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Income Tax Appellate Tribunal, HYDERABAD BENCH ‘A, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN
PER S. RIFAUR RAHMAN, AM: This appeal filed by the Revenue is directed against the order of CIT(A), Kurnool, dated, 05/10/2018 for AY 2009-10.
Brief facts of the case are, the assessee, an individual filed his return of income for the AY 2009-10 admitting a total income of Rs. 3,51,004/-. Subsequently, the case was selected for scrutiny and scrutiny assessment was completed u/s 143(3) of the Income-tax Act, 1961 ( in short ‘the Act’) on 30/08/2011 by determining the assessee’s total income at Rs. 3,91,004/-.
2.1 Subsequently, the Commissioner of Income Tax-III, Hyderabad passed an order u/s.263 of the I.T. Act, 1961 dated 28.02.2014 setting aside the assessment order u/s.143(3) dated 30.08.2011 with following observations:
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“1. The assessee, who is a dealer in purchase and sale of land, had made cash payment of Rs.9,00,000/- for the purchase of land which attracts the provisions of section 40A(3) read with Rule 6DD but the AO had not examined. 2. The assessee had claimed interest of Rs.2,34,367/- on creditors for finance which the assessing office allowed without making any enquiry into the genuineness of the credits. 3. As per the AIR information, in the assessee's SB A/c with ING Vysya Bank, there was cash deposits of Rs.24,90,000/-. However, the sales turnover of the assessee during the year was only Rs.9,68,800/- and assessee had no other known sources for the cash deposits. The AO completed the assessment without carrying out any verification for the source of these cash deposits.”
2.2 Aggrieved with the order of CIT, the assessee contested before Hon'ble ITAT, Hyderabad Bench 'A'. The Hon'ble ITAT passed an order in ITA No.936/HYD/2014, dated.18.02.2015 allowing grounds at (2) and (3) above. In respect of ground (1) concerning disallowance of Rs.9,00,000 u/s 40A(3), the Hon'ble ITAT set aside the matter with a direction to examine whether the cash payments fall within the exemptions of Rule 6DD of the Income Tax Rules, 1962 and only thereafter, to decide whether to apply section 40A(3) to such payments.
2.3 Subsequently, the AO, consequent to the order of ITAT, passed an order u/s 143(3) r.w.s 254 by holding that the impugned payment of cash of Rs.9,00,000/- towards sale consideration of land was in violation of provisions of section 40A(3) of the I.T Act, 1961 and made a disallowance of Rs.9,00,000/- u/s.40A(3) of the I.T. Act.
Aggrieved by the order of AO, the assessee Preferred an appeal before the CIT(A).
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Before the CIT(A), the assessee filed written submissions, which were extracted by the CIT(A) in his order at pages 3 to 6. For the sake of clarity, the same are reproduced below: "The assessee, a dealer in purchase and sale of land, filed on 21-08-2009 his return of income admitting a total income of Rs.3,51,004/-. The assessment u/s 143(3) was completed on 30-08-2011 by determining the total income at Rs.3,91,004. An order u/s 263 was passed on 28-02-2014 setting aside the assessment to be redone on three issues. On an appeal against this order, the Hon'ble ITAT, in their Order dt. 18-02-2015, modified the order u/s 263 by restricting the direction to the disallowance u1s 40(A3) in respect of the payment of RS.9 lakhs towards purchase of land. 2. During the course of consequent assessment proceedings, the assessee explained that the provisions of section 40A(3) are not applicable to this payment. The assessee's contentions and the Assessing Officer's conclusions are reproduced below, from the assessment order for the sake easy reference: "8. In essence, the assessee's contentions are that the registration of land took place in the afternoon of 07-03- 2009 that the day happens to be Saturday followed by public holiday Sunday; that the vendor N. Kesava Reddy stated that he was in need of money and so insisted on payment of cash, that the deal was earlier postponed twice and if is only as a final opportunity that the registration was fixed for 07-03-2009 further postponement whereof might adversely affect assessee's business interests and therefore prudency and commercial expediency demanded payment of sale consideration of Rs. 9,00,000 in cash. Therefore, the AR argued that rule 6DD applies to assessee’s case and therefore application of section - 40A(3) is not warranted. 10. I have considered the facts and explanation submitted by the assessee. The assessee lays stress on payment of sale consideration in cash in exceptional circumstances on 07-03-2009. And the entire explanation revolves around the same. But this is not correct. The cash payment was actually made on 02-03-
