M/s Landmark Colonizers, Jalandhar V. The Assistant Commissioner of Income Tax, Jalandhar

ITA 85/ASR/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8776 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 10-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DINESH SARNA
• Keywords: Business expenditure; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 40A(3); 271(1)(b); 139; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNA AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.SANJAY GARG, JUDICIAL MEMBER I.T.A. NO.85(ASR)/2014 ASSESSMENT YEAR: 2009-10 M/S. LANDMARK COLONIZERS PPR BUILDING, NAKODAR ROAD, JALANDHAR. PAN:AACFL5129P VS. ASST. CIT, RANGE-I, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. DINESH SARNA, ADV. RESPONDENT BY: SH. RAHUL DHAWAN, DR DATE OF HEARING: 01/12/2016 DATE OF PRONOUNCEMENT: 07/02/2017 ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF LD. CIT(A), JALANDHAR, DT.02.12.2013 FOR ASST. YEAR: 2009-10. 2. THE APPEAL WAS EARLIER DISMISSED VIDE ORDER D ATED 23.04.2014 ON ACCOUNT OF APPEAL BEING DEFECTIVE. HOWEVER, THE SAI D ORDER OF TRIBUNAL WAS RECALLED VIDE ORDER DATED 22.08.2016 AND APPEAL WAS LISTED FOR HEARING ON MERITS. 3. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE CAS E OF THE ASSESSEE IS COVERED BY THE ORDER OF TRIBUNAL IN ITS OWN CASE VI DE ITA NO.359(ASR)/2015 FOR ASST. YEAR: 2010-11, WHEREIN T HE HONBLE TRIBUNAL ITA NO.85/ASR/2014 ASST.YEAR:2009-10 2 HAS ALLOWED THE APPEAL OF ASSESSEE ON SIMILAR FACTS . NARRATING THE FACTS OF THE CASE, THE LD. AR SUBMITTED THAT ASSESSEE IS ENG AGED IN DEVELOPMENT AND SALE OF PROPERTY AND DURING THE YEAR IT HAD PUR CHASED SOME PROPERTY AND A PART OF THE PURCHASE CONSIDERATION AMOUNTING TO RS.9,42,000/- WAS PAID IN CASH. THE ASSESSING OFFICER HAD MADE TH E DISALLOWANCE U/S 40A(3) AND WHICH THE LD. CIT(A) HAD ALSO CONFIRMED. HE SUBMITTED THAT THE HONBLE TRIBUNAL WHILE ALLOWING THE APPEAL OF T HE ASSESSEE FOR ASST. YEAR: 2010-11 HAD FOLLOWED THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SH. GURDAS GARG. THE LD. AR FURTHER RELIED UPON THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AVTAR SINGH & SONS, 194 ITR 80, WHEREIN THE HON BLE COURT HAS HELD THAT WHERE THE IDENTITY OF PARTY TO WHOM THE PAYME NTS WERE MADE WAS KNOWN AND THE AND PAYMENTS WERE FOUND TO BE GENUINE , THE PAYMENT COULD NOT BE DISALLOWED ON THE GROUND THAT THE PAYM ENTS WERE MADE BY CASH. 4. THE LD. DR, ON THE OTHER HAND, ARGUED THAT THE C ASE LAW OF SH. GURDAS GARG DECIDED BY HONBLE PUNJAB & HARYANA HIG H COURT SHOULD NOT BE FOLLOWED AS A REVIEW PETITION FILED BY DEPAR TMENT IS PENDING AND THE HONBLE HIGH COURT HAD MENTIONED IN THE ORDER I TSELF THAT THE DEPARTMENT WAS FREE TO FILE REVIEW PETITION. ITA NO.85/ASR/2014 ASST.YEAR:2009-10 3 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT FOR ASST. Y EAR: 2010-11 A SIMILAR ADDITION WAS MADE BY ASSESSING OFFICER, HOWEVER, TH E HONBLE TRIBUNAL VIDE ORDER DATED 22.06.2016 HAD ALLOWED THE APPEAL OF THE ASSESSEE. THE OPERATIVE PART OF THE ORDER OF TRIBUNAL AS CONTAINE D IN PARA-8 IS REPRODUCED BELOW. 