M/S. SHREE GOVIND KRIPA BUILDMART LTD., Jaipur V. ACIT, Jaipur

ITA 472/JPR/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54137 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 18-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K L MOOLCHANDAN I
• Keywords: Capital asset; Business expenditure; Search and seizure; Principle of natural justice; Source of fund; Additional evidence; Reasonable cause; Corroborative evidences; Retraction; Revenue expenditure
• Section: 40A(3); 142(1); 68; 145; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.472/ JP/2011 ASSESSMENT YEAR 2008-09 PAN: AALCS 1446 C M/S. SHREE GOVIND KRIPA BUILDMART (P) LTD VS. THE ACIT A-2, RANA PRATAP NAGAR CENTRAL CIRCLE- 1 JHOTWARA, JAIPUR JAIPUR (APPELLANT ) (RESPONDENT) ITA NO.582/ JP/2011 ASSESSMENT YEAR 2008-09 PAN: AALCS 1446 C THE DCIT VS. M/S. SHREE GOVIND KRIPA BUILDMART ( P) LTD. CENTRAL CIRCLE- 1 A-2, RANA PRATAP NAGAR JAIPUR JHOTWARA, JAIPUR (APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI K.L. MOOLCHANDANI DEPARTMENT BY : SHRI SUNIL MATHUR DATE OF HEARING: 09-08-2011 DATE OF PRONOUNCEMENT:26-08-2011 ORDER PER N.L. KALRA, AM:- THE ASSESSEE AS WELL AS REVENUE HAVE FILED APPEAL S AGAINST THE ORDER OF THE LD. CIT(A), CENTRAL JAIPUR DATED 30-03-2011 FOR THE ASSESSMENT YEAR 2008-09. 2 2.1 THE FIRST GROUND OF APPEAL OF THE ASSESSEE IS T HAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 79,52,500/- OUT OF TOTAL ADDITION OF RS. 7,16,02,224/- AS MADE BY THE AO U/S 68 OF THE ACT. 2.2 THE REVENUE IS ALSO AGGRIEVED AGAINST ALLOWING RELIEF OF RS. 4,95,82,259 OUT OF ADDITION OF RS. 7,16,02,224/- BY ADMITTING THE ADDITIONAL EVIDENCES. 2.3 THE AO DURING THE COURSE OF ASSESSMENT PROCEEDI NGS REQUIRED THE ASSESSEE TO SUBMIT THE CONFIRMATION FROM THE PARTIE S FROM WHOM MONEY WAS RECEIVED EITHER AS SHARE APPLICATION MONEY OR LOANS OR CREDITS. THE ASSESSEE DID NOT FURNISH THE FULL PARTICULARS OF THE PARTIES FROM WHOM THE AMOUNTS WERE RECEIVED DURING THE YEAR. THE PAN AND SOURCE O F FUNDS ADVANCED TO THE ASSESSEE WERE NOT EXPLAINED. THE AO ACCORDINGLY AT PAGES 4 TO 7 OF THE ASSESSMENT ORDER HAS GIVEN THE NAMES OF 118 PARTIES FROM WHOM THE ASSESSEE HAS RECEIVED THE ADVANCE DURING THE YEAR. THE TOTAL MONEY RECEIVED DURING THE YEAR IS RS. 7,16,02,224/-. THE AO TREATE D THE SUMS SO CREDITED AS UNEXPLAINED AND ADDED TO THE INCOME OF THE ASSESSEE U/S 68 OF THE ACT. 2.4 BEFORE THE LD. CIT(A), THE ASSESSEE FILED THE E VIDENCE. THE ASSESSEE GAVE THE FOLLOWING REASONS FOR ACCEPTING THE ADDITI ONAL EVIDENCE. 1.SUBMISSION REGARDING ACCEPTABILITY OF ADDITIONA L EVIDENCE THE ASSESSEE HAS FILED CONFIRMATION LETTERS, PROOF OF IDENTITY, AFFIDAVITS, BANK STATEMENTS AND OTHER DOCUMENTS AS ADDITIONAL EVIDEN CE IN PREVIOUS HEARINGS. THE 3 ASSESSEE HAS MADE DETAILED SUBMISSION IN HIS APPLIC ATION FOR ADMISSION OF ADDITIONAL EVIDENCE. FURTHER TO IT, WE SUBMIT THAT: - A) THE MAIN DIRECTOR OF COMPANY SHRI SHANKAR KHANDELWAL WHO WAS LOOKING DAY TO DAY AFFAIRS OF COMPANY WAS SUFFERING FROM CANCER AND DUE TO THIS INCURABLE DISEASE HE WAS UNDER HEAVY DEPRESSIO N. DUE TO THIS REASON THE HE COULD NOT APPEAR PERSONALLY BEFORE THE AO TO KNO W THE REQUIREMENTS RAISED BY THE AO. FURTHER, THEN AR OF THE ASSESSEE DIDNT ADVISE TO DIRECTORS OF ASSESSEE BECAUSE OF SICKNESS AND HEAVY DEPRESSION O F SHRI SHANKAR KHANDELWAL. THE MEDICAL PAPERS OF SHRI SHANKAR KHAN DELWAL IN SUPPORT OF THE ABOVE CONTENTION HAVE ALREADY BEEN FILED IN WS FOR AY 2002-03 FILED IN THE CASE OF SHRI SHANKAR KHANDELWAL. THE ASSESSEES CASE IS COVERED BY CLAUSE (B) & (C) OF RULE 46A OF INCOME TAX RULES. THEREFO RE, IN THE INTEREST OF SUBSTANTIAL JUSTICE THE ADDITIONAL EVIDENCE NOW SUB MITTED BY THE ASSESSEE DESERVES TO BE ADMITTED. THE ASSESSEE HAS SUBMITTED SEVERAL DECISIONS IN THE APPLICATION FILED UNDER RULE 46A. B) THE A.R. HAS FURTHER SUBMITTED THE S PECIFIC DETAILS OF VARIOUS NOTICES ISSUED AND ARGUED THAT ON GOING THROUGH THE SE NOTICES, IT IS VERY CLEAR THAT NEITHER THE A.O. WHO PASSED ASSESSMENT ORDER N OR HIS PREDECESSOR HAS EVER ASKED FOR FILING THE CONFIRMATION OF THE CREDI TS SHOWN BY WAY OF ADVANCE AGAINST PLOT BOOKING OR EVEN OTHER CASH CREDITS. TH E A.R. SUBMITTED FOLLOWING DETAILS. NOTICE U/S 142(1)/143(2) BY THE PRESENT AO:- THE ASSESSING OFFICER WHO ASSESSED THE CASE OF THE ASSESSEE HAS ISSUED FOLLOWING NOTICES U/S 143(2) AND 142(1) OF INCOME T AX ACT AND HE NEVER ASKED THE ASSESSEE TO FILE CONFIRMATION LETTER OF C ASH CREDITORS & ADVANCE RECEIVED AGAINST PLOTS, THIS MAY BE SEEN FROM THE F OLLOWINGS. (I) 142(1) DATED 07/11/2008:- THE ASSESSEE WAS NOT ASKED TO FURNISH THE CONFIRMAT ION LETTER OF CASH CREDITORS AND ADVANCES. IN THIS NOTICE, THE ASSESSE E WAS ASKED TO FURNISH THE INCOME TAX RETURN OF AY 2008-09. (II) 143(2) DATED 25/03/2009:- IN THIS NOTICE THE ASSESSEE WAS NOT ASKED TO FURNIS H THE CONFIRMATION LETTER OF CASH CREDITORS & ADVANCES. IN THIS NOTICE, THE ASSE SSEE WAS ASKED TO PRODUCE THE BOOKS OF ACCOUNT AND DOCUMENTS. (III)143(2) DATED 04/09/2009:- IN THIS NOTICE ALSO, THE ASSESSEE WAS NOT ASKED TO FURNISH THE CONFIRMATION LETTER OF CASH CREDITORS AND ADVANCES. IN THIS NOTI CE, THE ASSESSEE WAS ASKED TO PRODUCE THE BOOKS OF ACCOUNT AND DOCUMENTS 4 IV) 142(1) DATED 27.10.2009:- IN THIS NOTICE ALSO, THE ASSESSEE WAS NOT ASKED TO FURNISH THE CONFIRMATION LETTER OF CASH CREDITORS & ADVANCES. IN THIS NOTICE THE QUERY WAS RAISED IN RESPECT OF DISALLOWANCE TO BE MADE U/S 40A(3) OF IN COME TAX ACT, 1961 AND TO PRODUCE BOOKS OF ACCOUNTS. THE ASSESSEE FILED TH E REPLY OF QUERY AND PRODUCED BOOKS OF ACCOUNT BEFORE THE AO WHICH INCLU DES THE CASH BOOKS AND BANK BOOK, WHICH SATISFIES THE QUERY OF THE AO. THEREFORE, ALL THE QUERIES RAISED BY THE AO HAVE BE EN REPLIED/COMPLIED BY THE ASSESSEE. THE LD. AO NEVER ASKED THE ASSESSEE TO FI LE CONFIRMATION LETTER OF THE CASH CREDITORS AND ADVANCES IN ANY NOTICE EITHE R ISSUED U/S 142(1) AND 143(2) OF INCOME TAX ACT. C) IN VIEW OF THE ABOVE SUBMISSION, WE SUBMIT THAT THE LD AO ASSESSED THE INCOME OF THE ASSESSEE WITHOUT PROVIDI NG THE REASONABLE OPPORTUNITY. THE ASSESSING OFFICER IS NOT ABSOLVED OF THE OBLIGATION TO COMPLY WITH THE FUNDAMENTAL RULES OF JUSTICE, WHICH HAVE C OME TO BE KNOWN IN ADMINISTRATIVE LAW AS THE PRINCIPLES OF JURISPRUDEN CE. COMPLIANCE WITH THE AUDI ALTERAM PARTEM RULE OF NATURAL JUSTICE IS AN INDISPENSABLE REQUIR EMENT OF A VALID ASSESSMENT ORDER. KINDLY SEE, JAGADAMBIKA PRATAP NARAIN SINGH (RAJA) V. CBDT (1975) 100 ITR 698 (SC), GOVERNMENT OF INDI A V. MAXIM A LOBO (1990) 83 CTR (MAD) 103; CIT V. VIMLADEN BHAGWANDAS PATEL (SMT.) (1979) 118 ITR 134 (GUJ); GANGADHARAN PILLAI (P) V. ACED ( 1980) 126 ITR 356 (KER); A SOCIEDADE DE FOMENTO INDUSTRIAL PVT. LTD. V. LAHIRI (KC) (1983) TAX LR 2664 (GOA); MALLAPPA KALLAPPA UGARE V. AG ITO (1 973) 91 ITR 529 (MYS); STATE BANK OF PATIALA V UNION OF INDIA (1973 ) 91 ITR 630 (P&H); CIT V SHAM LAL (1981) 127 ITR 816 (P&H); JAI PRAKASH SI NGH V CIT (1978) 111 ITR 507 (GAU); THOMAKUTTY (MO) V CIT (1958) 34 ITR 501 (KER); KOYAMMANKUTTY V ITO (1965) 58 ITR 871 (KER); MENON (TCN) V ITO (1974) 96 ITR 148 (KER.). THEREFORE THE CONFIRMATION LETTERS AND OTHER EVIDEN CES, NOW FURNISHED BY THE ASSESSEE AS ADDITIONAL EVIDENCE DESERVE TO BE A CCEPTED IN THE INTEREST OF JUSTICE. 2.5 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE ADMITTED THE ADDITIONAL EVIDENCE AFTER OBSERVING AS UNDER:- 3.3 I HAVE CONSIDERED THE ARGUMENT OF THE A .R AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN FROM PERUSAL OF ABOVE MENTIONED NOTICES ISSUED BY THE A.O. THAT IN THE INSTANT CASE, THE A .O. HAS NEVER ASKED THE APPELLANT TO FURNISH THE CONFIRMATION OF THE CREDIT S APPEARING MOSTLY ON ACCOUNT OF ADVANCE BOOKING OF PLOTS AND ALSO A FE W OF THEM OTHERWISE. 