SHRI BALASAHEB RUPCHAND MADHWAI,NASHIK vs. INCOME TAX OFFICER, WARD -1(4), NASHIK

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ITA 370/PUN/2020Status: DisposedITAT Pune13 December 2022AY 2008-20098 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the assessee's appeal, upholding the order of the CIT(A). Regarding Ground No. 1, the Tribunal noted that the assessee failed to appear before the Tribunal and did not provide any written submissions or adjournment letters. It found no evidence on record to rebut or controvert the additions confirmed by the CIT(A). The Tribunal agreed with the CIT(A)'s reasoning that the cash payments of Rs. 64,66,000 were disallowable under Section 40A(3) as the assessee could not demonstrate that the payments were covered under any exception mentioned in Rule 6DD. The CIT(A) had also held that the assessee's argument of genuine payments was not acceptable and that the disallowance made by the AO invoking Section 40A(3) was in order. For Ground No. 2, the Tribunal also found merit in the CIT(A)'s order, which held that the assessee failed to explain the source of investment of Rs. 89,66,000, and that the burden of proof lay on the assessee. The Tribunal cited the Supreme Court's observation in CIT Vs. K.Y.Pilliah that if the Tribunal fully agrees with the lower appellate authority and has no other grounds, it does not act illegally by not repeating the grounds. Therefore, both grounds of appeal were dismissed.

What were the facts?

The assessee, Shri Balasaheb Rupchand Madhwai, is an individual engaged in land dealings. For Assessment Year 2008-09, he filed a return declaring an income of Rs. 11,95,574. A survey action under section 133A was conducted, leading the Assessing Officer (AO) to believe that the assessee made cash payments exceeding Rs. 20,000 in violation of Section 40A(3) and that the source of Rs. 89,60,000 was unexplained. The AO made an addition of Rs. 89,60,000, assessing the total income at Rs. 1,01,61,570. The assessee appealed to the Commissioner of Income Tax (Appeals) - 1, Nashik, who granted partial relief. The assessee further appealed to the Income Tax Appellate Tribunal (ITAT), Pune.

What were the issues?

1. Whether the disallowance of Rs. 64,66,000 paid in cash for land purchases is hit by the provisions of Section 40A(3) of the Income Tax Act, 1961, considering business expediencies and judicial precedents. 2. Whether the addition of Rs. 64,66,000 (or Rs. 89,66,000 as stated in the CIT(A)'s order) as unexplained investment under Section 69 of the Income Tax Act, 1961, is justified, given the assessee's failure to explain the source of funds. Assessee's Contentions: For Issue 1: The assessee argued that the CIT(A) erred in disallowing the cash payments under Section 40A(3) without considering business expediencies, endorsements by the Sub-Registrar, and judicial pronouncements such as Anupam Tele Services Vs. ITO (Guj. HC), Shri. Gangadhar Karbhari Jadhav Vs. DCIT (ITAT Pune), and Dyaneshwar Dhamne Vs ITO (ITAT Pune). The assessee contended that these payments were genuine and made at the instance of the sellers. For Issue 2: The assessee argued that the CIT(A) erred in holding the amount of Rs. 64,66,000 as hit by Section 69 without specifying how the provision applies and without dwelling into the issue in detail. Revenue's Contentions: The revenue did not file any written submissions. The Departmental Representative (DR) argued the case before the Tribunal. The judgment notes that the assessee continuously failed to attend hearings and did not file written submissions or adjournment letters, indicating no evidence to rebut the additions confirmed by the CIT(A).

Which sections of the Income-tax Act were involved?

Section 40A(3),Section 69,Section 144(A),Section 147,Section 133A,Section 114(g)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE

Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE

For Respondent: Shri M.G.Jasnani— DR
Hearing: 19/12/2022Pronounced: 23/12/2022

ORDER

PER DR. DIPAK P. RIPOTE, AM:

1.

This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Appeals)-1, Nashik dated 03.07.2017 emanating from assessment order of Assessing officer dated 10.03.2016 under section 144(A) r.w.s 147 of the I.T.Act, 1961 for the A.Y.2008-09. The Assessee has raised the following grounds of appeal: 40A(3) Disallowance against cash payments The Ld. CIT (A) in her order dated 03/07/2017 has held that and amount of Rs. 64,66,000/- paid by the appellant in cash to the persons from whom land was purchased to be hit by the provisions of section 40A (3) of the IT Act 1961. Here the Ld. CIT (A) has not Balasaheb Rupchand Madhwai [A] considered the fact that while deciding issues related to the provisions of section 40A(3) of the IT Act 1961 the fact that the payments have been endorsed by the H’ble Sub- Registrar, business expediencies, etc. as has been decided in Judicial forums, should have been considered.