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2009 and not on 07-03-2009. This sets aside the other claims of assessee put forth in justification of need of payment of sale consideration in cash on 07-03-2009. The fact is that the vendor N. Kesava Reddy executed a sale cum GP A on 2/3/2009 in favour of assessee for sale of land of Ac.0.62 cents in Sy.No.428 in Nunepalle Village, Nandyal, for a consideration of Rs.9,00,000/-. From the recitals of the document it is evident that the sale consideration in cash was paid on the day of agreement itself, i.e., 02-03-2009 as acknowledged by vendor Kesava Reddy. It is only that registration took place in SRO's office, Nandyal, with Document No.120922/202092 on 7/3/2009 at 17.15 hours. Section 40A(3) is invoked in assessee's case for payment of sale consideration in cash of Rs. 9,00,000 on 02-03- 2009. The second day of March 2009 happened to be Monday and was not a public holiday. The argument that vendor Sri Kesava Reddy insisted on payment of impugned sum of Rs.9,00,000, in the facts of the case, becomes ridiculous as, by the time of registration on 07- 03-2009, he had already received the sale consideration. Therefore, set aside the assessee's explanation as irrelevant and, in the absence of any other explanation than what has been discussed above, I hold that the impugned payment of cash of Rs. 9,00,000/- towards sale consideration of land was in violation of provisions of section 40A(3) of the I.T. Act. ... " 3. It is submitted that the learned Assessing Officer did not appreciate the facts and circumstances under which the document was prepared and registered. The assumption of the learned Assessing Officer was that the vendor received the consideration on 2-03-2009 itself since the document was dated/executed on 2-03- 2009, though the registration of the document took place on 7-3-2009. 4.1 A copy of the document is enclosed for perusal, along with a copy of a free translation into English thereof. As can be seen from the Telugu document, it is clear that: i. Non judicial stamp papers were purchased on 25-02- 2009 in the name of Bavanasi Naga Mahesh. ii. Blank unfilled document, in Telugu, computer print, was copied on the stamp papers.
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iii. All the blanks - date, name and address of the vendee, name and address of the vendor, amount of consideration -- were filled in by hand in Telugu. iv. Schedule to the document is totally handwritten in Telugu. v. There is no date mentioned after signature of the vendor at any of the pages of the documents. vi. There is no date mentioned after the signature of the two witnesses at the end of the schedule. 4.2 The sequence of events, as submitted before the Assessing Officer, is reproduced below for easy understanding: i. The Vendor accepted to sell the property to the assessee. ii. The assessee purchased on 25-2-2009 stamp papers, but the vendor did not turnup. iii. The Document writer took a print of the model document on the stamp papers, keeping the relevant portions unfilled. iv. The vendor was expected to come on 2-03-2009 and the document writer filled up, in writing, the date and the name and address of the assessee-vendee in the document; v. The Vendor did not come on that day. vi. Vendor sent word on noon of7-3-2009 that he would come sometime in the evening of that day and demanded that the consideration should be paid in cash only for his urgent needs. vii. Then the assessee withdrew the amount from his bank account before closure of the banking hours and kept the amount ready; viii. Vendor came to the Registrar Office on 9-3-2009 in evening hours; ix. Vendor handed over his earlier document of the property and gave his
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address; x. The document writer filled all the blanks (except the date and the address of the assessee-vendee, which were filled up earlier) in the pre-printed document and the total schedule was written in hand, taking the details from the earlier document handed over by the vendor xi. The document was presented for registration between 4 PM. and 5 PM. after paying the necessary fee. 4.3.1 Thus, the learned Assessing Officer's statement that the document was executed on 2-3-2009 is not correct, though it was dated 2-3-2009. As submitted earlier, the Stamp Papers were purchased on 25-2-2009 and the blank relating to the date and address of the assessee-vendee were filled in on 2-3-2009 expecting that the vendor would come on 2-3-2009 itself. However, he did not turn up. All the other blanks in the document were filled only 7-3-2009, gathering the details from the vendor and his document. It is, therefore, submitted that the learned Assessing Officer's conclusion that was executed on 2-3-2009 and the consideration was paid on 2-3-2009 is not correct. 4.3.2 It is also improbable to assume that the entire consideration would be paid without getting the document registered simultaneously . 4.4 It is prayed that the Hon'ble Commissioner oflncometax (Appeals), in the facts and circumstances explained above, be pleased to delete the addition of Rs.9,00,000 made U/S 40A(3)."
