [III] TATA TELESERVICES LIMITED ASSURED THE ASSESSEE THAT SUCH AMOUNT SHALL BE DEPOSITED IN THEIR BANK ACCOUNT ON BEHALF OF THE AS SESSEE; [IV] IT IS NOT DISPUTED THAT THE TATA TELESERVICES LIMITED DID NOT ACT ON SUCH PROMISE; [V] IF THE ASSESSEE HAD NOT MADE CASH PAYM ENT AND RELIED ON CHEQUE PAYMENTS ALONE, IT WOULD HAVE RECEIVED THE R ECHARGE VOUCHERS DELAYED BY 4/5 DAYS AND THEREBY SEVERELY A FFECTING ITS BUSINESS OPERATIONS. THE PAYMENTS BETWEEN THE ASSES SEE AND THE TATA TELESERVICES LIMITED WERE GENUINE. THE TATA TE LESERVICES LIMITED HAD INSISTED THAT SUCH PAYMENTS BE MADE IN CASH, WHICH TATA TELESERVICES LIMITED IN TURN ASSURED AND DEPOS ITED THE AMOUNT IN A BANK ACCOUNT. IN THE FACTS OF THE PRESENT CASE , RIGORS OF SECTION 40A(3) OF THE ACT MUST BE LIFTED. FURTHER THE EXCEP TIONS CONTAINED IN RULE 6DD ARE NOT EXHAUSTIVE AND THE SAID RULE MUST BE INTERPRETED LIBERALLY. THE QUESTION IS ANSWERED IN FAVOUR OF TH E APPELLANT ASSESSEE AND AGAINST THE REVENUE. ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 21 13. THE HONBLE DELHI HIGH COURT IN THE CASE OF R.C . GOEL VS. CIT REPORTED IN 259 CTR 15 (2013) HELD AS UNDER: 9. IN THE PRESENT CASE, THE PREVIOUSLY NOTED DISCUSSIO N WOULD. REVEAL THAT THE ASSESSEE ENGAGES ITSELF IN EXECUTING CATER ING CONTRACTS FOR RAILWAYS IN RESPECT OF TWO TRAINS. IN THOSE TRAINS, ITS PERSONNEL ARE DEPLOYED FOR SALE OF SMALL ARTICLES OF DAILY NECESS ITY AND USE TO THE PASSENGERS. PER FORCE, THE PAYMENTS RECEIVED BY THE M ARE NECESSARILY IN CASH THESE AMOUNTS ARE COLLECTED AND IN TURN HANDED OVER TO THE ASSESSEE THE ASSESSEE IN TERMS OF ITS CONTRACT IS B OUND TO MAINTAIN CONSTANT SUPPLIES IN THE TRAINS AND ENSURE THAT AT NO POINT IN TIME CAN THE PASSENGERS BE DEPRIVED OF THESE ARTICLES (WHICH ARE FOOD ARTICLES, SOFT DRINKS AND OTHER ITEMS NECESSARY FOR TRAVEL). IN THE COURSE OF SUCH TRANSACTIONS, IT SOURCES THESE ARTICLES FROM M/S SH RUTI ENTERPRISES. APPARENTLY, THAT CONCERN IS ALSO SMALL TIME ONE AND INSISTS ON CASH PAYMENTS FOR ENSURING CONTINUITY AND TIMELY SUPPLIE S. WHILST, THE COURT IS CONSCIOUS AND DOES NOT IN ANY MANNER WISH TO COMMEN T ADVERSELY, ON THE LARGER PUBLIC 'INTEREST ELEMENT EMBEDDED IN SECTION 40A AND THE UNDERLYING PRINCIPLE 1 AT THE SAME TIME, THE COURT ALSO NOTES THAT THE PROVISO SEEKS TO RELIEVE TO A CERTAIN EXTENT, THE M EASURE OF HARDSHIP WHICH MIGHT BE IMPOSED UPON SMALL BUSINESSES AND PROFESSI ONALS WHO ARE ENGAGED IN ACTIVITIES AND ARE DEPENDENT ENTIRELY ON TIMELY CASH FLOW. IT IS IN SUCH CASES, THAT RULE 613D - WHICH WAS FORMULATED AS A PROVISO TO SECTION 40A (3) -STEPS IN TO AID SUCH ASSESSEES AND CONCERN S IN THIS CONTEXT, THE STATUTORY MANDATE IN SECTION 6DD (K), AT LEAST IN T HE CIRCUMSTANCES OF THE CASE, HAS TO BE SO CONSTRUED AS TO. MEAN THAT BUT F OR THE CASH PAYMENT, THE ASSESSEE WOULD HAVE BEEN DEPRIVED THE BENEFIT O F SUPPLIES ITSELF. THIS COURT CLARIFIES THAT THE INTERPRETATION OF THE EXPR ESSION 'WHO IS REQUIRED TO MAKE PAYMENT IN CASH' HAVING REGARD TO THE CIRCUMST ANCES OF THE CASE IS FACT DEPENDENT, AT LEAST IN THE PRESENT CASE THE CO NSEQUENCE OF INSTANCES OF PAYMENT THROUGH ACCOUNT PAYEE CHEQUES IN 'SMALL BUSINESS WHICH ARE DEPENDENT ON SUCH SUPPLIES WOULD BE TO COMPLETELY S TIFLE, IF NOT STOP, THE BUSINESS ACTIVITIES. IT IS IN THAT SENSE THAT THE EX PRESSION 'REQUIRED' WOULD HAVE TO BE CONSTRUED. 