M/S RANA & JOSHI BUILDTECH P LTD,INDORE vs. THE PCIT-1, BHOPAL

This appeal by assessee is directed against the order dated 26.03.2021 of the Pr. Commissioner of Income Tax-1, Bhopal for A.Y.2015-16.

2. There is a delay of 737 days in filing the present appeal the assesse has filed an application for condonation of delay which is ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. supported by the affidavit of director of the assessee company. Ld. AR of the assessee has submitted that the impugned order was passed by the assesse during the Covid-19 pandemic period and therefore, out of the total delay of 737 days the delay up to 28.02.2022 is covered by the judgment of Hon’ble Supreme Court in suo-moto cognizance of extension of limitation writ petition (C) No. 3 of 2020) reported in 441 ITR 722. He has pointed out that against the order passed u/s 143(3) on 18.12.2017 the assessee filed an appeal before the CIT(A) within the limitation period without any delay and further the assesse also challenged the penalty levied by the AO u/s 271E vide order dated 30.02.2022 by filing appeal before the CIT(A). Ld. Counsel pointed out that earlier counsel of the assesse advised that no need to file appeal against the impugned order but when the assesse consulted him for filing the appeal against the order passed by the AO in pursuant to the order passed u/s 263 of the Act he also advise the assesse should also file an appeal before the Tribunal against the impugned order passed u/s 263 of the Act. Thus, Ld. AR has submitted that the assesse was under bona fide belief that as per the advice of the earlier counsel there was no need to file appeal against the impugned order and therefore, the assesse has acted as per the advice of the counsel under the bonafide belief and consequently the appeal could not be filed within the period of limitation. He has submitted that there was no mala fide or deliberate delay in filing the present appeal but the assesse has acted bonafidely as per

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. advice of the counsel and therefore, the assesse could not file appeal against the impugned order within the period of limitation.

2.1 Ld. AR has further contended that since the assesse has already filed an appeal against the scrutiny assessment u/s 143(3) as well as against the order passed by the AO in pursuant to the order u/s 263 of the Act therefore, the assesse would not have gained in any manner whatsoever, by not filing the appeal against impugned order within the period of the limitation. He has relied upon the decision of Hon’ble Bombay High court in case of Vijay Vishan Meghani vs. DCIT 398 ITR 250 and submitted that the Hon’ble High Court has held that the litigant should not be deprived of an adjudication on merits unless the court of law found that litigant deliberately and intentionally delayed filing of appeal. He has also relied upon the judgment of Hon’ble Supreme Court in case of Improvement Trust vs. Ujagar Singh Civil Appeal No.2395 of 2008 dated 26.06.2010 and submitted that unless mala fide are writ large, delay should be condoned. Matters should be disposed of on merits and not technicalities. Thus, Ld. AR has submitted that the appeal of the assesse be decided on merits and not on the basis of technical considerations against. The cause of substantial justice has to be preferred and there should be a liberal, pragmatic, justice oriented, non-pedantic approach while dealing with an application for condonation of delay.He has also relied upon the judgment of Hon’ble Supreme Court in case of Collector Land Acquisition

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. Anantnag & Anr. Vs. Mst. Katiji & Ors. 62 CTR 23 as well as following decisions:

(i)Vedabai Aoias Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil

(ii) B. Madhuri Goud vs. B. Damodar Reddy 12 SCC 693

(iii)Radheshyam Patel vs. Pr. CIT Income Tax Appeal No.8 of 2023 (M.P. High court)

(iv) Nitesh Agarwal Prop. M/s. S.S. Diam vs. ACIT in ITaNo.825/JP/2018 2.2 Thus, ld. AR has pleaded that the delay in filing the appeal may be condoned and the appeal of the assesse be admitted for adjudication on merits.

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. Supreme Court in case of suo-moto cognizance of extension of limitation (supra) has passed following direction in para 5 as under:

“5. Taking into consideration the arguments advanced by learned counsel and the impact of the surge of the virus on public health and adversities faced by litigants in the prevailing conditions, we deem it appropriate to dispose of the M.A. No. 21 of 2022 with the following directions: (i) The order dated 23-3-2020 is restored and in continuation of the subsequent orders dated 8-3-2021, 27- 4-2021 and 23-9-2021, it is directed that the period from 15-3-2020 till 28-2-2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi- judicial proceedings. (ii) Consequently, the balance period of limitation remaining as on 3-10-2021, if any, shall become available with effect from 1-3-2022. iii. In cases where the limitation would have expired during the period between 15-3-2020 till 28-2- 2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 1-3-2022. In the event the actual balance period of limitation remaining, with effect from 1-3-2022 is greater than 90 days, that longer period shall apply. IV. It is further clarified that the period from 15-3-2020 till 28-2-2022 shall also stand excluded in computing the periods prescribed under sections 23 (4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.”

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. 4.1 Thus, the period of limitation has been extended upto 28.02.2022 as this period shall stand excluded for the purpose of limitation. The Hon’ble Supreme Court further allowed a period of 90 days from 01.03.2022 for institution of proceedings if the limitation was already expired before 01.03.2022 or going to be expired thereafter. Thus, the appeal if would have been filed up to 30th May 2022 was to be considered as within the period of limitation as per the directions of the Hon’ble Supreme Court. However, in the present case the present appeal was filed on 01.06.2023 and therefore, there is a further delay of one year and one month for which the assesse explained the cause that earlier the counsel of the assesse advised that since the matter is set aside to the record of the AO for fresh adjudication therefore, the assessee need not file the appeal against the impugned order but contest matter before the AO and thereafter the appeal can be filed against the order passed by the AO. It is pertinent to note that the Pr. CIT while passing impugned order has set aside the order of the AO passed u/s 143(3) with direction to the AO to make denovo after proper examination, inquiry and verification as under:

“5. For the above reasons I am satisfied that this is a fit case where action u/s 263 is justified and inescapable. This view of mine further gains strength and support by the ratio of the decisions in the case laws mentioned here below: “1. Ram Pyari Devi Saraogi us CIT (1968) 67 ITR 84 (SC) the Hon'ble Supreme Court has held that assessment made in undue haste and without making inquiries which are called for the circumstances of the case is erroneous and prejudicial to the Interest of revenue. Page 6 of 27 ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd.

3. CIT v Bhagwan Das (2005) 272 ITR 367 (AIL) (HC), the Hon'ble High Court has held that non-application of mind by the Assessing Officer was prejudicial to the interest of the revenue.

4. Pratap Footwear ACIT(2003) SOT 638 (Jabalpur) (Trib.) the Hon'ble Tribunal has held that non-application of mind by the Assessing Officer was prejudicial to the interest of revenue.

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. that there was no need of filing the appeal against the impugned order. However, filing the appeal is substantial right vested with the assesse aggrieved by the order passed by the tax authorities. Therefore, if the assesse has acted bonafidely as per the advice of the counsel and subsequently after the order passed by the AO in pursuant to the revision order passed u/s 263 it was again advised by the counsel that the assesse should challenge the impugned order passed u/s 263 along with order passed by the AO in pursuant to the order passed u/s 263 then the delay in filing the appeal due to bonafide belief of the assesse to act in accordance with advice of the counsel would certainly falls in the ambit of reasonable and sufficient cause. It is pertinent to note that the assesse has challenged the scrutiny assessment passed u/s 143(3) by filling the appeal before the CIT(A) within the period of limitation however, the said assessment order passed u/s 143(3) was revised by the Pr. CIT vide impugned order and order passed by the AO in pursuant to the revision order has also been challenged in appeal before the CIT(A). Further the assesse also challenged penalty order passed u/s 271E by filing the appeal before the CIT(A) within the period of limitation. All these facts and circumstances show that the assesse was very prompt in taking necessary steps for filing the appeal whenever it is advised so. The Director of the assessee has filed affidavit narrating surrounding circumstances and cause of delay as under:

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. “1. Shri Manish Kumar Joshi, director of M/s Rana & Joshi Buildtech Private Limited (Formerly known as M/s Rana Buildtech Private Limited), solemnly affirm on oath as under:

1. 1. The case of our company for the Assessment Year 2015-16 was selected for scrutiny wherein our erstwhile counsel duly complied with all the notices issued under section 143(2)/142(1) of the Income-Tax Act, 1961 from time-to-time during the course of assessment proceedings.

2. Subsequently, revisionary proceedings were initiated by the Ld. Principal Commissioner of Income Tax-1, Bhopal under section 263 of the Income-Tax Act, 1961 during the month of March, 2021 and order was passed under section 263 of the Income-Tax Act, 1961 on 26-03-2021 with a direction to the Assessing Officer to frame the assessment de novo after proper examination, inquiry and verification. We were also not advised by our erstwhile counsel to file an appeal before the Hon'ble Bench against the order passed under section 263 of the Income-Tax Act, 1961.

3. It was just recently that our company appointed a senior counsel for representing our appellate matters before the income-tax appellate authorities and the senior counsel on going through the E-Proceedings tab on the E-Filing Portal of the Income-Tax Department came across the fact that assessment order had been passed under section 143(3) r.w.s. 263 r.w.s. 144B of the Act on 30-03-2022 against which appeal remained to be filed before the Ld. CIT(A). However, as soon as this fact came across the senior counsel, he advised our company to not only file an appeal before the Ld. CIT(A) challenging the assessment order passed under section 143(3) r.w.s. 263 r.w.s. 144B of the Act but to also file an appeal before the Hon'ble Bench challenging the legality/ validity of revisionary order passed by the Ld. Principal Commissioner of Income Tax-1, Bhopal under section 263 of the Income-Tax Act, 1961.

4. It was for the aforesaid reason that the present appeal is being filed before the Hon'ble Bench with a delay of 457 days (Period from 1st March, 2022 to 31st May, 2023). It is being Page 9 of 27 ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. brought to the kind notice of the Hon'ble Bench that period from the date of passing of revisionary order under section 263 of the Income-Tax Act, 1961 till 28-02-2022 has been excluded while computing the aforesaid period of delay in light of the judgment of the Hon'ble Supreme Court of India [Miscellaneous Application No. 21 of 2022 in Miscellaneous Application No. 665 of 2021 in Suo Motu Writ Petition (C) No. 3 of 2020] dated 10- 01-2022. However, 1 would like to submit before the Hon'ble Bench that as soon as the senior counsel advised us to file an appeal before the Hon'ble ITAT, Indore Bench against the order passed under section 263 of the Income-Tax Act, 1961, we paid the challan for appeal fees immediately and accordingly the present appeal is being filed without any further delay.

5. Hence, in the interest of substantial justice, Hon'ble Bench is hereby requested to-condone the delay in filing of the present appeal and admit the appeal as legal and valid.” 4.3 Therefore, when the assessee has challenged all other orders passed by the AO before the CIT(A) within the period of limitation and also challenged the order passed u/s 143(3) r.w.section 263 of the Act then there is no reason to disbelieve that the delay in filing the present appeal was due to bonafide act of the assesse in following the advice of the counsel.

4.4 We also find existence of reasons for giving said advice because the Pr. CIT has not adjudicated any issue on merits but simply set aside the assessment order with the direction to pass denovo order. Therefore, in the facts and circumstances as discussed above we find that the explanation of the assessee for cause of delay is bona fide and not merely to cover an ulterior purpose such as laches on the part of the assessee or an attempt to save limitation in an underhand way. When the assesse has not Page 10 of 27

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. acted in malafide but a reason explained are factually corroborated with the surrounding circumstances then liberal construction be given to the term sufficient cause. It is settled proposition of law that no one should be deprived for adjudication of his matter on merits unless it is found that litigant has deliberately and intentionally delayed in filing the appeal.

4.5 The Hon’ble Supreme Court in case of Improvement Trust vs. Ujagar Singh (supra) has observed that unless mala fides are writ large, on the conduct of the party, generally as a normal rule, delay should be condoned. The Hon’ble Supreme Court has observed that an attempt should always be made to allow the matter to be contested on merits rather than to throw it on such technicalities. However, the appellant would not have gained in any manner whatsoever, by not filing the appeal within the period of limitation.

4.6 In case of Collector Land Acquisition Anantgan & Anr. Vs. Mst. Katiji & Ors. (supra) the Hon’ble Supreme Court has held that while interpreting the expression “sufficient cause’ liberal approach has to be adopted as refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. Therefore, when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. 4.7 The Hon’ble Jurisdictional High Court in case of Radheyshyam Patel vs. Pr. CIT (supra) while condoning of delay of more than 5 years in filing the appeal has observed that right to file appeal cannot be extinguished as the assesse would be left remediless. Accordingly in the facts and circumstances of the case we are satisfied that the assesse has sufficient cause of delay of one year and one month for filing the present appeal. Hence the delay in filing the appeal is condoned.

