Deuputy Commissioner Of Income Tax, 12 Raipur vs. Rcp Infratech Pvt. Ltd.

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TAXC/154/2017HC ChhattisgarhCGHC01019395201707 February 2018Author: HON'BLE SHRI JUSTICE PRASHANT KUMAR MISHRA,HON'BLE SHRI JUSTICE RAM PRASANNA SHARMA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal by the Revenue did not involve any substantial question of law. The Court affirmed the concurrent findings of the CIT (Appeals) and the Tribunal that the explanation offered by the assessee for making cash payments was acceptable. The Court relied on judicial precedents, including the order of a Coordinate Bench in Tax Case No. 13 of 2016, which in turn referred to orders in Walford Transport (Eastern India) v. CIT and Saraswati Housing & Developers v. Additional Commissioner of Income Tax. The reasoning and interpretation applied by the lower appellate authorities were found to be duly supported by these precedents. Consequently, the appeal filed by the Revenue was dismissed.

What were the facts?

The Revenue has appealed against an order of the Income Tax Appellate Tribunal (Tribunal) dated May 11, 2017. The Tribunal had dismissed the Revenue's appeal against the order of the CIT (Appeals), Raipur, dated April 30, 2014. The CIT (Appeals) had allowed the assessee's appeal against an order by the Assessing Officer (AO). The AO had imposed a tax liability of Rs. 3,41,84,000/- by disallowing expenditure under Section 40A(3) of the Income Tax Act, 1961. The assessee, RCP Infratech Pvt. Ltd., had made cash payments totaling Rs. 3,41,84,000/- for land purchases, which the AO found did not meet the conditions of Rule 6DD.

What were the issues?

1. Whether the Tribunal erred in affirming the order of the CIT (Appeals) which allowed the assessee's appeal against the disallowance of expenditure under Section 40A(3) of the Income Tax Act, 1961, despite cash payments exceeding Rs. 20,000/- per day to individuals for land purchases. Assessee's Contentions (as per CIT (Appeals) findings): The sellers insisted on cash payments. The assessee established the identity of the sellers through photographs, addresses, and witnesses. The transactions were conducted in the presence of a competent authority who verified the payments. Therefore, the deals were legally permissible, transparent, and without intent to evade tax. Revenue's Contentions: The Revenue's appeal was based on the AO's finding that the explanation for cash payments did not satisfy Rule 6DD of the Income Tax Rules, 1962, leading to the disallowance under Section 40A(3).

Which sections of the Income-tax Act were involved?

Section 40A(3)

AI-generated summary — verify with the full judgment below

1 AFR HIGH COURT OF CHHATTISGARH, BILASPUR TAXC No. 154 of 2017 Deuputy Commissioner Of Income Tax, 1(2) Raipur Chhattisgarh,, Chhattisgarh ---- Petitioner Versus RCP Infratech Pvt. Ltd. V I P Street, Khamardih, Shankar Nagar, Raipur Chhattisgarh., Chhattisgarh ---- Respondent For Appellant Ms Naushina Afrin Ali, Advocate. For Respondent None Hon'ble Shri Justice Prashant Kumar Mishra Hon'ble Shri Justice Ram Prasanna Sharma Order On Board by Hon'ble Prashant Kumar Mishra J. 08/02/2018

1.

Heard.

2.

This appeal by revenue would assail the order passed by the Income Tax Appellate Tribunal (henceforth, the Tribunal) on 11.05.2017, dismissing the appeal preferred by the revenue wherein challenge was made to the order

2 passed by the CIT (Appeals), Raipur dated 30.04.2014, which allowed the assessee's appeal against the order passed by the AO, imposing tax liability to the tune of Rs.3,41,84,000/- applying Section 40A(3) of the Income Tax Act, 1961 (henceforth, the Act).

3.

Section 40A(3) of the Act provides that 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 an account payee bank draft exceeds Rs.20,000/-, no deduction shall be allowed in respect of such expenditure.

4.

In the case at hand, it is admitted that payment to the tune of Rs. 3,41,84,000/- was made by the assessee in cash to different persons towards payment of purchase price for lands as the assessee is engaged in the business of sale and purchase of lands. The Assessing Officer recorded his satisfaction that the explanation offered by the assessee as to why payments were made in cash, does not satisfy the requirement of Rule 6DD of the Income Tax Rules, 1962. 5. The CIT (Appeals) allowed the appeal preferred by the assessee accepting the arguments that the sellers have insisted for cash payment; the identity was established by 3 furnishing photograph, addresses and witnesses and the deal was made in the presence of competent authority, which has cross checked the payments, therefore, the entire deal having been made in a legally permissible and transparent manner, there was no intention to evade tax.

6.

While allowing the appeal the CIT (Appeals) also referred to the order passed by the Coordinate Bench of this Court in Tax Case No. 13 of 2016 decided on 01.03.2016, to hold that the Assessing Officer is not correct in invoking the provisions of Section 40A(3) of the Act with respect to the subject transactions. The CIT Appeal thus deleted the additions made by the AO. The Tribunal has affirmed the order passed by the CIT(Appeals).

7.

We have heard learned counsel for the revenue at length, however, we are not in a position to take any different view than the one taken by the Coordinate Bench in the matter of Assistant Commissioner of Income Tax- Circle- 1(2) vs M/s R.P. Real Estate Pvt. Ltd. In the said matter, this Court has referred to the order passed by Gauhati High Court in [Walford Transport (Eastern India) v. CIT] 1999-240 ITR 902 and Saraswati Housing & Developers v. Additional Commissioner of Income Tax, (2013) 142 ITD 0198, Delhi Bench (G) to hold that once the Appellate

4 Court and the Tribunal have concurrently found that the explanation offered by the assessee as to why the cash payments made to the sellers is acceptable, the same does not involve any substantial question of law as the reasoning assigned and the interpretation applied by the Tribunal and the CIT (Appeals) are duly supported by the judicial precedents.

8.

In view of the above, we find no substance in this appeal as it does not involve any substantial question of law. Accordingly, the appeal is dismissed. Judge Judge Prashant Kumar Mishra Ram Prasanna Sharma Akhilesh

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