PRAHLAD DAS GOYAL,BHOPAL vs. DCIT - 1(1) BHOPAL, BHOPAL

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आयकरअपीलीयअिधकरण, इंदौरɊायपीठ, इंदौर
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI B.M. BIYANI, ACCOUNTANT MEMBER
AND SHRI PARESH M. JOSHI, JUDICIAL MEMBER
Assessment Year:2016-17
Prahlad Das Goyal,
18, Shyamla Hills,
Bhopal
बनाम/
Vs.
DCIT/ACIT 1(1)
Bhopal
(Assessee/Appellant)
(Revenue/Respondent)
PAN: ABBPG3494L
Assessee by Shri S.S. Deshpande, AR
Revenue by Shri Ashish Porwal, Sr. DR
Date of Hearing
31.07.2025
Date of Pronouncement
04.08.2025
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first appeal dated 16.12.2024 passed by learned Commissioner of Income-Tax (Appeals)-Addl/JCIT(A)-10, Mumbai
[“CIT(A)”] which in turn arises out of assessment-order dated 30.10.2018
passed by learned DCIT/ACIT-1(1), Bhopal [“AO”] u/s 143(3) of Income-tax
Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2016-17, the assessee has filed this appeal on following effective ground:
“1. That on the facts and in the circumstances of the case of the assessee the learned Honorable Commissioner of Income Tax Appeals
Mumbai was not justified in confirming disallowance under section 40(i)(ia) of the Income Tax Act1961 to the extent of Rs 5,70,000/-.”

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2. The background facts leading to present appeal are such that the assessee-individual is engaged in the business of builders and contractors and trading of land. For AY 2016-17, the assessee filed return declaring a total income of Rs. 30,18,300/-. The case was selected for scrutiny and the AO issued notices u/s 143(2)/142(1) which were complied by assessee.
Ultimately, the AO passed assessment-order after making a disallowance of Rs. 11,70,000/- u/s 40(a)(ia) equivalent to 30% of the payments of Rs.
39,00,000/- made by assessee against purchase of land without making
TDS u/s 194-IA. Aggrieved, the assessee carried matter in first-appeal whereupon the CIT(A) deleted disallowance relatable to the payment of Rs.
20,00,000/- accepting assessee’s argument that the said payment was made in May, 2013 before 01.06.2013 i.e. the date from which the provision of section 194-IA came into the statute. However, the CIT(A) upheld rest of the disallowance relatable to the payments of Rs. 19,00,000/- [the amount of disallowance upheld by CIT(A) comes to Rs. 5,70,000/- being 30% of Rs.
19,00,000/-]. Still aggrieved, the assessee has come in next appeal before us.
3. Presently, the issue before us is the disallowance of Rs. 5,70,000/- being 30% of Rs. 19,00,000/- upheld by CIT(A). There were two payments of Rs. 10,00,000/- (+) Rs. 9,00,000/-, aggregating to Rs. 19,00,000/-, to which the impugned disallowance relates. Learned Representatives of both sides made their vehement submissions against and for the disallowance.
4. Payment of Rs. 10,00,000/-:

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4.1
This payment was made during current year against purchase of a land admeasuring 1.93 acres located at Badwai. We adjudicate below the rival contentions raised by both sides:
(i)
The first contention raised by Ld. AR is that the purchase of said land was registered through sale-deed dated 06.10.2022; the purchase consideration was Rs. 1,43,50,000/- but the valuation made by Stamps Authority was Rs. 1,70,28,000/-; the TDS @ 1% of Rs.
1,70,28,000/- amounting to Rs. 1,70,280/- deductible u/s 194-IA was deducted and paid on 18.11.2022 through challan No. 07878 –
Rs.
85,140/-
(+) challan
No.
02135
–
Rs.
85,140/-.
Copies of registered sale-deed and challans are placed at Pages 21-28, 36 & 38
of Paper-Book to which our attention was drawn. Thus, Ld. AR made an attempt to impress upon us that the proper amount of TDS was deducted in relation to the transaction of purchase, which is evident from these documents.
However, we are unable to accept this contention of Ld. AR. On a careful scrutiny of the documents referred by Ld. AR, the bench was able to find during the hearing itself that the TDS of Rs. 1,70,280/- was deducted by one “Shri Anchit Goyal” and not by present assessee who is “Prahlad Goyal”. We find that the AO has made disallowance in the hands of present assessee “Prahlad
Goyal” who has made payment of Rs. 10,00,000/- through cheques dated 891202 dated 15.05.0214 & 891203 dated 22.05.2014 (Page No.
26 of Paper-Book) and those cheques were cleared from S.B.I. A/c No.

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33109042434 of assessee on 30.01.2016/ 03.02.2016 (Pages 45-46 of Paper-Book) and the assessee has debited this payment of Rs.
10,00,000/- in Trading A/c of the financial year 2015-16 relevant to AY 2016-17 under consideration by way of “purchase”. Therefore, the deduction of TDS by “Shri Anchit Goyal” on 06.10.2022 (falling in the financial year 2022-23) is nothing to do with the payment made by assessee in current year. The facts remain that the assessee has debited the payment of Rs. 10,00,000/- to Trading A/c of financial year 2015-16 relevant to AY 2016-17 under consideration by way of “purchase” and also that the assessee has not deducted and paid TDS.
Therefore, the first contention raised by Ld. AR is meritless and rejected.
(ii)
The second contention raised by Ld. AR is such that the impugned land remained unsold in current year and the assessee credited cost of same to Trading A/c by way of “closing stock”. Therefore, the debit entry of “purchase” is nullified by credit entry of “closing stock” and in a way, the assessee has not claimed any deduction of expenditure.
Hence, the disallowance provision of section 40(a)(ia) cannot apply when there is no deduction of expenditure. However, during hearing, the bench attracted the attention of Ld. AR to the decision of Hon’ble
Ludhiana (1991) 191 ITR 667 (SC) wherein it has been held that the ‘purchase’
of stock-in-trade is an ‘expenditure’
which attracts

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disallowance and it was also held that the valuation of stock-in-trade is taken into account for determining profit u/s 28 on commercial principles. The relevant para of decision is extracted below:
“As to the second question it may be stated that the word 'expenditure'
has not been defined in the Act. It is a word of wide import. Section 40A(3) refers to the expenditure incurred by the assessee in respect of which payment is made. It means all outgoings are brought under the word 'expenditure' for the purpose of the Section. The expenditure for purchasing the stock-in-trade is one of such outgoings. The value of the stock-in-trade has to be taken into account while determining the gross profits under section 28 on principles of commercial accounting. The payments made for purchases would also be covered by the word
'expenditure' and such payments can be disallowed if they are made in cash in the sums exceeding the amount specified under section 40A(3).
We have earlier observed that Rule 6DD has to be read along with Section 40A(3). The Rule also contemplates payments made for stock-in-trade and raw materials. This Rule is in accordance with the terms of Section 40A(3). The Rule provides that an assessee can be exempted from the requirements of payment by crossed cheque or a crossed bank draft where the purchases are made of certain agricultural or horticultural commodities or from a village where there is no banking facility.
Section 40A(3) is, therefore.
attracted to payments made for acquiring stock-in-trade and other materials. This is also the view taken by several High Courts. See 'Sajowanlal Jaiswal v.
CIT, [1976] 103 ITR 706 Orissa;
U.P. Hardware Store v. CIT, [1976]
104 ITR 664 Allahabad;
Ratan Udyog v. ITO, [1977] 109 ITR 1
Allahabad;
P.R.
Textiles v.
CIT,
Kerala,
[19801
121
ITR
237
Kerala; CIT, v. Kishan Chand Maheswari Dass, [1980] 121 ITR 232 P
& H; Kanti Lal Purshottam and Co. v. CIT, [1985] 155 ITR 519 Raj; CIT, v. New Light Tin Mfg. Co., [1980] 121 ITR 229 P & H;
Fakri
Automobiles v. CIT, [1986] 160 ITR 504 Raj; Venkata Satayanarayana
Timber Depot v. ITR, [1987] 165 ITR 253 AP.; and Akash Films v. CIT,
[1991] ITR 32 Karnataka. The decisions of the High Courts of Andhra
Pradesh, Orissa, Allahabad, Kerala, Karnataka, Punjab & Haryana,
Rajasthan and Patna are to the effect that the payments made for purchasing stock-in-trade or raw materials should also be regarded as expenditure for the purpose of Section 40A(3).
The only discordant note struck on this aspect is by the Gauhati High Court in CIT v.
Hardware Exchange, [1991] 190 ITR 61. The Gauhati High Court has observed that Section 40A(3) applies only to payments made on account of 'expenditure incurred' and the payment made purchase of stock-in-trade cannot be termed as 'expenditure incurred since money does not go irretrievably in such cases. We are unable to agree with the view taken by the Gauhati High Court.”

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Therefore, in view of the decision of Hon’ble Supreme Court, the payment of Rs. 10,00,000/- made by assessee and debited as an item of ‘purchase’ in Trading A/c attracts disallowance u/s 40(a)(ia) even if the same is valued as stock-in-trade and ultimately credited in Trading A/c to determine the profit of business on principles of commercial accounting. The contention of Ld. AR is therefore against the decisions of Hon’ble Supreme Court and rejected.
(iii)
The third contention raised by Ld. AR is such that the impugned payment of Rs.
10,00,000/- was an ‘advance’
payment against purchase transaction and hence it does not attract section 194-IA. In this regard, the provision of section 194-IA was referred during hearing which prescribes thus:
“194-IA. (1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum for the stamp duty value of such property, whichever is higher,] as income-tax thereon.”
[Emphasis supplid]
Thus, the emphasized words in the above section clearly show that the TDS has to be made at the time of credit to the account of transferor/seller or at the time of payment, whichever is earlier.
There is no ambiguity in the language of section according to which Prahlad Das Goyal
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the TDS is required at the time of payment of sum. In our considered view, advance payment is also a payment of sum to the transferor/seller and hence the assessee was very much liable for deduction of TDS at the time of making payment. Hence, this contention raised by Ld. AR is also meritless and rejected.
(iv)
The fourth and last contention raised by Ld. AR is such that the section 194-IA obligates a ‘transferee’ to deduct TDS but in present case, the property was ultimately registered in the name of “Shri
Anchit Goyal” and not in the name of assessee. Therefore, the assessee was not a ‘transferee’. We are not influenced by this contention of Ld. AR. The section 194-IA does not say that the ‘transferee’ would mean the person in whose name the purchased land is ultimately registered for any reason. Considering the purpose of provision, the term ‘transferee’ would mean the person who has made purchase and who was responsible for payment at the relevant time. In present case, the assessee has made payment from his own source and also debited the impugned payment by way of ‘purchase’
in Trading A/c of current year. These facts clearly make the assessee liable for TDS in current AY 2016-17. The ultimate registration of property in the name of “Shri Anchit Goyal” in the year 2022 is not a relevant point and cannot come to the rescue of assessee. Hence, this contention raised by Ld. AR is also rejected.

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4.2
Thus, all four contentions raised by Ld. AR are rejected and it is held that the payment of Rs. 10,00,000/- attracted TDS u/s 194-IA by assessee and consequently the disallowance is attracted in the hands of assessee qua such payment.
5. Payment of Rs. 9,00,000/-:
5.1
This payment was made against purchase of another land admeasuring 4.97 acres located at Badwai.
5.2
Ld. AR referred Page 48-55 of Paper-Book where the registered sale- deed of land dated 29.09.2012 is placed. Referring to payment schedule mentioned in sale-deed, Ld. AR showed that the payment of Rs. 9,00,000/- was made through Cheque No. 000507 drawn on Bank of India before registration of sale-deed. However, subsequently, the cheque was not cleared and the assessee made payment of Rs. 9,00,000/- to the seller through a banker’s cheque dated 29.12.2015 (Page 57 of Paper-Book). He submitted that both events i.e. the purchase of land as well as payment to seller through cheque No. 000507 had completed on 29.09.2012 i.e. before
01.06.2013 (the day from which section 194-IA came into statute) and therefore the provision of section 194-IA was not applicable.
5.3
Ld. DR for revenue, however, submitted that the payment made through cheque No. 000507 as mentioned in registered sale-deed dated
29.09.2012 had not materialized and the payment was effectively made to the seller on 29.12.2015 which is after 01.06.2013. Therefore, the assessee

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was required to make TDS at the time of payment on 29.12.2015 which the assessee has failed to make. Therefore, the disallowance made by AO is proper and must be upheld.
5.4
In re-joinder, Ld. AR submitted that the facts have to be understood carefully and truly. He submitted that the assessee made payment to seller on 29.09.2012 through cheque No. 000507 before registration of sale-deed.
After that the relationship of “buyer-seller” between the parties had come to an end and the relationship of “debtor-creditor” came into existence.
Therefore, when the cheque 000507 could not be cleared and ultimately the assessee made payment through a banker’s cheque dated 29.12.2015, it was not a payment of consideration towards purchase of land but it was a payment to creditor only. In the situation, Ld. AR prayed, it must be held that the payment of purchase consideration of land was made before execution of registered-deed on 29.09.2012 and since at that time, the provision of section 194-IA was not applicable, the assessee was not required to deduct TDS and consequently no disallowance is attracted.
5.5
We have considered rival submissions of both sides and carefully examined the facts. Admittedly, the impugned land was purchased through registered deed dated 29.09.2012 and in such registered deed, there is a clear mention of payment of Rs. 9,00,000/- having been made by assessee through cheque No. 000507. Thus, the purchase of land as well as payment completed before/on 29.09.2012. Although the cheque No. 000507 was ultimately not cleared and the assessee made payment through a banker

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cheque dated 29.12.2015 but the transaction of purchase had completed on 29.09.2012 before 01.06.2013. Therefore, we are in agreement with Ld. AR’s submission that the payment of Rs. 9,00,000/- did not attract TDS u/s 194-
IA by assessee and consequently no disallowance is attracted in the hands of assessee qua such payment.
6. In view of above discussions, we arrive at a final conclusion to uphold the disallowance qua the payment of Rs. 10,00,000/- and delete the disallowance qua the payment of Rs. 9,00,000/-. The assessee gets a part- relief to that extent.
The AO is directed to modify assessment-order accordingly.
7. Resultantly, this appeal is partly allowed.
Order pronounced in open court on 04/08/2025 (PARESH M. JOSHI)
ACCOUNTANT MEMBER
Indore
िदनांक/Dated :
04/08/2025
Patel/Sr. PS

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Copies to:
(1)
The appellant
(2)
The respondent
(3)
CIT
(4)
CIT(A)
(5)
Departmental Representative
(6)
Guard File
By order
E COPYSr. Private Secretary
Income Tax Appellate Tribunal
Indore Bench, Indore