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IN THE PRES ENT CASE THE AUTHORITIES BELOW HAS NOT DOUBTED THE GENUINENESS O F THE TRANSACTION AND IN THE CASE LAW OF SH. GURDAS GARG, THE HONBLE PUNJAB & HARYANA HIGH COURT HAS HELD THAT WHERE THE GENUINENESS OF T RANSACTION IS NOT DOUBTED THE ADDITION U/S 40A(3) CANNOT BE MADE. THE RELEVANT FINDINGS OF THE HONBLE PUNJAB & HARYANA HIGH COURT ARE REPR ODUCED BELOW. 8. THE RESPONDENTS CASE IS ALSO SUPPORTED BY THE JUDGMENT OF THE SUPREME COURT IN ATTAR SINGH GURMUKH SINGH VS. ITO, (1991) 4 SCC 385. AFTER REFERRING TO RULE 6DD, THE SUPREME COURT HELD: 7. IN OUR OPINION, THERE IS LITTLE MERIT IN THIS CO NTENTION. SECTION 40- A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSI ON OF RULE 6-DD. THE SECTION MUST BE READ ALONG WITH THE RULE. IF READ T OGETHER, IT WILL BE CLEAR THAT THE PROVISIONS ARE NOT INTENDED TO RESTRICT TH E BUSINESS ACTIVITIES. THERE IS NO RESTRICTION ON THE ASSESEE IN HIS TRADI NG ACTIVITIES. SECTION 40-A (3) ONLY EMPOWERS THE ASSESSING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RESPECT OF WHICH PAYMENT IS NOT M ADE BY CROSSED CHEQUE OR CROSSED BANK DRAFT. THE PAYMENT BY CROSSED CHEQU E OR CROSSED BANK DRAFT IS INSISTED ON THE ENABLE THE ASSESSING AUTHO RITY TO ASCERTAIN WHERE THE PAYMENT WAS GENUINE OR WHETHER IT WAS OUT OF TH E INCOME FROM DISCLOSED SOURCES. THE TERMS OF SECTION 40-A(3) ARE NOT ABSOLUTE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELE VANT FACTORS ARE NOT EXCLUDED. THE GENUINE AND BONA FIDE TRANSACTIONS AR E NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE ASSESSING OFFICER THE CIRCUMSTA NCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40-A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYE E. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECEIVED TH E CASH PAYMENT. RULE 6-DD PROVIDES THAT AN ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSSED BANK DRAFT I N THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF SECTION 40- A(3) AND RULE 6-DD THAT THEY ARE INTENDED TO REGULATE THE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTION S. [SEE: MUDIAM OIL COMPANY VS. ITO (1973) 92 ITR 519 (AP)]. IF THE PAYME NT IS MADE BY A CROSSED CHEQUE DRAWN ON A BANK OR A CROSSED BANK DR AFT THEN IT WILL BE EASIER TO ASCERTAIN, WHEN DEDUCTION IS CLAIMED, WHE THER THE PAYMENT WAS ITA NO.85/ASR/2014 ASST.YEAR:2009-10 4 GENUINE AND WHETHER IT WAS OUT OF THE INCOME FROM D ISCLOSED SOURCE. IN INTERPRETING A TAXING STATUTE THE COURT CANNOT BE O BLIVIOUS OF THE PROLIFERATION OF BLACK MONEY WHICH IS UNDER CIRCULA TION IN OUR COUNTRY. ANY RESTRAINT INTENDED TO CURB THE CHANCES AND OPPORTUN ITIES TO USE OR CREATE BLACK MONEY SHOULD NOT BE REGARDED AS CURTAILING TH E FREEDOM OF TRADE OR BUSINESS. 