M/S ESSARJEE CONSTRUCTION PVT. LTD., Bhopal V. THE DCIT 1(1), Bhopal

ITA 900/IND/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8571 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 30-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S AMBEDKAR
• Assessee Lawyers: M K SHARMA
• Section: 40A(3); 143(3); 142(1)

Judgement Text

ESSARJEE CONSTRUCTIONS PVT.LTD ITA NO.900/IND/2016 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.900/IND/2016 ASSESSMENT YEAR 2010-11 REVENUE BY SHRI R.S. AMBEDKAR , SR.DR ASSESSEE BY S HRI M.K. SHARMA, CA DATE OF HEARING 0 8 .04 . 201 9 DATE OF PRONOUNCEMENT 11 .0 4 . 201 9 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEAL IS FILED AT THE INSTANCE OF ASSESSEE PERTAINING TO ASSESSMENT YEAR 2010-11 AND IS DIRECT ED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-31, (IN SHORT LD.CIT(A)], NEW DELHI, CAMP BHOPAL DATED 01.06.2016 WHICH IS AR ISING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHOR T THE ACT) DATED 14.03.2013 FRAMED BY DCIT-1(1), BHOPAL. M /S. ESSARJEE CONSTRUCTION PVT. LTD, Z-10, ZONE-1, M.P. NAGAR, BHOPAL VS. DEPUTY COMMISSIONER OF INCOME TAX, 1(1), BHOPAL ( APPELLANT ) (RESPONDENT ) PAN A A ACE8852F ESSARJEE CONSTRUCTIONS PVT.LTD ITA NO.900/IND/2016 2 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL; 1. THAT, THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS. 5,40,000/- TO THE TOTAL INCOME OF THE APPELLANT U/S 40A(3) OF THE INCOME TAX ACT, 1961. 2. THAT, THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION, IGNORING THE FACT THAT THE PAYMENT WAS MA DE BY THE APPELLANT IN CASH, DUE TO EXCEPTIONAL CIRCUMSTANCES, AS THE RECI PIENT REFUSED TO ACCEPT THE CHEQUE PAYMENT, AND THE GENUINENESS OF THE TRANSACT ION IS UNDISPUTED. 3. THAT AMOUNT OF RS. 5,40,000/- PAID TO ONE OF THE SE LLERS OF THE LAND, IS A PART OF STOCKS IN TRADE OF THE APPELLANT, THEREFORE DISA LLOWANCE, IF AT ALL, CAN BE MADE, IN THE YEAR IN WHICH SALE OF SUCH' STOCK OF L AND' TAKES PLACE. 4. THAT THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS DECIDED, WITH THE PERMI SSION OF HONOURABLE BENCH. 3. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN CI VIL CONSTRUCTION BUSINESS. INCOME OF RS.79,65,389/- DECLARED IN E-R ETURN OF INCOME FILED ON 07.10.2010. CASE WAS PICKED UP FOR SCRUTINY FOL LOWED BY SERVING OF NOTICES U/S 143(2) AND 142(1) OF THE ACT. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS LD. A.O CAME TO KNOW THAT TH E ASSESSEE PAID A CASH SUM OF RS.5,40,000/- TO SMT. ANAR BAI FOR PUR CHASE OF LAND AT KHAJURI KHURD. LD. A.O TOOK A VIEW THAT AS THE ASSE SSEE IS IN THE BUSINESS OF PURCHASE AND SALE OF LAND AND CIVIL CON STRUCTION BUSINESS AND THE ALLEGED PAYMENT OF CASH OF RS.5,40,000/- IS HIT BY THE PROVISIONS ESSARJEE CONSTRUCTIONS PVT.LTD ITA NO.900/IND/2016 3 OF SECTION 40A(3) OF THE ACT, THE ALLEGED AMOUNT NE EDS TO BE DISALLOWED AS THE ASSESSEE COULD NOT MENTION ANY CIRCUMSTANCES SP ECIFIED IN RULE 6DD OF THE I.T. RULE JUSTIFYING SUCH CASH PAYMENTS. IN COME ASSESSED AT RS.85,05,390/-. AGGRIEVED ASSESSEE PREFERRED APPEA L BEFORE LD. CIT(A) BUT FAILED TO SUCCEED AND THE DISALLOWANCE U/S 40A( 3) OF THE ACT WAS CONFIRMED BY LD. CIT(A) OBSERVING AS FOLLOWS; 4.4 I HAVE CONSIDERED THE FINDINGS RECORDED BY TH E ID. AO AS PER THE ASSESSMENT ORDER, THE SUBMISSION MADE BY THE APPELLANT, THE PO SITION OF THE LAW AND THE FACTS OF THE CASE ON RECORD. THE LD. AO DISALLOWED A SUM OF RS.5,40,OOO/- U/S 40A(3) OF THE ACT BEING CASH PAYMENT MADE TO A SELLER OF T HE LAND, NAMELY SMT. ANARI BAI. THE APPELLANT HAS CONTENTED THAT INITIALLY THE SELLER HAD REFUSED TO ACCEPT PAYMENT BY CASH. HOWEVER, THE APPELLANT HAS FAILED TO SUBSTANTIATE THE AFORESAID CONTENTION WITH ANY DOCUMENTARY EVIDENCE. IT IS SE EN THAT NOT ONLY THIS BUT PAYMENT BY CHEQUE WERE ALSO MADE TO THE SAID SELLER . HENCE, THE ARGUMENT OF HER REFUSAL TO ACCEPT CHEQUE IS NOT TENABLE. THE ID. AR FURTHER ARGUED THAT THE LAND I~ A PART OF THE STOCK IN TRADE OF THE YEAR; CONSEQUEN TLY IT DOES NOT AFFECT THE NET PROFIT LIABLE TO TAX DURING THE YEAR. THIS ARGUMENT ALSO IS NOT TENABLE BECAUSE THE PROVISIONS OF SECTION 40A(3) REQUIRE DISALLOWANCE O F ANY PAYMENT MADE IN CASH ABOVE RS. 20,000/- IN A DAY. THERE IS NO DISTINCTIO N AS REGARDS THE NATURE O HE PAYMENT/EXPENDITURE. FOR THESE REASONS, THE DECISIO NS RELIED UPON BY THE ID. AR ARE DISTINGUISHABLE BOTH ON FACTS AND CIRCUMSTANCES . IN VIEW OF THE ABOVE, I DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. AO. ACCORDINGLY, THE GROUND NOS. 1 AND 2 ARE REJECTED. 5. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. ESSARJEE CONSTRUCTIONS PVT.LTD ITA NO.900/IND/2016 4 6. LD. COUNSEL FOR THE ASSESSEE FIRSTLY PLEADED THA T THE SELLER OF THE PROPERTY REFUSED TO ACCEPT THE CHEQUE GIVEN IN ADVA NCE AS SHE WAS NOT HAVING ANY BANK ACCOUNT. SUBSEQUENTLY SHE OPENED T HE BANK ACCOUNT AND REMAINING PAYMENT FOR PURCHASE CONSTRUCTION WA S RECEIVED BY HER THROUGH ACCOUNT PAYEE CHEQUE. GENUINENESS OF THE T RANSACTION IS NOT DISPUTED. SECONDLY HE PLEADED THAT THE AMOUNT PAID AT RS.5,40,000/- HAS NOT BEEN CLAIMED AS EXPENDITURE FOR THE YEAR UNDER CONSIDERATION AS THE LAND PURCHASED REMAINED AS STOCK IN HAND AND WAS CA RRY FORWARD TO SUBSEQUENT YEARS. 7. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHE MENTLY ARGUED SUPPORTING THE ORDERS OF LOWER AUTHORITIES. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND GONE THROUGH THE PAPER BOOK FILED BY THE ASSESSEE. THE ISSUE RAISED IN THIS APPEAL BY THE ASSESSEE REVOLVE S AROUND THE DISALLOWANCE OF RS.5,40,000/- U/S 40A(3) OF THE ACT . WE OBSERVE THAT THE ASSESSEE IS INTO THE BUSINESS OF PURCHASE AND SALE OF LAND AND CIVIL CONSTRUCTION BUSINESS. IT PURCHASED LAND FROM SMT. ANAR BAI FOR A TOTAL CONSIDERATION OF RS.36,00,000/-. OUT OF THE TOTAL PURCHASE CONSIDERATION OF RS.36,00,000/- ASSESSEE PAID CASH OF RS.6,20,000 /- (VERIFIABLE FROM THE ESSARJEE CONSTRUCTIONS PVT.LTD ITA NO.900/IND/2016 5 REGISTERED SALE DEED AS WELL AS AFFIDAVIT PLACED IN THE PAPER BOOK). OUT OF THE CASH PAYMENT OF RS.6,20,000/- LD. A.O HAS DISPU TED ONLY SUM OF RS. 5,40,000/- WHICH IN VIEW OF LD. A.O WAS PAYMENT FOR EXPENDITURE IN CASH EXCEEDING RS.20,000/-. THE TOTAL TRANSACTION OF PU RCHASE OF LAND FOR RS.36,00,000/- IS NOT DISPUTED AND THE COMPLETE DET AILS OF CONSIDERATION PAID IN CASH AND CHEQUE ARE MENTIONED IN THE REGIST RY SALE DEED WHICH HAS BEEN EXECUTED BEFORE THE REGISTERING AUTHORITY AND THEREFORE THE GENUINENESS OF THE TRANSACTION CANNOT BE DOUBTED. 9. IT IS PLEADED BEFORE US THAT THE SELLER SMT. ANA R BAI WAS NOT HAVING A BANK ACCOUNT ON THE DATE OF RECEIVING CASH AND SU BSEQUENTLY WHEN THE ACCOUNT WAS OPENED THE CONSIDERATION WAS PAID IN V ARIOUS INSTALMENTS BY ACCOUNT PAYEE CHEQUES. THIS FACT THAT SMT. ANAR BAI WAS NOT HAVING THE BANK ACCOUNT AT THE INITIAL DATE OF RECEIVING T HE CONSIDERATION IN CASH HAS NOT BEEN DISPUTED BY THE REVENUE AUTHORITIES. T HE SAID CASH PAYMENT WAS MADE BY ASSESSEE FOR BUSINESS EXPEDIENCY IN ORD ER TO CONFIRM THE PURCHASE DEAL. 10. THEREFORE LOOKING TO THE GIVEN FACTS AND CIRCUM STANCES OF THE CASE THE ALLEGED CASH PAYMENT OF RS.5,40,000/- COMES UND ER THE EXCEPTIONS PROVIDED IN RULE 6DD OF THE IT RULES AND THUS BOTH THE LOWER AUTHORITIES ESSARJEE CONSTRUCTIONS PVT.LTD ITA NO.900/IND/2016 6 WERE NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE U /S 40A(3) OF THE ACT AND THE SAME DESERVES TO BE DELETED. WE ACCORDINGL Y ORDER SO AND ALLOW GROUND NO.1 & 2 RAISED BY THE ASSESSEE. 10. APROPOS THE SECOND PLEA RAISED IN GROUND NO.3 O F THE ASSESSEES APPEAL CONTENDING THAT THE DISALLOWANCE IS NOT CALL ED FOR AS THE ALLEGED AMOUNT WAS NOT CLAIMED AS AN EXPENDITURE DURING THE YEAR BECOMES INFRUCTUOUS AND MERELY ACADEMIC AS WE HAVE ALREADY DELETED THE DISALLOWANCE U/S 40A(3) OF THE ACT AT RS. 5,40,000/ - WHILE ADJUDICATING GROUND NO.1 & 2 OF INSTANT APPEAL. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 11.04.20 19. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 11 APRIL, 2019 /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