M/s Shagun Developers, INDORE V. ITO 4(3), INDORE

ITA 588/Ind/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9470 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 22-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MOURYA
• Assessee Lawyers: SHREYA JAIN CAS
• Keywords: Capital asset
• Section: 40A(3); 143(3); 148

Judgement Text

SHAGUN DEVELOPERS ITA NO.588/IND/2017 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.588/IND/2017 ASSESSMENT YEAR 2007-08 REVENUE BY S HRI R.P. MOURYA , SR.DR ASSESSEE BY SHRI PRAKASH JAIN & MS. SHREYA JAIN,CAS DATE OF HEARING 1 7 .1 2 . 2018 DAT E OF PRONOUNCEMENT 19 .1 2 .2018 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEAL IS FILED AT THE INSTANCE OF ASSESSEE PERTAINING TO ASSESSMENT YEAR 2007-08 AND IS DIREC TED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)- II (IN SHORT LD.CIT(A)], INDORE DATED 20.06.2017 WHICH IS ARIS ING OUT OF THE ORDER U/S 148/143(3) OF THE INCOME TAX ACT 1961(IN SHORT THE ACT) DATED 16.03.2015 FRAMED BY ITO-4(3), INDORE. 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL; M/S. SHAG UN DEVELOPERS, 16/2 JAWAHAR MARG, INDORE VS. INCOME TAX OFFICDER - 4(3), INDORE ( APPELLANT ) (RESPONDENT ) PAN NO. A B L FS7946K SHAGUN DEVELOPERS ITA NO.588/IND/2017 2 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND LAW THE LD. CIT(A) ERRED IN CONFIRMING ADDITION OF RS.15,00,000 /-MADE BY THE LD.A.O UNDER SECTION 40A(3). 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND LAW THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE PAYME NT OF RS.15,00,000/- FOR PURCHASE OF AGRICULTURAL LAND WAS MADE ON ACCOUNT O F ACQUISITION OF CAPITAL ASSETS AND IN THE BALANCE SHEET OF THE FIRM ALSO IT IS SHOWN AND CLASSIFIED AS INVESTMENT IN FIXED ASSETS, CONSEQUENT THERETO I T IS OUT OF PURVIEW OF SECTION 40A(3). 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND LAW THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE APPEL LANT FIRM PURCHASED AGRICULTURAL LAND FROM THE AGRICULTURIST WHICH FALL S UNDER SPECIFIED CIRCUMSTANCES UNDER RULE 6DD, AS SUCH OUT OF AMBIT OF SECTION U/S 40A(3). 3. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS PARTNERSHIP FIRM ENGAGED IN THE BUSINES S OF BUILDER AND DEVELOPER. RETURN OF INCOME FOR THE ASSESSMENT YEA R 2007-08 WAS NOT FILED. NOTICE U/S 148 OF THE ACT WAS DULY SERV ED UPON THE ASSESSEE AFTER DULY RECORDING THE REASONS. ASSESSME NT PROCEEDINGS U/S 143(3) R.W.S. 148 OF THE ACT WAS COMPLETED AFTE R MAKING A DISALLOWANCE U/S 40A(3) OF THE ACT FOR THE ALLEGED CASH PAYMENT OF RS.15,00,000/- FOR PURCHASE OF PROPERTY THEREBY VIO LATING THE PROVISIONS OF SECTION 40A(3) OF THE ACT FOR THE ALA LEGED INCURRING EXPENDITURE IN CASH FOR A SUM EXCEEDING RS.20,000/ -. 4. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD.CI T(A) BUT FAILED SHAGUN DEVELOPERS ITA NO.588/IND/2017 3 TO SUCCEED AS LD. CIT(A) CONFIRMED THE VIEW TAKEN B Y THE LEARNED ASSESSING OFFICER (IN SHORT LD. A.O) THAT THE ASS ESSEE HAS VIOLATED THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 5. AGGRIEVED ASSESSEE IS NOW IN APPEAL BEFORE THE T RIBUNAL. 6. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO E XPENDITURE HAS BEEN CLAIMED IN THE PROFIT & LOSS ACCOUNT AND T HEREFORE NO DISALLOWANCE SHOULD HAVE BEEN MADE BY LD. A.O U/S 4 0A(3) OF THE ACT. RELIANCE WAS PLACED ON THE DECISION OF CO-ORD INATE BENCH, DELHI IN THE CASE OF ACIT V/S JASMINE BUILDTECH (P) LTD ITA NO. 1679/DEL/2013 ORDER DATED 21.11.2017. 