5 FOR THIS PURPOSE THE MATTER WAS BROUGHT TO THE KNOW LEDGE OF, AND ALSO DISCUSSED, WITH A.O. WHO HAS POINTED OUT THAT IN NO TICE U/S 142(1) DATED 27.10.09, HE HAS ASKED FOR THE CONFIRMATION OF THE CASH CREDITORS AS WELL AS FOR DISALLOWANCE U/S 40A(3), AS MENTIONED IN THE OR DER SHEET. HOWEVER, IT WAS NOTICED FROM THE COPY OF THE ANNEXURE ISSUED AL ONGWITH NOTICE U/S 142(1) THAT ONLY ONE MATTER WAS REFERRED WHICH WAS THE SHOW CAUSE FOR DISALLOWANCE U/S 40A(3), THE COPY OF WHICH IS ALSO FURNISHED BY THE A.R. BEFORE THE UNDERSIGNED. IT SEEM THAT A.O. HAS DIREC TED THE STAFF TO ISSUE NOTICE U/S 142 (1) ALONGWITH ANNEXURE WHICH SHOULD HAVE CONTAINED QUERY FOR FILING OF CONFIRMATION OF SHARE APPLICAT ION/ CASH LOAN CONFIRMATION AS WELL AS SHOW CAUSE FOR THE DISALLOW ANCE U/S 40A(3). BUT INADVERTENTLY, IN THE ANNEXURE, THE STAFF HAD MENTI ONED ONLY ABOUT SHOW CAUSE FOR DISALLOWANCE U/S 40A (3) AND POINT REGARD ING CASH CREDIT CONFIRMATION WAS NOT MENTIONED. BE IT AS IT MAY. HO WEVER, ULTIMATELY, THE FACT OF THE MATTER IS THAT THE APPELLANT WAS NEVER ASKED TO FURNISH THE CONFIRMATION OF CREDITS BY WAY OF PLOT BOOKING ADVA NCE. CONSIDERING THESE FACTS AND ALSO THE FACT THAT THE FURNISHING OF ADDI TIONAL EVIDENCE GOES TO THE ROOT OF THE MATTER IN AS FAR AS THE ACTUAL DETERMIN ATION OF INCOME OF THE APPELLANT IS CONCERNED AND IN VIEW OF THE DECISIONS OF THE COURTS, THE ADDITIONAL EVIDENCE IS ALLOWED TO BE ADMITTED. 2.6 FROM PAGES 5 TO 49 OF THE APPELLATE ORDER, THE LD. CIT(A) HAS MENTIONED THE ADDITIONAL EVIDENCE FILED BEFORE HIM AND HAVE ALSO MENTIONED THE COMMENTS OF THE AO IN RESPECT OF ADDITIONAL EV IDENCE BEFORE THE LD. CIT(A), THE ASSESSEE RELIED UPON THE FOLLOWING CASE LAWS:- 1. CIT VS. SMT. P.K. NOORJAHAN, 237 ITR 570 (SC) 6 2. CIT VS. BHARAT ENGG. & CONSTRUCTION CO.83 ITR 187 (SC) 3. CIT VS. ORISSA CORPORATION (P) LTD., 159 ITR 79 (SC ) 4. ARAVALI TRADING CO. VS. ITO, 8 DTR 199 (RAJ.) 2.7 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE REDUCED THE ADDITION TO RS. 79,52,500/- AND BALANCE ADDITION OF RS. 4,95,82,259/- WAS DELETED. IT WILL BE USEFUL TO REP RODUCE THE ORDER OF THE LD. CIT(A) IN REDUCING THE ADDITION TO RS. 79,52,500/-/ 3.3.1 C OMING TO THE MERITS OF THE ADDITION, THE FIRST ARGU MENT OF THE APPELLANT IS REGARDING A.O. TAKING SOME OF THE AMOUNTS TWICE AND FURTHER IN SOME CASES AMOUNT BEING TAKEN INCORRECTL Y BY THE A.O., TOTALING TO RS. 1,40,67,465/-. IT IS SEEN THAT THE A.O. HAS RECTIFIED THE MISTAKE WHEREVER THE AMOUNTS HAVE EITHER BEEN DOUBLY TAKEN OR INCORRECT AMOUNT HAVE BEEN TAKEN. THUS, THE ADDITION HAS BEEN REDUCE D BY RS. 1,40,67,465/- LEAVING THE BALANCE ADDITION AMOUNTING TO RS. 5,7 5,34,759/-. 3.3.2 FROM PERUSAL OF THE EXPLANATION FILED BY THE APPELLANT, IT HAS BEEN NOTICED THAT ALMOST ALL THE ENTRIES ARE IN RELATION TO ADVANCE RECEIVED AGAINST BOOKING/SALE OF PLOTS, WHICH IS AL SO FOUND CORRECT BY THE A.O. AS PER REMAND REPORT SUBMITTED BY THE A.O. IN MOST OF THE CASES, THE APPELLANT COMPANY HAS ISSUED THE ALLOTMENT LETTER T O THE PARTY EITHER IN THIS YEAR OR IN THE SUBSEQUENT YEAR. THE A.O. HAS VERIFI ED THESE DETAILS BY GOING THROUGH THE REGISTRATION FORM SUBMITTED BY TH E PARTY FOR PLOT BOOKING. MOST OF THE ADVANCES HAVE BEEN RECEIVED TH ROUGH CHEQUES. FURTHER THE APPELLANT HAS FILED THE CONFIRMATION LE TTERS IN VARIOUS CASES. THE APPELLANT HAS EVEN FURTHER FILED THE COPIES OF THE BANK STATEMENT OF THE DIFFERENT PARTIES. THESE EVIDENCES HAVE BEEN SEEN A ND VERIFIED BY THE A.O. THE A.O. IN HIS REMAND REPORT, HAS NOT GIVEN ANY AD VERSE COMMENT ON 7 MERITS ABOUT THE VARIOUS ENTRIES MENTIONED AT SR. NO. 1, SR. NO. 3 TO 33, SR. NO. 35 TO 59, SR. NO. 61 TO 80, SR. NO. 82 TO 118 EXCEPT THE GENERAL ADVERSE COMMENTS THAT APPELLANT FAILED TO FURNISH THE DETAI LS IN ASSESSMENT PROCEEDINGS INSPITE OF NUMBER OF OPPORTUNITY GIVEN . THIS ISSUE HAS ALREADY BEEN DEALT WITH BY THE UNDERSIGNED AND IN VIEW OF T HE FACTS MENTIONED IN THE EARLIER PARAS, THE CLAIM OF THE A.O. WAS FOUND TO BE NOT CORRECT ABOUT THE OPPORTUNITY GIVEN . ACCORDINGLY, THE ADDITIONS SO MADE BY THE A.O. IN RESPECT OF THESE ENTRIES ARE HEREBY DELETED WITHOUT ANY FURTHER DISCUSSION. 3.3.3 IN RESPECT OF ENTRY AT SR. NO. 2 (SH. ANIL DH ANDHIA RS. 6,87,500./- ) & SR. NO. 60 (M.S. CHOUDHARY- RS. 15,000/-), THE A.O. HAS OBSERVED THAT IN ABSENCE OF SUPPORTING EVIDENCE OR BANK ACCOUNT, THE TRANSACTIONS FROM THESE PERSONS REMAIN UNVERIFIABLE . CONSIDERING THESE FACTS, I AGREE WITH THE VIEW OF THE A.O. AND REJECT THE ARGUMENT OF THE A.R. AND ADDITIONS OF RS. 7,02,500/- IS HEREBY CONFIRMED . 3.3.4 SIMILARLY IN RESPECT OF ENTRIES AT SR. NO. 34 SHOWN IN THE NAME OF KISSANS RS. 54 LAKHS, THE A.O. HAS OBSERVED THAT APPELLANT HAS FAILED TO PROVE THE CREDITWORTHINESS AND GENUINENES S OF THE PARTIES AND ACCORDINGLY THE ADDITION MAY BE SUSTAINED. I HAVE A LSO PERUSED THE DETAILS. IT IS NOTICED THAT THE APPELLANT HAS CLAIMED TO HAV E RECEIVED RS. 19 LAKHS IN CASH FROM SH. RAM PAL YADAV AND RS. 35 LAKHS IN CAS H FROM ONE SH. SURJA RAM. REGARDING SOURCE, IT WAS CLAIMED THAT SAME WAS OUT OF SALE PROCEEDS OF THEIR AGRICULTURAL LAND. HOWEVER, NO ANY DOCUMEN TARY EVIDENCE IN THIS REGARD WAS FURNISHED. NO ANY SPECIFIC DETAILS AS TO WHICH LAND WAS SOLD AND HOW MUCH AMOUNT WAS STATED TO BE RECEIVED FROM CONTENDED SALE OF THE LAND AND THE REASONS AND EXPLANATION AS TO HOW SUCH HEAVY AMOUNT WAS ADVANCED TO THE APPELLANT IN CASH, WAS NOT FURN ISHED. ACCORDINGLY, I AGREE WITH THE FINDING OF A.O. THAT AMOUNT OF RS. 54 LAKHS IS UNEXPLAINED AND HELD TO BE INCOME OF THE APPELLANT FROM UNDISC LOSED SOURCES. 8 3.3.5 SIMILARLY REGARDING ENTRY AT SR. NO. 81 NAMEL Y SH. RAKESH KUAMR GUPTA- RS. 18,50,000/-, THE A.O, IN THE REMAN D REPORT, HAS NOT FOUND THE EVIDENCES SATISFACTORY AND HAS COMMENTED THAT ADDITION MAY BE SUSTAINED. I HAVE PERUSED THE DETAILS. THE APPELLAN T HAS ONLY FURNISHED THE AFFIDAVIT WITHOUT FURNISHING ANY SUPPORTING EVIDENC E AND DETAILS REGARDING CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S. MOREOVER, IT WAS CLAIMED THAT CHEQUE OF RS. 8.5 LAKHS WAS ISSUED B Y DEPOSITING CASH AVAILABLE AS CASH BALANCE. AS ALREADY MENTIONED IT IS UNDISPUTED FACT THAT SH. RAKESH GUPTA IS BENAMI OF THE MAIN DIRECTOR SH. SHANKAR LAL KHANDELWAL AND ACCORDINGLY, THE CASH DEPOSIT IN HIS BANK ACCOUNT IS OUT OF UNEXPLAINED SOURCES. ACCORDINGLY, THE CASH CREDIT O F RS. 18.50 LAKHS SHOWN IN THE NAME OF SH. RAKESH KUMAR GUPTA IS HELD TO BE UNEXPLAINED AND THE ADDITION OF THE SAME AS INCOME FROM UNDISCL OSED SOURCES IN THE HANDS OF APPELLANT IS SUSTAINED . 3.3.6 THUS IN BRIEF, THE ADDITION OF RS. 79,52,500/ - IS SUSTAINED AS ABOVE AND BALANCE ADDITION OF RS. 4,95,82,259/- IS HEREBY DELETED. 2.8 BEFORE US, THE LD. AR HAS FILED THE WRITTEN SUB MISSION ALONGWITH PAPER BOOK. IT HAS BEEN STATED THAT THE ASSESSEE COMPANY BELONGS TO SHANKAR LAL KHANDELWAL GROUP OF JAIPUR. THE SEARCH AND SEIZURE OPERATIONS WERE CONDUCTED AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE INDIVIDUALS AND BUSINESS CONCERNS BELONGING TO THE GROUP. DURING TH E COURSE OF SEARCH, SHRI SHANKAR LAL KHANDELWAL ADMITTED THE UNDISCLOSED INV ESTMENT OF RS. 375.20 LACS. HOWEVER, VIDE LETTERS DATED 20-11-07 AND 21-1 1-07, SHRI SHANKAR LAL KHANDELWAL RETRACTED FROM THE STATEMENT. THIS GROUP HAS SHOWN UNDISCLOSED 9 INCOME OF RS. 223.33 LACS IN THE NAMES OF VARIOUS P ERSONS WHILE FILING THE RETURN IN RESPONSE TO NOTICE ISSUED U/S 153A. THE L D. AR POINTED OUT THAT RETRACTION IS JUST AFTER THE SEARCH. THE SEARCH TOO K PLACE ON 16-11-07 AND 17- 11-07. 