Prime Infra Developers Pvt. Ltd., Delhi V. ITO, Ward- 20(1), New Delhi

ITA 7144/DEL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5764 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 28-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHISH GOEL
• Keywords: Principle of natural justice
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 7144/DEL/2017 ASSESSMENT YEAR: 2013-14 PRIME INFRA DEVELOPERS PVT. LTD., VS. ITO, WARD 20( 1) A-2, BASEMENT, WAZIRPR NEW DELHI INDUSTRIAL AREA, DELHI 11 0052 (PAN: AAFCP2702C) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. VED JAIN, ADV. & SH. ASHISH GOEL, CA REVENUE BY : SH. ATIQ AHMED, SR. DR. ORDER PER H.S. SIDHU, JM THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDE R DATED 22.09.2017 OF THE LD. CIT(A)-38, NEW DELHI RELATING TO ASSESSMENT YEAR 2013-14 ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TILE OR DER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS BAD BOTH IN THE EYES OF LAW AND ON FAC TS. 2 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N PASSING THE ORDER WITHOUT GIVING ASSESSEE AN OPPORT UNITY OF BEING HEARD IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. (II) THAT THE NON APPEARANCE BEFORE THE CIT(A) WAS AN ACCOUNT OF REASONS BEYOND THE CONTROL OF THE ASSESS EE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE DISALLOWANCE OF RS.1 ,54,97,974/- MA DE BY AO AN ACCOUNT OF CASH PAYMENTS INVOKING THE PROVISI ON OF SECTION 40A(3) OF THE ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE DISALLOWANCE DESPITE THE FACT THAT T HE REASON FOR CASH PAYMENT WAS AN ACCOUNT OF ONE OF TH E REASONS PROVIDED IN EXCEPTIONAL CIRCUMSTANCES FOR T HESE PAYMENTS UNDER RULE 6DD OF THE ACT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW, IN CONFIRMING THE DISALLOWANCE DESPITE THE PAYMENTS HA VING BEEN MADE OUT OF BUSINESS EXPEDIENCY. 3 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW, IN CONFIRMING THE DISALLOWANCE DESPITE THE FACT THAT T HERE BEING NO DOUBT AS TO THE GENUINENESS OF TRANSACTION S AND THUS NO DISALLOWANCE U/S 40A(3) CAN BE MADE. 7. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE COMPANY IS STATED TO BE ENGAGED IN THE BUSINESS OF REAL EST ATE. THE CASE OF THE ASSESSEE WAS SELECTED UNDER SCRUTINY THROUGH CASS. ACCORDINGLY, NOTICE U/S. 143(2) OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED AS THE ACT). THE ASSESSEE COM PANY HAS PURCHASED VARIOUS LANDS DURING THE RELEVANT PERIOD FOR RESIDENTIAL PROJECT IN GURGAON. FROM THE PERUSAL OF THE DETAILS SUBMITTED BY THE ASSESSEE, AO OBSERVED THAT THE AS SESSEE COMPANY HAS PURCHASED VARIOUS LAND. FROM THE SALE DEED IT HAS BEEN NOTICED THAT SUBSTANTIAL CASH AMOUNT HAS BEEN UTILIZED FOR PURCHASE OF INVENTORY. TOTAL CASH AMOU NT THAT HAS BEEN PAID FOR THE PURCHASE OF INVENTORY OF RS. 1,54 ,97,974/-. THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 02.3.201 6 WAS 4 ASKED TO EXPLAIN THE REASON FOR PAYMENT MADE IN CAS H AND IT HAS ALSO BEEN ASKED TO EXPLAIN THE SAME. THE ASSES SEE VIDE SUBMISSION DATED 14.3.2016 HAS SUBMITTED THAT ASSES SEE COMPANY IS ENGAGED IN REAL ESTATE AND PROPERTY DEVE LOPMENT BUSINESS AND MAJOR ACTIVITY OF THE COMPANY TO LAUNC H THE NEW RESIDENTIAL AND COMMERCIAL PROJECTS. DURING