VIJAY SINGH,FARIDABAD vs. ITO, WARD- 2(4), FARIDABAD

1. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld. AO by sustaining the addition of Rs. 48,05,000 u/s 40A(3) without appreciating that genuineness of transaction has remained thoroughly undoubted and there is no flow of unaccounted money nor the transaction is evasive in character nor source of payment and identity of payee is in dispute and nor there is any fictitious or false transaction.

The facts in brief are that assessee is engaged in the business of trading of electrical items in the name of proprietary concern, M/s. V.S. Electronics and also sale purchase of property in his individual name. The Assessing Officer on perusal of the details of purchases debited to the assessee’s P & L account noticed that assessee has made cash payments, exceeding Rs.20,000/- on account of purchases. The details of which are given at page 2 of the assessment order for sums aggregating to Rs.48,05,000/-. He further observed that exceptions provided in Rule 6DD are not applicable. After detailed discussion, he has made the addition of Rs.48,05,000/-.

Ld. CIT (A) has confirmed the action of the Assessing Officer holding that the assessee was unable to bring out any business exigencies to justify the payment in cash. Further, the payment stated to be made for land purchase so that the title deeds were registered in Tigaon, a small town which is well served by banking facility. Further, the payments are made in cash much before the actual registration and handing over of possession, and to that extent bear the character of being advance payments.

Before us, the ld. counsel for the assessee submitted that assessee has made the payment for the purchase of land from the farmers and these farmers has filed affidavits to confirm that they had insisted for cash payments. Copy of these affidavits has been filed in the paper book from pages 50 to 62. Under these circumstances, the cash payment cannot be disallowed u/s. 40A(3) as it falls within ambit of Rule 6DD.

On the other hand, ld. DR submitted that if the town in which transaction has taken place has banking facility, then it cannot be held to be an exceptional case and if the advances have been made for purchase of land in cash, then it does fall within the ambit of Section 40A(3). He thus strongly relied upon the order of the Ld. CIT (A).

After considering the rival submissions and on perusal of the relevant findings given in the impugned order as well as material referred to before us, we find that assessee has filed the affidavit of the sellers/farmers in respect of payment made in cash and the reasons for demanding the cash payments for sale consideration. However, there is no finding either by the Assessing Officer or Ld. CIT (A) on these affidavits. Since these affidavits goes to the very root of the issue involved, therefore, the matter is remanded back to the file of the Assessing Officer to examine affidavits and to examine, whether cash payment made to the farmers falls within the exceptional clause under Rule 6DD. The ld. Assessing Officer is also directed to give reasonable opportunity to the assessee to substantiate its case.

Regarding addition of Rs.59,719/- u/s. 80C, ld. counsel submitted that same has been disallowed by the Assessing Officer on the ground that assessee has failed to substantiate the claim of deduction. He submitted that the assessee has furnished the certificate of tuition fee which is appearing at page 66, claiming exemption u/s.80C, therefore, the issue is also restored back to the file of the Assessing Officer to examine the certificate and allow deduction as per law. 8. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 14th January, 2020.