2.9 IN RESPECT OF ADDITION CONFIRMED BY THE LD. CI T(A), TO THE EXTENT OF RS. 79,52,500/-, THE LD. AR HAS GIVEN THE FOLLOWING SUBMISSIONS IN SUPPORT OF THE CASE THAT ADDITION DESERVES TO BE DELETED. IN FACT, DURING THE COURSE OF ASSESSMENT PROCEEDI NGS THE APPELLANT WAS PREVENTED BY REASONABLE CAUSE FROM FI LING THE REQUIRED DETAILS IN RESPECT OF THESE CREDITORS. BUT IN APPEA L PROCEEDINGS, DETAILED SUBMISSIONS WERE MADE IN RESPECT OF EACH AND EVERY CASH CREDIT ALONG- WITH REQUIRED DOCUMENTARY EVIDENCES IN THE FORM OF CONFIRMATION LETTERS, PROOF OF IDENTITY, NATURE OF TRANSACTION AND SOURCE S OF THE FUNDS ETC. BEFORE THE CIT (A) WITH A REQUEST TO CONSIDER THESE DETAIL S AND EVIDENCES UNDER RULE 46A OF THE I.T. RULES, 1962. THERE WAS ALSO P OINTED OUT TOTALING MISTAKE OF RS. 1,40,67,465/- IN MAKING SUCH ADDITIONS. AFTER AFFORDING DUE OPPORTUNITY TO THE AO AND AFTER OBTAINING REMAN D REPORT FROM HIM ON ALL THESE POINTS, THE LEARNED CIT (A) HAD ACKNOWL EDGED THE TOTALING MISTAKE OF RS. 1,40,67,465/- STRAIGHT AWAY AND DELETED THE SAME. HE HAD ALSO ADMITTED THE ADDITIONAL EVIDENCES AND ACCEP TED CREDITS IN RESPECT OF 114 CREDITORS FOR RS.4,95,82,259/- HOWEVER, IN RESP ECT OF THE FOLLOWING FOUR CREDITORS, HE WAS NOT WILLING TO ACCEPT THE SA ME ON THE PLEA THAT THESE DEPOSITS REMAINED UN-VERIFIABLE: S.NO. OF NAME OF THE CREDITOR. AMOUNT. AOS ORD. 2 SHRI ANIL DHANDHIA RS. 6,87,500/- 60 SHRI M.S. CHOUDHARY RS. 15,000/- 34 KISSANS RS. 54,00,000/- 81 SHRI RAKESH KUMAR GUPTA. RS. 18,50,000/- TOTAL RS. 79,52,500 /- WHILE CONFIRMING THE ABOVE ADDITIONS, YOUR HONORS W OULD NOTE THAT THE LD. CIT (A) HAD NOT GIVEN HIS OWN FIN DINGS IN RESPECT OF SUCH DEPOSITS AND ALSO DID NOT ASSIGN ANY REASON FOR REJECTING THE EXPLANATION OF THE APPELLANT. HE HAD SIMPLY REFERRE D TO THE REMAND 10 REPORT OF THE AO AND CONCLUDED THAT THE EXPLANATION FURNISHED IN RESPECT OF SUCH DEPOSITS WAS NOT FOUND SATISFACTOR Y BY THE LD AO SO THESE DEPOSITS WERE NOT VERIFIABLE . THUS FOR CONFIRMING SUCH ADDITIONS, HE HAD HEAVILY RELIED UPON THE REMAND RE PORT OF THE AO. AS A JUDICIAL AUTHORITY, IT IS HIS PIOUS DUTY TO GIVE WELL REASONED FINDINGS TO ARRIVE AT LOGICAL CONCLUSIONS. THE FINDINGS GIVEN IN ABSENCE OF SUCH AN EXERCISE ARE BAD IN LAW AND DESERVE TO BE QUASHED SUMMARILY. FURTHER, ON READING OF THE R EMAND REPORT OF THE AO, YOUR HONORS WOULD NOTE THAT THE LD. AO ALSO DID NOT VENTURE TO SPECIFY AS TO WHY THE EXPLANATION OF THE APPELLANT WAS NOT SATISFACTORY. FOR INSTANCE, IN RESPECT OF THE D EPOSIT APPEARING IN THE NAME OF (I) SHRI ANIL DHANDHIA, IT WAS OBSERVED BY THE AO. THAT THE APPELLANT HAD PRODUCED ALL THE NECESSARY DOCUME NTARY EVIDENCES IN RESPECT OF THE IDENTITY, GENUINENESS O F THE TRANSACTION AND TRANSFER OF THE FUNDS, BUT IN ABSENCE OF COPY O F THE BANK STATEMENT, SUCH EXPLANATION WAS NOT SATISFACTORY.(K INDLY REFER TO PAGE NO.9 OF THE APPEAL ORDER),(II) LIKE-WISE IN R ESPECT OF OTHER DEPOSIT OF RS.15,000/- APPEARING IN THE NAME OF SHR I M.L. CHOUDHARY ALSO, HE HAD GIVEN SIMILAR CRYPT REMARKS WHICH DID NOT LEAD TO ANY DEFINITE FINDING.(PAGE NO.29 OF THE APP EAL ORDER) (III) REGARDING THIRD DEPOSIT OF RS. 54,00,000/- IN THE N AMES OF KISSANS ALSO THE AO HAD GIVEN HIS REPORT IN THE SIMILAR MAN NER AND FASHION STATING THEREIN THAT ALL THE REQUIRED DOCUMENTS AND DETAILS REGARDING IDENTITY, TRANSACTION ETC. COULD BE FURNISHED BY TH E APPELLANT, BUT THESE WERE NOT MAINTAINABLE IN ABSENCE OF BANK STAT EMENT.(KINDLY REFER TO PAGE NO.21 OF THE APPEAL ORDER) WHILE ARR IVING AT SUCH FINDINGS, NEITHER THEY HAD REBUTTED THE CONTENTS OF THE AFFIDAVIT, NOT DID THEY DEMAND ANY FURTHER SUPPORTING EVIDENCE AS ALLEGED IN THE REMAND REPORT. IN ABSENCE OF SUCH AN EXERCISE T HE REMAND REPORT AS SUBMITTED BY THE AO IS IRRELEVANT AND IMM ATERIAL SO FOR THE CORRECTNESS OR GENUINENESS OF THESE DEPOSITS IS CONCERNED. (IV) LASTLY, THE DEPOSIT OF RS.18,50,000/- APPEARING IN THE NAME OF SHRI RAKESH KUMAR GUPTA, IT WAS REPORTED THAT ON THE BAS IS OF AFFIDAVIT ALONE, SUCH DEPOSIT COULD NOT BE ACCEPTED. THE AO D ID NOT COMMENT ON THE FACT THAT THE CREDITOR UNDER CONSIDE RATION WAS BENAMIDAR OF ONE OF THE DIRECTORS OF THE CO. AND BO TH THE DEPOSITS WERE RECEIVED THROUGH CHEQUES ONLY DULY ROUTED THRO UGH THE CASH FLOW STATEMENT ONLY. FURTHER THE FIRST DEPOSIT OF R S.9,50,000/- WAS NOT A DEPOSIT AS REPORTED BUT WAS A RE-PAYMENT OF THE LOAN TAKEN TWO DAYS EARLIER. IN REMAND REPORT, ALL THESE FACTS WERE NOT DWELT UPON FOR ARRIVING AT SUCH FINDING. MORE-OVER THE CR EDITOR UNDER CONSIDERATION HAD BEEN TAKEN AS BENAMIDHAR OF ONE O F THE DIRECTORS OF THE CO. SHRI SHANKARLAL KHANDELWAL AND ALL THE I NVESTMENTS ETC. HAD OWNED BY HIM SO THERE WAS NO QUESTION AT ALL TO MAKE FURTHER ADDITION ON ACCOUNT OF THE DEPOSITS SHOWN IN THE NA ME OF SUCH BENANIDHAR. 11 FROM THE READING OF ABOVE REMAND REPORT OF THE AO, YOUR HONORS WOULD APPRECIATE THAT THE REMAND REPORT AS R ELIED UPON BY THE LD. CIT (A) FOR ARRIVING AT SUCH FINDINGS WAS N OT SPECIFIC AND CATEGORICAL AND DID NOT DEAL WITH THE POINTS AT ISS UE IN RIGHT PERSPECTIVE. THUS THE CONCLUSIONS SO ARRIVED AT ON THE BASIS OF SUCH FAULTY REMAND REPORT ARE BAD IN LAW. IN THE CIRCUM STANCES, THE LD. CIT (A) HAD ERRONEOUSLY CONFIRMED THESE ADDITIONS O N THE BASIS OF SUCH FAULTY REPORT WHICH DESERVE TO BE DELETED. 2.10 BEFORE US, THE LD. DR HAS FILED THE WRITTEN SU BMISSIONS WHICH ARE REPRODUCED AS UNDER:- ..THE ARGUMENTS TAKEN BY LD. A.R. AGAINST CONFIRMATION OF THESE ADDITIONS ARE NOT ACCEPTABLE BECAUSE OF THE FOLLOWING REASONS. (I) FIRST OF ALL, LD. AR HAS CLAIMED THAT THE LD. C IT(A) HAS GIVEN THIS DECISION RELYING ON THE REMAND REPOR T OF THE AO AND THEREFORE, SUCH DECISION IS BAD IN LAW. IN THIS REGARD, IT IS SUBMITTED THAT THE LD. CIT(A) HAS MERELY REFERRED TO THE REMAND REPORT OF THE AO AND AFTER REFERRING TO THE SAME HE HAS GIVEN HIS WELL R EASONED ORDER WHICH CANNOT BE SAID TO BE BAD IN LAW. (II) SECONDLY, THE LD. AR HAS ARGUED IN RESPECT OF ALL THE ABOVE PARTIES, THE ASSESSEE HAD FURNISHED AFFID AVITS AND THEREFORE, THE CASH CREDITS SHOULD HAVE BEEN AC CEPTED AS EXPLAINED. IN THIS REGARD, IT IS SUBMITTED THAT TO PROVE THEGS OF CASH CREDITS, THE ASSESSEE IS ALSO REQUIRED TO PROV E THE CREDITWORTHINESS OF THE CREDITORS. AS PER THE DISCU SSION MADE BY THE LD. CIT(A), IT CAN BE SAID THAT THE ASS ESSEE 12 HAS FAILED TO EXPLAIN THE SOURCE OF MONEY CLAIMED T O BE ADVANCED BY THESE PARTIES. IN THE CASES OF SHRI ANI L DHANDHIA AND SHRI M.S. CHOUDHARY, THE BANK STATEMEN T WERE NOT PRODUCED AND THEREFORE, THE SOURCE COULD N OT BE SAID TO BE EXPLAINED. IN RESPECT OF THE KISSANS RS . 35.00 LACS AND RS. 19.00 LACS WERE CLAIMED TO BE ADVANCED IN CASH BY SHRI RAMPAL YADAV AND SHRI SURJARAM RESPECTIVELY. THESE AMOUNTS WERE CLAIMED TO BE OUT OF SALE PROCEEDS OF THEIR AGRICULTURAL LAND. HOWEVER, NO DOCUMENTARY EVIDENCE REGARDING THE SALE OF AGRICULT URAL LAND WAS PRODUCED. THEREFORE, SUCH BIG AMOUNT CLAIM ED TO BE RECEIVED IN CASH CANNOT BE TREATED AS EXPLAIN ED. SIMILARLY, IN THE CASE OF SHRI RAKESH GUPTA ALSO, N O EVIDENCE REGARDING THE CREDITWORTHINESS WAS PRODUCE D. THIS PERSON IS ACCEPTED BY THE GROUP AS A BENAMIDAR AND THEREFORE, PRIMA FACIE SUCH ADVANCE IS UNACCOUNTED MONEY OF THE ASSESSEE GROUP. EVEN IN RESPECT OF ON E CHEQUE OF RS. 8.50 LACS, THE CHEQUE IS ISSUED AFTER CASH DEPOSIT IN HIS BANK ACCOUNT IN VIEW OF THE ABOVE DISCUSSION, THERE IS NO DOUBT THAT THE ADDITION OF RS. 79,52,500/- HAS BEEN RIGHT LY CONFIRMED BY THE LD. CIT(A) . 2.11 THE LD. DR ALSO CONTENDED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE ADDITIONAL EVIDENCE. IT WAS STATED BY THE LD. DR THAT THE LD. CIT(A) HAS ERRED IN GIVING THE RELIEF OF RS. 4,95,8 2,259/-. 13 2.12 WE HAVE HEARD BOTH THE PARTIES. FIRST WE WILL TAKE UP THE ISSUE AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN ADMITTING T HE ADDITIONAL EVIDENCES. AS PER ORDER SHEET ENTRY, IT IS CLEAR THAT THE ASSE SSEE FILED THE RETURN ON 28- 11-09. THE AO ISSUED THE NOTICE U/S 143(2) AND THE CASE WAS FIXED FOR HEARING ON 10-02-2009. ON 10-02-09, THE REPRESENTAT IVE OF THE ASSESSEE APPEARED AND STATED THAT THERE WERE NO BUSINESS ACT IVITIES DURING THE ASSESSMENT YEAR 2008-09. THE AO REQUIRED THE ASSESS EE TO GIVE THE FOLLOWING DETAILS. 1. PAID UP CAPITAL 2. DETAILS OF PRELIMINARY EXPENSES 3. BANK STATEMENT 4. TO PRODUCE CASH BOOK, LEDGER AND OTHER DOCUMENTS THE AO VIDE ORDER SHEET ENTRY DATED 20-02-09 MENTIO NED THAT THE SUM OF RS. 5.00 LACS BE NOT ADDED AS UNDISCLOSED INCOME BECAUS E THE ASSESSEE HAS NOT BEEN ABLE TO GIVE THE SOURCE OF THE AMOUNT CREDITED AS SHARE CAPITAL. THE HEARINGS WERE ADJOURNED ON 24-02-09. HOWEVER, THERE IS NO ENTRY ON 24-02- 09. FRESH NOTICE WAS ISSUED ON 27-10-09 AND THE ASS ESSEE WAS REQUIRED TO FILE THE SOURCES OF THE FUNDS FOR SUBSCRIPTION OF S HARE CAPITAL WHICH HAS BEEN SUBSCRIBED IN CASH BY SHRI TIKAM KHANDELWAL, SMT. G UMAN KHANDELWAL AND SHRI DILIP KUMAWAT. THEREAFTER THE ORDER SHEET ENTR Y IS DATED 28-11-09 AND ON THAT DATE CERTAIN DETAILS IN RESPECT OF SHARE A PPLICATION MONEY WERE FILED 14 BY THE ASSESSEE. THE CASE WAS ADJOURNED TO 9 TH DEC. 09. THE ASSESSMENT HAS BEEN MADE ON 13 TH DEC. 09. THE LD. CIT(A) HAS OBSERVED THAT AO VIDE NOTICE U/S 142(1) HAS NOT ASKED THE ASSESSEE TO FURNISH TH E CONFIRMATION LETTER OF CASH CREDITORS AND ADVANCE. FROM THE SEQUENCE OF TH E EVENTS MENTIONED IN ORDER SHEET ENTRY AND CONSIDERING THE INFORMATION A S DESIRED VIDE NOTICE, IT IS CLEAR THAT THE ASSESSEE HAS NOT BEEN ALLOWED ADEQUA TE OPPORTUNITY TO PRODUCE THE CONFIRMATIONS. THUS THE LD. CIT(A) WAS JUSTIFIE D IN ADMITTING THE ADDITIONAL EVIDENCES. 