THE YE AR COMPANY HAD BEEN PURCHASED THE LAND IN BULK FROM FARMERS TO LAUNCH A RESIDENTIAL PROJECT. IT WAS FURTHER SUBMITTED THAT ADVANCE WAS PAID AS A TOKEN MONEY FOR THE EXECUTION OF DEAL ON SUNDAY I.E. THE DAY WHICH WAS PUBLIC HOLIDAY FOR BANKS. THE FAC T THAT THE ADVANCE PAYMENT WAS MADE ON SUNDAY I.E. 05.08.2012 IS ALSO MENTIONED TO THE REGISTRY ITSELF AND AT THAT TIME O F ADVANCE PAYMENT NO BANKING FACILITY WAS AVAILABLE DUE TO BA NK HOLIDAY AND THE ASSESSEE COMPANY HAD NO ALTERNATIVE OPTION TO MAKE THE PAYMENT IMMEDIATELY. THEREAFTER, AO OBSERVED TH AT IT MAY NOT BE OUT OF PLACE TO MENTION THAT PAYMENTS IN CAS H TO PERSONS WHO ARE HOLDING LAND IN AND AROUND DELHI ARE NOT OU T OF PURVIEW OF TAXATION. THERE IS SUBSTANTIAL POSSIBILITY THAT THE PERSONS SELLING THE LAND ARE NOT FILING THEIR RETURN OF I NCOME OR NOT DISCLOSING THE FULL INCOME. THUS THE ACT OF THE AS SESSEE BY MAKING PAYMENT IN CASH CANNOT BE ASSUMED TO BE BONA FIDE, EVEN THOUGH IT IS IN BLATANT VIOLATION OF THE PROV ISIONS OF SECTION 5 40A(3) OF THE INCOME TAX ACT. ACCORDINGLY, AN AMOUN T OF RS. 1,54,97,974/- WAS DISALLOWED UNDER SECTION 40A(3) O F THE ACT AND INCOME OF THE ASSESSEE WAS ASSESSEED AT RS. 1,54,97,970/- U/S. 143(4) OF THE ACT VIDE ORDER DAT ED 30.03.2016. AGAINST THE ASSESSMENT ORDER, THE ASS ESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGN ED EXPARTE ORDER 22.09.2017 HAS DISMISSED THE APPEAL OF THE A SSESSEE BY OBSERVING THAT THERE WAS SUFFICIENT APPLICATION OF MIND BY AO WHILE FRAMING THE ASSESSMENT AND THE FACTUAL FINDIN GS REGARDING VIOLATION OF CLAUSE (J) OF RULE 6DD HAVE NOT BEEN CONTROVERTED BY THE ASSESSEE DURING APPEAL PROCEEDINGS AND IN V IEW OF THE CONTINUED NON-COMPLIANCE AND NON-PROSECUTION OF APP EAL BY THE ASSESSEE, HE UPHELD THE ASSESSMENT ORDER. AGGRIEV ED WITH THE IMPUGNED ORDER DATED 22.09.2017, ASSESSEE IS IN APP EAL BEFORE THE TRIBUNAL. 3. LD. COUNSEL OF THE ASSESSEE HAS FILED A PAPER B OOK CONTAINING PAGES 1-68 HAVING THE COPY OF ACKNOWLEDG EMENT RETURN OF INCOME ALONGWITH COMPUTATION OF INCOME; COPY OF AUDITED FINANCIAL STATEMENTS; COPY OF REPLY FILED W ITH THE AO DATED 18.2.2016 ALONGWITH THE COPY OF SALE DEEDS OF THE PROPERTY PURCHASED; COPY OF REPLY FILED BY THE ASSE SSEE BEFORE AO ON 22.2.2016 AND COPY OF LETTER FILED BEFORE AO DATED 6 23.3.2016 ENCLOSING AFFIDAVIT FROM REAL ESTATE BROK ER. HE SUBMITTED THAT LEARNED CIT(A) HAS PASSING THE EXPAR TE ORDER WITHOUT GIVING ASSESSEE AN OPPORTUNITY OF BEING HEA RD IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE, DESPITE THE FACT THAT NON APPEARANCE BEFORE THE CIT(A) WAS AN ACCOUNT OF REAS ONS BEYOND THE CONTROL OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT LD. CIT(A) WRONGLY CONFIRMED THE DISALLOWANCE OF RS.1,54,97,974/- MADE BY AO AN ACCOUNT OF CASH PAYM ENTS INVOKING THE PROVISION OF SECTION 40A(3) OF THE ACT DESPITE THE FACT THAT THE REASON FOR CASH PAYMENT WAS AN ACCOUN T OF ONE OF THE REASONS PROVIDED IN EXCEPTIONAL CIRCUMSTANCES F OR THESE PAYMENTS UNDER RULE 6DD OF THE ACT. IT WAS THE FURT HER CONTENTION THAT LEARNED CIT(A) HAS WRONGLY CONFIRME D THE DISALLOWANCE DESPITE THE PAYMENTS HAVING BEEN MADE OUT OF BUSINESS EXPEDIENCY AND ALSO WRONG IN CONFIRMING T HE DISALLOWANCE DESPITE