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Facts
The assessee, engaged in real estate development, made cash payments exceeding Rs. 20,000/- for land purchases. The Assessing Officer (AO) made an addition under Section 40A(3) of the Income Tax Act, 1961, for these payments, which was confirmed by the CIT(A). The assessee appealed this disallowance.
Held
The Tribunal held that the cash payments for land purchases were not justified by business expediency, unlike cases involving daily transactions or perishable goods. The Tribunal found the AO's action and the CIT(A)'s confirmation to be justified.
Key Issues
Whether cash payments exceeding Rs. 20,000/- for land acquisition in real estate development are hit by Section 40A(3) of the Income Tax Act, 1961.
Sections Cited
40A(3), 69
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िनधा"रती की ओर से/Assessee by : Shri Sudhir Sehgal, Advocate राज" की ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 15/05/2025 उदघोषणा की तारीख/Date of Pronouncement : 20/05/2025 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the CIT(A), Patiala dt. 05/03/2019 pertaining to Assessment Year 2013-14. 2. In the present appeal Assessee has raised the following grounds:
1. The Ld. CIT(A) erred on facts & law in confirming the disallowance of Rs. 1,30,07,935/ by the AO for making cash payment exceeding Rs.20,000/- for purchase of liquor, which according to the CIT(A) is an violation of the provisions of section 40A(3) of the Income Tax Act 1961, without rebutting he explanation furnished during the course of assessment/appellate proceedings.
2. The Ld. CIT(A) erred on facts & law in confirming the addition of Rs.2,00,000/- made by the AO for alleged unexplained investment u/s 69 on account of payment of license fees/security of Rs. 2,00,000/-.
3. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
3. At the time of hearing, the Ld. AR submitted that Ground No. 1 raised in the present appeal is squarely covered against the assessee by the decision of the Coordinate Bench in decided on 03.02.2025, in the case of M/s. Silver Oaks Township Ltd. Accordingly, the Ld. AR submitted that the assessee is not 2 pressing the said ground and prayed that the ground may be decided by the Tribunal in terms of the said binding precedent.
Per contra, the Ld. DR relied upon the findings recorded by the lower authorities.
We have heard the rival submissions and perused the material available on the record. It is observed that the Coordinate Bench of the Tribunal has already adjudicated an identical issue in the case of M/s. Silver Township Ltd. (supra) and dismissed the assessee’s ground. The relevant finding reads as under:
We have considered the findings of the Assessing Officer in the assessment order and the decision of the ld. CIT(A) in his appellate order and we have also considered the case laws brought on record by the ld. Counsel of the Assessee in the case of ‘Munish Arora v ACIT’ (supra), we find that the Assessee is engaged in the business of event management and the cash payments have been made over and above Rs.20,000/- for items like taxi / vehicle charges fuel charges meals for workers, petrol for generator, engine oil for genset, payment of photography and cameras, photo development, truck repair and sound repairs etc. All these things were considered necessary to run the business of event management and for these expenses money is to be paid instantly. Accordingly, payment exceeding the prescribed limit u/s 40A(3) was allowed. Similarly, the ld. Counsel for the Assessee has brought on record the case laws in the case of ‘ITO vs. Shri Kailash Sharma C/o M/s Verka Milk Agency’ in (supra). In this case also the Chandigarh Bench had allowed the payment exceeding eligible limit and additions were not confirmed by the ITAT u/s 40A(3) on the fact that the Assessee was a cash carry dealer for supplying Verka Milk and fresh milk products in Palampur and adjoining areas. The assessee has also explained that the milk was to be lifted daily and the payments were to be collected in the evening which were to be made to the Verka Agency in the morning itself and further the Verka Milk Agency did not provide milk on credit basis and further the payment was made to the Union of Producers of milk. Considering the above practical aspects, factors and circumstances and business expediency, it was held by the Tribunal that the Id. CIT(A) was justified in deleting the disallowance made by the A.O. and the appeal of the Revenue dismissed.
But here in this case, the ld. DR has pointed out that the Assessee as per findings given by the A.O. and accepted by the ld. CIT(A), is a company is engaged in the real estate development. The company has developed different projects, the company purchased lands from different people where cash payment were made amounting to Rs. 23,92,500/- (to different parties) in cash exceeding Rs. 20,000/-. We have considered the facts brought on record by the Assessing Officer and we have also considered the findings given by the ld. CIT(A) and we find that the case laws brought on record by the Counsel of the Assessee are having entirely different facts from the facts of the case of ‘Munish Arora vs. CIT’ (supra) as well as in the case of ‘Kailash Sharma C/o M/s Verka Milk Agency’ (supra), wherein the Assessee was carrying on business where cash payments was must. For example, payment for food for labour or payment for vehicle / taxi charges etc. are such expenses which are to be made immediately and in such circumstances, clearly cash is paid. 8. Similarly, in the case of ‘Kailash Sharma C/o M/s Verka Milk Agency’ (supra) the Assessee is engaged in the business of procurement of milk on day to day basis where milk was procured in the morning and payments were necessarily to be made by the evening. Normally, credit is not available in these kinds of business, therefore, keeping in view the necessity / requirements / exigencies of the business, cash payments exceeding Rs. 20,000/- could be made. But in the instant case, the Assessee is engaged in the business of land development and it had purchased land from different parties. Payment for purchase of lands have been made in cash, which in our view, is not acceptable because the Assessee had enough time to make payment either by cheque or demand draft to 3 different land sellers, therefore, coordinate bench decisions in the case of ‘Munish Arora vs. CIT’ (supra) and ‘Kailash Sharma C/o M/s Verka Mila Agency’ (supra) are quite different from the facts and circumstances of the instant case. Accordingly, we find the action of the Assessing Officer for making addition of Rs. 23,92,000/- u/s 40A(3) and its confirmation by the ld. CIT(A) are very much justified and need no interference. Accordingly, Assessee’s appeal on Ground Nos. 1 to 3 are dismissed. 6. In our considered opinion, the Coordinate Bench has already adjudicated the issue, which is identical in nature to ground No. 1 involved in the present appeal. Hence, no fresh adjudication is warranted. Respectfully following the said decision, we dismiss the ground raised
by the assessee. Accordingly, Ground No. 1 is dismissed.
7. With respect to Ground No. 2, the Ld. AR submitted that the assessee does not wish to press the same. However, the Ld. DR objected to the prayer for dismissal as ‘not pressed.’
8. Having considered the rival contentions, we find no hesitation in dismissing Ground No. 2 as ‘not pressed’.
9. In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open Court on 20/05/2025 मनोज कुमार अ"वाल लिलत कुमार (MANOJ KUMAR AGGARWAL) (LALIET KUMAR) लेखा सद"/ ACCOUNTANT MEMBER "ाियक सद" /JUDICIAL MEMBER