2.13 BEFORE THE LD. CIT(A), THE ASSESSEE STATED THA T THE AO HAS MADE DOUBLE ADDITION IN RESPECT OF CASH CREDITORS TO TH E EXTENT OF RS. 1,40,67,465/-. SUCH DETAILS HAVE BEEN MENTIONED BY THE LD. CIT(A) AT PAGES 7 AND 8 OF THE APPELLATE ORDER. THE AO HAS ALSO REC TIFIED THE ORDER U/S 154 OF THE ACT, THUS THE ADDITION WHICH REMAINS AFTER THE ORDER U/S 154 IS OF RS. 5,75,34,749/-. FROM THIS ADDITION, THE LD. CIT(A) H AS CONFIRMED THE ADDITION TO THE EXTENT OF RS. 79,52,500/-. 2.14 THE LD. CIT(A) AT PAGES 8 TO 49 OF THE APPELLA TE ORDER HAS GIVEN THE DETAILS OF ADDITIONAL EVIDENCES FILED IN RESPECT OF 118 PERSONS. THE LD. CIT(A) HAS ALSO MENTIONED THE COMMENTS OF THE AO IN RESPECT OF ADDITIONAL EVIDENCE RELATING TO EACH CREDITORS. IN RESPECT OF PERSONS AT SERIAL NO. 2, 34, 60 AND 81, THE LD. CIT(A) HAS CONFIRMED THE ADDITIO N AND IN RESPECT OF OTHER 15 CREDITORS, THE LD. CIT(A) HAS DELETED THE ADDITION. IN RESPECT OF THE CREDITORS FOR WHICH THE LD. CIT(A) HAS DELETED THE ADDITION, THE NATURE OF EVIDENCES ARE THE SAME IN RESPECT OF EACH CREDITORS AND THE COMM ENTS OF THE AO ARE ALSO THE SAME. HENCE, FOR READY REFERENCE, WE ARE REPROD UCING THE EXTRACTS FROM THE ORDER OF THE LD. CIT(A) IN RESPECT OF THREE CR EDITORS FOR WHICH LD. CIT(A) HAS DELETED THE ADDITION. WE ARE REPRODUCING IN RES PECT OF CASH CREDITS AT SERIAL NO. 1, 59 AND 118 AS UNDER: 1. SHRI AMJAD KHAN. RS. 5,00,000/- COPIES OF CONFIRMATION LETTER, REGISTRATION FORM, PAN CARD ARE AT PB (PAGE 45 TO 4 8). THE AMOUNT FROM THIS PARTY WAS RECEIVED AS ADVANCE AGAINST SAL ES OF PLOT AND THE SAME REFUNDED BACK TO PARTY. THE ADVANCE FOR PLOT BOOKIN G IS VERIFIABLE FROM REGISTRATION FORM SUBMITTED BY THE PARTY. SINCE BY FILLING THE ABOVE DOCUMENTS THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION PRO VED, HENCE, ALL THE INGREDIENTS OF SECTION 68 STAND SATISFIED, THEREFOR E, NO ADDITION DESERVES TO BE MADE. A.OS COMMENTS: - I HAVE GONE THROUGH THE SUBMISSIO N AND SUPPORTING DOCUMENTS FILED BY THE ASSESSEE DURING APPELLATE PR OCEEDINGS. ASSESSEE HAS NOW GIVEN EVIDENCE REGARDING RECEIPT OF MONEY F ROM PARTY AND GENUINENESS OF TRANSACTIONS, INCLUDING BANK STATEME NT OF PARTY. DURING ASSESSMENT PROCEEDINGS ASSESSEE HAS FAILED TO FURNI SH SOURCE OF FUND INSPITE OF NUMBER OF OPPORTUNITIES GIVEN. 59 . MAYA D/O HANUMAN YADAV RS.70,000/-. COPY OF LEDGERS ARE PLACED AT P.B. (PAGE NO. 213-216). COPY OF LEDGER ACCOUNT IS PLACED AT P.B. (PAGE NO 215). DURING THE YEAR THE ASSESSEE NOT RECEIVED ANY AMOUN T FROM THIS PARTY. THE AMOUNT CREDITED IN A/C OF PART Y WAS ON ACCOUNT OF LAND PURCHASED FROM THIS PARTY. THE PURCHASES DEED AGAINST PURCHASES OF LAND IS AT PB PAGE 466 TO 477. FURTHER THE CORRESPONDING PURCHASES SUMMARY IS AT PB PAGE 213 . A.OS COMMENTS: - I HAVE GONE THROUGH THE SUBMISSIO N AND SUPPORTING DOCUMENTS FILED BY THE ASSESSEE DURING APPELLATE PR OCEEDINGS AND THE SAME IS ACCEPTABLE 16 118. YOGESH AGARWAL RS. 70,000/- COPIES OF ALLOTMENT LETTER, REGISTRATION FORM AND PAN CARD ARE PLACED AT P.B. (PAGE NO.401-405). THE AMOUNT FROM THIS PARTY WAS RECEIVED AS ADVANCE AGAINST SALES OF PLOT AND THIS WAS ADJUSTED AGAINST SALES OF PLOT MADE TO THIS PARTY IN NEXT YEAR. THE ADVANCE FOR PLOT BOOKING AND SALES IN NEXT YEAR IS VERIFIABLE FROM REGISTRATION FORM SUBMITTED BY THE PARTY AND COPY O F ALLOTMENT LETTER ISSUED TO PARTY. SINCE BY FILLING THE ABOVE DOCUMENTS THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION PROVED, HENCE, ALL T HE INGREDIENTS OF SECTION 68 STAND SATISFIED, THEREFORE, NO ADDITION DESERVES TO BE MADE. A.OS COMMENTS: - I HAVE GONE THROUGH THE SUB MISSION AND SUPPORTING DOCUMENTS FILED BY THE ASSESSEE DURING APPELLATE PR OCEEDINGS. ASSESSEE HAS NOW GIVEN EVIDENCE REGARDING RECEIPT OF MONEY F ROM PARTY AND GENUINENESS OF TRANSACTIONS, INCLUDING BANK STATEME NT OF PARTY. DURING ASSESSMENT PROCEEDINGS ASSESSEE HAS FAILED TO FURNI SH SOURCE OF FUND INSPITE OF NUMBER OF OPPORTUNITIES GIVEN. HENCE, IN RESPECT OF THE CREDITS WHICH HAVE BEEN A CCEPTED BY THE LD. CIT(A), IT IS CLEAR THAT THE AO WAS SATISFIED WITH THE EVID ENCES FURNISHED BEFORE THE LD. CIT(A). THE ONLY GRIEVANCE OF THE AO WAS THAT SUCH EVIDENCES WERE NOT PRODUCED BEFORE HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) SHO ULD NOT HAVE ADMITTED THE ADDITIONAL EVIDENCE. SINCE WE HAD ALREADY HELD THAT THE LD. CIT(A) WAS JUSTIFIED IN ADMITTING THE ADDITIONAL EVIDENCE, THE REFORE, WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION TO TH E EXTENT OF RS. 4,95,82,259/-. HENCE, THE GROUND OF APPEAL RAISED B Y THE REVENUE IS DISMISSED. 17 2.15 THE LD. CIT(A) HAS CONFIRMED THE CASH CREDIT O F RS. 6,87,500/- IN THE NAME OF SHRI ANIL DHANDHIA. THE SAME HAS BEEN RECEI VED THROUGH CHEQUE NO. 523878 AND HAS BEEN DEPOSITED IN UCO BANK ON 19 -10-2007. SHRI ANIL DHANDHIA BOOKED THE PLOT BY ISSUING CHEQUE DRAWN ON BANK OF RAJASTHAN LTD.. SINCE THE TRANSACTION DID NOT MATERIALIZE THE REFORE, THE AMOUNT WAS PAID BACK THE SAME TO SHRI ANIL DHANDHIA ON 30-10-07 THR OUGH DRAFT DRAWN ON UCO BANK. THUS THE EVIDENCES WHICH WERE AVAILABLE W ITH THE ASSESSEE WERE SUFFICIENT FOR IT TO DISCHARGE THE ONUS. THE ADDRES S OF SHRI ANIL DHANDHIA IS AVAILABLE IN THE FORM FOR BOOKING OF THE PLOT. WE THEREFORE, FEEL THAT THE ASSESSEE HAS DISCHARGED THE ONUS AND THEREFORE, THE RE WAS NO CASE OF MAKING ADDITION U/S 68 OF THE ACT. 2.16 THE SECOND ADDITION IS IN RESPECT OF SHRI M.S . CHOUDHARY AMOUNTING TO RS. 15,000/-. THE ASSESSEE HAS FILED THE CONFIRM ATION OF SHRI M.S. CHOUDHARY. THE AMOUNT HAS BEEN PAID AS SHARE CAPITA L. THE AMOUNT IS ONLY RS. 15,000/-. ONCE THE CONFIRMATION HAS BEEN FILED THEN THE ADDITION COULD NOT HAVE BEEN MADE U/S 68 OF THE ACT WITHOUT COLLEC TING ANY FURTHER EVIDENCE. 2.17 A SUM OF RS. 54.00 LACS CREDITED IN THE NAME O F KISSAN HAS BEEN CONFIRMED BY THE LD. CIT(A). BEFORE THE LD. CIT(A), IT WAS SUBMITTED BY THE ASSESSEE THAT IT HAS RECEIVED RS. 19.00 LACS IN CAS H FROM SHRI RAM PAL YADAV 18 AND RS. 35.00 LACS IN CASH FROM SHRI SUIRJA RAM. TH E ASSESSEE FILED THE AFFIDAVITS OF SHRI RAM PAL YADAV AND SHRI SURJA RAM . SHRI RAM PAL YADAV HAS ADMITTED TO HAVE GIVEN RS. 19.00 LACS IN CASH O N 7-12-07. HE HAS EXPLAINED THAT SOURCE OF THE FUNDS WAS FROM THE REC EIPT OF SALE OF LAND. IT IS NOT THE CASE OF THE REVENUE THAT THE ADDRESS GIVEN IN THE AFFIDAVIT IS FALSE. SHRI RAM PAL YADAV BELONGS TO VILLAGE CHAKWAD. THIS VILLAGE IS HAVING NO BANK FACILITY AND SUCH EVIDENCE HAS BEEN PLACED BEF ORE THE LOWER AUTHORITIES WHILE CONSIDERING THE ADDITION U/S 40A(3) OF THE AC T. THUS THE ONUS STANDS DISCHARGED AND THEREFORE, THE LD. CIT(A) WAS NOT JU STIFIED IN CONFIRMING THE ADDITION OF RS. 19.00 LACS. SIMILAR IS THE FACT IN RESPECT OF SHRI SURJA RAM PERTAINING TO RECEIPT OF RS. 35.00 LACS. HENCE, WE HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 54.00 LACS WHICH WERE CREDITED IN THE NAMES OF SHRI RAM PAL YADAV AND SHR I SURJA RAM AS BOTH THE PERSONS WERE BELONGING TO VILLAGE CHAKWAD. 2.18 THE LD. CIT(A) HAS CONFIRMED THE ADDITION OF R S. 18.50 LACS CREDITED IN THE NAME OF SHRI RAKESH KUMAR GUPTA. SHRI RAKESH KUMAR GUPTA WAS BENAMI OF THE ASSESSEE. AN AFFIDAVIT OF SHRI RAKESH KUMAR GUPTA WAS ALSO FILED. THE DEPOSITS WERE RECEIVED THROUGH CHEQUES A ND HAVE BEEN ROUTED THROUGH CASH FLOW STATEMENT OF SHRI RAKESH KUMAR GU PTA. THUS THE SOURCES 19 OF FUNDS STAND EXPLAINED. WE THEREFORE, HOLD THAT T HE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 79,52,0 00/- 3.1 THE SECOND GROUND OF APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 3,42,60,562 /- OUT OF TOTAL ADDITION OF RS. 5,13,95,252/- MADE BY THE AO ON ACCOUNT OF DIS ALLOWANCE U/S 40A(3). 