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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: HON’BLE SHRI MAHAVIR SINGH & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2011-12 arises out of the order of learned Commissioner of Income Tax (Appeals)-18, Chennai [CIT(A)] dated 27-09-2017 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s. 153A of the Act on 27-01-2014. 2. Though the assessee has raised multiple grounds of appeal, however, Ld. AR submitted that the only issue urged in the appeal is 2 - disallowance u/s. 40A(3) of the Act as contained in ground nos. 2 to 4 which read as under: - 2. The CIT (Appeals) erred in sustaining the disallowance of Rs.17,93,600/- being the cash payments in excess of Rs.20,000/- on the application of section 40A(3) of the Act in the computation of taxable total income without assigning proper reasons and justification without assigning proper reasons and justification.
3. The CIT (Appeals) failed to appreciate that in the absence of direct evidence in the seized records, the sustenance of the said addition was wrong, erroneous, unjustified, incorrect and not sustainable in law.
4. The CIT (Appeals) failed to appreciate that the proviso below section 40A(3A) of the Act in any event was not considered and ought to have appreciated that the commercial decision in making the payments in cash would be the outside purview of the said disallowance provision in the statute.
The Ld. AR submitted that other additions were admitted by the assessee during appellate proceedings.
The Ld. AR submitted that the expenditure was incurred in cash out of commercial expediency. The same has been controverted by Ld. Sr. DR. Having heard rival submissions, our adjudication would be as under.
The assessee was subjected to search action on 02.03.2012 wherein incriminating documents were found on the basis of which additions were made. One such impounded material was documents containing cash payments in excess of Rs.20,000/- otherwise than by way of account payee cheque or demand draft during the year as follow: - 1 15-05-2010 Layout expenses 1,35,600 2 20-06-2010 Agricultural expenses 91,200 3 30-06-2010 New Shed installation 1,85,000 4 31-08-2010 Surveyor/maniyakkarar expenses 37,600 5 31-08-2010 New shed installation 1,16,400 6 25-09-2010 New fencing layout 1,37,000 7 15-10-2010 New road laying 1,22,000 8 31-01-2011 Brokerage expenses to Maruthachalam 1,30,000 9 31-01-2011 Road laying 1,87,000 10 20-02-2011 New layout expenses 1,05,000 11 23-03-2011 New layout application follow up expenses 2,20,400 3 - 12 23-03-2011 Temporary shed removal 2,26,400 13 31-03-2011 Commission paid to A. John 1,00,000 Total 17,93,600 The assessee submitted that the expenditure was incurred in connection with a land which was to be utilized for shifting the factory. However, it was decided to dispose-off the land by sub-division into plots. Accordingly, the expenditure was incurred in cash. At the time of filing of Income Tax Returns, the assessee was given to understand that the transaction would be taxed as business income. Therefore, it was an inadvertent mistake. However rejecting the same, Ld. AO, invoking the provision of Sec. 40A(3), disallowed the same. The stand of Ld. AO, upon confirmation by Ld. CIT(A), is in further challenge before us.
It is undisputed fact that the aforesaid expenditure has been incurred in cash for an amount exceeding Rs.20,000/- which has been claimed as business expenditure. The provisions of Sec. 40A(3) are squarely attracted to the facts of the case. The Ld. AR has taken a plea of commercial expediency which we are not inclined to accept for the simple reason that the aforesaid expenditure was not part of the books of accounts and contained in incriminating material found during the course of search action on the assessee. The assessee claimed the same and taken the plea of ignorance which is not, at all, a plausible explanation. Finding no strength in the case of the assessee, we dismiss the grounds urged before us.
4 - 5. The appeal stands dismissed.
Order pronounced on 03rd August, 2022.