THE FACT THAT THERE BEING NO D OUBT AS TO THE GENUINENESS OF TRANSACTIONS AND THUS NO DISALLO WANCE U/S 40A(3) CAN BE MADE. IN THE LAST, IT WAS ALSO SUBMIT TED THAT THE PAYMENT WAS MADE ON 05.08.2012 I.E. SUNDAY IS NOT DISPUTED BY THE AUTHORITIES BELOW AND RULE 6DD(J) SPECIFICAL LY PROVIDES EXCEPTION FOR DISALLOWANCE UNDER SECTION 40A(3) ON THE DAY ON WHICH BANKS ARE CLOSED. THE PAYMENT WERE MADE TO F ARMERS 7 FOR PURCHASE OF THEIR AGRICULTURAL LAND AND THE PA YMENTS WERE DULY SUPPORTED BY THE VARIOUS DOCUMENTATION IN FORM OF CONVEYANCE DEED ETC. THEREFORE, HE STATED THAT DISA LLOWANCE UNDER SECTION 40A(3) IS UNCALLED FOR. TO SUPPORT HI S CONTENTION HE FILED ANOTHER PAPER BOOK CONTAINING PAGES 1-72 HAVING THE COPIES OF FOLLOWING CASE LAWS ON THE ISSUE WHEN PA YMENT IS MADE ON THE DAY ON WHICH BANKS ARE CLOSED AND THE E XCEPTION IS COVERED UNDER RULE 6DD AND ON THE ISSUE WHEN GE NUINENESS OF THE TRANSACTION IS NOT DOUBTED BY THE AO, THEN NO DISALLOWANCE U/S. 40A(3) IS CALLED FOR. - HONBLE HIGH COURT OF MADRAS DECISION IN THE CASE OF HOTEL NAGAS (P) LTD. VS. CIT, SALEM (2016) 69 TAXMANN.COM 438 ( MADRAS) - HONBLE HIGH COURT OF ANDHRA PRADESH DECISION IN THE CASE OF SRI LAXMI SATYANARAYANA OIL MILL VS. CIT, AP, HYDERABAD (2014) 49 TAXMANN.COM 263 (ANDHRA PRADESH) - HONBLE HIGH COURT OF PUNJAB AND HARYANA DECISION IN THE CASE OF GURDAS GARG VS. CIT(A), BATHINDA (2015) 63 TAXMANN.COM 289 (P&H). 8 - ITAT, JAIPUR DECISION PASSED IN ITA NO. 5170/DEL/2014 IN THE CASE OF ITO VS. SHYAM APPARELS PVT. LTD. AND VICEVERSA. - ITAT, DELHI DECISION DATED 31.8.2016 PASSED IN ITA NO. 504/2016 IN THE CASE OF ACIT, FARIDABAD VS. M/S MARIGOLD MERCHANDIES (P) LTD. - ITAT, DELHI DECISION IN THE CASE OF GALAXY DWELLERS P LTD. VS. CIT 2017 (11) TMI 112. - HONBLE RAJASTHAN HIGH COURT DECISION IN THE CASE OF CIT VS. ACE INDIA ABODES LTD. 2017 (11) TMI 620. - HONBLE RAJASTHAN HIGH COURT DECISION IN THE CASE OF SMT. HARSHILA CHORDIA VS. ITO 2006 (11) TMI 117. 4. ON THE OTHER HAND, LD. SR. DR RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT ASSESSEE C OMPANY HAS PURCHASED VARIOUS LAND. FROM THE SALE DEED IT IS RE VEALED THAT THAT SUBSTANTIAL CASH AMOUNT HAS BEEN UTILIZED FOR PURCHASE OF INVENTORY. TOTAL CASH AMOUNT THAT HAS BEEN PAID FOR THE PURCHASE OF INVENTORY OF RS. 1,54,97,974/-. HE FURT HER 9 SUBMITTED THAT THAT PAYMENTS IN CASH TO PERSONS WHO ARE HOLDING LAND IN AND AROUND DELHI ARE NOT OUT OF PUR VIEW OF TAXATION. THERE IS SUBSTANTIAL POSSIBILITY THAT THE PERSONS SELLING THE LAND ARE NOT FILING THEIR RETURN OF INCOME OR NOT DISCLOSING THE FULL INCOME. THUS THE ACT OF THE ASSESSEE BY M AKING PAYMENT IN CASH CANNOT BE ASSUMED TO BE BONAFIDE, E VEN THOUGH IT IS A COMPLETE VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE INCOME TAX ACT. HOWEVER, THERE WAS S UFFICIENT APPLICATION OF MIND BY AO WHILE FRAMING THE ASSESSM ENT AND THE FACTUAL FINDINGS REGARDING VIOLATION OF CLAUSE (J) OF RULE 6DD HAVE NOT BEEN CONTROVERTED BY THE ASSESSEE DURI NG APPEAL PROCEEDINGS AND IN VIEW OF THE CONTINUED NON-COMPLI ANCE AND NON-PROSECUTION OF APPEAL BY THE ASSESSEE, LD. CIT( A) HAS RIGHTLY UPHELD THE ASSESSMENT ORDER, WHICH DOES NO T NEED ANY INTERFERENCE ON OUR PART. IN VIEW OF ABOVE, LD. SR. DR REQUESTED THAT THE ORDER OF THE LD. CIT(A) MAY BE U PHELD AND APPEAL OF THE ASSESSEE MAY BE DISMISSED. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS, ESPECIALLY THE ORDERS OF THE AUTHORITIES BELOW, PA PER BOOK FILED BY THE ASSESSEE CONTAINING PAGES 1-68 HAVING THE CO PY OF ACKNOWLEDGEMENT RETURN OF INCOME ALONGWITH COMPUT ATION OF 10 INCOME; COPY OF AUDITED FINANCIAL STATEMENTS; COPY OF REPLY FILED WITH THE AO DATED 18.2.2016 ALONGWITH THE COP Y OF SALE DEEDS OF THE PROPERTY PURCHASED; COPY OF REPLY FILE D BY THE ASSESSEE BEFORE AO ON 22.2.2016 AND COPY OF LETTER FILED BEFORE AO DATED 23.3.2016 ENCLOSING AFFIDAVIT FROM REAL ES TATE BROKER AND THE CASE LAWS CITED BY THE LD. COUNSEL OF THE A SSESSEE IN SHAPE OF PAPER BOOK AND THE COPY OF CALENDAR FOR TH E YEAR 2012. WE FIND THAT ASSESSEE COMPANY IS A REAL ESTAT E DEVELOPER AND MAJOR ACTIVITIES OF THE COMPANY IS TO LAUNCH NE W RESIDENTIAL & COMMERCIAL PROJECTS AND DURING THE YEAR UNDER CON SIDERATION, ASSESSEE COMPANY HAD PURCHASED VARIOUS LANDS IN GUR GAON FROM FARMERS FOR A RESIDENTIAL PROJECT. DETAILS OF WHICH ARE AS UNDER: S.NO. PROPERTY DETAILS OF ADVANCE PAYMENT IN CASH (AS ADVANCE BEING MADE ON 05.08.2012 I.E. SUNDAY) & PB PG. WHERE DATE IS APPEARING. DETAILS OF PAYMENT IN CASH AT THE TIME OF REGISTRY 1 DHANKOT 33KANAL 11MARLA 5.5S (SALE DEED AT PB PG. 15-25) RS. 38,60,730/ - (PB PG. 21) & DATE 5.8.2012 IS APPEARING AT PB PG. 19 9,65,179.00 (PB. PG. 23) 2 DHANKOT 26K 8M ( SALE DEED AT PB PG. 26- 33) RS. 33,33,000/ - (PB PG. 30) AND DATED 05.08.2012 IS APPEARING AT PB PG. 30 - 3 DHANKOT 26K 8M (PB PG. 34- 56,62,600/ - (PB PG. 40) & DATE 14,15,600 (PB PG. 42) 11 44) 05.08.2012 IS APPEARING AT PB PG. 38 4 DHANKOT 1K 0M 3.5S (PB. PG. 45-52) 1,28,691/ - (PB PG. 49) & DATE - 5.08.2012 IS APPEARING AT PB PG. 49. 32,174/ - (PB PG. 51) 5 DHANKOT 0K 6M 4S (PB PG. 53- 59) 1,00,000 (PB PG. 55) TOTAL 1,29,84,421/ - 25,12 ,953/ - 5.1 AFTER PERUSING THE AFORESAID TABLE, WE NOTE THA T THE ASSESSEE COMPANY HAS MADE ADVANCE PAYMENT OF RS.1,29,84,421/- FOR THE PURCHASE OF VARIOUS LANDS TO THE FARMERS AS A TOKEN MONEY FOR THE EXECUTION OF THE D EAL ON SUNDAY I.E. THE DAY WHICH WAS PUBLIC HOLIDAY FOR B ANKS. IT IS UNDISPUTED FACT THAT THE PAYMENT IS MADE ON 05.08.2 012 WHICH IS MENTIONED IN THE REGISTERED DOCUMENT I.E. SALE D EED ITSELF. THE DATE ON WHICH THE ADVANCE PAYMENT WAS MADE WAS 05.08.2012 AND ON THAT DATE BANKING FACILITY WAS NO T AVAILABLE DUE TO BANK HOLIDAY AND THE ASSESSEE COMPANY HAS N O ALTERNATIVE OPTION AND HAD TO MAKE PAYMENT IN CASH AND THE SAME IS NOT DISALLOWED UNDER SECTION 40A(3) OF THE INCOME TAX ACT AND EXPRESSLY PROVIDED IN THE EXCEPTIONS PROVID ED IN RULE 6DD(J) WHICH READS AS UNDER: 12 (J) WHERE THE PAYMENT WAS REQUIRED TO BE MADE ON A DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE;' 5.2 5.2 WE FURTHER NOTE THAT ON THE DATE OF REGISTRY AS SESSEE WENT TO FARMERS HOME TO TAKE THEM FOR REGISTRATION OF L AND. HOWEVER, FARMERS CHANGED THEIR MIND AND DEMANDED MO RE MONEY THAN WHAT THEY HAD EARLIER AGREED INTO. THEN THE ASSESSEE COMPANY HAD NO OPTION BUT TO MAKE IMMEDIAT E PAYMENT DUE TO THE FOLLOWING REASONS ON ACCOUNT OF BUSINESS EXPEDIENCY: I. THERE WAS NO TIME TO AVAIL BANKING FACILITY AT I T WOULD HAVE RESULTED INTO LAPSE OF TIME FOR REGISTRY . II. ASSESSEE COMPANY HAS ALREADY MADE THE SUBSTANT IAL PAYMENTS TO FARMERS ANY FURTHER DELAY IN REGISTRY WOULD HAVE MADE THEIR ADVANCE PAYMENT AT RISK. MOREOVER, THE TIME OF REGISTRY WAS GOING TO BE LAPSED. 5.3 THUS, ASSESSEE HAD NO OPTION AT THE TIME OF REG ISTRY BUT TO MAKE THESE PAYMENTS OF RS. 25,12,953/- IN CASH DUE TO ITS 13 BUSINESS EXPEDIENCY AND THUS COVERED BY THE PROVISO TO SECTION 40A(3) WHICH 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 UNDER SUB-SECTION (3) AND THIS SUBSECTION WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, 34 [OR USE OF ELECTRONIC CLEARING SYSTEM THROUGH A BANK ACCOUNT, EXCEEDS TEN THOUSAND RUPEES,], IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED, HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS.]' 5.4 THEREAFTER, THE CASE OF THE COMPANY WAS SELECTE D FOR SCRUTINY AND STATUTORY NOTICE U/S 143(2) OF THE I.T . ACT, 1961 WAS ISSUED TO THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE WAS ASKED TO EXPLAIN THE REAS ON FOR 14 PAYMENT IN CASH WITH RESPECT TO THE AFORESAID DEALS . LN RESPONSE TO THE SAME, THE ASSESSEE FILED ITS DETAIL ED REPLY DATED 14.03.2016 (PB PG. 60-65, THE COPY OF WHICH IS REPR ODUCED IN THE ASSESSMENT ORDER ITSELF) AND SUBMITTED THAT: I. THE FACT THAT ADVANCE PAYMENT IS MADE ON SUNDAY I.E. ON 05.08.2012 IS MENTIONED IN REGISTRY ITSELF. II. ASSESSEE COMPANY HAS ALSO EXPLAINED THE REASON FOR MAKING PAYMENT IN CASH AT THE TIME OF REGISTRY. III. GENUINENESS OF THE PAYMENTS MADE BY THE ASSES SEE WAS NOT DOUBTED BY THE AO. IV. BUSINESS EXPEDIENCY WAS NOT CHALLENGED BY THE AO. NO ADVERSE COMMENTED BY THE AO. 5.5 WE OBSERVE THAT DURING THE ASSESSMENT PROCEEDIN GS, THE ASSESSEE ALSO SUBMITTED THE COPY OF SALE DEEDS (PB PAGE 13- 59) AS WELL AS AFFIDAVIT FROM THE REAL ESTATE BROKE R (PB PAGE 66-68). THE AO HOWEVER NOT BEING SATISFIED BY ALL THE CLAIMS AND ARGUMENTS ADVANCED BY THE ASSESSEE MADE A DISAL LOWANCE OF RS. 1,54,97,974/- BY INVOKING PROVISIONS OF SECT ION 40(A)(3). AGGRIEVED WITH THE SAME, THE ASSESSEE WENT INTO APP EAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER SUSTA INED THE ADDITION MADE BY THE AO. 15 5.6 IN VIEW OF THE AFORESAID FACTS, IT IS CRYSTAL CLEAR THAT THE PAYMENT WAS MADE ON DT. 05.08.2012 I.E. 'SUNDAY' WH ICH IS NOT DISPUTED BY THE AO AS WELL AS LD. CIT(A) AND RULE 6 DD(J) SPECIFICALLY PROVIDES EXCEPTION FOR DISALLOWANCE UN DER SECTION 40A(3) ON THE DAY ON, WHICH BANKS ARE CLOSED. THE P AYMENTS WERE MADE TO FARMERS FOR PURCHASE OF THEIR AGRICULT URAL LAND AND THE PAYMENTS ARE DULY SUPPORTED BY THE VARIOUS DOCUMENTATION IN FORM OF CONVEYANCE DEED ETC. THERE FORE, IN THE ABOVE CIRCUMSTANCES, DISALLOWANCE MADE UNDER SE CTION 40A(3) IS NOT JUSTIFIED. OUR AFORESAID VIEW IS FO RTIFIED BY THE FOLLOWING DECISIONS:- I. WHEN PAYMENT IS MADE ON THE DAY ON WHICH BANKS ARE CLOSED AND THE EXCEPTION IS COVERED UNDER RULE 6DD: A) HOTEL NAGAS PVT. LTD. VS. CIT [2016J 69 TAXMAN. COM 438 (MAD.) A. 'THEREFORE, IF AS RIGHTLY OBSERVED BY THE TRIBUNAL IN PARAGRAPH 4 OF ITS ORDER, THE PURPOSE OF SECTION 40A(3) IS TO DISCOURAGE CASH TRANSACTIONS LEADING T O CIRCULATION OF UNACCOUNTED MONEY, THEN, THE SAME MAY NOT NORMALLY HAPPEN BEFORE THE SUB REGISTRAR AT THE TIME OF REGISTRATION OF DOCUMENTS, AS THE 16 PAYMENTS MADE AT THAT TIME GET RECORDED OFFICIALLY.