3.2 THE AO AT PAGE 8 OF THE ASSESSMENT ORDER HAS GI VEN THE DETAILS OF PAYMENT MADE IN CASH. THE TOTAL OF SUCH PAYMENT IS RS. 5,13,95,252/-. THE ASSESSEE VIDE ORDER SHEET ENTRY WAS ASKED TO EXPLAI N AS TO WHY DISALLOWANCE SHOULD NOT BE MADE U/S 40A(3) OF THE ACT. IN REPLY TO THIS SHOW CAUSE, THE ASSESSEE STATED THAT AGRICULTURAL LAND HAS BEEN PUR CHASED THROUGH REGISTERED SALE DEED. DUE STAMP DUTY HAS BEEN PAID ON PRESENTA TION OF DOCUMENTS BEFORE THE REGISTERING AUTHORITY. THE IDENTITY OF T HE PAYEE IS ESTABLISHED AND RECEIPT OF PAYMENTS IS DULY ACKNOWLEDGED BY THE PAY EE. IT WAS THEREFORE, SUBMITTED THAT NO DISALLOWANCE IS REQUIRED TO BE MA DE AND FOR THIS PROPOSITION, THE ASSESSEE HAS RELIED UPON THE DECIS ION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF KANTI LAL PURSHOTTAM & CO. VS. CIT, 155 ITR 519. THE AO WAS NOT CONVINCED WITH THE REPLY OF THE ASSESSEE. THE AO REFERRED TO THE DECISION OF HON'BLE APEX COU RT IN THE CASE OF ATTAR SINGH GURMUKH SINGH ETC. VS. ITO, 191 ITR 667. THE AO ALSO MENTIONED 20 THAT PAYMENTS ARE NOT COVERED UNDER RULE 6DD OF I.T . RULES. THE AO ACCORDINGLY MADE THE ADDITION OF RS. 5,13,95,252/- U/S 40A(3) OF THE ACT. 3.3 BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT TH E AO HAS CONSIDERED THE ADDITION OF RS. 1,52,40,000/- IN RESPECT OF PA YMENT MADE TO KAILASH, TARACHAND SANGRI ON 20-10-2007 AS AGAINST ACTUAL PA YMENT OF RS. 15.24 LACS. THUS THE AO HAS MADE EXCESS ADDITION OF RS. 1 ,37,16,000/-. 3.4 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE LD. AR CONFIRMED THE ADDITION TO THE EXTENT OF RS.3,24,60, 562/- U/S 40A(3) OF THE ACT AND THE FINDINGS OF THE LD. CIT(A) ARE AVAILABL E AT PAGES 58 TO 69 OF THE APPELLATE ORDER. WE ARE SUMMARIZING BELOW THE FINDI NGS OF THE LD. CIT(A). 1. THE ASSESSEE CLAIMED THAT THE PAYMENTS TO THE EX TENT OF RS. 38,58,252/- WERE MADE TOWARDS PURCHASE OF STAMP AND REGISTRATION CHARGES. THE LD. CIT(A) NOTICED THAT T HE PAYMENTS INCLUDE THE PAYMENTS MADE TO THE ADVOCATE AS HIS FE ES. THE PAYMENT FOR STAMP DUTY AND REGISTRATION CHARGES WER E TO THE EXTENT OF RS. 34,18,690/- AND THE LD. CIT(A) HAS DE LETED THE ADDITION OF RS. 34,18,690/- AS AGAINST THE CLAIM OF THE ASSESSEE MADE TO THE EXTENT OF RS. 38,58,252/-.. 2. THE AO HAS WRONGLY TAKEN THE AMOUNT AT RS. 1,52,40,000/- AS AGAINST RS. 15,24,000/- MADE TO KA ILASH, TARACHAND ETC. HENCE, THE LD. CIT(A) REDUCED THE AD DITION TO THE EXTENT OF RS. 1,37,16,000/- 21 3. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS MA DE THE CASH PAYMENT TO THE SELLERS APART FROM PAYMENTS MAD E BY CHEQUE. IT WAS THEREFORE, HELD THAT THE SELLERS COU LD NOT BE SAID TO HAVE NOT USING THE BANK FACILITIES. HENCE, PAYME NTS ARE NOT COVERED UNDER RULE 6DD 4. DISALLOWANCE U/S 40A(3) CAN BE MADE EVEN AFTER T HE EXPENDITURE IS GENUINE. FOR THIS PROPOSITION, THE L D. CIT(A) REFERRED TO THE DECISION OF HON'BLE GUJARAT HIGH CO URT IN THE CASE OF HASSANAND PINJOMAL VS. CIT 112 ITR 134. TH E LD. CIT(A) HAS REPRODUCED THE HELD PORTION FROM THE DEC ISION OF HON'BLE GUJARAT HIGH COURT AT PAGE 59 OF THE APPELL ATE ORDER 5. THE PAYMENTS MADE FOR PURCHASE OF THE STOCK ARE COVERED U/S 40A(3). FOR THIS PROPOSITION, THE RELIANCE IS P LACED ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO, 191 ITR 667 6. IT WAS ARGUED THAT THE ASSESSEE HAS NOT DONE TRA DING ACTIVITY AND THEREFORE, PROVISIONS OF SECTION 40A(3 ) ARE NOT APPLICABLE. THE LD. CIT(A) OBSERVED THAT ONCE THE E XPENDITURE IS FOR PURCHASE OF STOCK IN TRADE THEN THE PROVISIO NS OF SECTION 40A(3) ARE APPLICABLE IRRESPECTIVE OF THE FACT AS TO WHETHER STOCK IN TRADE HAS BEEN SOLD OR CARRIED OVER AS CLO SING STOCK. ALL OUTGOING ARE COVERED UNDER WORD EXPENDITURE FOR T HE PURPOSE OF SECTION 40A(3) AS PER THE DECISION OF HON'BLE AP EX COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO (SUPR A). (7) BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT NO DISALLOWANCE U/S 40A(3) CAN BE MADE IN CASE THE PAY MENTS ARE 22 ON ACCOUNT OF BUSINESS EXPEDIENCY AND OTHER RELEVA NT FACTORS. REFERENCE WAS MADE TO SECOND PROVISO TO SECTION 40A (3) OF THE ACT. THE LD. CIT(A) OBSERVED THAT SECOND PROVIS O TO SECTION 40A(3) IS TO BE READ AS A WHOLE. THE PAYMEN T WILL NOT BE GOVERNED U/S 40A(3) OF THE ACT IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED. HENCE, CONSIDER ATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS HAVE TO BE CONSIDERED BY THE AUTHORITIES WHICH IS REQUIRED TO PRESCRIBE THE CIRCUMSTANCES UNDER WHICH PROVISIONS OF SECTION 40A (3) ARE NOT APPLICABLE. BEFORE THE LD. CIT(A), IT WAS SUBMI TTED THAT THERE WERE NO BANK FACILITIES IN THE VILLAGE OF SEL LERS. THE LD. CIT(A) HAS REPRODUCED THE RELEVANT PORTION OF THE R EMAND REPORT OF THE AO AT PAGES 62 TO 65 OF THE APPELLATE ORDER, THE AO IN HIS REMAND REPORT HAS STATED THAT THE SELLERS HAVE MADE FALSE DECLARATION IN THEIR AFFIDAVITS THAT THEY WER E NOT HAVING ANY BANK ACCOUNT AT THE TIME OF ENTERING INTO THE S ALE TRANSACTION WITH THE ASSESSEE. THESE PARTIES HAVE R ECEIVED SALE CONSIDERATION PARTLY IN CASH AND PARTLY BY ACCOUNT PAYEE CHEQUE. FROM THE SALE DEED, IT IS NOTICED THAT THE SELLERS HAVE BEEN GIVEN CHEQUES OF DATED 20-10-07, 19-01-08, 25- 03-08 AND 10-06-08. THE CASH HAS BEEN PAID ON 31-10-07 IN RES PECT OF SALE DEED BY PHULCHAND, LALARAM, SHANTI DEVI, PRAB HU, VIMLA AND MOTA. SIMILARLY, THE SALE DEED WITH TARACHAND SHOWED THAT CASH PAYMENT ON 20-10-07 AND THE CHEQUE IS ALSO OF THE SAME DATE. THE CASH HAS BEEN MADE TO DHAPU DEVI ON 20-10 07 AND 1- 11-07 AND THE CHEQUES HAVE BEEN GIVEN ON 20-10-07. SIMILARLY THE CASH HAS BEEN PAID ON 11-03-07 AND 20-10-07 IN RESPECT OF 23 LAND FROM SHRI SITARAM, DHANNAL LAL, MAYA AND VIMLA . THE CHEQUES ARE DATED 20-10-07. (8) FROM THE REMAND REPORT, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS ISSUED THE CHEQUES TO THOSE VERY SELLE RS TO WHOM CASH HAS BEEN PAID. THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAS NOT PRODUCED THESE SELLERS FOR CROSS EXAMINATION BEFORE THE AO. THE LD. CIT(A) OBSERVED THAT RULE 6D D IS NOT APPLICABLE. (9) THE DECISION OF HON'BLE JURISDICTIONAL HIGH COU RT IN THE CASE OF KANTILAL PURSHOTAM & CO. VS. CIT (SUPRA) IS NOT APPLICABLE BECAUSE THE CASE OF THE ASSESSEE IS NOT COVERED UNDER RULE 6DD. (10) THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF GIRDHARI LAL GOENKA VS CIT, , 179 ITR 122 IS NOT APPLICABLE BECAUSE IN THAT CASE, THE MATTER WAS DECIDED ON THE BASIS OF RULE 6DD(J). RULE 6DD(J) HAS BEEN OMITTED W.E.F. 01 -07-1995. (11) FOLLOWING DECISIONS ARE NOT APPLICABLE BECAUSE THESE ARE BASED ON RULE 6DD(J) 1. CIT VS. K.K.S.K. LEATHER PROCESSOR 292 ITR 669 (MAD.) 2. JCIT VS. SWARUP VEGETABLES PRODUCTS INDUSTRIES LTD., 96 ITD 468 (DEL.) 3. ACIT VS. GOPAL DAS, 59 TTJ 768 (INDORE) 3.5 ON THE BASIS OF THE OBSERVATION AS MENTIONED AB OVE, THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE TO THE EXTENT OF RS. 3,42,60,562/-. 24 3.6 BEFORE US, THE LD. AR HAS FILED THE FOLLOWING S UBMISSIONS. IN APPEAL PROCEEDINGS, A DETAILED REPLY ON THE PO INT WAS SUBMITTED BEFORE THE HONORABLE CIT (A) EXPLAINING T HEREIN THE REAL SPIRIT OF THESE PROVISIONS AND ALSO THE DETAILS OF THE MOD E OF PAYMENT IN EACH AND EVERY PAYMENT AS PER COPY OF THE WRITTEN SUBMIS SIONS PLACED IN THE PAPER BOOK AT PAGE NO. 1 TO 31. HAVING CON SIDERED SUCH EVIDENCES AND DETAILS, THE HONORABLE CIT (A) HAD DELETED ADDI TION OF RS.1,71,34,690/- ON ACCOUNT OF TOTALING MISTAKE AND WHERE NO VIOLATION U/S 40A(3) OF THE ACT WAS NOTED. HOWEVER, HE WAS N OT WILLING TO CONSIDER OUR OTHER ARGUMENTS ON THE PLEA THAT ALL THE OUT-G OINGS INCLUDING THE CASH PAYMENTS FOR ACQUIRING THE STOCKS IN TRADE ATTRACTE D THESE PROVISIONS AND CONFIRMED ADDITION OF RS.3,42,60,252/- ON ACCOUNT OF SUCH VIOLATION U/S 40A(3) OF THE ACT. (KINDLY REFER TO PAGE NO. 69 OF THE APPEAL ORDER). THE HONORABLE CIT (A) HAD SUMMARILY TURNED DOWN OUR OTH ER ARGUMENTS AS LISTED AT S.NO. 27 TO 28. IN THE WRITTEN SUBMISSION S CITING THEREIN NUMBER OF JUDICIAL CITATIONS ON THE POINT (PB 28 TO 31) AN D ALSO THE INTERPRETATION OF THE OBSERVATIONS OF HONORABLE SUPREME COURT IN T HE CASE OF ATTAR SINGH GURUMUKH SINGH ETC. VS. ITO (1991) 191 ITR 667 (SC) . IT APPEARED THAT THE LEARNED AUTHORITIES BELOW DID NOT APPRECIATE TH E DECISION OF THE HONORABLE SUPREME COURT IN RIGHT PERSPECTIVE. THE S AID JUDGMENT HAS BEEN ELABORATELY DEALT WITH AND INTERPRETED BY HONORABLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS CHAUDHARY & CO. WHILE INTERPRETING THE ABOVE JUDGMENT OF HONORABLE SUPREME COURT, THE HONORABLE HIGH COURT OF ALLAHABAD (1995) 129 CTR (ALL) 101 OPINED BUSINESS EXPENDITURE-DISALLOWANCE U/S 40A (3)- ASSESSEE PROD UCED EVIDENCE THAT THE PAYEE INSISTED ON CASH PAYMENT- IDENTITY OF PAY EE WAS DISCLOSED AND GENUINENESS OF PAYMENT ALSO ESTABLISHED- DISALLOWAN CE U/S 40 A (3) WAS NOT CALLED FOR- THE OBJECT OF SECTION 40A (3) IS TH AT NO FICTITIOUS AMOUNT SHOULD BE ALLOWED AS REVENUE EXPENDITURE AND NOT TH AT CASH PAYMENT CAN NEVER BE MADE. ON THE BASIS OF SUCH INTERPRETATION ONLY, THE HONORABLE ITAT, JAIPUR BENCH JAIPUR HAVE TAKEN THE SAME VIEW IN THE CASE OF M/S PACL INDIA LTD VS ACIT CIRCLE-3, JAIPUR HOLDING THE REIN THAT BUSINESS EXPENDITURE-DISALLOWANCE U/S 40A (3)- APPLICABILITY OF RULE 6DD(H)- CLAUSE (H) OF RULE 6DD TAKES OUT OF THE PURVIEW OF SECTION 40A (3) SUCH CASH PAYMENT WHICH IS MADE IN A VILLAGE OR TOWN WHICH IS NOT SERVED BY ANY BANK TO ANY PERSON WHO ORDINARILY RESIDES OR IS CARRYING ON ANY BUSINESS IN SUCH VILLAGE OR TOWN- IN THE INSTANT CA SE, ADMITTEDLY THE SELLERS OF THE LAND ARE VILLAGERS ENGAGED IN FARMING ACTIVI TIES AND RESIDING AT PLACES WHICH ARE NOT SERVED BY ANY BANK. THE AUTHORITIES BELOW DID NOT TAKE NOTE OF THESE CI TATIONS WHILE RELYING ON THE BOARDS PRESS NOTE DATED 8 TH MAY, 1969 TO TURN DOWN THE CLAIM OF THE APPELLANT. IN FACT, THEY HAVE MISINTER PRETED THE BOARDS INSTRUCTIONS ON THE POINT. IN FACT, THIS PRESS NOTE TALKS ABOUT THE PLACE 25 WHERE THE RECIPIENTS ARE RESIDING AND NOT THE PLA CE WHERE THE PAYMENT IS MADE. THIS POINT HAS BEEN DIRECTLY DEALT WITH BY THE ABOVE REFERRED JUDICIAL AUTHORITIES IN VERY CLEAR TERMS. HOWEVER, THE AUTHORITIES BELOW HAVE RUBBISHED SUCH IMPORTANT CITATION WITHOUT DISC USSIONS AND GIVING SPECIFIC FINDINGS ON THE POINT. IN SHORT, THE FIND INGS OF THE AUTHORITIES BELOW ON THE POINT ARE ASSAILED FOR THE FOLLOWING R EASONS: (I) AT THE OUT-SET, YOUR HONORS WOULD APPRECIATE THAT F OR INVOKING PROVISIONS OF SECTION 40(A)(3) OF THE ACT THE REAL INTENTION FOR CARRYING OUT A TRANSACTION IS TO BE LOOKED IN TO DECIDE THE NATUR E OF A PARTICULAR PAYMENT. WHETHER A PARTICULAR PAYMENT IS OF EXPE NDITURE NATURE OR OF INVESTMENT NATURE WOULD BE DECIDED BY THE INTENTIO N OF CARRYING OUT SUCH TRANSACTION ONLY. IF THE INTENTION IS TO MAKE INVES TMENT ONLY THEN THESE PROVISIONS WOULD NOT COME INTO PLAY AND IF SUCH OUT -GOING IS MADE FOR ACQUIRING THE STOCKS IN TRADE ONLY THEN THESE PROVI SIONS WOULD COME INTO PLAY. IN THE PRESENT CASE, THE AUTHORITIES BELOW DI D NOT DWELL UPON THE ACTUAL INTENTIONS OF THE APPELLANT. IN ABSENCE OF S UCH AN EXERCISE, THESE PROVISIONS COULD NOT BE INVOKED LEGALLY AND VALIDLY . MORE-OVER, HERE IT WOULD BE RELEVANT TO MENTION HERE THAT INITIALLY, T HE APPELLANT MADE PAYMENT FOR PURCHASE OF THE SAID WITH THE INTENTION OF MAKING AN INVESTMENT ONLY. HOWEVER, SUBSEQUENTLY WHEN IT WAS FOUND ECONOMICALLY VIABLE TO CONVERT SUCH INVESTMENT AS BUSINESS STOCK , THE SAID PLOT WAS PUT AS STOCK IN TRADE. SUCH INTENTION OF THE APPELLANT IS EVIDENT FROM THE FACT THAT THE PLOT UNDER CONSIDERATION WAS NOT SOLD DUR ING THE YEAR UNDER CONSIDERATION. THIS FACT WAS BROUGHT TO THE NOTICE OF THE AUTHORITIES BELOW TO SHOW HIS REAL INTENTION OF MAKING INVESTMENT IN THE SAID PLOT. HOWEVER THEY WERE NOT WILLING TO CONSIDER THIS FACT AND RUB BISHED THE SAME WITHOUT ANY REASON OR WITHOUT BRINGING ANY MATERIAL ON RECO RD TO REBUT SUCH CLAIM OF THE APPELLANT. (II) ON GOING THROUGH THE RELEVANT PROVISIONS OF THE ACT , IT WOULD BE NOTED THAT THE WORDS SUCH EXPENDITURE SHALL NOT BE ALLOWED AS A DEDUCTION ARE OF RELEVANCE. IN THE INSTANT CASE, THE APPELLANT HAD NOT CLAIMED THE IMPUGNED PAYMENTS AS DEDUCTION. THEREFORE NO ADDITION CAN BE MADE AGAINST SUCH CASH PAYMENT. (III) AGAIN IT WAS ALSO RELEVANT TO SEE AS TO WHEN THESE PROVISIONS WOULD BE ATTRACTED I.E. IN THE YEAR WHEN THE INVESTMENT WAS MADE OR IN THE YEAR WHEN SUCH PROPERTY WAS SOLD? DESPITE OF SPECIFIC RE QUEST ON THE POINT AS MADE IN THE WRITTEN SUBMISSION, THE AUTHORITIES BEL OW DID NOT DECIDE THIS POINT. IN ABSENCE OF SPECIFIC ADJUDICATION ON THE P OINT, THE ORDER SO PASSED IS BAD IN LAW AS PER JUDICIAL DISCIPLINE AND DESERV ES TO BE QUASHED. (IV) IT IS A SETTLED LAW AS OPINED BY THE JUDICIAL AUTHO RITIES IN NUMBER OF CASES THAT FOR ADMINISTERING THE LAW JUDICIOUSLY IT IS AL WAYS DESIRABLE TO TAKE A PRACTICAL AND PRAGMATIC VIEW TO THE PROBLEM. KINDLY REFER TO THE JUDGMENT OF HONORABLE CALCUTTA HIGH COURT IN THE CASE OF GIR DHARI LAL GOENKA VS 26 CIT REPORTED IN 179 ITR 122 THAT ITO HAS TO TAKE A PRAGMATIC VIEW OF THE MATTER. THE ITO SHOULD TAKE A PRACTICAL APPROACH TO PROBLEM AND STRIKE A BALANCE BETWEEN THE DIRECTION OF LAW AND HARDSHIP T O THE ASSESSEE. HE SHOULD NOT ENMESH HIMSELF IN TECHNICALITIES. AFTER ALL, THE OBJECT IS NOT TO DEPRIVE THE ASSESSEE OF THE DEDUCTION WHICH HE IS O THERWISE ENTITLED TO CLAIM WHERE THE AMOUNT WAS PAID IN CASH OR RECEIVED IN CASH. THE ASSESSING OFFICER HAS TO FIND OUT WHETHER THE TRANS ACTION IS GENUINE OR NOT AND IF HE FINDS THAT THE TRANSACTION IS GENUINE, HE SHOULD ALLOW THE DEDUCTION, THE CIRCULAR OF THE BOARD IS NOT EXHAUST IVE; IT IS ONLY ILLUSTRATIVE AND THE ASSESSING OFFICER HAS TO TAKE INTO ACCOUNT THE SURROUNDING CIRCUMSTANCES, CONSIDERATIONS OF BUSINESS EXPEDIENC Y AND THE FACTS OF EACH PARTICULAR CASE IN EXERCISING HIS DISCRETION EITHER IN FAVOR OR AGAINST THE ASSESSEE. (V) IT IS ALSO A SETTLED LAW THAT THESE PROVISIONS WOUL D NOT COME INTO PLAY WHERE THE BOOKS RESULTS WERE REJECTED U/S 145 OF TH E ACT AND PROFITS WERE ESTIMATED AS HELD IN THE CASE OF CIT VS BANWARI LAL BANSHIDHAR(1998)148 CTR (ALL) 533 AS UNDER: BUSINESS EXPENDITURE- DISALLOWANCE U/S 40 A (3)- I NCOME ASSESSED AT G.P. RATE- WHERE INCOME IS ASSESSED AT G.P. RATE BY REJECTING THE BOOKS OF THE ASSESSEE U/S 145(1) PROVISO, NO DISALLOWANCE CA N BE MADE SEPARATELY U/S 40 A (3) FOLLOWED BY HONORABLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SMT. SANTOSH JAIN (2008) 296 ITR (P &H) 324. (VI) AND LASTLY, WHILE DEALING WITH RULE 6DD AND THE REA L SPIRIT ON THE BOARDS CIRCULAR ON THE SUBJECT, THE HONORABLE RAJASTHAN H IGH COURT IN THE CASE OF SMT. HARSHILA CHORDIA VS ITO (2007) 208 (RAJ) 2 008)298 ITR 349 (RAJ) HAVE OPINED AS UNDER: BUSINESS EXPENDITURE- DISALLOWANCE U/S 40A(3)- EXC EPTIONAL OR UN- AVOIDABLE CIRCUMSTANCES- CIRCUMSTANCES IN WHICH THE CONDITIONS LAID DOWN IN RULE 6DD(J) COULD BE APPLICABLE CAN NOT BE SPELT OUT AND THE CIRCUMSTANCES PROVIDED IN CBDT CIRCULAR ARE NOT EXH AUSTIVE BUT ILLUSTRATIVE- AS PER CIRCULAR NO. 220 DATED 31.05-7 7 CLEARLY STATES THAT RULE 6DD(J) HAS TO BE LIBERALLY CONSTRUED, AND ORDINARIL Y WHERE THE GENUINENESS OF THE TRANSACTION AND THE IDENTITY OF THE PAYEE IS ESTABLISHED, THE REQUIREMENT OF RULE 6DD(J) MUST BE DEEMED TO HAS BE EN SATISFIED- GENUINENESS OF THE TRANSACTIONS AND THE IDENTITY OF THE PAYEE IS NOT DISPUTED IN THE PRESENT CASE ALSO, YOUR HONORS WOULD APPRECI ATE THAT IDENTITY OF THE PAYEE IS PROVED, THE GENUINENESS OF THE TRANSACTION IS DULY DOCUMENTED BY THE SALE DEED INSTRUMENTS AND THE AMOUNT OF THE TRA NSACTION IS ALSO CERTIFIED BY THE STAMP REGISTRATION AUTHORITIES BY WAY OF DLC RATES ETC. THUS ALL THE THREE INGREDIENTS OF THE GENUINENESS & CORRECTNESS OF THE TRANSACTION AND ALSO THE IDENTITY OF THE PAYEE IS E STABLISHED IN THE PRESENT CASE. IN THE CIRCUMSTANCES, PROVISIONS OF SECTION 4 0A (3) ARE NOT ATTRACTED 27 IN THE PRESENT CASE AND ADDITION MADE ON THE BASIS OF MISINTERPRETATION OF THESE PROVISIONS NEEDS TO BE DELETED. (V) LASTLY, ON GOING THROUGH THE APPEAL ORDER, IT W OULD BE NOTED THAT THE LD. CIT (A) HAD HIMSELF OBSERVED THAT WHILE PURCHASING THESE PROPERTIES AS LISTED AT PAGE NO. 8 OF ASSESSMENT ORDER, PAYMENTS TO THE TUNE OF RS.94,00,000/- WERE MADE THROUGH CHEQUES ONLY. THE LD. CIT (A) HAD ALSO MENTIONED CHEQUE PAYMENTS IN THE APPEAL ORDER AT PAGE NO. 64-65 MENTIONING THEREIN TOTAL PAYMENTS MADE BY CHEQUE FO R RS. 94,00,000/- INSTEAD THE ACTUAL PAYMENT MADE BY THE APPELLANT CO MPANY THROUGH CHEQUES OF RS. 1,29,00,000/-. THESE PAYMENTS DID N OT ATTRACT THE PROVISIONS OF SECTION 40A (3) OF THE ACT. ACCORDING LY NO DISALLOWANCE WAS WARRANTED ON ACCOUNT OF SUCH CHEQUE PAYMENTS. HOWE VER WHILE QUANTIFYING THE AMOUNT OF RELIEF GRANTED UNDER THIS HEAD AT PAGE NO. 69 OF THE ORDER, HE HAD THROUGH AN OVER-SIGHT, OVER-LOOKE D THESE FIGURES AND DID NOT ALLOW ANY RELIEF ON ACCOUNT OF SUCH CHEQUE PAYM ENTS. WE HAVE ALREADY MOVED A RECTIFICATION APPLICATION BEFORE THE LD.CIT (A) FOR RECTIFYING THIS MISTAKE U/S 154 OF THE ACT, WHICH IS PENDING AS ON DATE. MEAN-WHILE YOUR HONORS ARE REQUESTED TO KINDLY CONSIDER THIS POINT ALSO AND DECIDE THE SAME AS PER PROVISIONS OF LAW. IN VIEW OF ABOVE DISCUSSIONS, IT IS SEEN THAT THE A DDITION MADE AND CONFIRMED ON ACCOUNT OF DISALLOWANCE MADE U/S 40A ( 3) IS BAD IN LAW AND DESERVES TO BE DELETED. 