M/s Dreamland Colonizers Pvt. Ltd., Barnala V. ITO, Barnala

ITA 919/CHANDI/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8471 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Corroborative evidences
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.919/CHD/2014 (ASSESSMENT YEAR : 2009-10) M/S DREAMLAND COLONIZERS PVT. LTD., VS. THE INCOME TAX OFFICER C/O BUDH RAM SAT PAL, WARD BARNALA, HANDIYA BAZAR, BARNALA. BARNALA. PAN: AACCD1489R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI SUSHIL KUMAR, CIT DR DATE OF HEARING : 15.12.2015 DATE OF PRONOUNCEMENT : 15.02.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCO ME TAX (APPEALS), PATIALA DATED 22.8.2014 FOR ASSESSMENT Y EAR 2009-10. THE APPEAL BEFORE THE CIT (APPEALS) WAS A GAINST THE ORDER OF THE ASSESSING OFFICER MADE UNDER SECTI ON 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT). 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS PURCHASED A LAND WORTH RS.20,92,000/- AND CLAIMED TOTAL EXPENSES OF RS.22,71,000/- IN P URCHASE 2 ACCOUNT INCLUDING STAMP DUTY AND OTHER EXPENSES. RS.20,92,000/- HAVE BEEN PAID TO SELLER IN CASH. T HE ASSESSING OFFICER ADDED THE AMOUNT UNDER SECTION 40 A(3) OF THE ACT AS THE EXPENSES ON PURCHASE OF LAND HAS BEEN CLAIMED AS BUSINESS EXPENSES. 3. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE SUBMITTED THAT THE SELLER OF THE LAND REFUSED TO AC CEPT THE AMOUNT IN CHEQUE AS IT WAS HIS FIRST DEALING WITH T HE ASSESSEE AND SELLER BEING AN ILLITERATE AGRICULTURI ST WITHOUT HAVING ANY BANK ACCOUNT. AN AFFIDAVIT OF T HE PURCHASER IN THIS REGARD WAS SUBMITTED BEFORE THE ASSESSING OFFICER. RELIANCE WAS PLACED ON THE ORDE R OF THE I.T.A.T., CHANDIGARH BENCH IN THE CASE OF ACIT VS . WILLIAM REZARDS & HOTEL PVT. LTD. IN ITA NO.571/CHD/2012, DATED 14.6.2013 AND THE DECISION O F HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. BRIDGE MOHAN SINGH & CO., 209 ITR 754 (P&H). 4. THE SUBMISSIONS WERE SENT TO THE ASSESSING OFFICER FOR COMMENTS, WHO BY LETTER NO.449 DATED 12.8.2004 BASICALLY RELIED ON ASSESSMENT ORDER AND SUBMITTED THAT THE PLEA OF THE ASSESSEE THAT THERE ARE NO BANKING FACILITY IN SANDHU PATH WHERE THE ASSESSEE RESIDES IS NOT CORRECT. AFTER CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE AND REMAND REPORT BY THE ASSESSING OFFICER, THE LEARNED CIT (APPEALS) HELD THAT THERE WERE 3 CERTAIN EXCEPTIONS PROVIDED UNDER RULE 6DD OF THE I NCOME TAX RULES FOR SECTION 40A(3) OF THE ACT WHERE PAYME NT IS MADE IN A VILLAGE OR TOWN WHICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK TO ANY PERSON WHO ORDINARILY RESIDES OR IS CARRYING ON ANY BUSINESS/PROFESSION OR VOCATION IN ANY SUCH VILLAGE OR TOWN. LOOKING TO THE FACTS OF THE CASE, THE SAME D OES NOT FALL INTO ANY SUCH CRITERIA. THIS WAY THE LEARNED CIT (APPEALS) DISMISSED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED, THE ASSESSEE HAS COME UP IN APPEAL, RAISING THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OF FICER IN CONFIRMING THE ADDITION OF RS, 20,92,000/- MADE BY HIM IN RESPECT OF AMOUNT PAID BY THE APPELLANT FOR TH E PURCHASE OF LAND BY APPLYING PROVISIONS OF SECTION 4 0A (3) OF THE INCOME TAX ACT, 1961. 2. THAT THE WORTHY CIT (A) HAS ERRED IN NOT CONSIDE RING THAT THE CASE OF THE APPELLANT IS WELL COVERED UNDER EXCEPTION GIVEN IN RULE 6DD OF THE INCOME TAX RULES T O WHICH PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. 6. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. IT WAS STATED THAT THE GENUINENESS OF THE TRANSACTIONS HAS NOT BEEN QUESTIONED BY ANY LOWER AUTHORITIES. EVEN THE 4 AFFIDAVIT FILED BY THE PAYEE HAS NOT BEEN CONTROVER TED. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT IN THE C ASE OF GURDAS GARG VS. CIT IN ITA NO.413 OF 2014, DATED 16.7.2015, TO THE EFFECT THAT THE PAYMENT BEING MAD E DUE TO BUSINESS EXIGENCY AND GENUINENESS OF TRANSACTION HAVING NOT BEEN DOUBTED, NO ADDITION UNDER SECTION 40A(3) OF THE ACT CAN BE MADE. 7. THE LEARNED D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE TO BE DECIDED BY US IS WHETHER ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, THE PROVISIONS OF SECTION 40A(3) OF THE A CT CAN BE APPLICABLE TO THE ASSESSEE OR NOT. SECTION 40A(3) OF THE ACT READS AS UNDER: SECTION 40A(3) : [(3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH 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, 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 5 AND GAINS OF BUSINESS OR PROFESSION UNDER SUB- SECTION (3) AND THIS SUB-SECTION 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, EXCEEDS TWENTY 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 :] 9. SINCE RELIANCE WAS PLACED ON A LATEST JUDGMENT OF THE HON'BLE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT IN THE CASE OF GURDAS GARG (SUPRA), AFTER PE RUSING THE SAID JUDGMENT WE FIND THAT A VERY APT GUIDANCE IS PROVIDED BY THE HON'BLE HIGH COURT IN DECIDING THE ISSUE IN QUESTION. THEREFORE, AT THE VERY FIRST INSTANCE , WE WOULD ANALYZE THE SAID JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT. IN THIS CASE, THE ASSE SSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN PROPERTIES. ADMITTEDLY, CERTAIN PAYMENTS WERE MADE IN CASH IN E XCESS OF RS.20,000/- PER DAY. INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT, THE ASSESSING OFFICER MADE THE DISALLOWANCE. THE LEARNED CIT (APPEALS) IN HIS OR DER GAVE FINDING THAT THE IDENTITY OF THE PAYEES I.E. THE VE NDER IN RESPECT OF THE LAND PURCHASED BY THE ASSESSEE WAS ESTABLISHED. THE SALE DEEDS WERE PRODUCED, THE GENUINENESS THEREOF WAS ACCEPTED. THE AMOUNT PAID IN RESPECT OF EACH OF THESE AGREEMENTS WAS CERTIFIED B Y THE STAMP REGISTRATION AUTHORITY. IN THIS WAY, THE LE ARNED 6 CIT (APPEALS) HELD THAT THE BAR AGAINST THE GRANT O F DEDUCTIONS UNDER SECTION 40A(3) OF THE ACT WAS NOT ATTRACTED. THE TRIBUNAL DID NOT UPSET THESE FINDIN GS GIVEN BY THE LEARNED CIT (APPEALS) INCLUDING AS TO THE GENUINENESS AND THE CORRECTNESS OF THE TRANSACTIONS . IN FACT, THE TRIBUNAL NOTED THE CONTENTION ON BEHALF O F THE ASSESSEE THAT THERE WAS A BOOM IN THE REAL ESTATE M ARKET, THAT IT WAS NECESSARY, THEREFORE, TO CONCLUDE THE TRANSACTIONS AT THE EARLIEST AND NOT TO POSTPONE TH EM, THAT THE ASSESSEE DID NOT KNOW THE VENDORS AND OBVI OUSLY, THEREFORE, INSISTED FOR PAYMENT IN CASH. THE TRIBU NAL DID NOT DOUBT THIS CASE. HOWEVER, THE TRIBUNAL HELD TH AT CLAIM FOR DEDUCTION WAS NOT SUSTAINABLE IN VIEW OF SECTION 40A(3) OF THE ACT AS THE PAYMENTS WERE MADE IN CASH OVER RS.20,000/-. THE HON'BLE HIGH COURT WHILE DECIDIN G THE ISSUE RELIED UPON THE JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SMT.HARSHILA CHORDIA VS. ITO (2008) 298 ITR 349, WHEREBY IT WAS HELD THAT THERE BEING N O DISPUTE ABOUT THE GENUINENESS OF THE TRANSACTION AN D THE PAYMENT AND IDENTITY OF THE RECEIVER BEING