[PARA 22]. B. ALL THE THREE AUTHORITIES HAVE FAILED TO APPREC IATE THAT WHEN A VAST EXTENT OF AGRICULTURAL LANDS IS PURCHASED FROM SEVERAL PERSONS, ESPECIALLY IN VILLAGES, IT IS NOT POSSIBLE TO EXPECT THE VILLAGER S TO ACCEPT THE SALE CONSIDERATION BY WAY OF CROSSED ACCOUNT PAYEE CHEQUE OR BANK DRAFT. THEREFORE, SO LONG AS THE PAYEES ARE IDENTIFIED AND THE GENUINENESS OF THE TRANSACTION IS NOT QUESTIONED AN D SO LONG AS THE PAYMENTS HAVE BEEN MADE AT THE TIME OF REGISTRATION IN THE PRESENCE OF THE SUB REGISTRAR, THE CASE WOULD FALL UNDER THE EXCEPTIONS PROVIDED IN CLAUSE (J) OF RULE 6DD. THIS POSITION H AS ALSO BEEN CLARIFIED BY CIRCULAR NO. 220, DATED 31-5 - 1977. [PARA 23]' B) SRI LAXMI SATYANARAYANA OIL MILLS VS CIT[2014] 3 67 ITR 200 (T&AP) A. 'SEVERAL HIGH COURTS FOLLOWED THIS DICTUM AND TOOK THE VIEW THAT THE PROVISION MUST BE INTERPRETE D LIBERALLY AND THE ASSESSEE CANNOT BE SUBJECTED TO UNDUE RIGOR. THE RAJASTHAN HIGH COURT IN SMT. 17 HARSHILA CHORDIA V. INCOME-TAX OFFICER [2008] 298 ITR 0349 WENT A STEP FURTHER, AND HELD THAT THE CIRCUMSTANCES MENTIONED IN THE CIRCULAR OF THE CBDT CANNOT BE SAID TO BE EXHAUSTIVE, AND THAT THE BOARD CLEARLY EXPRESSED THE VIEW THAT CLAUSE (J) OF RULE 6DD MUST BE LIBERALLY CONSTRUED. B. AS OBSERVED BY THE SUPREME COURT, ONCE AN ASSESSEE FURNISHES THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A (3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE PROBLEMS, THE PROVISO, AND THEREBY THE RULE 6DD, GET ATTRACTED. THE PARLIAMENT DID NOT INTEND THAT PAYMENT OF RS. 2,500/-; OR MORE, MUST BE MADE ONLY THROUGH THE CROSSED CHEQUE. THIS IS EVIDENT FROM THE PROVISO TO SECTION 40A(3), RULE 6DD, AND THE CIRCULARS ISSUED FROM TIME TO TIME. CLAUSE 6(J) (2) OF RULE 6DD TAKE IN THEIR FOLD, ALL THE CIRCUMSTANC ES, UNDER WHICH AN ASSESSEE FACES IN THE COURSE OF HIS BUSINESS. PARAGRAPH 3(VI) OF THE CIRCULAR OF THE CB DT HAS FURTHER WIDENED THE SCOPE OF 'THE RULE, BY MENTIONING THAT IF THE PAYMENT, OTHERWISE THAN THROUGH CHEQUE WAS MADE, ON BEING PROMISED AND 18 SPECIFIC DISCOUNT BY THE SELLER, THE RIGOR OF SECTI ON 40A(3) DOES NOT APPLY. C. COMING TO THE FACTS OF THE CASE, THE CONSISTENT PLEA OF THE APPLICANT WAS THAT IT HAD TO MAKE THE PAYMENT FOR PURCHASE OF THE GROUND-NUT, IN CASH, BECAUSE THE SELLER NOT ONLY INSISTED ON THAT, BUT A LSO GAVE INCENTIVES, SUCH AS FACILITY OF PAYMENT WITHIN ONE WEEK, AND DISCOUNT. THE CERTIFICATE ISSUED BY M/S 'SATYANARAYANA TRADING COMPANY SUPPORTED THIS. THE QUESTION AS TO WHETHER THERE WAS JUSTIFICATION ON THE PART OF THE SELLER OF THE GOOD S IN IMPOSING SUCH CONDITIONS, IS OUTSIDE THE SCOPE OF T HE ENQUIRY. AS A MATTER OF FACT, THERE EXISTED SOME JUSTIFICATION FOR THE TRADERS, AT LEAST AT THE RELE VANT POINT OF TIME, IN INSISTING THE PAYMENT OF AMOUNTS, IN CASH. THE REASON IS THAT THE BANKING ACTIVITY WAS N OT THAT PROMINENT AND POPULAR, AND INSTANCES OF CHEQUES ISSUED BY AGENCIES OR PERSONS, IN THE COURS E OF BUSINESS BEING BOUNCED, WERE NOT INFREQUENT. THE DELAY IN RECEIVING THE CONSIDERATION FOR ANY MATERI AL SUPPLIED BY A TRADER WOULD HAVE ITS OWN CASCADING EFFECT ON THE BUSINESS ACTIVITIES. IT IS ONLY WHEN BOTH 19 THE PARTIES TO THE CONTRACT ARE KNOWN TO EACH OTHER SO INTIMATELY, AND THE SELLER IS VERY CONFIDENT NOT ONLY OF THE SOLVENCY OF THE PURCHASER, BUT ALSO HIS BUSINESS ETHICS, THAT HE WOULD BE INCLINED TO RECEI VE THE CONSIDERATION THROUGH CHEQUE. D. OBVIOUSLY BECAUSE THE PARLIAMENT AS WELL AS THE CBDT WERE LIVE TO THESE ISSUES, THE PROVISIONS, REFERRED TO ABOVE, WERE ENACTED OR INCORPORATED. TH E ASSESSING AUTHORITY HAS TAKEN A HYPER-TECHNICAL VIE W AND FAILED TO DISCERN THE SPIRIT UNDERLYING THE RELEVANT PROVISIONS. THOUGH THE APPELLATE AUTHORITY EXHIBITED AN ELEMENT OF OBJECTIVITY, IT WAS ONLY IN A LIMITED ASPECT. THE TRIBUNAL HAS IGNORED THE PURPOR T OF THE RELEVANT PROVISIONS OF LAW AND REFUSED TO GR ANT ANY RELIEF TO THE ASSESSEE.' C) ITO WARD 3 (2) , JAIPUR VS M/S SHYAM APPARELS PVT. LTD. AND VICE-VERSA [ITA NO. 497- 549/JP/2016 DATED: - 07 NOVEMBER 2017] A. ADDITION MADE BY THE A.O. U/S. 40A(3) - PAYMENT TO TWO SELLERS OF THE LAND IN 'CASH UNDER THE BUSIN ESS EXIGENCY - HELD THAT:- THE PAYMENT OF RS.1,82,40,000/- TO SHRI ASHOK AGARWAL, POWER OF 20 ATTORNEY HOLDER OF HIS DAUGHTER, THE AMOUNT WAS PAID ON SUNDAY AND ALSO THE SELLER HAS GIVEN THE NOTICE TO RELEASE THE PAYMENT BY 25/3/2012, WHICH WAS SUNDAY. SUNDAY WAS A BANK HOLIDAY. UNDER THESE COMPELLING SITUATIONS, THE ASSESSEE HAD TO MAKE PAYMENT IN CASH. THE REVENUE HAS FAILED TO CONTROVERT THESE FACTS, THEREFORE, WE FIND NO MERIT IN THIS GROUND OF REVENUE'S APPEAL. THE SAME IS DISMISSED. AS FAR AS THE ASSESSEE'S APPEAL IS CONCERNED, WE HAVE NOTICED THAT THE EVIDENCES HAVE BEEN FILED WHICH ESTABLISHES THAT THE DOCUMENTS FOR REGISTRATI ON SUBMITTED AFTER THE BANKING HOURS IN RESPECT OF LAN D PURCHASED FROM HIRA LAL KHETAN FOR RS. 13,62,658/- AND FROM SMT. SHANTA DEVI MITTAL FOR RS. 11,75,000/-. NO SUCH EVIDENCE IS AVAILABLE ON RECORD IN RESPECT OF OTHER PURCHASES. THE ASSESSEE HAS ALSO SOLD HIS PROPERTY ON 15/09/2011 FOR WHICH A DEED WAS ALSO EXECUTED IN FAVOUR OF M/S OCEAN SEVEN BUILDTECH (P) LTD., GURGAON ON THE SAME DAY AFTER BANKING HOURS. IT WAS SUBMITTED THAT DIRECTOR OF M/S OCEAN SEVEN BUILDTECH (P) LTD. REACHED TO 21 JAIPUR ON 15/9/2011 AFTER THE BANKING HOURS, THEREFORE, THE PAYMENTS AGAINST THE SALE DEED WERE RECEIVED IN CASH DUE TO CLOSURE OF THE BANKING HOUR S AND THE SAME CASH RECEIVED FROM THIS PARTY WAS FURTHER PAID TO THESE TWO PARTIES FROM WHOM THE LAN D WAS PURCHASED BY THE ASSESSEE. THESE FACTS ARE VERIFIABLE FROM THESE TWO PURCHASE DEEDS, WHICH WERE DULY FILED BEFORE THE ASSESSING OFFICER. THEREFORE, IT IS ESTABLISHED THAT THE ASSESSEE HAS TO MAKE PAYMENT TO THESE TWO SELLERS OF THE LAND IN CASH UNDER THE BUSINESS EXIGENCY TO SAFEGUARD THE INTEREST AND ALSO FOR GENUINE AND BONAFIDE NEEDS OF ASSESSEE'S BUSINESS. IT IS ALSO A FACT THAT THESE PURCHASES AND SALE DEEDS WERE PUT FORTH BEFORE THE REGISTRAR ON THE SAME DAY AFTER BANKING HOURS WHICH STRENGTHEN THE CONTENTION OF THE ASSESSEE. THE CASH RECEIVED ON THE SALE OF THE LAND WAS UTILIZED FOR MAKING PAYMENT TO TWO PARTIES. THESE DEEDS WERE REGISTERED AFTER 4.00 P.M., WHICH IS USUALLY THE BANKING HOURS. THEREFORE, CONSIDERING ALL THESE FAC TS AND CIRCUMSTANCES, WE PARTLY ALLOW THIS GROUND OF ASSESSEE'S APPEAL. 