M/S. DIVINE CIETY PVT. LTD.,UJJAIN vs. THE DCIT 2(1), UJJAIN

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ITA 161/IND/2015Status: DisposedITAT Indore12 January 2017AY 2010-117 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal restored the cash credit issue to the Assessing Officer for verification of details regarding a specific company. It deleted the disallowance for cash payments, following a jurisdictional High Court ruling on illiterate payees. The TDS issue was also restored to the Assessing Officer to verify if the payee had accounted for the income.

What were the facts?

The assessee, engaged in real estate, faced additions for unexplained cash credit, disallowance for cash payments exceeding Rs. 20,000, and non-deduction of TDS. The assessee sought to remand the cash credit issue for further details and argued that cash payments were made to illiterate payees without bank accounts.

What were the issues?

Whether additions for unexplained cash credit and non-deduction of TDS are justified, and if disallowance under Section 40A(3) is applicable for cash payments to illiterate payees without bank accounts.

Which sections of the Income-tax Act were involved?

Section 68,Section 40A(3),Section 40A(ia)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI D.T. GARASIA & SHRI O.P. MEENA

For Appellant: Shri S.S. Deshpande, CA
For Respondent: Shri K.G. Goyal, DR
Hearing: 12.1.2017Pronounced: 12.1.2017

1 Divine City 161 of 2015 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE

BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER And SHRI O.P. MEENA, ACCOUNTANT MEMBER

ITA No.161/Ind/2015 A.Y. 2010-11

M/s. Divine City P. Ltd., Ujjain PAN – AACCD 4627 M :: Appellant

Vs

DCIT-2(1), Ujjain :: Respondent

Assessee by Shri S.S. Deshpande, CA Respondent by Shri K.G. Goyal, DR Date of hearing 12.1.2017 Date of pronouncement 12.1.2017

O R D E R PER SHRI D.T. GARASIA, JM

The above appeal filed by the assessee is against the order of learned

CIT(A)-Ujjain dated 26.12.2014.

2.

Short facts of the case are that the assessee is in business of real

estate. The Assessing Officer made addition of Rs.33 lacs on account of

unexplained cash credit u/s 68 of the Act and disallowance of Rs.19,20,000

2 Divine City 161 of 2015 on account of disallowance u/s 40A(3) of the Act5 and addition of

Rs.17,99,483/- on account of non-deduction of TDS.

3.

With regard to first issue, the assessee has in the balance-sheet has

shown the paid up capital was increased from Rs.1 lac to 60,60,000/- and

share premium of Rs.47,34,000 in assessment year 2010-11. The Assessing

Officer found that shares to Balbir Sihngh Sahani, Balbir Singh HUF, Manoj

Tiwari and Manoj Tiwari HUF and Smt. Anjana Tiwari were allotted a face

value of Rs.10/share and premium value of Rs.30 per share. However, 6600

shares were allotted to Indore Petro Chemicals Ltd. at the face value 10 per

share and premium value of 40 per share, therefore, Assessing Officer made

an inquiry from Indore Petro Chemicals Ltd. that they have made payments

for acquiring shares or not. Similarly, assessee has allotted shares to Balbir

Singh, Balbir Singh HUF, the shares were allotted at face value of 10 per

share and premium value of 30 per share. The assessee failed to provide any

detail before the Assessing Officer why the shares were allotted at higher

value to the Indore Petro Chemicals Ltd. The assessee failed to prove the

same before the Assessing Officer and learned CIT(A), therefore, the

assessee is before us.

3 Divine City 161 of 2015 4. During course of hearing, learned Counsel for the assessee submitted

that he is ready to go back to the Assessing Officer and ready to submit the

details regarding allotment of shares and he is ready to produce the names

of shareholders, contact nos. and address of Indore Petro Chemicals before

the Assessing Officer, therefore, the matter may be remanded to the

Assessing Officer. Ld. DR had no objection if the matter is restored to the file

of the Assessing Officer.

5.

We have heard rival contentions of both the parties and perused the

material available on record. We restore this issue to the file of the

Assessing Officer and the assessee is directed to provide the details in

respect of Indore Petro Chemicals Ltd. Moreover, the assessee is directed to

give addresses of business activity, names of directors and address of Indore

Petro Chemicals. The Assessing Officer is at liberty to call for directors of

Indore Petro Chemicals Ltd. and decide the matter afresh. If the assessee

failed to give the address of Indore petro Chemicals P. Ltd. then Assessing

Officer is at liberty to repeat the addition by passing the order as per law.

6.

With regard to the second issue, the assessee has purchased the land

of 1.47 hec at the cost of Rs.28,80,000/-. From perusal of sale deed, the

4 Divine City 161 of 2015 Assessing Officer found that assessee has made payment of Rs.9,60,000/-

through cheques and rest of Rs.19,20,000/- through cash. Therefore,

assessee has violated the provisions of sec. 40A(3) of the Act. Therefore, he

has made addition.

7.

During course of hearing, the learned Counsel for the assessee

submitted that decision of Hon'ble Jurisdictional High Court of MP 218 ITR

46 in the case of CIT vs. Aachal Alloys wherein the High Court has held that

where payments in cash were duly signed by payees and insistence on

making cash payments was founded on fulcrum that payees did not have

any bank account and, being illiterate, they required payment in cash, no

disallowance could be made u/s 40A(3). The learned Counsel for the

assessee submitted that land is situated at village Pitha Piplai and two

persons one lady and one Kamal Mohan Lal do not have bank accounts,

therefore, payment has been made in cash. Therefore, no addition can be

made. On the other hand, ld. DR relied upon the orders of the Revenue

Authorities.

8.

We have heard rival contentions of both the parties and perused the

material available on record. We find that the issue in controversy is covered

5 Divine City 161 of 2015 by the decision of Hon'ble Jurisdictional High Court of MP in case of CIT vs.

Achal Alloys (P) Ltd. (supra) wherein it is held that where payments in cash

were duly signed by payees and insistence on making cash payments was

founded on fulcrum that payees did not have any bank account and, being

illiterate, they required payment in cash, no disallowance could be made u/s

40A(3). In the instant case, the payment has been made to landowners and

they have given affidavits that two persons are ladies and one Shri Kamal

Mohan do not have bank accounts it is on pages nos. 16 and 17 of paper

book, therefore, we are of the view that that Revenue Authorities are not

justified in making the addition of Rs.19,20,000/- u/s 40A(3) on account of

cash payment made for purchase of agricultural land stating is it stock-in-

trade, therefore, we delete the addition.

9.

With regard to the last issue, the Assessing Officer found that assessee

has debited 17,99,483/- against a party with the name of Ajanta Barber

Wires and Fabrication works under the head payment sight development

expenses. Therefore, assessee is required to deduct a TDS for supply and

installation of the main gate of real estate project, therefore, Assessing

6 Divine City 161 of 2015 Officer has made the addition. The learned CIT(A) confirmed the action of

the Assessing Officer. Now, the assessee is before us.

10.

During course of hearing, the learned Counsel for the assessee

submitted that payment has been made to Ajanta Wires and Fabrication and

it has confirmed that it has received the payment from the assessee.

Therefore, this matter may be restored to the Assessing Officer to verify the

same. If the payee has accounted the money in his return of income then no

deduction on account of non-deduction of TDS can be made under 40a(ia) of

the Act. On the other hand, ld. DR relied upon the order of the Revenue

Authorities.

11.

We have heard rival contentions of both the parties and perused the

material available on record. As per the decision of Hon’ble Delhi High Court

in the case of CIT vs. Ansal Land Mark Township Private Limited, 377 ITR

635 (Del) has categorically held that “Second proviso to section 40a(ia) is

declaratory and curative in nature and has retrospective effect from Ist April,

2005”. We, therefore, in the interest of justice and fair play, restore this

issue to the file of the Assessing Officer for the purpose of limited

7 Divine City 161 of 2015 verification on the aspect as to whether the concerned has included the

receipt in its profit and loss account in computing the business income

offered to tax and if it is found to be so, the Assessing Officer is directed to

delete the disallowance. Needless to say that the Assessing Officer shall

provide adequate opportunity of being heard to the assessee. Therefore,

this issue is allowed for statistical purposes.

12.

In the result, this appeal filed by the assessee is partly allowed under

the terms as indicated hereinabove.

Order was pronounced in the open Court on 12.1.2017.

Sd/- Sd/- (O.P. MEENA) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 12.1.2017

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