3.7 THE LD. AR HAS MADE FURTHER SUBMISSIONS AS UNDE R:- IN CONTINUATION TO OUR EARLIER WRITTEN SUBMISSION S AS MADE IN THE ABOVE MENTIONED APPEAL, WE BEG TO BRING THE FOLLOWI NG FURTHER FACTS ON RECORD FOR YOUR KIND PERUSAL AND NECESSARY VERIFICA TION IN CONNECTION WITH OUR GROUND NO. 2 REGARDING ADDITION OF RS. 3,42,60, 562/- CONFIRMED BY THE CIT (A) ON ACCOUNT OF DISALLOWANCE MADE U/S 40 A(3) OF THE ACT: (I) ON PERUSAL OF THE SALE DEEDS, YOUR HONORS WOULD NOT E THAT ALL THE CASH PAYMENTS WERE MADE PRIOR TO THE DATE OF THE EXECUTION OF THE SALE DEEDS, IN THE VILLAGE OF THESE SELLERS WHEN THE AGREEMENTS TO SALE WERE ENTERED INTO. AT THE GIVEN POINT OF TIME, I.E. WHEN THE AGREEMENTS TO SALE WERE BEING ENTERED INTO, THE SEL LERS DID NOT HAVE ANY BANK ACCOUNT AS CONFIRMED AND CERTIFIED BY THE SELLERS AND THE CONCERNED SARPANCH OF THE VILLAGE. SUBSEQUENTLY, TH E SALE DEEDS WERE GOT REGISTERED AT JAIPUR IN THE OFFICE OF THE REGISTRAR. AT THE TIME OF REGISTRATION, THE BALANCE AMOUNT OF THE SAL E CONSIDERATION WAS PAID THROUGH ACCOUNT PAYEE CHEQUES ONLY. THIS F ACT IS EVIDENT FROM THESE INSTRUMENTS ITSELF, COPY OF WHICH ARE SU BMITTED HEREWITH FOR YOUR KIND PERUSAL AND RECORD. FOR READ Y REFERENCE THE 28 RELEVANT EXTRACT FROM SUCH INSTRUMENTS INDICATING T HIS FACT IS RE- PRODUCED HEREUNDER: FO; EQY; DH LEIQ.KZ /KU JKFK ES FO; EQY; DH LEIQ.KZ /KU JKFK ES FO; EQY; DH LEIQ.KZ /KU JKFK ES FO; EQY; DH LEIQ.KZ /KU JKFK ESA LS : A LS : A LS : A LS : --------- V{KJS V{KJS V{KJS V{KJS --------------- IZFKEI{K FOSRKX.K US IQOZ ESA FO; VUQCU/K DS LE; VIUS FGLLS VUQLKJ LFEEFYR IZFKEI{K FOSRKX.K US IQOZ ESA FO; VUQCU/K DS LE; VIUS FGLLS VUQLKJ LFEEFYR IZFKEI{K FOSRKX.K US IQOZ ESA FO; VUQCU/K DS LE; VIUS FGLLS VUQLKJ LFEEFYR IZFKEI{K FOSRKX.K US IQOZ ESA FO; VUQCU/K DS LE; VIUS FGLLS VUQLKJ LFEEFYR :I LS MDR SRK F :I LS MDR SRK F :I LS MDR SRK F :I LS MDR SRK FNRH;I{K LS UDN IZKIR DJ FY;S FKS NRH;I{K LS UDN IZKIR DJ FY;S FKS NRH;I{K LS UDN IZKIR DJ FY;S FKS NRH;I{K LS UDN IZKIR DJ FY;S FKS THE COPY OF THE AFFIDAVITS AND CERTIFICATE FROM SAR PANCH TO THIS EFFECT ALONG-WITH THE RELEVANT SALE DEEDS WERE SUBM ITTED BEFORE THE LD. CIT (A) IN SUPPORT OF OUR ABOVE CONTENTIONS. HOWEVER, T HE LEARNED CIT (A) DID NOT TAKE NOTE OF THESE FACTS AND CONFIRMED THE ADDI TIONS IN RESPECT OF THE CASH PAYMENTS MADE AT THE TIME OF AGREEMENTS TO SAL E, IGNORING OUR ABOVE CONTENTIONS . OBVIOUSLY THE ADDITION SO CONFIRMED IS CONTRARY TO THE SPIRIT OF THESE PROVISIONS. 3.8 BEFORE US, THE LD. DR HAS ALSO FILED THE WRITTE N SUBMISSION. THE WRITTEN SUBMISSIONS IN BRIEF ARE AS UNDER:- 1. THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. CHOUDHARY & CO. 129 CTR 101 IS NOT APPLICABLE AS THAT DECISION IS BASED ON RULE 6 DD(J). RULE 6DD(J) STAND OMITTED AND THE RELIANCE ON THIS DECISION BY THE ASSESSEE IS NOT APPLICABLE. 2. THE DECISION OF ITAT JAIPUR BENCH IN THE CASE OF PACL INDIA LTD. VS. ACIT, CIRCLE- 3, JAIPUR IS NOT APPLICABLE BECAUSE IN THAT CASE THE SELLERS WERE NO T HAVING THE BANK ACCOUNT. IN THE INSTANT CASE, THE A SSESSEE HAS MADE THE PAYMENT BY ACCOUNT PAYEE CHEQUE AS WEL L AS BY CASH. (3) THE ARGUMENT OF THE ASSESSEE THAT IT PURCHASED THE LAND AS AN INVESTMENT IS NOT BASED ON ANY EVIDENCE. THE BOOKS OF ACCOUNTS AND THE FINANCIAL STATEMENT SHOWE D THAT THE PLOTS OF LAND SOLD WERE AS STOCK IN TRADE OF THE 29 ASSESSEE. HENCE, THE PROVISIONS OF SECTION 40A(3) A RE NOT APPLICABLE (4) THE LD. CIT(A) HAS MENTIONED THAT THE EXPENDITU RE INCURRED FOR PURCHASING OF LAND AS STOCK IN TRADE I S COVERED U/S 40A(3) IRRESPECTIVE OF THE FACT AS TO W HETHER STOCK WAS SOLD OR REMAINED IN THE CLOSING STOCK. (5) THE LD. DR SUPPORTED THE FINDING OF THE LD. CIT (A) THAT CERTAIN DECISIONS ARE NOT APPLICABLE. THE DECI SION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SM T. HARSHILA CHORDIA VS. ITO 298 ITR 349 IS NOT APPLICA BLE BECAUSE IT IS BASED ON RULE 6DD(J) 3.9 WE HAVE HEARD BOTH THE PARTIES. BEFORE THE LOWE R AUTHORITIES, THE ASSESSEE HAS FILED THE CERTIFICATE FROM SARPANCH IN WHICH IT HAS BEEN MENTIONED THAT VILLAGE CHAKWAD, TEHSIL JAIPUR IS NO T SERVED BY ANY BANK INCLUDING THE NATIONALISED BANK, PRIVATE BANK, SAHK ARI BANK OR GRAMIN BANK. THERE IS NO EVIDENCE ON RECORD TO SUGGEST THA T THE CERTIFICATE IS INCORRECT OR FALSE. THE ASSESSEE HAS MADE PURCHASES THROUGH 07 SALE DEEDS. THE COPIES OF THE SALE DEEDS HAVE BEEN INCLUDED IN THE PAPER BOOK AND SUCH SALE DEEDS HAVE BEEN PRODUCED BEFORE THE AUTHORITIE S BELOW. SUCH SALE DEEDS SHOW THAT THE CASH AMOUNT HAS BEEN PAID BEFORE THE DATE OF REGISTRATION. AS PER 07 SALE DEEDS, THE AMOUNT PAID IN CASH BEFORE R EGISTRATION OF THE DOCUMENTS IN RESPECT OF TRANSFER OF LAND IS AS UND ER:- 30 1. RS. 98,50,000/- 2. RS. 32,16,000/- 3. RS. 31,16,000/- 4. RS. 20,80,600/- 5. RS. 47,87,000/- 6. RS. 93,48,000/- 7. RS. 15,24,000/- RS. 3,39,21,000 IT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES THA T SUCH PAYMENTS HAVE BEEN MADE IN THE VILLAGE AND THE VILLAGE WAS NOT SERVED BY ANY BANK AS PER THE CERTIFICATE OF THE SARPANCH. RULE 6DD(G) IS AS UNDE R:- WHERE PAYMENT IS MADE IN VILLAGE OR TOWN, WHICH O N THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK, TO ANY PERSON WHO ORDINARILY RESIDES, OR IS CARRYING ON AN Y BUSINESS, PROFESSION OR VOCATION, IN ANY SUCH VILLAGE OR TOWN . 3.10 THE COPIES OF THE SALE DEEDS CLEARLY SHOW THAT THE SELLERS ARE RESIDENT OF THE VILLAGE CHAKWAD. IF THE CIRCUMSTANCES MENTIO NED IN RULE 6DD(G) ARE SATISFIED THEN THE PROVISIONS OF SECTION 40A(3) WIL L NOT BE APPLICABLE. RULE 6DD(G) NEVER SPECIFIES THAT A PERSON WHO IS RESIDEN T OF A VILLAGE AND WHERE BANKING FACILITIES ARE NOT AVAILABLE THEN THE AMOUN TS RECEIVED BY HIM WILL BE GOVERNED U/S 40A(3) OF THE ACT, IN CASE HE IS HAVIN G THE BANK ACCOUNT AT THAT RELEVANT TIME. ONE HAS TO CONSIDER THE CONDITIONS A ND CIRCUMSTANCES AS MENTIONED IN THE RULE AND IN CASE ANY CONDITION IS NOT MENTIONED THEN IT WILL NOT BE APPLIED. THE LD. CIT(A) HAS NOT ACCEPTED THE APPLICABILITY OF RULE 31 6DD(G) BECAUSE THERE HAVE BEEN SOME PAYMENTS THROUG H CHEQUE BEFORE THE DATE ON WHICH CASH PAYMENTS HAVE BEEN MADE. THE CIR CUMSTANCES UNDER WHICH THE LD. CIT(A) HAS HELD THAT RULE 6DD(G) WILL NOT BE APPLICABLE, ARE NOT CONTAINED IN THE RULE AND THEREFORE, WE HOLD TH AT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF R ULE 6DD(G). IT IS MENTIONED IN PROVISO THAT NO DISALLOWANCE SHALL BE MADE IN CA SE THE PAYMENT IS NOT MADE BY CHEQUE ETC. IN SUCH CASES AND UNDER SUCH CI RCUMSTANCES AS MAY BE PRESCRIBED HAVING NATURE AND EXTENT OF BANKING FACI LITIES AVAILABLE, CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELE VANT FACTORS. REQUIREMENT IN RULE 6DD(G) IS THAT IN CASE THE PAYM ENT IS MADE AT A PLACE WHERE THERE ARE NO BANKING FACILITY THEN DISALLOWAN CE IS NOT BE MADE. REQUIREMENT OF RULE 6DD(G) ARE SATISFIED AND HENCE DISALLOWANCE CANNOT BE MADE. 3.11 DURING THE YEAR, THE ASSESSEE HAS NOT DONE ANY BUSINESS. UNDER SIMILAR CIRCUMSTANCES, THE ITAT JAIPUR BENCH IN THE CASE OF M/S. ACE INDIA ABODES LTD. VS. ACIT (ITA NO.79/JP/2001 DATED 12-08-2011) HAS DELETED THE DISALLOWANCE U/S 40A(3) AFTER OBSERVING IN PARA 18 TO 20 WHICH IS REPRODUCED AS UNDER:- 18. SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL IN CA SE OF M/S. RISHABHDEV TOWNSHIP & DEVELOPERS P. LTD. THE TRIBU NAL WHILE DECIDING 32 THE APPEAL OF THE DEPARTMENT IN ITA NO. 181/JP/201 0 VIDE ITS ORDER DATED 