22 D) ITO FARIDABAD VS M/S MARIGOLD MERCHANDISE (P) LT D. [ITA NO. 5170/0EL/2014 DATED: - 11 SEPTEMBER 2017] A. ADDITION MADE U/S. 40A(3) - PURCHASE OF LAND HOLDING THESE CASH PAYMENT FALLS UNDER EXCEPTIONAL CIRCUMSTANCES R.W.R. 6DD OF INCOME TAX RULES - HELD THAT:- CIT(A) HAS RIGHTLY HELD THAT THE ASSESSEE'S CASE IS FOUND TO BE COVERED UNDER THE EXCEPTIONAL CIRCUMSTANCES UNDER RULE 6DD OF IT RULES. ACCORDINGLY, THE ADDITION MADE BY THE AO AMOUNTING TO RS. 60 LACS WAS RIGHTLY DELETED BY THE LD. CIT( A). - DECIDED IN FAVOUR OF ASSESSEE. II. WHEN GENUINENESS OF THE TRANSACTION IS NOT DOUB TED BY THE AO, NO DISALLOWANCE UNDER SECTION 40A(3) IS CALLED FOR: 5.7 WE NOTE THAT IN THE PRESENT CASE THE GENUINENES S OF THE TRANSACTIONS WHICH WERE ENTERED BY THE ASSESSEE HAV E NOT BEEN DISPUTED BY THE AUTHORITIES BELOW. THIS FACT IS EVI DENT FROM THE PLAIN READING OF THE ORDERS OF THE AUTHORITIES BELO W. WE FURTHER NOTE THAT THE AUTHORITIES BELOW HAVE NOT RAISED AN Y DOUBT ABOUT THE GENUINENESS OF THE TRANSACTION THEREFORE THERE IS NO DISPUTE REGARDING THE IDENTITY OF THE PAYEE OR THE VERACITY OF THE TRANSACTION. THE ONLY OBJECTION RAISED WAS THE VIOLATION OF 23 PROVISIONS OF SECTION 40(A)(3). THUS ONCE THE TRANS ACTION ARE CONSIDERED GENUINE AND BONA FIDE, THEN THE SAME ARE TAKEN OUT OF THE PURVIEW OF THE SECTION 40(A)(3). THIS VIEW IS FORTIFIED BY THE FOLLOWING CASE LAWS:- - DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF GURDAS GARG VS THE COMMISSIONER OF INCOME TAX [2015 (8) TMI 569] THE FACTS OF WHICH ARE PARIMATERIA TO THE PRESENT CASE. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS HELD AS OBSERVED AS UNDER (HEAD NOTES ONLY): SECTION 40A(3) OF THE INCOME TAX ACT, 1961 READ WITH RULE 6DD OF THE INCOME TAX RULES, 1962 BUSINESS DISALLOWANCE CASH PAYMENTS EXCEEDING PRESCRIBED LIMITS (GENUINENESS OF TRANSACTIONS) DURING ASSESSMENT PROCEEDINGS AO NOTED THAT ASSESSEE, WHO WAS ENGAGED IN TRADING IN PROPERTIES, MADE CERTAIN TRANSACTIONS IN CASH IN 24 EXCESS OF RS. 20,000 AND DISALLOWED SAME UNDER SECTION 40A(3) WHETHER SINCE GENUINENESS OF SAID TRANSACTIONS HAD NOT BEEN DISBELIEVED BY AUTHORITIES BELOW, IT MADE OUT A CASE OF BUSINESS EXPEDIENCY AND COULD NOT BE DISALLOWED UNDER SECTION 40A(3). - HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF HARSHILA CHORDIA VS ITO [2008] ITR 349 WHEREIN THE COURT OBSERVED AS UNDER (HEADS NOTE ONLY) ADDITION U/S 40A(3) - PAYMENTS THROUGH BANK ONLY - HELD THAT REQUIREMENT U/R 6DD(J) ARE DEEMED TO HAVE BEEN SATISFIED IF GENUINENESS OF TRANSACTIONS & PAYMENTS & IDENTITY OF RECEIVER IS ESTABLISHED - ADDITIONS ARE INVALID - ASSESSIBILITY OF AMOUNT OF CASH CREDITS WOULD BE FINALIZED AFTER AO OUTCOME. 25 6. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE PRECEDENTS, AS CITED AB OVE, THE DISALLOWANCE OF RS. 1,54,97,974/- U/S. 40A(3) OF TH E INCOME TAX ACT, 1961 MADE BY THE AO AND SUSTAINED BY THE L D. CIT(A) IS NOT JUSTIFIED, HENCE, THE SAME IS DELETED AND A CCORDINGLY THE APPEAL OF THE ASSESSEE STANDS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON 27-06-2018. SD/- SD/- [L.P. SAHU] (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27-06-2018 SR BHATANGAR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.