Ferns Forest Sales Pvt. Ltd., Kolkata V. A.C.I.T.-CC-1(1), Kolkata

ITSSA 54/KOL/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3602 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 16-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause; Set aside
• Section: 132; 40A(3); 143(3); 153A; 143(2)

Judgement Text

1. IT(SS) No.54/Kol/2020 AY 2007-08 IT(SS_ No. 55/Kol/2020 AY 2008-09 Ferns Forest Sales Pvt. Ltd IN THE INCOME TAX APPELLATE TRIBUNAL BENCH “C” KOLKATA Before Shri Manish Borad, Accountant Member and Shri Sonjoy Sarma, Judicial Member IT(SS) No. 54/Kol/2020 Assessment Year: 2007-08 M/s. Ferns Forest Sales Pvt. Ltd. C/o Subash Agarwal & Associates, Advocates, Siddha Gibson,1 Gibson Lane, Suite 213, 2 nd Fl.,Kolkata-700 069. बनाम V/s. A.C.I.T, Central Cir-1(1), Kolkata, Aaykar Bhawan Poorva, 3 rd Fl., 110 Shanti Pally, E.M Bypass, Kolkata—107. IT(SS) No. 55/Kol/2020 Assessment Year: 2008-09 M/s. Ferns Forest Sales Pvt. Ltd. C/o Subash Agarwal & Associates, Advocates, Siddha Gibson,1 Gibson Lane, Suite 213, 2 nd Fl.,Kolkata-700 069. बनाम V/s. ACIT, C.C-III, Kolkata Now, A.C.I.T, Central Cir- 1(1), Kolkata, Aaykar Bhawan Poorva, 3 rd Fl., 110 Shanti Pally, E.M Bypass, Kolkata—107. PAN:AABCF 0479L अपीलाथ /Appellant .. यथ /Respondent अपीलाथ क ओर से/ By Appellant/Assessee Shri Siddarth Agarwal, Advocate, Ld.AR यथ क ओर से/By Respondent/Department Shri Tushal Dhawal Singh, CIT/Ld. DR स ु नवाई क तार ख/Date of Hearing 09-06-2022 घोषणा क तार ख/ Date of Pronouncement 11 -07-2022 2. IT(SS) No.54/Kol/2020 AY 2007-08 IT(SS_ No. 55/Kol/2020 AY 2008-09 Ferns Forest Sales Pvt. Ltd आदेश /O R D E R PER MANISH BORAD, AM. These appeals of the assessee for the assessment years 2007-08 and 2008-09 are directed against the separate orders dt. 21-05- 2019/17-10-2019 passed by the ld. Commissioner of Income-tax (Appeals) [ in short, hereafter referred to as the ‘CIT-A’], Kolkata-20, which are arising out of the assessment orders dt. 15-03-2016/22-03- 2013 framed u/s. 143(3)/147 and 153A/143(3) of the Income Tax Act, 1961 [ in short, hereinafter referred to as ‘the Act’] dated 21-03- 2016 passed by Assistant Commissioner of Income Tax, Central Circle-III/1(1), Kolkata. 2. At the time of hearing the registry has informed that both the present appeals are time barred by 204 and 63 days. The assessee prayed for condonation of the delay. The reasons are placed on record. We, after perusing the same as well as material available on record find merit in the reasonable cause stated by the assessee and in the larger interest of justice, condone the delay and admit the both appeals for adjudication. 3. The assessee has raised the following grounds of appeal for the A.Ys 2007-08 & 2008-09, which read as under :- 3. IT(SS) No.54/Kol/2020 AY 2007-08 IT(SS_ No. 55/Kol/2020 AY 2008-09 Ferns Forest Sales Pvt. Ltd A.Y 2007-08 Grounds of Appeal 1. For that the re-assessment framed u/s. 147/143(3) is void and nullity before the eyes of law as there are no recorded reasons to believe that the income chargeable to tax has escaped assessment. 2. For that without prejudice to ground no. 2 as stated above, the recorded reasons are invalid and improper and as such, the reassessment framed is bad in the eyes of law. 3. For that the re-assessment is vitiated in law in the absence of approval 1 proper approval as envisaged u/s 151. 4. For that on the facts and in the circumstances of the case, the Ld. CIT(A) ought to have deleted the disallowance of Rs. 14,53,880/- u/s 40A(3) being 20% of cash payment against purchase of land worth Rs. 72,69,440/-. 5. For that the Ld. CIT(A) failed to appreciate that the place where payment was made was not served by the banking facilities, therefore application of section 40A(3) by the A.O. was unjustified. 6. The appellant craves leave to add further grounds of appeal or alter the grounds at the time of hearing. A.Y 2008-09 Grounds of Appeal 4. IT(SS) No.54/Kol/2020 AY 2007-08 IT(SS_ No. 55/Kol/2020 AY 2008-09 Ferns Forest Sales Pvt. Ltd 1. For that on the facts and in the circumstances of the case, the Ld. CIT(A) ought to have deleted the disallowance of Rs. 11,60,000/- u/s 40A(3) being cash payment against purchase of land. 2. For that the Ld. CIT(A) failed to appreciate that the place where payment was made was not served by the banking facilities, therefore application of section 40A(3) by the A.O. was unjustified. 3. For that the Ld: CIT(A) ought to have appreciated that the aforesaid disallowance/addition could not be made in the proceedings u/s 153A r.w. 143(3). 4. The appellant craves leave to add further grounds of appeal or alter the grounds at the time of hearing. 4. Subsequently, the assessee has raised the following additional ground of appeal separately for the A.Ys 2007-08 and 2008-09 as follows: A.Y 2007-08 A. For that the action of the A.O. in adding back item of regular assessment, being purchase of land in cash, by applying the provision of section 40A(3) is beyond his jurisdiction inasmuch as the original assessment was made u/s 153A. B. For that the addition made u/s 40A(3) was not justified inasmuch as the purchases of land was not claimed as deduction but formed part of stock-in-trade of the assessee. A.Y 2008-09 5. IT(SS) No.54/Kol/2020 AY 2007-08 IT(SS_ No. 55/Kol/2020 AY 2008-09 Ferns Forest Sales Pvt. Ltd A. For that the addition made u/s. 40A(3) was not justified inasmuch as the purchases of land was not claimed as deduction but formed part of stock-in-trade of the assessee. First we take up the assessee’s appeal for the AY 2007-08. ITSS No.54/Kol/2020 5. We have heard the rival contentions and perused the record placed before us and gone through the documents attached in the paper book(s) dt. 7-10-2020 and dt. 10-11-2020 submitted by the assessee. The grievance of the assessee raised in the grounds of appeal and the additional ground is firstly challenging the validity of re-assessment proceedings made u/s. 147/143(3) and secondly the addition made u/s. 40A(3) of the Income-tax Act, 1961 ( in short, hereinafter referred to as ‘the Act’) for the alleged cash payment made towards purchase of land. 6. As regards legal ground raised, we find no merit in the contention of the ld. Counsel for the assessee and therefore, the ground nos. 1,2 & 3 raised by the assessee for the AY 2007-08 are dismissed. 7. As regards merits of the case in ground nos. 4 & 5 for the AY 2007-08 of assessee’s appeal, the ld. Counsel for the assessee has contended that the ld. CIT(A) erred in confirming the action of the ld. AO making disallowance u/s. 40A(3) of the Act at Rs.14,53,880/- being 20% of cash payment made against purchase of land of worth of Rs.72,69,440/-. 6. IT(SS) No.54/Kol/2020 AY 2007-08 IT(SS_ No. 55/Kol/2020 AY 2008-09 Ferns Forest Sales Pvt. Ltd 8. We observe that the assessee is engaged in the business of real estate purchase and sale of land and cash payment of Rs. 72,69,400/- has been made and each payment in exceeding Rs. 20,000/- has been made in a day to various persons. This fact is not disputed at the end of both the lower authorities. However, going through the contentions of the ld. Counsel for the assessee, we find that all the alleged payments are duly reflected in the purchase deed registered with the registering authority after making payment of stamp duty. This proves the genuineness of the transaction and the payment made by the buyer to seller. 9. As regards the payment made in cash, it is contended on behalf of assessee that all the alleged sellers were residing at a place, which was not having any banking facility. The ld. Counsel for the assessee has filed a downloaded document from Indian Village Directory of village, Ganragari. As per Census 2011 population of is 1907 and there is 403 houses in the village. The instant appeal relates to FY 2006-07, which is 4 years prior to the year of Census 2011. It also prima facie indicates that seller(s) are residing in a small village and in absence of any information that this particular village had a banking facility, we find force in the contention of the ld. Counsel for the assessee that case of the assessee falls under the exception provided under Rule 6DD(g) of the I.T Rules, 1962, which provides that disallowance u/s. 40A(3) of the Act shall not be made “ where the payment 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 7. IT(SS) No.54/Kol/2020 AY 2007-08 IT(SS_ No. 55/Kol/2020 AY 2008-09 Ferns Forest Sales Pvt. Ltd resides or is carrying on any business or profession or vocation in only such village or town”. 10. Under the given facts and circumstances of the case, we observe that since the genuineness of the transaction of cash payment for purchase of land is not disputed by the revenue and the case of the assessee falls under the exception of Rule 6DD(g) of the I.T Rules, 1962, the disallowance of Rs. 14,53,880/- [ 20% of Rs.72,69,440/-] made u/s. 40A(3) of the Act is uncalled for. We, therefore, set aside the finding of the ld. CIT(A) and delete the impugned disallowance made u/s. 40A(3) of the Act and allow the ground No. 4 & ground No.5) raised by the assessee for the AY 2007- 08. Ground No.6 is general in nature, which needs no adjudication. 11. The appeal of assessee for the AY 2007-08 (IT SS No. 54/Kol/2020) is partly allowed. 12. Now, we take up the assessee appeal (ITSS No.55/Kol/2020) for the AY 2008-09. ITSS No.55/Kol/2020 13. At the outset, the ld. Counsel for the assessee submitted that the case of the assessee is squarely covered by the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Kabul Chawla reported in 380 ITR 573(Del.) as no incriminating material was found in the course of search in the case of the assessee for the FY 2007- 2008 relevant to AY 2008-09, therefore, the impugned addition is not 8. IT(SS) No.54/Kol/2020 AY 2007-08 IT(SS_ No. 55/Kol/2020 AY 2008-09 Ferns Forest Sales Pvt. Ltd made on such incriminating material found during the course of search. 14. Per contra, Ld. Departmental Representative supported the orders of the lower authorities. 15. We have heard the rival contentions and perused the records placed before us. The assessee has raised both legal and issue on merits of the case. As far as legal issue is concerned, it is contended that the proceedings are carried out by the ld. AO are bad in law as no incriminating material was found during the course of search with the assessee for the period pertaining to FY 2007-08 relevant to AY 2008- 09. On perusal of records, we find that the assessee filed its original return of income for the AY 2008-09 on 19-02-2009. The case was not selected for scrutiny as no notice u/s. 143(2) of the Act was issued within the statutory time limit. A search u/s. 132 of the Act was conducted on 27-01-2011 at the office premises of the assessee company. As on the date of search assessment for AY 2008-09 was completed and unabated. The addition for the AY 2008-09 could be made in the assessment proceedings u/s. 143(3) r.w.s 153A of the Act only if any incriminating material pertaining to this AY was found by the search tem. Perusal of assessment records shows that no reference has been made by ld. AO to any incriminating material before making any disallowance u/s. 40A(3) of the Act and addition is purely made on the basis of purchases duly reflected in the financial statement of the assessee company. Even in the impugned order, the ld. CIT(A) observed in para 9.3 that it is only during the course of post 9. IT(SS) No.54/Kol/2020 AY 2007-08 IT(SS_ No. 55/Kol/2020 AY 2008-09 Ferns Forest Sales Pvt. Ltd search some material in the form of statement of assessee came into the light, wherein it confirmed that the appellant used to make payment in cash for purchase of land. 16. Thus, in view of the ratio laid down by the Hon’ble Delhi High Court in the case of Kabul Chawla (supra) and the same being squarely applicable on the facts of the case, we find that since AY 2008-09 is completed and unabated assessment year and no incriminating material is found by the search team for the AY 2008-09, ld.AO erred in carrying out assessment proceedings u/s. 153A r.w.s 143(3) of the Act and the same deserves to be quashed. We accordingly set aside the impugned finding of the ld. CIT(A) on this issue. Since we have already quashed the assessment proceedings made u/s. 153A/143(3) of the Act, the addition made u/s. 40A(3) of the Act of Rs.11,60,000/- stands deleted. The legal ground raised by the assessee is allowed. 17. As far as merits of the case is concerned, since we have already quashed the assessment proceedings carried out u/s.153A r.w.s 143(3) of the Act, it merely remains academic to deal with the merits of the case. Therefore, grounds raised on merits of the case are dismissed as infructuous being academic in nature. Thus, the appeal of assessee for the AY 2008-09 is allowed. 10. IT(SS) No.54/Kol/2020 AY 2007-08 IT(SS_ No. 55/Kol/2020 AY 2008-09 Ferns Forest Sales Pvt. Ltd 18. In the result, the appeal by assessee for the AY 2007-08 is partly allowed and that for AY 2008-09 is allowed as per terms indicated hereinabove. Order pronounced on 11/7/22 at Kolkata Sd/- Sd/- ( SONJOY SARMA) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 11-07-2022 **PP/SPS आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1.अपीलाथ /Appellant/Assessee: M/s. Ferns Forest Sales Pvt. Ltd. C/o Subash Agarwal & Associates, Advocates, Siddha Gibson,1 Gibson Lane, Suite 213, 2 nd Fl.,Kolkata-700 069. 2. यथ /Respondent/Department: A.C.I.T, Central Cir-1(1), Kolkata, Aaykar Bhawan Poorva, 3 rd Fl., 110 Shanti Pally, E.M Bypass, Kolkata—107. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त- अपील / CIT (A) 5. वभागीय त न ध, आयकर अपील य अ धकरण कोलकाता / DR, ITAT, Kolkata 6.गाड फाइल/Guardfile. By order/आदेश से, /True Copy/ Assistant Registrar ITAT, Kolkata