Hill View Infrastructure Pvt. Ltd., Chandigarh V. DCIT, Chandigarh

ITA 644/CHANDI/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6647 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 13-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 27-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Keywords: Commercial expediency
• Section: 40A(3); 115JB; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.644/CHD/2016 ASSESSMENT YEAR:2008-09 HILL VIEW INFRASTRUCTURE PVT. LTD. VS. THE DCIT SCO NO. 2474, SECTOR 22-C CENTRAL CIRCLE-1 CHANDIGARH CHANDIGARH PAN NO. AABCH6185R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. SUDHIR SEHGAL DEPARTMENT BY : SMT. CHANDRAKANTA DATE OF HEARING : 31/08/2017 DATE OF PRONOUNCEMENT : 14/11/2017 ORDER PER DR. B.R.R. KUMAR, A.M: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT (A)-3, GURGAON DT. 31/03/2016. 2. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS. 8,00,00 0/- TO THE TAXABLE INCOME UNDER SECTION 40A(3) OF THE INCOME TAX ACT, 1961. 2. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING DEDUCTION UNDER S ECTION 80-IB ON DISALLOWANCE OF DONATION OF RS. 20,47,300/- AND FBT AMOUNTING TO RS . 67,855/-. 3. THAT THE SUBMISSIONS FILED DURING THE COURSE OF HEARING HAS NOT BEEN CONSIDERED PROPERLY. 3. GROUND NO. 1 DEALS WITH ADDITION OF RS. 8,00,000 /- UNDER SECTION 40A(3) . THE ASSESSING OFFICER HAS DISALLOWED RS. 8,00,000/- ON ACCOUNT OF CASH PAYMENT MADE TO ONE SHRI. AMARNATH FOR PURCHASE OF LAND ON 06/07/2007, AS THE SELLER DOESNT FALL UNDER ANY OF THE CLAUSES MENTIONED UND ER RULE 6DD. 2 4. LD. CIT (A) HAS CONFIRMED THE DISALLOWANCE AS TH E ASSESSEE HAS NOT FURNISHED ANY SPECIFIC REASON FOR HAVING MADE THE C ASH PAYMENT SO AS TO MAKE A CASE OF BUSINESS EXPEDIENCY. 5. BEFORE US THE LD. AR ARGUED THAT SINCE THE SOURC ES HAVE BEEN PROVED, THE PARTY TO WHOM THE PAYMENTS WERE MADE IS IDENTIFIABL E AND THE EXPENSES INCURRED IN CASH WERE GENUINE AND DUE TO BUSINESS E XPEDIENCY HENCE, NO DISALLOWANCE IS CALLED FOR. 6. THE LD. DR ARGUED THAT THE ASSESSEE COULD NOT PR OVE THE BUSINESS EXPEDIENCY AS IT IS A TRANSACTION OF LAND AND THERE WAS NO URGENT NEED TO MAKE CASH PAYMENT AT THIS AGE OF EXISTENCE OF WIDER BANK ING OPERATIONS ALL OVER. 7. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE TO BE DECID ED IS WHETHER THE PROVISIONS OF SECTION 40A (3) ARE APPLICABLE TO THE ASSESSEE O R NOT. FOR THE SAKE OF CONVENIENCE SECTION 40A (3) READS AS UNDER: SECTION 40A(3) [(3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN R ESPECT OF WHICH 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 ACCOUNT PAY EE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSI ON UNDER SUB-SECTION(3) AND THIS SUB-SECTION WHERE A PAYMENT OR AGGREGATE OF PAYMENT S MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAW N ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, I N SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED, HAVING REG ARD TO THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATI ONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. FROM THE ABOVE READING IT CLEARLY SAYS THAT THE INV OKING OF SECTION 40A(3) DISALLOWANCE DOES NOT ARISE IF CONSIDERATIONS OF BU SINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE EXISTING WHILE MAKING CASH PAY MENTS. 