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Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: SHRI R.S. SYAL
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.
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.
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, 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.
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 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 (3rd 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.
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.
In the result, the appeal is partly allowed. Order pronounced in the Open Court on 13th October, 2023.