DISCLOSE D, THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT CANNOT BE MADE. THE HON'BLE RAJASTHAN HIGH COURT RELIED UPON A CIRCULAR OF THE CBDT DATED 31.5.1977 REPORTED IN (1 977) 108 (ST.) 8. FURTHER THE HON'BLE PUNJAB & HARYANA HIGH COURT ALSO MADE A REFERENCE TO A JUDGMENT OF THE HO N'BLE APEX COURT IN THE CASE OF ATTAR SINGH GURMUKH SIN GH VS. ITO (1991) 4SCC 385, WHEREBY IT WAS HELD THAT T HE PROVISIONS OF SECTION 40A(3) OF THE ACT AND RULE 6D D OF 7 THE INCOME TAX RULES WERE INTENDED TO REGULATE THE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLAC K MONEY FOR BUSINESS TRANSACTIONS. AFTER ANALYZING A LL THESE, THE HON'BLE HIGH COURT HELD THAT THE TRIBUNA L HAS NOT DISBELIEVED THE TRANSACTIONS OR THE GENUINENESS THEREOF, NOR HAS IT DISBELIEVED THE FACT OF PAYMENT S HAVING BEEN MADE, MORE IMPORTANTLY, THE REASONS FURNISHED BY THE ASSESSEE FOR MAKING THE CASH PAYMENTS HAVE NOT BEEN DISBELIEVED. THIS CLEARLY MAKES OUT A CASE OF BUSI NESS EXPEDIENCY. IN THIS VIEW, THE HON'BLE HIGH COURT H ELD THE PAYMENTS TO BE OUTSIDE THE PURVIEW OF SECTION 40A(3 ) OF THE ACT. 10. TAKING THE GUIDANCE FROM THE ABOVE SAID JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT, WHICH IS ALSO A VERY RECENT JUDGMENT OF THE HON'BLE HIGH COURT WE NOW ADVERT TO ANALYZE THE CASE OF THE PRESENT ASSESSEE. THE PROPOSITION LAID DOWN BY TH E HON'BLE HIGH COURT IS QUITE UNAMBIGUOUS TO THE EFFE CT THAT EVEN IF THE CASE OF THE ASSESSEE DOES NOT FALL IN ANY OF THE CLAUSES OF RULE 6DD OF THE INCOME TAX RULES, INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT CAN BE DISPENSED WITH IF THE ASSESSEE IS ABLE T O PROVE THE BUSINESS EXPEDIENCY BECAUSE OF WHICH IT H AS TO MAKE THE CASH PAYMENTS, THE GENUINENESS OF THE TRANSACTIONS HAVE ALSO TO BE VERIFIED. 8 11. IN THE PRESENT CASE, DETAILED SUBMISSIONS WITH CORROBORATIVE EVIDENCES WERE FILED BEFORE THE LOWER AUTHORITIES INCLUDING THAT OF THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT (APPEALS). THE ELABORATE SUBMISSIONS WERE MADE TO PROVE THAT THE EXPENSES INCURRED IN CASH WERE GENUINE WHICH WERE PAID TO THE SELLER FOR PURCHASE OF LAND AND THERE W ERE PRACTICAL EXPEDIENCY BECAUSE OF WHICH THE PAYMENTS HAVE TO BE MADE IN CASH. THIS IS AN UNDISPUTED FAC T. THE PAYEE HAS GIVEN AN AFFIDAVIT WHICH WAS FILED BE FORE THE ASSESSING OFFICER AS WELL WHEREBY HE AFFIRMED T HE FACT THAT HE DOES NOT HAVE ANY BANK ACCOUNT. THESE FACTS HAVE NOT BEEN CONROVERTED BY THE ASSESSING OFFICER NOR THE LEARNED CIT (APPEALS) AND THE PARTY WAS IDENTIFIABLE. HE WAS OF THE VIEW THAT THE ASSE SSEE IS REQUIRED TO PROVE THAT DUE TO EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES AS PROVIDED UNDER THE RULES, THE PAYMENTS WERE MADE IN CASH. THEREFORE, IT IS NOT A CASE OF THE DEPARTMENT THAT THE PAYMENTS SO MADE IN CASH WERE NOT GENUINE. THE REASONS GIVEN B Y THE ASSESSEE AT EVERY STAGE HAVE NOT BEEN DISBELIEV ED. SINCE THESE REASONS ARE CORRECT, THEY REALLY MAKE O UT A CASE OF BUSINESS EXPEDIENCY. IN THIS VIEW, RESPECT FULLY FOLLOWING THE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF GURDAS GARG (SUPRA), WE HOLD THAT THE PAYMENTS CANNOT BE 9 DISALLOWED UNDER SECTION 40A(3) OF THE ACT. THE ADDITION IS DELETED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF FEBRUARY, 2016. SD/- SD/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 15 TH FEBRUARY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH