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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SMT. ANNAPURNA GUPTA
Assessee by : None Revenue by : Shri S. S. Shukla, Sr. DR Date of Hearing 23.12.2021 Date of Pronouncement 10.01.2022 O R D E R PER SMT. ANNAPURNA GUPTA - AM:
The present appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), Gandhinagar, Ahmedabad, (in short referred to as CIT(A)), dated 13.02.2018 passed under Section 250(6) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2013-14.
None appeared on behalf of the assessee nor any application was filed seeking adjournment. A perusal of the order sheet entries of hearings conducted in the present appeal reveal that whenever the appeal was called up for hearing none appeared on behalf of the assessee. Notice issued through registered post for todays hearing was returned back with the noting that despite three attempts made, i.e. on 07/10/21, 08/1021 and 09/10/21, nobody was found at the stated address. It is evident that the assessee does not seem to M/s. Shrijee Developers vs. ITO Asst.Year –2013-14 - 2 - be interested in pursuing the appeal. The appeal was, therefore, proceeded to be heard and decided ex-parte. The grounds raised
by the assessee are as under: “1. The order passed by the Ld. CIT(A) is bad in law, having passed against the principles of natural justice. The same may be quashed.
2. On facts and circumstances of the case as well as in law Ld. CIT(A) has grossly erred in confirming addition of Rs. 4,66,000/-, so made u/s. 40A(3) of the Act by the A.O. The same may be deleted.
3. On facts and circumstances of the case as well as in law Ld. CIT(A) has grossly erred in confirming addition of Rs. 6,44,785/- on account of preliminary expenses. The same may be deleted.”
Ground No. 1 raising the plea of the appellate order being passed in contravention of the principles of natural justice merits no consideration since the order of the Ld.CIT(A) reveals that the assessee was represented during hearing through its counsel ,Shri Mahendra Swami, Adv. who was heard and his submissions in writing were also taken on record . No instance of the CIT(A) order having been passed against the principles of natural justice, having come to our notice, the aforesaid ground of the assessee needs to be dismissed. Ground No.1 is accordingly dismissed.
Ground No. 2 relates to the addition of Rs. 4,66,000/- made under Section 40A(3) of the Act .Ld. CIT(A) has dealt with the same at Para 4.2 of his order as under: “4.2 I have considered the facts of the case, assessment order and submission made by the appellant. The AO held in his order that the appellant had purchased 2 plots of land for Rs. 1,71,000/- and Rs. 2,95,000/- during the year under consideration, the payments of which were made in cash. He therefore, disallowed the said amount totaling to Rs.4,66,000/- u/s 40A(3) of the Act. The appellant has contended that being first year of business, it was interested in buying land and since the farmers were unknown and insisted on cash payments, the said payments were made in cash. I find that the appellant has not filed any documentary evidences in support of its claim. The appellant has claimed exemption from provisions of section 40A(3) by relying on Rule 6DD(g). However, the name and addresses of the seller of land
M/s. Shrijee Developers vs. ITO Asst.Year –2013-14 - 3 - have not been submitted. Thus, it is not established whether the area itself was served with a banking facility or not. Moreover, the land purchased was part of the appellant's ''stock-in-trade" and the case is squarely covered against the appellant by the decision of the Hon’ble Indore ITAT in the case of Kunjika Construction Vs ITO in dated 12/04/2013, which is based on identical-facts. Considering the discussion above, addition of Rs,4,66,000/- is confirmed. Ground of appeal no.1 is dismissed.”
5. We have gone through the above and find that the issue relates to disallowance of expenditure made in cash in excess of the limit specified in Section 40A(3) of the Act. A perusal of the submissions filed in writing to the CIT(A) reveal that the assessee had contended that the sellers had insisted on cash payment since they did not have bank accounts and the village where the sellers resided also was not served with any banking facility. On the basis of the aforesaid exceptional circumstance the assessee had pleaded to be exempt from the rigors of section 40A(3) of the Act relying on Rule 6DD(g) of the Income Tax Rules,1962.
6. The findings of the Ld. CIT(A) ,upholding the disallowance, are to the effect that the assessee had not substantiated its claim of exemption from the provision of Section 40A(3) as per Rule 6DD(g) of the Act. He has pointed out that neither the name nor address of the sellers of the land was submitted nor it was shown whether the area where the land was located was served with banking facilities or not. The Ld. CIT(A) has also pointed out that the land purchased was stock-in-trade of the assessee and has further relied on a decision of ITAT Indore Bench in the case of Kunjika Construction (supra) which he stated was passed on identical facts. the addition was upheld.
7. In view of the above categorical findings of the Ld. CIT(A) demonstrating ineligibility of the assessee from exemption from the rigors of M/s. Shrijee Developers vs. ITO Asst.Year –2013-14 - 4 - section 40A(3) of the Act, we see no reason to interfere in the order of the Ld.CIT(A).
8. In view of the above the order of the Ld. CIT(A) confirming the addition of Rs. 4,66,000/- made under Section 40A(3) of the Act is upheld. Ground No. 2 raised by the assessee is dismissed.
9. Ground No. 3 relates to the issue of addition made of Rs. 6,44,785/- on account of preliminary expenses.
The finding of the Ld. CIT(A) in this regard, we find that is at Para 5.2 of the order as under: “5.2 I have considered the facts of the case, assessment order and submission made by the appellant. The AO disallowed the amount of Rs.6,44,785/- which was the claim of preliminary expenses claimed as loss by the appellant, in view of the fact that the appellant had filed its return of income beyond the time allowed u/s 139(1) and as such, was not entitled to carry forward any loss. The appellant has filed its return of income on 27/01/2014 as against the due date of 31/07/2013. As per Section 139(3) of the Income Tax Act which deals with return of loss, any assessee or entity who has acquired or earned any income that falls under the heading 'Profits and Gains of Business or Profession' or under the heading 'Capital Gains', will mandatorily be required to file income tax returns of such income at any time prior to the expiration of the due date as mentioned under Section 139(1) and should the assessee or the entity in question not file income tax returns before the expiration of the due date mentioned under Section 139(1), then the -assessee or entity will lose the right to carry forward any losses incurred to subsequent years. In this case, since the return of income has not been filed within the prescribed time, the action of the AO in disallowing the loss of Rs.6,44,785/- is confirmed. Ground of appeal no. 2 is dismissed.”
11. On going through the above we find that this claim has been disallowed not on account of it being preliminary expenses but on account of the fact that it resulted in loss of equivalent amount of the assessee and since the return was filed belatedly the assessee was debarred in law from carrying forward the said loss. In substance it is the carry forward of loss of Rs. 6,44,785/- which M/s. Shrijee Developers vs. ITO Asst.Year –2013-14 - 5 - has been denied to the assessee. Since the Ld. CIT(A) has upheld the same applying the statutory provisions of law we see no reason to disagree with the Ld. CIT(A). The order of the Ld. CIT(A) upholding the denial of carry forward of loss of Rs. 6,44,785/- is, therefore, upheld. Ground No. 3 raised by the assessee is dismissed.