7. PER CONTRA DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE DEC ISION RELIED BY LD. COUNSEL FOR THE ASSESSEE. SOLE GRIEVANCE RAISED BY THE ASSESSEE IN GROUND 1, 2 & 3 RELATES TO DISALLOWANCE OF RS. 15,00,000/- MADE BY LD. A.O U/S 40A(3) OF THE ACT WHICH HAS BEEN CON FIRMED BY THE LD. CIT(A). SHAGUN DEVELOPERS ITA NO.588/IND/2017 4 9. PROVISIONS OF SECTION 40A(3) OF THE ACT ARE VIOL ATED IF THE ASSESSEE INCUR ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT IS MADE IN A SUM EXCEEDING RS.20,000/- OTHERWISE THEN BY ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR BY A ACCOUNT PAYEE DRAFT THEN IN SUCH SITUATION NO DEDUCTION SHALL BE ALLOWED FOR SU CH EXPENDITURE. FROM PERUSAL OF THE ABOVE PROVISION 40A(3) OF THE A CT WE UNDERSTAND THAT THE FIRST CONDITION BEFORE MAKING D ISALLOWANCE U/S 40A(3) IS THAT AN EXPENDITURE HAS TO BE INCURRED AND THEREAFTER IT IS TO BE SEEN THAT WHETHER SUCH EXPENDITURE HAS BEE N INCURRED IN CASH. 10. NOW EXAMINING THE FACTS OF THE INSTANT APPEAL, WE OBSERVE THAT THE ASSESSEE FIRM WAS INCORPORATED ON 21.12.2006 AN D THE YEAR UNDER APPEAL IS THE FIRST YEAR OF THE ASSESSEE FIRM . ON PERUSAL OF THE BALANCE SHEET PLACED AT PAGE-3 OF THE PAPER BOO K, WE FIND THAT AGAINST THE PARTNERS CAPITAL TOTALING TO RS.31,38,1 45/- THERE ARE TWO ITEMS ON THE ASSETS SIDE NAMELY FIXED ASSETS AT RS. 31,37,670/- AND CASH IN HAND AT RS.475/-. NO PROFIT & LOSS ACC OUNT HAS BEEN PREPARED FOR THE FINANCIAL YEAR 2006-07 AS THERE WA S NO OCCASION TO PREPARE BECAUSE THERE IS NO REVENUE AND EXPENDITURE DURING THE SHAGUN DEVELOPERS ITA NO.588/IND/2017 5 YEAR. WE ALSO OBSERVE THAT THE ALLEGED CASH PAYMEN T IS MADE FOR PURCHASING THE PLOT OF LAND WHICH HAS NOT BEEN SHOW N AS STOCK IN HAND RATHER IT HAS BEEN SHOWN UNDER THE HEADS FIXED ASSETS. 11. FURTHER WE FIND THAT THE CO-ORDINATE BENCH OF D ELHI IN THE CASE OF ACIT V/S JASMINE BUILDTECH (P) LTD (SUPRA ) ADJUDICATING SIMILAR ISSUE HAS HELD THAT WHERE PAYMENTS HAS NOT BEEN CLAIMED AS EXPENDITURE THEN NO DISALLOWANCE U/S 40A(3) OF T HE ACT SHALL ARISE. 12. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANC ES OF THE CASE AND RESPECTFULLY FOLLOWING THE DECISION OF THE CO-O RDINATE BENCH ARE OF THE CONSIDERED VIEW THAT AS THE ASSESSEE HAS NO T INCURRED ANY EXPENDITURE DURING THE YEAR IN CASH AND THE ALLEGED CASH PAYMENT HAS BEEN UTILIZED FOR PURCHASING THE FIXED ASSETS, BOTH THE LOWER AUTHORITIES ERRED IN SUSTAINING THE DISALLOWANCE U /S 40A(3) OF THE ACT AT RS.15,00,000/- WE ACCORDINGLY DIRECT THE ASS ESSING OFFICER TO DELETE THE ADDITION OF RS.15,00,000/- AND ALLOW GRO UND NO.1 & 2 RAISED BY THE ASSESSEE. SHAGUN DEVELOPERS ITA NO.588/IND/2017 6 13. AS REGARDS GROUND NO.3 BY WHICH ASSESSEE CLAIME D THAT THE CASH PAYMENT OF RS.15,00,000/- HAS BEEN MADE TO PUR CHASE AN AGRICULTURE LAND AND THE CASE OF THE ASSESSEE IS CO VERED UNDER THE EXCEPTIONS PROVIDED UNDER RULE 6DD OF THE I.T RULES , WE FIND NO REASON TO ADJUDICATE THIS GROUND AS WE HAVE ALREADY DELETED THE DISALLOWANCE OF RS.15,00,000/- MADE U/S 40A(3) OF T HE ACT AND THEREFORE GROUND NO.3 IS RENDERED TO BE INFRUCTUOUS AND MERELY ACADEMIC IN NATURE. IN THE RESULT GROUND NO.3 OF T HE ASSESSEE IS DISMISSED. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . THE ORDER PRONOUNCED IN THE OPEN COURT ON 19.12.20 18. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 19 DECEMBER, 2018 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE