Pandhrinath Jagannath Nere, Nashik V. Income Tax Officer, Ward-2(3), Nashik, Nashik

ITA 878/PUN/2023

AI Insights

The case involves Pandhrinath Jagannath Nere, the appellant, who contested the addition of Rs.15.00 lakh to his income for the assessment year 2012-13, which was added by the Assessing Officer under section 40A(3) of the Income-tax Act, 1961. This addition was confirmed by the CIT(A). The amount was part of a total payment of Rs.51.00 lakh made for an immovable property, which was the assessee's stock in trade. The payment was partially made in cash on bank holidays, which the assessee argued was at the insistence of the seller due to his immediate need for cash. The Tribunal accepted the assessee's argument, citing the exception in Rule 6DD(j) that applies when payments are made on days when banks are closed due to holidays or strikes.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124177 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 12-10-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 06-08-2023
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset converted into stock in trade
• Section: 45(2); 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT आयकर अपील सं. /ITA No.878/PUN/2023 नधा रण वष / Assessment Year : 2012-13 Pandhrinath Jagannath Nere, 13-14, Balaji Vihar Apartment, Ashok Stambh, Nashik – 422 001, Maharashtra PAN : ACVPN7479B Vs. The ITO, Ward-2(3), Nashik Appellant Respondent आदेश / ORDER PER R.S. SYAL, VP: This appeal by the assessee arises out of the order dated 15-06-2023 passed by the CIT(A) in National Faceless Appeal Centre (NFAC), Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2012-13. 2. The only issue pressed in this appeal is against the confirmation of addition of Rs.15.00 lakh made by the Assessing Officer (AO) u/s.40A(3) of the Act. 3. Briefly stated, the facts of the case are that the assessee purchased certain immovable property on 14-03-2012 for a sum of Rs.51.00 lakh which was admittedly its stock in trade. Out of this, Assessee by Shri Pramod S.Shingte Revenue by Smt. Neha Deshpande Date of hearing 13-10-2023 Date of pronouncement 13-10-2023 ITA No. 878/PUN/2023 Pandhrinath Jagannath Nere 2 an amount of Rs.36.00 lakh was paid through cheques and the remaining amount of Rs.15.00 lakh was paid in 3 installments of Rs.5.00 lakh each on 20-11-2011, 27-11-2011 and 11-12-2011. On being called upon to explain as to why the disallowance of Rs.15.00 lakh be not made u/s.40A(3), the assessee submitted that the above payments were made at the insistence of the sellers and were made on Sundays, being closed holidays. The AO held that the assessee could not bring any extraordinary circumstances for making the payments in cash and as a consequence thereof made the addition of Rs.15.00 lakh u/s.40A(3) of the Act. The ld. CIT(A) confirmed the same. 4. Having heard both the sides and perusing the relevant material on record, it is seen that there is no dispute on the fact that the assessee made payment of Rs.51.00 lakh for the land held as stock- in-trade, out of which a sum of Rs.15.00 lakh was paid in cash on 3 different days at Rs.5.00 lakh each. Such dates have been accepted to be closed bank holidays. In support of the contention that the seller namely, Shri Ganpat Murlidhar Hedge, insisted on making payment in cash, the assessee furnished an affidavit of Shri Ganpat Murlidhar Hedge emphasizing that he was in need of money and since the bank was closed on the above dates he insisted on cash ITA No. 878/PUN/2023 Pandhrinath Jagannath Nere 3 payment. Further, a threat was also given that if the amount was not paid the agreement of sale would be cancelled. The contents of the affidavit have not been controverted by the AO. These facts indicate that the assessee made payments to the sellers in cash in violation of section 40A(3) of the Act on 3 bank holidays. Rule 6DD(j) contains exceptions to the applicability of section 40A(3). Clause (j) of Rule 6DD, which was prevalent at the material time and omitted by the income-tax (3 rd Amendment) Rules, 2020 w.e.f. 29-01-2020, provided that no disallowance will be made where the payment was required to be made on a date on which the banks were closed on account of holiday or strike. The assessment year under consideration is 2012-13 and at the material time clause (j) of Rule 6DD was very much part of the Rule. Since the assessee admittedly paid cash for a sum exceeding Rs.10,000/- on 3 dates on which the banks were closed, there can be no question of making any disallowance u/s.40A(3) of the Act. I, therefore, order to delete the addition. 5. The second ground against the applicability of section 45(2) on conversion of capital asset into stock in trade and the consequential revision of total income was not pressed by the ld. AR. The same, therefore, stands dismissed. ITA No. 878/PUN/2023 Pandhrinath Jagannath Nere 4 6. In the result, the appeal is partly allowed. Order pronounced in the Open Court on 13 th October, 2023. Sd/- (R.S.SYAL) VICE PRESIDENT प ु णे Pune; दनांक Dated : 13 th October, 2023 Satish आदेश क त ल प अ े षत/Copy of the Order is forwarded to: 1. अपीलाथ / The Appellant; 2. यथ / The Respondent; 3. The Pr.CIT concerned 4. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, SMC, Pune / DR, ITAT, Pune 5. गाड फाईल / Guard file आदेशान ु सार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune Date 1. Draft dictated on 13-10-2023 Sr.PS 2. Draft placed before author 13-10-2023 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *