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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI D.T. GARASIA & SHRI O.P. MEENA
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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