9. AT THE COST OF REPLETION, THE TRIBUNAL HAS NOT D ISBELIEVED THE TRANSACTIONS OR THE GENUINENESS THEREOF. NOR HAS IT DISBELIEVED THE FACT OF PAYMENTS HAVING BEEN MADE. MORE IMPORTANT, THE REAS ONS FURNISHED BY THE APPELLANT FOR HAVING MADE THE CASH PAYMENTS, WH ICH WE HAVE ALREADY ADVERTED, TO HAVE NOT BEEN DISBELIEVED. IN OUR VIEW , ASSUMING THESE REASONS TO BE CORRECT, THE CLEARLY MAKE OUT A CASE OF BUSINESS EXPEDIENCY. 10. IN THE CIRCUMSTANCES, THE ORDER OF THE TRIBUNA L IN THIS REGARD IS SET ASIDE. THE PAYMENTS CANNOT BE DISALLOWED UNDER SECT ION 40A(3) OF THE ACT. FINDING THE ISSUE PARI MATERIA WITH THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SH. GURDAS GARG, WE DELETE THE ADDITION MADE BY LD. CIT(A). FURTHER WE FIND THAT THE HONBLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF CIT VS. AVTAR SINGH & SONS 194 ITR 80 A LSO HELD THAT WHERE THE IDENTITY OF PARTY TO WHOM PAYMENTS WERE MADE WA S KNOWN AND THE PAYMENTS WERE FOUND TO BE GENUINE, THE DISALLOWANCE U/S 40A(3) CANNOT BE MADE. THE ARGUMENT OF LD. DR THAT THE JUDGMENT O F HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE SH. GURDAS GARG SHOU LD NOT BE FOLLOWED DOES NOT HOLD ANY FORCE. MOREOVER, IN ANOTHER JUDGM ENT DELIVERED BY PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AVTAR SINGH & SONS 194 ITR 80, HAS REORDERED SIMILAR FINDINGS. WE FURTHER FIND THAT HONBLE KOLKATA HIGH COURT IN THE CASE OF GIRDHARILAL GOENKA VS. CIT 179 ITR 122 (CAL.) , THE HONBLE HIGH COURT HAS HELD THAT THE OBJECT OF THE PROVISIONS OF SECTION 4 0A(3) IS TO CHECK EVASION OF TAX AND IF THE PAYMENT IS MADE FROM THE DISCLOSED SOURCES AND ITA NO.85/ASR/2014 ASST.YEAR:2009-10 5 BOTH THE PAYER AND PAYEE HAD DECLARED IN THE RESPEC TIVE ACCOUNT AND THE PAYMENTS MADE WERE ON ACCOUNT OF GENUINE TRANSACTIO NS THEN NO DISALLOWANCE U/S 40A(3) SHOULD BE MADE. WE FIND THAT IN THE PRESENT CASE THIS WAS THE ONLY TRANSACTION WHICH WAS MADE BY ASSESSEE TO SELLER OF PROPERTY AN D IDENTITY OF THE PAYEE IS ALSO ESTABLISHED IN VIEW OF THE AGREEMENT TO SALE WHICH WAS EXECUTED BETWEEN THE ASSESSEE AND PAYEE A COPY OF W HICH IS PLACED AT (PB-5 TO 7). WE FURTHER FIND THAT IN RESPONSE TO QU ERY RAISED BY ASSESSING OFFICER, THE ASSESSEE HAD SUBMITTED AS UNDER: (A) ASSESSEE WAS NOT HAVING ANY BUSINESS RELATION WITH THE PERSON FROM WHOM ASSESSEE PURCHASE PROPERTY. (B) THE TRANSACTION WITH THE PERSONS FROM WHOM ASSESSEE PURCHASE PROPERTY WAS FIRST AND ONLY TRANSACTION. (C) THE PURCHASER INSISTS ON CASH PAYMENT AS THEY DO NO T KNOWN ASSESSEE PERSONALLY. (D) THE TRANSACTION OF PURCHASE OF PROPERTY IS WITNESSE S BY TWO IMPENDENT PERSONS IN THE PRESENCE OF WHOM CASH TRANSACTION