14. THE COORDINATE BENCH OF THIS TRIBUNAL, IN THE C ASE OF SAHITYA HOUSING PVT. LTD. VS. DCIT IN ITA NO.246/HYD/2011, UNDER SIMILAR CIRCUMSTANCES HELD AS UNDER: ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 22 '13. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIE S, PERUSED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE REVENUE AUTHORITIES. SEC 40A(3) READS AS UNDER: PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UND ER SUB SECTION (3) AND THIS SUB SECTION WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MA DE 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 RUPEES IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED HAVING REGARD TO THE NATURE AN D EXTENT OF BANKING FACILITIES VAILABLE CONSIDERATIONS OF BUSINESS EXPENDITURE AND OTHER RELEVANT FACTORS. 14. THE EXCEPTIONS TO THE APPLICATION OF SEC 40A(3) IS LAID DOWN IN RULE 6DDJ. RULE 6DD AFTER ITS AMENDMENT FROM 1995,READS AS UNDER: RULE 6DD PRIOR TO 25.7.1995, CLAUSE (J) OF RULE 6DD OF THE I T RULES READ AS FOLLOWS: 6DD....... I) IN ANY OTHER CAUSE, WHERE THE ASSESSEE SATISFIES THE ASSESSING OFFICER THAT THE PAYMENT COULD NOT BE MADE BY A CROSS CHEQUE DRAW ON A BANK OR BY A DRAWN ON A BANK OR BY A CROSSED BANK DRAFT...... (1) DUE TO EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES OR (2) BECAUSE PAYMENT IN THE MANNER AFORESAID WAS NOT PRACTICABLE, OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE, HAVING REGA RD TO THE NATURE OF THE TRANSACTION AND THE NECESSITY FOR EXPEDITIOUS SETTL EMENT THEREOF. AND ALSO FURNISHES EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER AS TO THE GENUINENESS OF THE PAYMENT AND IDENTITY OF THE PAYE E. THE ABOVE CLAUSE (J) OF RULE 6DD HAS BEEN OMITTED B Y THE IT (FOURTEENTH AMENDMENT) RULES 1995 W.E.F. 27.5.1995. IT IS PERTI NENT TO REFER AT THIS JUNCTURE, TO THE DECISION OF HONBLE ANDHRA PRADESH HIGH COURT I N THE CASE OF SMT. CH. MANGAYAMMA VS. UNION OF INDIA AND OTHERS (239 ITR 6 87), WHEREIN CONSIDERING THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF S.40A( 3) OF THE ACT IN THE LIGHT OF THE ABOVE AMENDMENT MADE TO RULE 6DD OF THE IT RULES, T HE HONBLE HIGH COURT OBSERVED AND HELD AT PAGE 693 OF THE REPORTS (239 I TR) AS FOLLOWS: IN VIEW OF THE AFORESAID PRINCIPLES AS LAID DOWN A ND THE OBJECT AS SOUGHT TO BE ACHIEVED U/S 40A(3) OF THE ACT, ANY CHANGES MADE IN THE SUBORDINATE LEGISLATION WOULD NOT IN ANY WAY AFFECT THE SUBSTANTIVE PROVISI ON. MOREOVER, BY DELETING THE CIRCUMSTANCES AS CONTEMPLATED EARLIER, VIZ., SUB CL AUSES (1) AND (2) OF RULE 6DD(J) THE OBJECTS OF CURBING