3 8. FROM THE RECORDS IT IS FOUND THAT THE COMMERCIAL EXPEDIENCY HAS NOT BEEN SUBMITTED EVEN BEFORE THE LD . CIT(A). IT WAS SUBMITTED THAT THE PAYMENT MADE IS GENUINE AND TO AN IDENTIFIABLE PERSON AND T HE PAYMENT MADE BY CASH WAS UNDER SOME COMPELLING CIRCUMSTANCES. THE ASSESS EE RELIED ON THE ORDER OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GURUDA S GARG IN ITA NO. 413 OF 2014, AND JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO (1991) 4SCC 385, WHEREBY IT WAS HELD THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND RULE 6DD OF THE INCOME TAX RU LES WERE INTENDED TO PREVENT THE USE OF UNACCOUNTED MONEY FOR BUSINESS T RANSACTIONS. 8.1 WE HAVE PERUSED THE MATERIAL PLACED ON RECORD. DURING THE ASSESSMENT PROCEEDING THE ASSESSEE EXPLAINS THAT THE AMOUNT WA S PAID FOR PURCHASE OF LAND FOR THE CAPITAL PROJECT OF DEVELOPING A PARK A ND THAT LAND DID NOT FORM PART OF THEIR STOCK IN TRADE. FURTHER BEFORE THE CI T(A) THE ASSESSEE HAS EXPLAINED THAT THE CASH PAYMENT WAS MADE UNDER SOME COMPELLIN G CIRCUMSTANCES. LD. CIT(A) HELD THAT THE ASSESSEE COULD NOT FILE ANY EV IDENCE TO SUBSTANTIATE HIS CLAIM TO MAKE OUT A CASE OF BUSINESS EXPEDIENCY. TH US IT COULD BE SEEN THAT THE BUSINESS EXPEDIENCY COULD NOT BE PROVED BEFORE THE LOWER AUTHORITIES. HENCE THE ISSUE IS BEING REMANDED BACK TO THE FILE OF ASS ESSING OFFICER TO ALLOW THE CASH PAYMENT AS PER RULE 8DD, ONLY IF BUSINESS EXPE DIENCY HAS BEEN CONCLUSIVELY PROVED BY THE ASSESSEE. AS A RESULT, T HIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 9. THE SECOND GROUND RELATES TO DEDUCTION UNDER SEC TION 80IB ON DISALLOWANCE OF DONATION PAID AND FBT. 10. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HA S DEBITED FBT AND DONATION AMOUNTING TO RS. 67,855/- AND RS. 20,47,300/- RESPE CTIVELY. THE ASSESSEE ITSELF ADMITTED THAT THESE WERE INADVERTENTLY OMITTED TO B E ADDED IN THE TAXABLE 4 INCOME OF THE ASSESSEE. FURTHER THE ASSESSEE HAS OF FERED THE SAME FOR TAXABLE. THEREFORE, AN AMOUNT OF RS. 21,15,155/- IS ADDED TO TAXABLE INCOME OF THE ASSESSEE. 11. THE LD. CIT(A)HAS CONFIRMED THE ADDITION ON THE GROUNDS THAT THE ASSESSEE HAS NOT ADDED THESE EXPENSES AS CLAIMED TO THE INCO ME OF THE ASSESSEE IN COMPUTATION OF GROSS TOTAL INCOME. THESE EXPENSES H AVE ONLY BEEN ADDED WHILE COMPUTING THE DEEMED TOTAL INCOME UNDER SECTI ON 115JB. 12. BEFORE US THE LD. AR FILED THE COPY OF THE RETU RN OF INCOME. IT IS OBSERVED THAT THE DONATION WAS SHOWN IN THE COLUMN NO. 33 FO R RS. 20,47,300/-. PROFIT BEFORE TAXES, PROFIT AFTER TAX AT COLUMN NO. 43 AND 47 HAVE BEEN SHOWN TO BE RS. 1,95,37,673/- IN THE COLUMN OF THE COMPUTATION OF T OTAL INCOME PART B-T1 THE TOTAL INCOME SHOWN WAS RS.1,95,37,673/-. SIMILAR AM OUNT WAS SHOWN IN THE GROSS TOTAL INCOME. THE ASSESSEE HAS ADDED THE DONATION A ND FBT FOR COMPUTATION OF TOTAL INCOME UNDER SECTION 115JB. AFTER DEDUCTION O F DONATION FBT THE DEEMED TOTAL INCOME UNDER SECTION 115JB REMAINS AT RS. 2,1 6,52,828/-. THE DONATION WAS ALREADY CLAIMED IN P&L ACCOUNT. HENCE THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IB IS ACCEPTABLE. THIS GROUND MAY B E TREATED AS ALLOWED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 14/11/2017 SD/- SD/- (DIVA SINGH) (DR. B.R.R. KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 14/11/2017 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR