M/s. TIRUPATI CONSTRUCTION, Ujjain V. The CIT, Ujjain

ITA 420/IND/2014

• Counselvise Citation: 42022714 RSA 2014
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIV VARSHNEY
• Assessee Lawyers: MANOJ PHADNIS
• Section: 40A(3); 143(3); 263

Judgement Text

M/S TIRUPATI CONSTRUCTION ITA NO. 420/IND/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER ITA NO. 420/IND/2014 A.Y.2009-10 M/S TIRUPATI CONSTRUCTION UJJAIN PAN AAFFT 3526K ::: APPELLANT VS COMMISSIONER OF INCOME TAX UJJAIN ::: RESPONDENT APPELLANT BY SHRI MANOJ PHADNIS RESPONDENT BY SHRI R AJIV VARSHNEY DATE OF HEARING 18 . 8 .2015 DATE OF PRONOUNCEMENT 30 .9.2015 O R D E R PER SHRI B.C. MEENA, AM THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LEARNED CIT, UJJAIN, DATED 28.3.2014. M/S TIRUPATI CONSTRUCTION ITA NO. 420/IND/2014 2 2. IN THIS CASE THE ASSESSMENT WAS MADE U/S 143(3) OF THE ACT ON 1.6.2011 AT LOSS OF RS.3,55,770/-. THE L EARNED CIT INITIATED PROCEEDINGS U/S 263 OF THE ACT AND SET ASIDE THE ORDER OF THE ASSESSING OFFICER BY DIRECTING THE ASSESSING OFFICER TO EXAMINE THE ISSUE IN THE LIGHT OF THE OBS ERVATIONS MADE IN HIS ORDER U/S 263 OF THE ACT AFTER ASCERTAININ G ALL THE FACTS AND AFFORDING PROPER OPPORTUNITY TO THE ASSES SEE AND TAKE DECISION AS PER LAW. 3. WE HAVE HEARD BOTH THE SIDES. THE MAIN ISSUE IN THI S APPEAL REVOLVES AROUND THE ISSUE AS TO WHETHER IT WAS IN THE KNOWLEDGE OF THE ASSESSING OFFICER THAT THE ASSES SEE HAS PAID IN CASH A SUM EXCEEDING RS.20,000/- FOR PURCHASE OF LAND WHICH HAS BEEN DEBITED TO THE TRADING ACCOUNT AND IF SO WHETHER HE HAS COMMITTED AN ERROR WHICH IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ENTITLED THE LEARNED CIT TO INVOKE PROVISIONS OF SE CTION 263 OF THE ACT. M/S TIRUPATI CONSTRUCTION ITA NO. 420/IND/2014 3 4. BEFORE US, IT WAS SUBMITTED BY THE LEARNED COUNSE L FOR THE ASSESSEE THAT THE ASSESSEE HAS MADE SEVERAL WRITTEN SUBMISSIONS DURING THE ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER AND HE DREW OUR ATTENTION TO VARIOUS SUBMISSIONS FILED IN THE PAPER BOOK I.E. REPLY DATED 19.10.2010 PAGE 34 OF THE PAPER BOOK, REPLY DATED 1.12.2010 PAGE 68 OF THE PAPER BOOK, REPLY DATED 15.12.2010 PAGE 286 OF THE PAPER BOOK, REPLY DATED 14.1.2010 PAGE 297 OF THE PAPER BOOK AND REPLY DATED 24.2.2010 PAGE 478 OF THE PAPER BOOK. BEFORE US IT WAS CONTESTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT AT THE TIME OF ASSESSMENT, THE ASSESSING OFFICER MADE PR OPER INQUIRES AND ESPECIALLY HE DREW OUR ATTENTION TO THE WR ITTEN SUBMISSIONS DATED 19.10.2010 WHEREIN SALE DEED FOR LAN D SITUATED AT SURVEY NO. 14/2 GRAM HEMAKHEDI FOR RS. 72,25,000/- WAS FILED. IN THIS SALE DEED IT WAS VERY C LEARLY MENTIONED THAT RS.41,84,076/- WAS PAID IN CASH FOR WHIC H M/S TIRUPATI CONSTRUCTION ITA NO. 420/IND/2014 4 CIT INVOKED PROVISIONS OF SECTION 263 OF THE ACT. T HE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS AN INQUIRY WHICH CAN BE DEMONSTRATED FROM THE MATERIAL AVAILABLE ON RECORD THAT THE ASSESSING OFFICER HAS MADE NECESSARY INQUIRIES IN RESPECT OF THE PURCHASE OF LAND BY WAY OF MAKING CASH PAYMENTS. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION IN CIT VS. AS HISH RAJPAL; 180 TAXMANN 623. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE WRITTEN SUBMISSIONS F ILED BEFORE THE ASSESSING OFFICER ADEQUATELY DEMONSTRATE THA T THE ASSESSING OFFICER HAS CARRIED OUT PROPER INQUIRIES . THE COPIES OF SALE DEED SUBMITTED BEFORE THE ASSESSING O FFICER WHICH ARE PLACED AT PAGES 156 TO 157 CLEARLY SHOW THAT TH E ASSESSEE HAS PAID RS.41,84,367/- IN CASH FOR PURCHASE OF LAND. THUS, ON THESE FACTS, IT IS WELL PRESUMED THAT T HE ASSESSING OFFICER HAS PERUSED THESE DOCUMENTS AND M/S TIRUPATI CONSTRUCTION ITA NO. 420/IND/2014 5 SATISFIED HIMSELF IN ALL RESPECT CONCERNING AN ITEM W HICH HAS BEEN DEBITED IN THE TRADING ACCOUNT. 5. BEFORE US, IT WAS ALSO PLEADED BY THE LEARNED COUNSE L FOR THE ASSESSEE THAT IT IS A NORMAL PRACTICE IN THE DEPARTMENT THAT WHENEVER AN ASSESSING OFFICER MADE INQUIRY AND SATISFIED HIMSELF WITH THE CORRECTNESS OF THE CLAIM THEN THE ASSESSING OFFICER SHALL NOT ELABORATE TH ESE FACTS IN THE ASSESSMENT ORDER BUT THE ASSESSING OFFI CER ONLY DISCUSSES THE ISSUES ON WHICH THE DISALLOWANCE I S MADE, TO MAKE IT A SPEAKING ORDER. RELIANCE WAS ALSO PLACED ON THE DECISION OF ITAT, B-BENCH, MUMBAI IN TH E CASE OF ANIL SHAH 162 TAXMANN.39 (MUMBAI) 6. AFTER HEARING BOTH THE SIDES, WE FIND MERIT IN T HE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE TH AT ONCE A DOCUMENT IS FILED BEFORE THE ASSESSING OFFIC ER IN SUPPORT OF AN ITEM DEBITED THE TRADING ACCOUNT THEN IT IS REASONABLY EXPECTED THAT THE ASSESSING OFFICER HAS APPLI ED M/S TIRUPATI CONSTRUCTION ITA NO. 420/IND/2014 6 ITS MIND AND ALLOWED THE CLAIM OF THE ASSESSEE. IT IS NOT IN THE HANDS OF THE ASSESSEE TO MAKE THE ASSESSING OFFICE R TO WRITE IN BLACK AND WHITE IN THE ASSESSMENT ORDER HOW H E HAS SATISFIED HIMSELF WITH REGARD TO THE CLAIM OF THE ASSESSEE IN THE TRADING ACCOUNT ON THE BASIS OF DOCUMEN TS SUBMITTED BEFORE HIM. IT IS ALSO A NORMAL PRACTICE THAT WHENEVER THE ASSESSING OFFICER SATISFIES HIMSELF ABOU T THE CORRECTNESS OF THE CLAIM IN THE FOUR CORNERS OF THE LAW THEN HE WILL NOT NARRATE IN DETAIL ABOUT THESE ASPECTS IN THE ASSESSMENT ORDER. NORMALLY IN THE ASSESSMENT ORDER THE ISSUES ARE DISCUSSED WHERE THE DISALLOWANCES ARE MADE B Y THE ASSESSING OFFICER. 7. ANOTHER ASPECT WHICH ARISES IN THIS APPEAL IS WHETHE R THE ASSESSING OFFICER COMMITTED AN ERROR IN NOT INVO KING THE PROVISIONS OF SECTION 40A(3) OF THE ACT IN RESP ECT OF THE PAYMENTS MADE IN EXCESS OF RS.20,000/- FOR PURCHASE O F LAND WHICH WAS A PART OF TRADING STOCK OF THE ASSESSEE AND M/S TIRUPATI CONSTRUCTION ITA NO. 420/IND/2014 7 DEBITED IN THE TRADING ACCOUNT. ON THIS ISSUE, THE L EARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF HARSHILA CHORDIA VS. ITO (2008) 298 ITR 349 (RAJ.) OBSERVED THAT THE EXEM PTIONS CONTAINED UNDER RULE 6DD ARE NOT EXHAUSTIVE AND THAT THE SAID RULE MUST BE INTERPRETED LIBERALLY. THE LEARNED C OUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION O F THE HON'BLE M.P. HIGH COURT IN THE CASE OF CIT VS. ACHAL ALLOYS LTD.; 218 ITR 46 WHEREIN IT WAS HELD THAT WHERE ANY CAS H PAYMENTS WERE DULY SIGNED BY PAYEES AND INSISTENCE O F CASH PAYMENT WAS FOUND ON THE GROUND THAT THE PAYEE DI D NOT HAVE ANY BANK ACCOUNT AND BEING ILLITERATE, THEY REQUIRE PAYMENT IN CASH THEN NO DISALLOWANCE IS CALLED FOR BY INVOKING PROVISIONS OF SECTION 40A(2) OF THE ACT . THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION IN THE CASE OF ANUPAM TELESERVICES VS. ITO; 218 ITR 46 WHEREIN THE HON'BLE HIGH COURT HELD AS UNDER :- M/S TIRUPATI CONSTRUCTION ITA NO. 420/IND/2014 8 IN THE PRESENT CASE, NEITHER THE GENUINENESS OF THE PAYMENT NOR THE IDENTITY OF THE PAYEE WERE IN ANY CASE DOUBTED. THESE WERE THE CONCLUSIONS ON FACTS DRAWN BY THE APPELLATE COMMISSIONER. THE TRIBUNAL ALSO DID NOT DISTURB SUCH FACTS BUT RELIED SOLELY ON RULE 6DD (J) OF THE RULES TO HOLD THAT SINCE THE CASE OF THE ASSESSEE DID NOT FALL UNDER THE SAID EXCLUSION CLAUSE NOR WAS COVERED UNDER ANY OF THE CLAUSES OF RULE 6DD, CONSEQUENCES ENVISAGED IN SECTION 40A(3) OF THE ACT MUST FOLLOW. (PARA 21) THUS, THE TRIBUNAL COMMITTED AN ERROR IN COMING TO SUCH A CONCLUSION FOR THE FOLLOWING REASONS : A] THE PARAMOUNT CONSIDERATION OF SECTION 40A(3) IS TO CURB AND REDUCE THE POSSIBILITIES OF BLACK MONEY TRANSACTIONS. AS HELD BY THE SUPREME COURT M/S TIRUPATI CONSTRUCTION ITA NO. 420/IND/2014 9 IN ATTAR SINGH GURMUKH SINGH [SUPRA], SECTION 40A(3) OF THE ACT DOES NOT ELIMINATE CONSIDERATIONS OF BUSINESS EXPEDIENCIES. [ B] IN THE PRESENT CASE, THE APPELLANT ASSESSEE WAS COMPELLED TO MAKE CASH PAYMENTS ON ACCOUNT OF PECULIAR SITUATION. SUCH SITUATION WAS AS FOLLOW - (I] THE PRINCIPAL COMPANY, TO WHICH THE ASSESSEE WAS A DISTRIBUTOR, INSISTED THAT CHEQUE PAYMENT FROM A COOPERATIVE 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 ASSESSEE; [ IV] IT IS NOT DISPUTED THAT THE TATA TELESERVICES LIMITED DID NOT ACT ON SUCH PROMISE; M/S TIRUPATI CONSTRUCTION ITA NO. 420/IND/2014 10 [V] IF THE ASSESSEE HAD NOT MADE CASH PAYMENT AND RELIED ON CHEQUE PAYMENTS ALONE, IT WOULD HAVE RECEIVED THE RECHARGE VOUCHERS DELAYED BY 4/5 DAYS AND THEREBY SEVERELY AFFECTING ITS BUSINESS OPERATIONS. (PARA 22) 8. THE FACTS OF THE CASE OF ANUPAM TELE SERVICES (SUPR A) ARE SIMILAR TO THE PECULIAR FACTS OF THE ASSESSEES CASE. THE PAYMENTS IN THE ASSESSEES CASE ARE GENUINE, THE LAND WAS PURCHASED FROM FARMERS AND THEY INSISTED CASH PAYMENTS AS THERE WAS NO LONG TERM RELATIONSHIP WITH THE ASSESSE E. IN THESE CIRCUMSTANCES, THE ASSESSING OFFICER MIGHT HAVE REACHED THE CONCLUSION THAT THE ASSESSEE DOES NOT DESE RVE TO BE VISITED BY RIGORS OF SECTION 40A(3) OF THE AC T. HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF HARSHITA CHORDIA; 298 ITR 349 HELD THAT EXCEPTIONS CONTAINED IN RULE 6DD(J) ARE NOT EXHAUSTIVE AND THESE RULES SHOULD BE CONSTRUED LIBERALLY. IN THE ASSESSEES CASE TRANSACTION WAS GENUIN E, M/S TIRUPATI CONSTRUCTION ITA NO. 420/IND/2014 11 THE CONVEYANCE DEED WAS EXECUTED BEFORE THE REGISTRAR, THE NAME AND ADDRESS OF THE SELLER WAS MENTIONED IN THE SAL E DEED ITSELF, THE IDENTITY OF THE PERSONS WAS NOT IN DOUBT. IN THESE CIRCUMSTANCES, THE ASSESSING OFFICER MUST HAVE COME TO THE CONCLUSION THAT THE PROVISIONS OF SECTION 40A (3) OF THE ACT WERE NOT APPLICABLE. CONSIDERING ALL THESE ASPE CTS, WHERE GENUINENESS OF TRANSACTION IS NOT IN QUESTION, T HE IDENTITY OF PAYEES IS ALSO WELL ESTABLISHED, THE PAYM ENTS HAVE BEEN MADE TO THE SELLER OF THE LAND IN RURAL AREAS, IN OUR VIEW, THE ASSESSING OFFICER RIGHTLY ACCEPTED THE CLAIM OF THE ASSESSEE AND FOUND THAT THE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE IN THE CASE OF PURCHASE OF LAN D BY THE ASSESSEE EVEN IF IT WAS ACQUIRED AS A STOCK IN TRADE. HON'BLE ITAT, JAIPUR BENCH, IN THE CASE OF M/S ACE IN DIA ABODES LTD. VS. ACIT (CENTRAL CIRCLE 2) HELD THAT PR OVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE IN THE CASE OF COLONISERS. IN VIEW OF THESE FACTS, THE ASSESSING OF FICER M/S TIRUPATI CONSTRUCTION ITA NO. 420/IND/2014 12 COULD HAVE VALIDLY HELD THE VIEW THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT ARE NOT APPLICABLE IN THE A SSESSEES CASE. IT IS ALSO WELL ESTABLISHED THAT THE PROVISIONS O F SECTION 263 OF THE ACT CANNOT BE INVOKED WHERE TWO V IEWS ARE POSSIBLE AND THE LEARNED CIT CANNOT SUBSTITUTE HIS OWN VIEW IN PLACE OF THE ASSESSING OFFICERS VIEW. CONSI DERING THESE ASPECTS OF THE CASE, WE SET ASIDE THE ORDER OF T HE LEARNED CIT AND RESTORE THAT OF THE ASSESSING OFFICER . 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. PRONOUNCED IN OPEN COURT ON 30 TH SEPTEMBER, 2015 SD SD (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER 30 TH SEPTEMBER, 2015 DN/- M/S TIRUPATI CONSTRUCTION ITA NO. 420/IND/2014 13