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Facts
The assessee purchased land for Rs. 469.98 Lacs and made a cash payment of Rs. 54.89 Lacs to agriculturists. The AO disallowed this cash payment under Section 40A(3). The CIT(A) confirmed the disallowance, citing lack of evidence and satisfactory explanation.
Held
The Tribunal admitted affidavits from the sellers as crucial evidence. It found that while the CIT(A) offered opportunities, the peculiar circumstances surrounding the cash payment to agriculturists warranted admitting the evidence. The impugned order was set aside, restoring the issue to the CIT(A) for fresh consideration.
Key Issues
Whether cash payments made to agriculturists for land purchase are disallowable under Section 40A(3) due to lack of evidence, and whether affidavits constitute sufficient evidence.
Sections Cited
143(3), 40A(3)
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Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH
Before: HON’BLE SHRI RAJPAL YADAV & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा�रणवष� / Assessment Year: 2011-12) Shri Sachin Goyal ACIT- Circle-7 बनाम/ Vs. 29/1, The Mall Ludhiana. Ludhiana 141 001 �थायीलेखासं./जीआइआरसं./PAN/GIR No. ABWPG-3117-D (अपीलाथ�/Appellant) (��थ� / Respondent) : अपीलाथ�कीओरसे/ Appellant by : S/Shri Pankaj Bhalla (CA) and VK Bhalla (CA)- Ld ARs. ��थ�कीओरसे/Respondent by : Dr. Ranjit Kaur (Addl. CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 18-03-2025 घोषणाकीतारीख /Date of Pronouncement : 24-03-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeals by assessee for Assessment Years (AY) 2010- 11 & 2011-12 arises out of separate orders of learned first appellate authority. First, we take up appeal for AY 2010-11 which arises out of the order of learned Commissioner of Income Tax (Appeals)-3, Ludhiana [CIT(A)] dated 20-08-2019 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 20-03- 2013. The sole grievance of the assessee is confirmation of addition u/s 40A(3) for Rs.54.89 Lacs. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. The registry has noted delay of one day in both the appeals which stand condoned.
It emerges that the assessee purchased certain land for Rs.469.98 Lacs out of which the payment of Rs.54.89 Lacs was made in cash. The land was held as stock-in-trade and accordingly, Ld. AO formed an opinion that the cash payment so made by the assessee would attract disallowance u/s 40A(3). The details of payment paid to various person has been tabulated at Para 3.1 of the order. The assessee had made payment to three persons. The assessee stated that it purchased agricultural land and the payment was made to agriculturists. The payment was under unavoidable circumstances since the payees did not have bank account and secondly, they had borrowed funds from the co-agriculturists against the security of the agricultural land which they had been holding and which had ultimately been sold to the assessee. To hand over the physical possession of agricultural land, they had to make payment to co-agriculturists and the assessee was compelled to make the payments to obtain clear title of the lands. In support, the affidavits of the agriculturists were also furnished. The assessee also stated that the payments were made in the presence of registration authority while executing sale deeds. Under these circumstances, the assessee opposed invocation of impugned provisions of Sec. 40A(3). However, Ld. AO referring to the first appellate order in assessee’s own case for AYs 2008-09 and 2009- 10 and Tribunal order in assessee’s company M/s Anshul Goyal Land & Housing Ltd., dated 17-05-2012 made the disallowance. The Ld. CIT(A) not only rejected the additional evidences u/s 46A but also confirmed the assessment on the ground that the explanation of the assessee was not satisfactory.
At the outset, we note that the order of Tribunal in the case of M/s Anshul Goyal Land & Housing Ltd., dated 17- 05-2012 was recalled and another order was passed by Tribunal on 27- 09-2019 as under: - 5. We have heard the rival submissions and perused the material available on record. It is seen that in the facts of the present case, the assessee returned an income of Rs.70,59,170/-. The assessee was found to have contravened the provisions of Section 40A(3) of the Income Tax Act by the AO. The AO put the assessee to notice of the fact that out of the purchases of land made for Rs.1,04,57,250/- the assessee had made payments in cash amounting to Rs. 47,54,125/-. Inviting attention to provisions of Section 40A(3) of the Act, he required the assessee to offer its explanation. 5.1 The assessee as per para 2.3 and 2.4 of order is found to have canvassed amongst other reasons that the agriculturists had desired that the payment be made in cash at the time of Registry and that they were not ready to accept the payments by means of account payee cheque or demand draft because they were of the view that in such circumstances they would get the payment after 2-3 days. Relevant extract from the assessment order is reproduced hereunder for the sake of completeness: 2.4 In this respect, it is submitted that the Agriculturist had desired to make the payment in terms of cash at the time of Registry and they were not ready to accept the payment by means of payee's account cheque or Demand Draft because they were of the view that they will get the payment alter 2-3 days after the execution of Sale Deed………..” 5.2 The assessee is found to have argued that in the circumstances, he had no alternative but to accept the desire of the sellers. It is seen that the claim made before the AO was not supported by way of any evidence. It is seen that the opportunities before the CIT(A) were also wasted as despite seeking time, the assessee could not file any supporting evidence. Accordingly, the appeal of the assessee was dismissed ex-parte by the said authority holding as under: 5. I have gone through the contention of the-appellant's counsel and also perused the findings of the AO. Since, the appellant failed to produce any submission/documentary evidence in support of his claim that the addition made by the AO is without any base, I do not find infirmity with the order of the AO and confirmed his findings that there was no genuine hardship before the appellant for making the payment in cash instead of a/c payee cheque or demand drafts. Thus, the case of the appellant clearly falls within the ambit of the provisions of Section 40A(3) of the Act, the contention raised by the appellant is therefore dismissed.
6. In the result, the appeal of the appellant is dismissed.” 5.3 We find that in these peculiar facts, the Affidavits of the sellers presumably insisting on cash payments constitute necessary and relevant evidences for determining the issue. We agree with the Sr. DR’s submissions that the CIT(A) has afforded sufficient opportunities, however looking at the nature of evidences mustered, we agree that these could not have been readily available. The assessee after purchasing the land admittedly had no need to stay in touch with the sellers and even otherwise, had no authority to command the filing of Affidavits. Time to trace and persuade the sellers to truthfully dispose what transpired in these peculiar circumstances, cannot be held to be arbitrarily sufficient or insufficient. Accordingly, holding that the evidence is necessary and crucial for determining the issues, the evidence is admitted. In the light of the above mentioned peculiar facts and circumstances, accepting the prayer of the ld. AR, the impugned order is set aside restoring the issues back to the file of the CIT(A) directing the assessee to place full facts and evidences in support of its claim before the said authority which is stated to be readily available. It is made clear that the opportunity so provided in good faith shall not be abused. In the eventuality of abuse of the trust reposed, it is made clear that the CIT(A) shall be at liberty to pass an order on the basis of the material available on record. Said order was pronounced in the Open Court at the time of hearing itself.
In the result, the appeal of the assessee is allowed for statistical purposes.
Since one of the basis to make impugned disallowance has already been restored back by Tribunal to Ld. CIT(A) for fresh consideration, to enable the revenue to take consistent stand in the matter, we restore the impugned issue back to the file of Ld. CIT(A) on similar lines. The additional evidences as furnished by the assessee would be duly considered by Ld. CIT(A). The appeal stand allowed for statistical purposes. Assessment Year 2011-12 4. Facts in this year are substantially the same. The Ld. AO made similar disallowance u/s 40A(3) for Rs.14.40 Lacs which was confirmed in first appeal. Aggrieved, the assessee is in further appeal before us. Facts being pari-materia the same, taking the same view, this issue stand restored back to the file of Ld. CIT(A) on similar lines. The Ld. AR has not pressed grounds relating to disallowance of loss for Rs.2.55 Lacs due to smallness of the amount. The appeal stand partly allowed for statistical purposes. 5. stand allowed for statistical purposes. stand partly allowed for statistical purposes. Orders pronounced on 24-03-2025 Sd/- Sd/- (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT लेखा सद� /ACCOUNTANT MEMBER Dated: 24-03-2025. आदेश की �ितिलिप अ�ेिषत / Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF ASSISTANT REGISTRAR
ITAT CHANDIGARGH