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Facts
The assessee appealed against the CIT(A)/NFAC's order for AY 2011-12. The appeal involved a disallowance of Rs.22.24 lacs under Section 40A(3) for cash payments made for land purchase. The assessee argued that the seller did not have a bank account, necessitating cash payment.
Held
The Tribunal held that the assessee's explanation for making cash payments was acceptable, considering the seller's lack of a bank account. Rule 6DD should not be interpreted restrictively in such genuine business transaction scenarios.
Key Issues
Whether the cash payment for land purchase, made because the seller had no bank account, is a valid exception under Section 40A(3) read with Rule 6DD?
Sections Cited
40A(3), 143(3), 147, 6DD
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Income Tax Appellate Tribunal, “DB” BENCH, AGRA
Before: SHRI SATBEER SINGH GODARA & SHRI MANOJ KUMAR AGGARWAL
O R D E R PER SATBEER SINGH GODARA, JUDICIAL MEMBER:
This assessee’s appeal for assessment year 2011-12 arises against Commissioner of Income Tax(Appeals)/National Faceless Appeal Centre (in short, the “CIT(A)/NFAC”), Delhi’s DIN and Order No. ITBA/NFAC/S/250/2022-23/1048369718(1) dated 30.12.2022, in proceedings u/s 143(3) r.w.s. 147 of the Income-tax Act, 1961, (hereinafter referred to as the ‘Act’). 2. Heard both the parties at length. Case file perused.
M/s Blue Lotus Developers 3. Learned counsel submits at the outset that the assessee does not wish to press for its former substantive grievance challenging disallowance of interest income amounting to Rs.1,73,490/- keeping in view smallness thereof. Rejected accordingly.
Next comes the second issue between the parties wherein both the lower authorities invoked section 40A(3) disallowance of Rs.22.24 lacs on the ground that the assessee had made cash payments for purchasing land from Shri Gabbar Singh. The Revenue’s case in light of the lower authorities findings is that neither the assessee has shown business exigency in making cash payments nor it’s case is covered under Rule 6DD of the Income Tax Rules.
The assessee’s case on the other hand is that Shri Gabar Singh having any bank account in his name, it was left with no option but to make impugned cash payments.
We are of the considered view that the assessee’s instant explanation deserves to be accepted as Rule 6DD in such a situation could not be held to be a self exhaustive provision involving genuine business payments in light of Anupam Tele Services Vs. ITO (2014) 366 ITR 122 (Guj.). We accordingly delete the impugned section 40A(3) disallowance in very terms.