29.4.2011 HAS HELD AS UNDER :- 7. AFTER CONSIDERING THE SUBMISSIONS AND PERUSIN G THE MATERIAL ON RECORD, WE FIND NO INFIRMITY IN THE FIN DING OF LD. CIT (A). THE DEPARTMENT IS IN APPEAL AND IF THEY WANT TO VERIFY WHETHER THERE IS A BRANCH IN VILLAGE BALLUPURA OR N OT CAN BE VERIFIED AT ANY POINT OF TIME WHICH THEY HAVE NOT D ONE. IT WILL BE JUST FUTILE EXERCISE IN SENDING THE MATTER BACK TO THE FILE OF AO TO JUST SATISFY HIMSELF BY GIVING HIM OPPORTUNITY. TH E EXCEPTION PROVIDED UNDER RULE 6DD(G) IS VERY CLEAR BY IT IS P ROVIDED THAT WHERE THE PAYMENT IS MADE IN A VILLAGE OR TOWN, WHI CH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK, TO ANY P ERSON WHO ORDINARILY RESIDES, OR IS CARRYING ON ANY BUSINESS, PROFESSION OR VOCATION, IN ANY SUCH VILLAGE OR TOWN, THEN NO DISA LLOWANCE CAN BE MADE UNDER SECTION 40A(3). IN FACT, THE LD. CIT (A ) HAS MENTIONED SUB CLAUSE (H) WHEREAS THE CORRECT CLAUSE IS 6DD(G) . THE LD. COUNSEL OF THE ASSESSEE HAS MADE STATEMENT AT BAR T HAT THERE IS NO BANK BRANCH IN VILLAGE BALLUPURA AT THE TIME OF PUR CHASE OF THE LAND FROM VARIOUS SELLERS. IT WAS ALSO SUBMITTED BY LD. A/R THAT NORMALLY THE VILLAGERS PAID IN CASH AT THE TIME OF ENTERING INTO AGREEMENT AND SALE DEED IS COMPLETED AT A LATER STA GE WHEREIN THEY HAVE AGREED TO RECEIVE THE AMOUNT FROM THE ASSESSEE EITHER IN CASH OR CHEQUE AS THE CASE MAY BE. THIS CONTENTION OF T HE LD. COUNSEL OF THE ASSESSEE REMAINED UNCONTROVERTED, THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE FINDING OF LD. CIT (A) AND HELD THAT LD. CIT (A) WAS RIGHT IN DELETING THE DISALLOWANCE MADE BY AO UNDER SECTION 40A(3). 33 19. SIMILAR VIEW HAS BEEN EXPRESSED BY THE TRIBUNAL IN CASE OF PACL INDIA LTD., 38 DTR 1 (JP) ALSO WHEREIN IT HAS BEEN HELD AS UNDER :- CLAUSE (H) OF R. 6DD TAKES OUT OF THE PURVIEW OF S. 40A(3) SUCH CASH PAYMENT WHICH IS MADE IN A VILL AGE OR TOWN WHICH IS NOT SERVED BY ANY BANK TO ANY PERSON WHO ORDINARILY RESIDES OR IS CARRYING ON ANY BUSINESS I N SUCH VILLAGE OR TOWN. THERE IS NO DISPUTE THAT THE SELLE RS OF THE LAND ARE VILLAGERS ENGAGED IN FARMING ACTIVITIES AN D ARE RESIDING AT PLACES AND ARE CARRYING ON FARMING ACTI VITIES AT PLACES WHICH ARE NOT SERVED BY ANY BANK AND SUCH SE LLERS HAVE NO BANK ACCOUNTS ANYWHERE. IT HAS BEEN EMPHATI CALLY ARGUED ON BEHALF OF THE APPELLANT-COMPANY THAT ALL PAYMENTS WERE MADE AT THE VILLAGES PRIOR TO REGISTR ATION OF THE SALE. THIS SUBMISSION CANNOT BE OUTRIGHTLY REJ ECTED. NORMALLY, ILLITERATE POOR FARMERS WOULD INSIST ON C ASH PAYMENTS, ESPECIALLY WHEN SUCH PAYMENTS INVOLVE HUG E AMOUNTS, AT THE PLACE OF THEIR RESIDENCE FOR THE SI MPLE REASON THAT THEY WOULD LIKE TO AVOID THE RISK OF RE CEIVING CASH AT THE TOWN WHERE THE SALE IS TO BE REGISTERED AND WHICH MAY BE FAR AWAY FROM THE VILLAGE AND SUCH CAS H HAS TO BE CARRIED BACK BY THEM TO THE VILLAGE. IT IS C OMMON KNOWLEDGE THAT THE SELLER HAS TO CONFIRM BEFORE THE SUB- REGISTRAR THAT FULL PAYMENT HAS BEEN RECEIVED BY HI M. AT THE SAME TIME, THE SUB-REGISTRAR SATISFIES HIMSELF ABOUT THE IDENTITY OF THE SELLER TO ENSURE THAT THE PAYMENT H AS BEEN MADE TO THE RIGHT PERSON. FOR THE SAKE OF CONVENIEN CE, IN THE RECEIPT THE PLACE IS MENTIONED AS THE TOWN WHER E THE DOCUMENT IS REGISTERED. THE AO HAS NOT MADE ANY EFF ORT TO EXAMINE ANY OF THE SELLERS TO VERIFY AS TO WHETHER THE 34 PAYMENTS WERE RECEIVED AT THE VILLAGES OR AT THE TO WN. CONSIDERING THE ENTIRE FACTS THE PROPOSITION THAT T HE PAYMENTS WERE MADE AT VILLAGES WHERE BANKING FACILI TIES DID NOT EXIST IS ACCEPTED. EVEN IF IT IS ASSUMED TH AT PAYMENTS WERE MADE AT A TOWN WHERE BANKING FACILITI ES WERE AVAILABLE, THE CASE OF THE APPELLANT-COMPANY W OULD STILL FALL UNDER THE EXCEPTION OF R. 6DD. RULE 6DD (H) HAS TO BE INTERPRETED LIBERALLY SO AS NOT TO FRUSTRATE THE OBJECT OF THE LEGISLATURE. THE OBJECT OF S. 40A(3) IS NOT TO DISALLOW GENUINE PAYMENTS AND THE R. 6DD HAS TO BE INTERPRET ED KEEPING IN VIEW THE OBJECT OF THE MAIN PROVISION. THE SECOND PROVISO TO S. 40A(3) REFERS TO THE NATURE A ND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS, WHICH MEANS THAT THE OBJECT OF THE LEGISLATURE IS NOT TO MAKE DISALL OWANCE OF SUCH CASH PAYMENTS WHICH HAVE TO BE COMPULSORILY MA DE BY THE ASSESSEE IN VIEW OF ABSENCE OF BANKING FACIL ITIES AT THE PLACE OF PAYMENT. IN THE PRESENT CASE, EVEN IF IT IS ASSUMED THAT THE PAYMENT WAS MADE AT THE DISTRICT HEADQUARTER, THE ADMITTED POSITION IS THAT THE SELL ERS DID NOT HAVE ANY BANK ACCOUNTS AT SUCH TOWN AND THEY DID NO T RESIDE OR CARRY ON ANY BUSINESS OR FARMING ACTIVITY AT SUCH TOWN. IT WOULD BE TOO MUCH TO EXPECT THAT THE APPE LLANT COMPANY WOULD BE ABLE TO COMPEL THE VILLAGERS TO OP EN BANK ACCOUNTS AT THE TOWN WHICH ULTIMATELY THEY WIL L NOT BE ABLE TO OPERATE AS THEY DO NOT RESIDE AT SUCH TOWN. IF SUCH A MYOPIC VIEW IS TAKEN REGARDING THE INTERPRETATION O F R. 6DD(H), THE VERY OBJECT OF THE LEGISLATURE WOULD BE FRUSTRATED. THERE IS NO DISPUTE REGARDING THE IDEN TITY OF THE PAYEES AND THE GENUINENESS OF THE LAND TRANSACTIONS IN RESPECT OF WHICH PAYMENTS HAVE BEEN MADE. IT IS NO TABLE 35 THAT R. 6DD(K) PROVIDES AN EXCEPTION IN RESPECT OF CASH PAYMENT WHICH IS MADE ON A DAY ON WHICH THE BANKS W ERE CLOSED. THIS PROVES THAT THE OBJECT OF THE LEGISLA TURE IS TO PROVIDE EXCEPTION IN RESPECT OF SUCH PAYMENT WHICH IS REQUIRED TO BE MADE IN CASH OR ABSENCE OF BANKING FACILITIES. RULE 6DD(H) MUST BE INTERPRETED KEEPIN G IN VIEW THIS OBJECT AND PURPOSE. THEREFORE, THE CASH P AYMENTS RE COVERED UNDER SECTION PROVISO TO S. 40A(3) AND R . 6DD(H). THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. 1,60,69,350/- SUSTAINED BY THE CIT (A). WHILE HOLDING SO, THE TRIBUNAL HAS TAKEN INTO CONSI DERATION CASES OF M/S. P. PRAVIN & CO., 274 ITR 534 (GUJ.), HASANA ND PINJOMAL, 112 ITR 134 (GUJ.), VENKATA SATYANARAYANA TIMBER DEPOT, 165 ITR 253 (AP) AND CHAUDHARY & CO., 217 ITR 431 (ALL.). 20. WHILE DECIDING THIS ISSUE, THE LD. CIT (A) HAS TAKEN INTO CONSIDERATION THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF HASANAND PINJOMAL (SUPRA) AND THIS VERY DECISION HA S BEEN CONSIDERED BY THE TRIBUNAL IN CASE OF PACL INDIA LTD. (SUPRA). I N THIS CASE ALSO IT HAS BEEN HELD THAT WHERE PAYMENT HAS BEEN MADE IN VILLA GES, THE PROVISIONS OF SECTION 40A(3) CANNOT BE APPLIED. WHILE HOLDING SO , THE TRIBUNAL HAS TAKEN INTO CONSIDERATION THE GENUINENESS OF THE PAY MENT MADE BY ASSESSEE THAT EVEN ON ACCOUNT OF GENUINENESS OF THE PAYMENT DISALLOWANCE SHOULD NOT BE MADE UNDER SECTION 40A(3). THE LD. CIT (A) HAS REJECTED BOTH THE CONTENTIONS OF ASSESSEE THAT PAYMENTS WERE MADE IN VILLAGES AND AMOUNT OF PAYMENT WAS GENUINE. SINCE BOTH THESE ISSUES HA VE ALREADY BEEN DECIDED BY THE TRIBUNAL IN ABOVE STATED CASES, THER EFORE, ON ACCOUNT OF PAYMENT MADE TO VILLAGERS IN THE VILLAGES, PROVISIO NS OF SECTION 40A(3) ARE NOT APPLICABLE AS HELD BY THE TRIBUNAL ABOVE. SINC E WE HAVE ALLOWED THE ISSUE TOTO IN FAVOUR OF THE ASSESSEE BY HOLDING THA T NO EXPENDITURE CAN BE DISALLOWED UNDER SECTION 40A(3) AS ASSESSEE HAS NOT CLAIMED ANY 36 EXPENDITURE IN ITS PROFIT & LOSS ACCOUNT, THEREFORE , WE HOLD THAT EVEN PART DISALLOWANCE CANNOT BE MADE ON ACCOUNT OF PAYMENT M ADE TO THE PARTIES RESIDING IN JAIPUR. ACCORDINGLY WE DELETE THE ENTI RE DISALLOWANCE SUSTAINED BY LD. CIT (A). THE LD. CIT(A) HAS CONFIRMED THE ADDITION U/S 40A(3 ) TO THE EXTENT OF RS. 3,42,60,562/-. THE DIFFERENCE OF RS. 3,39,562/- IS IN RESPECT OF PAYMENT MADE TO THE ADVOCATE OR DEED WRITER. 3.12 SINCE WE HAVE HELD AFTER FOLLOWING THE DECISI ON OF JAIPUR BENCH IN THE CASE OF M/S. ACE INDIA ABODES LTD. VS. ACIT ( SUPRA) THAT PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE, THEREFORE, THE A MOUNT OF RS. 3,39,562/- CANNOT BE DISALLOWED U/S 40A(3). 4. IN THE RESULT, THE APPEALS OF THE ASSESSEE IS AL LOWED AND THAT OF THE REVENUE IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 26-08 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 26/08/2011 *MISHRA COPY FORWARDED TO :- 1. M/S. SHREE GOVIND KRIPA BUILDMART (P) LTD. , JAIPU R 2. THE ACIT, CENTRAL CIRCLE- 1, JAIPUR / THE DCIT CENT RAL CIRCLE-1 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.472/JP /11) A.R. ITAT JAIPUR 37 38 39 40