In this regard a kind reference is invited to Honorable Guj'rat High Court’s Judgment covering the similar issues in case of Anupam Tele Services Vs. ITO in Tax Appeal No. 556 of 2013 reported in 268 CTR 121 (Guj.). It has been held that, the paramount consideration of section 40A(3) is to curb and reduce the possibilities of black money transactions and as held by the H’ble Supreme Court in the case of Attar Singh Grumukh Singh (1991) 191 ITR667 (SC), section 40A(3) of the Act does not eliminate considerations of business expediencies.

The appellants further invite a kind attention to the judgment delivered by ITAT Pune in the cases of Shri. Gangadhar Karbhari Jadhav Vs. DCIT in its order in dated 21.04.2017 and Dyaneshwar Dhamne Vs ITO in ITA No. 202/PN/2016 dated 08.07.2016 has held in similar facts and circumstances that such payments are not hit by the provisions of section 40A (3) of the IT Act 1961.

Therefore appellants state that, on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in holding that the amount of Rs. 64,66,000/- is hit by the provisions of section 40A (3) of the IT Act 1961, without considering the issue in its entirety.

69 unexplained investment:- The Ld. CIT (A) in her order dated 03/07/2017 has held that and amount of Rs.64,66,000/- paid by the appellant in cash to the Balasaheb Rupchand Madhwai [A] persons from whom land was purchased to be hit by the provisions of section 40A (3) of the IT Act 1961 as also the provisions of section 69 of the IT Act 1961. Here the Ld. CIT (A) has not specified how the provisions of section 69 of the IT Act 1961 are also attracted to the impugned addition without dwelling into this issue in detail and without stipulating the details.

On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in holding that the amount of Rs.64,66,000/- is hit by the provisions of section 40A (3) as also section 69 of the IT Act 1961, without considering the issue in its entirety and without specifying how the provisions of the section 69 of the IT Act 1961 would apply.

The appellant craves for addition, deletion, alteration, and modification etc. of the grounds of appeal.”

2. Briefly facts of the case are that the appellant is an individual engaged in the business of plots and land dealings. The return of income for A.Y. 2008-09 was filed on 02.05.2012 declaring total income of Rs.11,95,574/-. The appellant is director in M/s.Satyaroop Buildcon Pvt. Ltd., and partner in M/s.Tirtharoop Buildcon. A survey action u/s.133A was conducted in the case of appellant on 22.01.2015. On the basis of the impounded documents, the Assessing Officer held that the assessee has made cash payments exceeding Rs.20,000/- which is in violation of section 40(A)(3) of the I.T.Act, 1961. The total amount paid in cash was Rs.89,66,000/-. The Assessing Officer also held that the assessee has not explained the source of Rs.89,60,000/-. The Assessing Officer made an Balasaheb Rupchand Madhwai [A] addition of Rs.89,60,000/- and assessed the income of the appellant at Rs.1,01,61,570/-.

3. Aggrieved by the addition made by the AO, the assessee filed appeal before the ld.CIT(A). The ld.CIT(A) gave part relief to the appeal of the assessee.

Ground No.1 : 4. Regarding the Ground No.1, the ld.CIT(A) in para 5.4 to 5.10 held as under: “5.4 I have carefully considered the facts of the case, the assessment order and the submission of the appellant. I have collated the information from the assessment order as well as from the appellant’s submission. On conjoint reading of the same it is found that the Assessing Officer has not appreciated the facts properly. The impounded documents filed by the assessee were in his possession. While making best judgement assessment, it is his duty to peruse the documents in his possession. There are payments made through bank which has been also disallowed u/s 40A(3). From the sale deed, it is apparent that the amount of ?19,86,000/- has been paid through cheque. Therefore, it is outside the purview of disallowance under section 40A(3).

5.5 Section 40A(3) reads as under “Where the assessee incurs 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 account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure.” Balasaheb Rupchand Madhwai [A] 5.6 The assessee has incurred expenditure in cash amounting to Rs.64,66,000/- as under:

Date Name of Seller Total Disallowance i Disallowance to consideration - u/s 40A(3) not | be sustained Entire payment justified to the u/s 40A(3), disallowed extent of bank u/s.40A(3) by AO payments and alternatively also added u/s 69 10/05/2007 Sitaram Tukaram 44,86,000 25,00,000 19,86,000 Malode - Land at Gat No.1206, Adgaon. 14/08/2007 Thakijbai Bhaurao 44,80,000 44,80,000 MaloneLand at Gat Nil No.1206, Adgaon 89,66,000 25,00,000 64,66,000 5.7 The argument of the Ld A.R. that the payment is genuine and done at the instance of sellers so no disallowance can be made cannot come to its rescue.

5.8 The main object of section 40A(3) of the Act is to regulate the financial transactions and to prevent the use of unaccounted money or reduce the chances of use of black money for business transactions. Plain reading of the above section reveals that the provisions of this section hit the assessee if two conditions are simultaneously satisfied. First there has to be an expenditure claimed by the assessee. Secondly, he should have made payment exceeding Rs.20,000/- by any means otherwise than by an account payee cheque/draft. The very purpose of the section is to discourage such transaction and parallel economy.

5.9 However, a perusal of the provisions of section 40A(3) shows that the said provision is a 'restriction’ on the allowance of a particular expenditure representing cash payment claimed in the profit and loss account. Further, the non obstante Clause in section 40A(3) has a far wider amplitude because it uses the words ‘notwithstanding anything contained in any other provisions of this Balasaheb Rupchand Madhwai [A] Act’. This provision is introduced in the act with a specific purpose of controlling the black money. Therefore, even assuming that the deduction is permissible or the deduction is deemed to have been allowed under any other provisions of this Act, still the control placed by the provisions of section 40A(3) in respect of the cash payment still holds precedence over such allowance. In these circumstances, the payment still holds precedence over such allowance. In these circumstances, the disallowance made by the Assessing Officer by invoking the provisions of section 40A(3) in respect of the cash payments of more than Rs.20,000/- are in order.

5.10 Further, the assessee has not been able to demonstrate that the payment made is covered under any exception mentioned under rule 6DD.

5.11 White re-appreciating the factual matrix in detail, I am of the view, that the cash payment is disallowable u/s 40A(3) of the Act, 1961 and the reasoning which was forthcoming from the assessee that the payments are genuine so no disallowance can be made is not acceptable. The addition of Rs.64,66,000/- is in order and is upheld.”

Ground No.2 : 5. Regarding the Ground No.2, the ld.CIT(A) in para 5.12 held as under: “5.12 The second issue is in consideration is the disallowance of unexplained Investment under section 69A of Rs.89,66,000/-. From the submission of the appellant it is visible that he is not able to explain the source of investment. It is a trite law that he has made the investment so the onus is on him to explain the same. The section 114(g) of Indian Evidence Act, 1872 lays a presumption that evidence which could be and is not produced, would, if Balasaheb Rupchand Madhwai [A] produced, be unfavourable to: the person who withholds it. In the appellate proceedings, burden of proof lies on the Assessee to prove that facts and findings of the AO are incorrect. If the assessee fails to disprove or rebut with cogent evidence such facts and findings, no interference is required. In this case, the assessee did no: choose to avail several opportunities in appellate proceedings which entails conclusion that he had no evidence or say or explanation to explain the source of investment of Rs.89,66,000/-.”

6.

None appeared on behalf of the assessee. We heard ld.DR for the Revenue. We find from the record that even before this Tribunal, the assessee has continuously not attended the hearing before the Bench i.e. 26.03.2021, 20.12.2021, 12.07.2022, 11.10.2022 and 19.12.2022. No written submissions filed, no adjournment letter filed. There is no evidence on record to rebut/controvert the said additions confirmed by the ld.CIT(A).

7.

Thus, in view of the aforesaid factual position and discussion of the ld.CIT(A), we find merit in the order of the ld.CIT(A), hence, we uphold the order of the ld.CIT(A). Accordingly, Ground No.1 & 2 of the assessee are dismissed.

8.

We find support from the orders of Hon’ble Supreme Court in the case of CIT Vs. K.Y.Pilliah 63ITR 411 (SC) in which Hon’ble Supreme Court observed as under: “The Income-tax Appellate Tribunal is the final fact-finding authority and normally to should record its conclusion on every disputed question raised before, it setting out its reasons in support Balasaheb Rupchand Madhwai [A] of its conclusion. But, in failing to record reasons, when the Appellate Tribunal fully agrees with the view expressed by the Appellate Assistant Commissioner and has no other ground to record in support of its conclusion, it does not act illegally or irregularly, merely because it does not repeat the grounds of the Appellate Assistant Commissioner on which the decision was given against the assessee or the department.”

9.

In the result, appeal of the Assessee is Dismissed. Order pronounced in the open Court on 23rd December, 2022.

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