WA S ACCEPTED BY THE SELLER. (E) APART FROM ABOVE, BUSINESS EXPENDITURE OUR TRANSACT ION IS SUPPORTED BY REGISTRATION DEED OR AGREEMENTS DULY EXECUTED BEFOR E A GAZETTED OFFICER I.E. TEHSILDAR, THIS PROVE THE GENUINENESS OF THE T RANSACTION AND ALSO PROVE THE IDENTITY OF THE PERSON FROM WHOM ASSESSEE PURCH ASE PROPERTY. SIR, YOUR KIND ATTENTION IS DRAWN TO THE PROVISIONS OF SECTION 6DD(J) WHEREIN IF THE ASSESSEE WAS REQUIRED TO MADE PAYMEN T ON A DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE THEN NO DISALLOWANCE SHOULD BE MADE. IN THE PRESENT CASE MO ST OF THE CASH TRANSACTION WERE MADE ON SUNDAY OR BANK HOLIDAY SO IT IS REQUESTED THAT NO ADVERSE INFERENCE MAY KINDLY BE DRAWN IN THAT CA SE. WHEREAS AS REGARD PAYMENT ON 08.07.2008 AMOUNTING TO RS.9,42,0 00/- IT IS STATED THAT THIS PAYMENT WAS MADE AT THE REQUEST OF THE SE LLER AT THE TIME OF EXECUTION OF DOCUMENTS. ASSESSEE PURCHASED THIS PRO PERTY FOR A CONSIDERATION OF RS.26,32,000/- AND ISSUED THREE CH EQUES ON DIFFERENT DATES ON ACCOUNT OF ADVANCE BUT AT THE TIME OF REGI STRATION OF DOCUMENTS SELLER REFUSE TO ACCEPT CHEQUE SO UNDER THE COMPELL ING CIRCUMSTANCES ITA NO.85/ASR/2014 ASST.YEAR:2009-10 6 ASSESSEE HAS TO MADE PAYMENT IN CASH IN THE PRESENC E OF TEHSILDAAR AND TWO WITNESSES. SIR, ASSESSEE PAID CASH IN THE PRESENCE OF A TEHSIL DAAR ALONG WITH TWO OTHER WITNESSES AND HAS ALSO SHOWN THE FULL VALUE P AID FOR LAND ACQUIRED IN THE SAID REGISTRATION DEED, INCLUDING THE AMOUNT PAID IN CASH. APART FROM THIS, THE PURCHASER INSISTED THE ASSESSEE TO M AKE PAYMENT IN CASH, WHICH BECAME AN UNAVOIDABLE CIRCUMSTANCES FOR THE A SSESSEE. THEREFORE, IT IS CLEAR THAT THE ASSESSEE DID NOT HAVE ANY INTE NTION TO EVADE TAX. IN THE LIGHT OF ABOVE SUBMISSION IT IS CLAIMED THAT SECTIO N SHOULD BE INTERPRETED IN A MANNER BY WHICH FULFILLS THE OBJECT FOR WHICH SEC TION 40A(3) WAS INTRODUCED AND SHOULD NOT BE INTERPRETED IN A MANNE R BY WHICH A GENUINE BUSINESS EXPENDITURE, WHERE THE IDENTITY OF THE PAY EE IS ALSO ESTABLISHED, CAN BE DISALLOWED. SIR, CONSIDERING ABOVE IT IS RESPECTFULLY PRAYED TH AT SINCE ASSESSEE MADE PAYMENT TO THE SELLER UNDER COMPELLING CIRCUMSTANCE S AND ON BANK HOLIDAY SO NO ADVERSE INFERENCE MAY KINDLY BE DRAWN ALSO CO NSIDERING THE FACT THAT IDENTITY OF THE SELLER IS NOT DOUBTFUL IN ALL THE CASES. THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTA NCES, AND JUDICIAL PRECEDENTS, WE HOLD THAT ADDITION SHOULD NOT HAVE B EEN MADE AND THEREFORE, WE DELETE THE SAME. 6. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE AS SESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/02/2017 . SD/- SD/- (SANJAY GARG) (T.S. KAPOOR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 07/02/2017 /PK/PS COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: 2. THE 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER