INCOME TAX OFFICER,, JALGAON vs. M/S. OMKAR DEVELOPERS,, JALGAON

The Revenue has raised the following grounds of appeal:- 1. On the facts and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.39,20,000/- made on account of disallowance u/s 40A(3) by the Assessing Officer.

The issue raised in the present appeal filed by the Revenue is against deletion of addition made under section 40A(3) of the Act at 39,20,000/-.

Briefly, in the facts of the case, the assessee was engaged in the business of promoters and developers. During the year under consideration, the assessee had purchased agricultural land situated within territorial limits of Jalgaon Municipal Corporation for total consideration of ₹ 99,20,000/- on 10.08.2011. The assessee had developed the said land and sold plots on the said land. The Assessing Officer during the course of assessment proceedings noted that sum of ₹ 60 lakhs was paid vide two cheques of ₹ 30 lakhs each to two sellers. Further, ₹ 19,60,000/- each was paid in cash to the two sellers. The Assessing Officer issued summons under section 131 of the Act to the said sellers and their statements were recorded on 25.08.2014. Salvi brothers confirmed their signatures and when questioned, whether balance sale consideration of ₹ 19,60,000/- was demanded by them in cash and whether they had any objection to receive entire consideration in cheque, they replied that they had not insisted for payment in cash and they also had no objection for entire payment to receive by cheque. The Assessing Officer thus, dis- regarded explanation of assessee that sellers had insisted upon payment in cash and disallowed the said amount of ₹ 39,20,000/-, in view of provisions of section 40A(3) of the Act.

Before the CIT(A), the contention of assessee was that the payment of ₹ 60 lakhs was made by bank cheques prior to the date of sale deed and cash payment of ₹ 39,20,000/- was made before the Sub-Registrar on the date of purchase deed – thus, the cash payments were certainly genuine. The assessee also filed letter dated 12.03.2012, which was duly signed by sellers confirming the fact that they had insisted upon cash payments since they had no faith in the partners of assessee firm. The CIT(A) also considered recorded statements of sellers before the Assessing Officer and held that the contention of sellers could not be accepted when they had confirmed that the impugned letter was duly signed by them. The CIT(A) also noted that the date on the said letter i.e. 12.03.2012 was much later than the date of purchase deed i.e. 10.08.2011. The CIT(A) reversing the order of Assessing Officer deleted the addition made under section 40A(3) of the Act at ₹ 39,20,000/-. Another point which was noted by the CIT(A) was that though actual payment was ₹ 39,20,000/- but the Assessing Officer by an error had made addition of ₹ 39,29,000/-, which was not justified.

The learned Departmental Representative for the Revenue placed reliance on the order of Assessing Officer and pointed out that when there was no insistence by the sellers for cash payments, there was no merit in the plea of assessee.

The learned Authorized Representative for the assessee however, pointed out that time and again it has been stressed that it is cash payment but in actual fact the payment was made through bearer cheques. Our attention was drawn to the bank statement which is placed at page 21 of Paper Book, wherein on 03.08.2011, two cheques of ₹ 30 lakhs each issued in the name of Dagdu Vitthal Salawi and Badrinarayan Vitthal Salawi were debited and

We have heard the rival contentions and perused the record. The issue which arises in the present appeal is against invoking of provisions of section 40A(3) of the Act. Under the said provisions of the Act, it is provided that in case any payment is made otherwise than by cheque or crossed demand draft above ₹ 20,000/-, then such expenditure is not to be allowed in the hands of assessee. The assessee is engaged in the business of builders and developers. During the year under consideration, the assessee had made investment in purchase of agricultural land, which was its business asset. The total consideration of said property was ₹ 99,20,000/-. The assessee had purchased the said property from two co-owners i.e. Dagdu Vitthal Salawi and Badrinarayan Vitthal Salawi. Initial payment of ₹ 30 lakhs each was paid by cheque to the two parties and there is no dispute with regard to the same. The balance payment of ₹ 19,60,000/- each was alleged to be paid in cash by the Assessing Officer. The case of assessee is two-fold that; first the payment has been made before registering authority on the date of registration of document i.e. on 11.08.2011. Further, the said payment has been made by way of bearer cheques before registering authority. Another aspect of the same is that the said payment was made at the instance of sellers as they were reluctant to get the document registered till the amount was received in totality. In support

In the result, appeal of Revenue is dismissed.