After considering the submissions of the assessee, the CIT(A) directed the AO to delete the addition of Rs. 9,00,000/- made u/s 40A(3) of the Act by observing as under: “5. The assessment order, statement of facts, grounds of appeal and written submissions have been perused. The explanation of the assessee citing the sequence of events is convincing. Substantial money would not have been given without getting registration. The Hon'ble ITAT, Amritsar in the case of Rakesh Kumar, Muktsar vs ACIT, Circle-II, Batbinda in ITA No.102(Asr)12014, dated 09.03.2016 for A.Y.2010-11 held that where the
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genuineness of payments is not disbelieved the disallowance u/s 40A(3) cannot be made and also Hon'ble ITAT, Jaipur in the case of M/s. A Daga Royal Arts in ITA No.1065/JP/2016, dated 15.04.2018 held that the identity of the sellers was known, genuineness of the purchase transaction was substantiated by registered sale deeds and the same was not disputed by the tax Authority. The availability of cash with Assessee is also not found undisclosed by the department. The payment was made by the assessee outside the banking hours on the day of the registration and next day happened to be a holiday. The assessee had no other option but to make the payment in cash in order to secure land. Considering the facts and circumstances of the case and keeping in view of the Judicial decisions cited supra, I am convinced that the payment is genuine and substantiated by registered sale deed. Therefore, I direct the AO to delete the addition of Rs.9,00,000/- made u/s 40A(3) of the I.T. Act, 1961.”
Aggrieved by the order of CIT(A), the revenue is in appeal before us raising the following grounds of appeal: “1. The order of learned CIT(A) is erroneous both on facts and in law. 2. The learned CIT(A) erred in not taking cognizance of the Hon'ble ITAT directions and decision that "Hence, the Commissioner was justified on invoking the jurisdiction under section 263 of the Act. The AO must afford reasonable opportunity of being heard to the assessee in that matter". The assessee has reiterated the same events and facts which were already presented before ITAT, Ld. CIT and AO and were duly observed and orders were passed by representative authorities. As the assessee has not brought on record any new facts and/or evidences to prove his claim in the proceedings u/s. 143(3) r.w.s 254 even after affording reasonable opportunity of being heard and the learned CIT(A) erred in deleting the addition. 3. The learned CIT(A) erred in not taking cognizance of the Hon'ble ITAT directions to the AO to verify whether the cash payments are coming within exceptions of Rule 6DD of the Rules before applying section 40A(3) to such payments after giving reasonable opportunity of being heard to the assessee. The assessee either during the proceedings uls, 143( 3) r.w.s 254 or before learned
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CIT(A) could not prove that the payments fall within Rule 6DD of the I.T Rules as per the directions of the Hon'ble ITAT. 4. The learned CIT(A) erred in not considering the fact that learned CIT(A) while passing the order U/s. 263 has clearly verified and has given her observation with respect to all exceptions laid down under Rule 6DD of the IT Rules and confirmed the applicability of Sec 40A(3) to this issue. The assessee has not brought on any new facts and/or evidences during the course of proceedings U/s. 143(3) r.w.s 254 which were not presented before learned CIT(A) during proceedings u/s. 263 and before Hon'ble ITAT. 5. Whether the learned CIT(A) is correct in allowing the appeal of the assessee when the assessee could not prove that the cash payment was made on 07-03-2009 since the registered document itself reveals and stated that the cash was paid and received by the date 0: execution of the document i.e., 02-03-2009 and the learned C!T(A) erred in deciding against the facts mentioned in registered document which is legal and binding.”
Ld. DR submitted that the AO has clearly observed that the transaction took place on 02/03/2009, which is not a holiday and there is no compulsion on assessee to make such cash payment on week day. It is not falling under exception as per Rule 6DD. Assessee is expected to follow the law and not to violate the same.
Ld. AR submitted that the assessee has prepared the document on 02/03/2009 for completing the transaction but due to some reason known to seller, he has not come forward for registration. The same document was used to complete the transaction on 07/03/2009. On the day of transaction, purchaser demanded cash, which happened to be Saturday. Assessee has to arrange the same and complete the registration. He brought to our notice the agreement which is pre-printed document and the necessary columns were filed in
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hand writing. It clearly shows that the actual transaction completed only on 07/03/2009 and not on 02/03/2009. Further, he relied on the decision in the case of Saraswati Housing & Developers Vs. ACIT (32 Taxman.com 307 (Delhi).
Considered the rival submissions and perused the material on record. We noticed that assessee has completed the registration on 07/03/2009 and the document indicates that it was prepared on 02/03/2009. The registration formalities were completed only on 07/03/2009 and suitably modifying the document in hand writing. The argument of AO is that the document and transaction was completed on 02/03/2009 but only registration was made on 07/03/2009. The CIT(A) has clarified the above observation of AO as improper and gave a finding that the substantial money would not be given without registration. No prudent purchaser will pay such huge funds without proper registration. No purchaser will make payment without registration on 02/03/2009 and make registration on 07/03/2009. The facts and sequence of events are in favour of assessee that the actual transaction took place only on 07/03/2009 and not on 02/03/2009. Therefore, we are inclined to accept the findings of ld. CIT(A) and the order of CIT(A) is upheld dismissing the grounds raised by the revenue.
In the result, appeal of the revenue is dismissed. Pronounced in the open court on 12th June, 2019.
Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 12th , 2019. kv
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