THE CIRCULATION OF BLACK MON EY AND REGULATING THE BUSINESS TRANSACTIONS BECOME MORE STRENGTHENED AND IT AVOIDS ANY UNDUE ADVANTAGE BEING TAKEN BY UNSCRUPULOUS ASSESSEES OR LITIGATION BEING MULTIPLIED. AS THE POSITION STANDS ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 23 NOW 20% OF THE CASH TRANSACTIONS EXCEEDING RS. 20,0 00 ARE DISALLOWED IN COMPUTING THE BUSINESS EXPENDITURE BUT NOT THE ENTIRE RS. 20, 000/- WHILE THE AMENDED PROVISION CONFERS ADVANTAGE TO THE ASSESSEE TO THIS EXTENT, THE CIRCUMSTANCES PERMITTED TO BE TAKEN INTO ACCOUNT BY THE ASSESSING AUTHORITY ARE NO LONGER AVAILABLE BY REASON OF DELETION OF OLD RULE 6DD(J). BUT THAT BY ITSELF DOES NOT MAKE SECTION 40A(3) ARBITRARY AND UNCONSTITUTIONAL. ONE CANNOT P LEAD IGNORANCE OF LAW AND MAKE CASH PAYMENTS CONTRARY TO LAW. IT IS TOO LATE IN TH E DAY TO ACCEPT ANY SUCH PROPOSITION. FURTHERMORE, IN THE PRESENT DAY BANKIN G SCENARIO, THE MODE OF PAYMENT BY WAY OF CROSSED CHEQUES OR DEMAND DRAFTS CANNOT B E SAID TO BE ONEROUS DUTY CASE ON AN ASSESSEE WHICH CAN BE MADE A FOUNDATION FOR A TTACKING THE VALIDITY OF THE SAID SECTION. THEREFORE, IT IS NOT OPEN FOR ATTACKING TH E PROVISION AS VIOLATIVE OF ANY PROVISION OF THE CONSTITUTION. THERE IS NO ARBITRAR INESS OR DISCRIMINATION IN THE SAID PROVISION WARRANTING INTERFERENCE BY THIS COURT UND ER THE CIRCUMSTANCES. IN VIEW OF THE ABOVE THERE IS ABSOLUTELY NO MERITS I N THE CHALLENGE MADE AS TO THE VALIDITY OF SECTION 40A(3) OF THE ACT BY MERE DELET ION OF SUB CLAUSES (1) AND (2) OF RULE 6DD(J). THE SAID PROVISION IS PERFECTLY VALID AND WE MAY HASTEN TO ADD THAT THE DELETION OF SUB CLAUSES (1) AND (2) OF RULE 6DD(J) IS ONLY A STEP FORWARD IN THE ACHIEVEMENT OF THE AVOWED OBJECT ENVISAGED U/S 40A( 3) OF THE ACT. 15. THEREFORE THE ONLY EXCEPTION THAT THE ASSESSEE CAN CLAIM IS WHEN PAYMENTS ARE REQUIRED TO BE MADE ON DAYS WHEN THE BANKS WERE CLO SED ON ACCOUNT OF HOLIDAYS OR STRIKE. TRANSACTIONS AFTER THE BANKING HOURS IN THE COURSE OF REGULAR BUSINESS WILL NOT FALL WITHIN THIS EXCEPTION. IN THOSE TRANSACTIONS, THE PAYMENT IS NOT REQUIRED TO BE MADE WHEN THE BANKS ARE CLOSED I.E. AFTER BANKING H OURS. FURTHER THE PURPOSE OF THE DISALLOWANCE U/S 40A (3) IS TO DISSUADE TRANSACTION S BY CASH. 16. SEC 40A(3) ITSELF PROVIDES THAT THE EXCEPTIONS WILL HAVE TO BE PRESCRIBED HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITI ES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. TAK ING ALL THESE FACTORS, CONSIDERING THE NATURE OF ACTIVITY OF THE ASSESSEE AND THE NECE SSITY FOR THEM TO PAY CASH TO THE LAND OWNERS WE ARE OF THE OPINION THAT THE CONDITIO N UNDER RULE 6DD FOR EXEMPTION VIZ., TRANSACTIONS SHOULD HAVE TAKEN PLACE ON BANK HOLIDAYS SHOULD BE READ DOWN IN THE CASE OF THE ASSESSEE. 17. IN THE CASE UNDER CONSIDERATION, NO BANKING FAC ILITY IS AVAILABLE WHERE THE PROPERTIES WERE PURCHASED BY ASSESSEE, THEREFORE, T HERE WAS NO CHOICE FOR THE ASSESSEE EXCEPT TO MAKE THE PAYMENTS IN CASH DUE TO EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES AS PROVIDED UNDER RULE 6DD. IN VIEW O F THE ABOVE DISCUSSION, WE SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION O F RS. 4,09,98,105/- MADE U/S 40A(3) OF THE ACT.' 15. THE LD. D.R., DURING THE COURSE OF ARGUMENTS RE LIED UPON HONBLE MADRAS HIGH COURT DECISION, IN THE CASE OF CIT VS. VENKATADRI ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 24 CONSTRUCTIONS REPORTED IN (2013) 255 CTR 385. WE HA VE EXAMINED THE CASE LAW RELIED UPON BY THE LD. D.R., IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND COME TO THE CONCLUSION THAT THE CA SE LAW RELIED UPON BY THE LD. D.R. IS NOT APPLICABLE TO THE FACTS OF T HE PRESENT CASE. THE CASE BEFORE THE HONBLE MADRAS HIGH COURT IS THAT T HE ASSESSEE HAS MADE THE CASH PAYMENTS FOR PURCHASE OF CEMENT WHERE IN, THE DEALER IS A BUSINESS PERSON HAVING ALL KINDS OF BANKING FACIL ITIES. IN THE PRESENT CASE ON HAND, THE CASH PAYMENT WAS MADE FOR PURCHAS E OF AGRICULTURAL LANDS FROM THE FARMERS AND AGRICULTURISTS AND THEY ARE RESIDING IN A VILLAGE WHERE THERE IS NO BANKING FACILITY IS AVAIL ABLE. THEREFORE, THE CASE RELIED UPON BY THE D.R. CANNOT BE MADE APPLICABLE T O THE CASE ON HAND. 16. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO APPLYING THE RATIOS OF COORDINATE BENCH DECISION OF THIS TRIBUNAL, WE ARE OF THE OPINION, THAT THERE IS BUSINESS EXPEDIENCY I N MAKING THE CASH PAYMENTS FOR PURCHASE OF AGRICULTURAL LAND FROM THE FARMERS. SECTION 40A(3) OF THE ACT DOES NOT ELIMINATE CONSIDERATION OF BUSINESS EXPEDIENCY, THUS WHERE ASSESSEE WAS COMPELLED TO MA KE CASH PAYMENTS, DISALLOWANCE U/S 40A(3) OF THE ACT WAS NO T JUSTIFIED. IT IS ALSO AN ADMITTED FACT THAT THERE IS NO BANKING FACI LITY AVAILABLE IN THE AREA WHERE THE FARMERS ARE RESIDING. THEREFORE, TH E CASE FALLS UNDER THE ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 25 EXCEPTION PROVIDED UNDER RULE 6DD(G) OF INCOME -TAX RULES. THE CIT(A), AFTER CONSIDERING THE RELEVANT FACTS DELETE D THE ADDITIONS MADE BY THE A.O. WE DO NOT FIND ANY ERROR OR INFIRMITY I N THE ORDER PASSED BY THE CIT(A). HENCE, WE INCLINED TO UPHELD THE ORDER OF THE CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITIONS. 17. THE ASSESSE, BY THIS CROSS OBJECTION, HAS RAISE D GROUND REGARDING SET OFF OF BROUGHT FORWARD LOSSES. SINCE, WE DELET E THE ADDITIONS MADE BY THE A.O., THE GROUND RAISED BY THE ASSESSEE BECO ME INFRUCTUOUS. THEREFORE, WE DISMISS THE CROSS OBJECTION FILED BY THE ASSESSEE. ITA NO.360/VIZAG/2012 : 18. THE FACTS AND ISSUE INVOLVED IN THIS APPEAL, IS SIMILAR TO ITA NO.242/VIZAG/2012. THE ONLY ISSUE, ARISES FOR OUR CONSIDERATION IN THIS APPEAL, IS WHETHER THE CIT IS RIGHT IN ASSUMING JUR ISDICTION U/S 263 AND DIRECT THE A.O. TO DISALLOW THE CASH PAYMENTS MADE FOR PURCHASE OF AGRICULTURAL LAND FROM FARMERS U/S 40A(3) OF THE AC T. IN THIS CASE, THE ASSESSEE HAS TAKEN A PLEA THAT THERE IS A BUSINESS EXPEDIENCY AND ALSO ITS CASE COVERED UNDER EXCEPTION PROVIDED IN RULE 6 DD(G). THE ASSESSE, FURTHER, SUBMITTED THAT IT HAS MADE THE PAYMENTS TH ROUGH ITS AGENTS, THEREFORE, THE CASH PAYMENTS MADE FOR PURCHASE OF A GRICULTURAL LANDS ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 26 ARE COVERED UNDER EXCEPTION PROVIDED IN RULE 6DD(K) . THEREFORE, REQUESTED TO QUASH THE ORDER PASSED BY THE CIT. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. THE ASSESSEE CONTENDED THAT I T HAS MADE THE CASH PAYMENTS THROUGH ITS AGENTS, THEREFORE, ITS CASE IS COVERED UNDER EXCEPTION PROVIDED IN RULE 6DD(K). THE ASSESSING O FFICERS CONTENTION IS THAT THEY ARE NOT AGENTS OF THE ASSESSE, BUT THEY A RE ONLY BROKERS WHO INITIATED THE TRANSACTION, THEREFORE, THE ASSESSEE S CONTENTION CANNOT BE ACCEPTED. WE DO NOT AGREE WITH THE STAND TAKEN BY T HE A.O. FOR THE REASON THAT THERE IS NO PROHIBITION OR RESTRICTION ON MIDDLEMEN TO WORK AS AN AGENT OF DIFFERENT PARTIES. IF THE AGENTS AR E ACTING ON BEHALF OF THE ASSESSEE AS AGENT AND THE PAYMENTS ARE MADE THR OUGH THE AGENT, THEN, THE ASSESSEE CASE FALLS UNDER THE EXCEPTION P ROVIDED UNDER CLAUSE 6DD(K) OF THE INCOME TAX RULES. BEING SO, EXEMPTI ON IS TO BE GIVEN AND ADDITIONS CANNOT BE MADE U/S 40A(3) OF THE ACT. IN THE PRESENT CASE ON HAND, FROM THE FACT, WE NOTICED THAT THE AS SESSEE PRIMARY CONTENTION IS THAT THERE IS BUSINESS EXPEDIENCY IN MAKING THE CASH PAYMENT, BECAUSE THE FARMERS HAVE INSISTED FOR CASH PAYMENT. IT IS ALSO AN ADMITTED FACT THAT, THERE IS NO BANKING FACILITY AVAILABLE IN THE AREA, WHERE THE FARMERS ARE RESIDED. THE DEPARTMENT HAS NOT BROUGHT ON ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 27 RECORD ANY EVIDENCE TO SHOW THAT THERE IS A BANKING FACILITY AVAILABLE IN THE REGION. CONSIDERING THE OVERALL FACTS AND CIRC UMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE CASH PAYMENTS MADE B Y THE ASSESSEE FOR PURCHASE OF LANDS ARE COVERED UNDER EXCEPTION PROVI DED UNDER RULE 6DD(G) AND 6DD(K) OF THE INCOME TAX RULES. 20. THE AUTHORIZED REPRESENTATIVE RELIED UPON THE I TAT, HYDERABAD BENCH DECISION IN THE CASE OF M/S ABHINANDANA HOUSI NG PVT LTD. VS.DCIT, IN ITA. NO. 695/HYD/2013. THE COORDINATE B ENCH, UNDER SIMILAR CIRCUMSTANCES, HELD THE ISSUE IN FAVOUR OF THE ASSESSE. THE RELEVANT PORTION IS REPRODUCED HEREUNDER: 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATE RIAL ON RECORD. THE STRONG CONTENTION OF THE DEPARTMENT IS THAT THE ABO VE AGENTS WORKED FOR OTHER PERSONS AS AGENTS AND THEY CANNOT BE AGENTS T O THE ASSESSEE. THERE IS NO PROHIBITION OR RESTRICTION ON A MIDDLEM AN TO WORK AS AGENT OF DIFFERENT PARTIES, IF HE WAS ACTING ON BEHALF OF TH E ASSESSEE AS AGENT. THE ASSESSEE'S CASE FALLS UNDER THE PURVIEW OF CLAUSE 6 DD(K) OF IT RULES, 1962. BEING SO, EXEMPTION IS TO BE GIVEN AND ADDITI ON CANNOT BE MADE U/S. 40A(3) OF THE ACT. THE REASONS ADVANCED BY THE DEPARTMENT ARE NOT APPROPRIATE. ACCORDINGLY, WE ARE INCLINED TO ALLOW THE CLAIM OF THE ASSESSEE AT RS. 3,15,65,263. 21. TO INVOKE THE PROVISIONS OF SECTION 263 OF THE ACT, THE TWIN CONDITIONS MUST BE SATISFIED. THE ORDER IS ERRONEO US, INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. UNLESS , BOTH THE CONDITIONS ARE SATISFIED, THE CIT IS NOT EMPOWERED TO ASSUME J URISDICTION U/S 263 OF THE ACT. IN THE PRESENT CASE ON HAND, THOUGH THE O RDER IS ERRONEOUS TO ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 28 THE EXTENT THAT THE A.O. HAS NOT CONDUCTED ANY ENQU IRY REGARDING THE CASH PAYMENTS DURING THE ASSESSMENT PROCEEDINGS, TH E CASH PAYMENTS ARE COVERED UNDER EXCEPTION PROVIDED IN RULE 6DD(K) , THEREFORE, DISALLOWANCE CANNOT BE MADE U/S 40A(3) OF THE ACT. SINCE, THE CASH PAYMENTS ARE COVERED UNDER RULE 6DD(K) AND THE SAME CANNOT BE DISALLOWED U/S 40A(3) OF THE ACT, THE ORDER PASSED BY THE A.O. CANNOT BE CONSIDERED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE, IN ANY CASE THERE IS NO LOSS OF REVENUE. WHEN THERE IS NO PREJ UDICE CAUSED TO THE REVENUE, THOUGH THE ORDER IS ERRONEOUS, IT CANNOT B E HELD PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, WE ARE OF THE OPINION THAT, IN THE ABSENCE OF ONE OUT OF THE TWO CONDITIONS REQUIRED F OR ASSUMING THE JURISDICTION U/S 263, THE CIT CANNOT REVISE THE ASS ESSMENT ORDER PASSED BY THE ASSESSING OFFICER. THEREFORE, CONSIDERING T HE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO RESPECTFULLY FOL LOWING THE COORDINATE BENCH DECISION, WE QUASH THE ORDER PASSED BY THE CI T AND RESTORE THE ASSESSMENT ORDER. 22. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA. NO. 242/VIZ/2013 IS DISMISSED AND APPEAL FILED BY THE A SSESSE IN ITA. NO. ITA NO.242/VIZAG/2012;316/VIZAG/2013 & CO28/VIZAG/2 012 KALLAM HOUSING & REAL ESTATES (PVT.) LTD., GUNTUR 29 316/VIZ/2013 IS ALLOWED. SIMILARLY, THE CROSS OBJEC TION FILED BY THE ASSESSEE IN CO NO.28/VIZAG/2012 IS ALSO DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11 TH DEC15. SD/- SD/- ( . ) ( . . . . ) ( (( ( V. DURGA RAO ) )) ) ( G. MANJUNATHA) / // / JUDICIAL MEMBER / // / ACCOUNTANT MEMBER /VISAKHAPATNAM: 3 / DATED : 11/12/2015 VG/SPS ) ' 4 / COPY OF THE ORDER FORWARDED TO :- 1. & / THE APPELLANT THE DCIT, CIRCLE-2(1), GUNTUR 2. '(& / THE RESPONDENT M/S. KALLAM HOUSING & REAL ESTATES PVT. LTD., 1-2-8 , 1 ST LANE, JKC NAGAR, GUNTUR. 3. 5 / THE CIT, GUNTUR 4. 5 () / THE CIT (A), GUNTUR 5. ' , , / // / DR, ITAT, VISAKHAPATNAM 6 . . . . / GUARD FILE / BY ORDER // TRUE COPY // 9: ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM SL. NO. DESCRIPTION DATE INITIALS 1. DATE OF DICTATION BY THE AUTHOR SR.PS 2. DRAFT PLACED BEFORE THE DICTATING MEMBER SR.PS 3. DRAFT PLACED BEFORE THE SECOND MEMBER SR. PS 4. DRAFT APPROVED BY THE SECOND MEMBER SR. PS 5. DATE OF APPROVED ORDER COMES TO THE SR. PS SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER SR. PS 7. DATE OF FILE SENT TO THE BENCH CLERK SR. PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK HD. C LK 9. DATE OF DISPATCH OF ORDER SR. PS