5. The assesse has raised following grounds of appeal:

1.“That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting-aside the order passed by the Assessing Officer by invoking the provisions of section 263 of the Income-Tax Act, 1961 even when the assessment order was passed after conducting necessary enquiries and after due application of mind and such order was neither erroneous nor prejudicial to the interests of the revenue. 2.That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting-aside the order passed by the Assessing Officer under section 143(3) of the Income-Tax Act, 1961 by invoking the provisions of section 263 of the Income-Tax Act, 1961 merely on the basis of Internal Audit Objection which is not permissible in the garb of revisionary proceedings.

3. That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting-aside the order passed by the Assessing Officer by invoking the provisions of section 263 of the Income-Tax Act, 1961 and directing the Assessing Officer to frame the assessment de novo after examining the issue related to disallowance of Rs. 65,33,000/- under section 40A(3) of the Act on account of alleged payments made by the appellant in cash even when the same was duly examined by Page 12 of 27

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. the Assessing Officer at the time of original assessment proceedings. 4.The appellant reserves the right to add, alter and modify the grounds of appeal as taken by it.” 5.1. The assesse has also filed an additional ground of appeal as under:

That on the facts and in the circumstances of the case and in law, the order passed by the Ld. PCIT under section 263 of the Act dated 26-03-2021 is null and void since it does not bear any Document Identification Number (DIN) in its body which is in gross violation of the principle laid down by the Hon’ble CBDT in its Circular No. 19/ 2019 dated 14-08-2019.

6. The assesse is a Pvt. Ltd. Company and filed its return of income for the year under consideration on 29.10.2015 declaring total income of Rs.60,04,220/-. The case of assesse was selected for limited scrutiny under CASS and the AO issued notice u/s 143(2) as well as u/s 142(1). The case was subsequently converted to complete scrutiny after taking due approval of Pr. CIT. The scrutiny assessment was completed u/s 143(3) on 18.12.2017 at total income of Rs.1,15,51,206/- as against the return income of Rs.604,220/-. Thereafter Pr. CIT noted that the assesse company made payment in cash which was required to be disallowed and added back to the assesse’s income u/s 40A(3) which was not done. The AO has passed order u/s 143(3) dated 18.12.2017 without considering disallowance u/s 40A(3) which renders the assessment order as erroneous as well as prejudicial to the interest of revenue. Accordingly the Pr. CIT initiated the proceedings u/s 263 of the Act

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. by issuing show cause notice dated 16.03.2021. In response to the show cause notice the assesse filed written submission. Finally the Pr. CIT has passed impugned order whereby the issue was set aside with direction to make denovo after proper examination and inquiry and verification of all the aspect and giving appropriate opportunity to the assessee.

6.1 Ld. AR of the assessee has submitted that the Pr. CIT has not mentioned DIN in the impugned order and therefore, in view of the CBDT Circular no.19 of 2019 dated 14.08.2019 the impugned order is not sustainable in law. He has thus submitted that as per para 2 of the CBDT Circular it is incumbent upon Income Tax Authority that no communication shall be issued relating assessment appeal, order etc. to the assessee or any other person after the 1st day of October 2019 unless a computer generated Document Identification Number (DIN) has been allotted and duly quoted in body of such communication. Only in exceptional circumstances as provided in para 3 of the circular the communication can be made without generation of DIN on existence of specific circumstances and by following procedure as stated in para 3. Thus, in absence of any reasons explained by the Pr. CIT in the impugned order for not generating DIN and not mentioning same in the body of the order, the impugned order is not sustainable in law. In support of his contention he has relied on various decisions of Hon’ble High Courts as well as this Tribunal.

Page 14 of 27 ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd.

महोदय/महोदया / मेसस�, Sir/Madam/M/s, Page 15 of 27

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. This is to inform you that Order/Notice/Letter dated 26/03/2021 is having Document No. (DIN) ITBA/COM/M/17/2020-21/1031798761(1). This is a system generated document and does not require any signature. 8.1 Therefore, this is not a case of non-generation of DIN but only irregularity is that DIN is not mentioned in the body of the impugned order but was duly intimated to the assessee. It is pertinent to note that decisions of Hon’ble High Courts on this issue deciding in favour of the assessee have been stayed by the Hon’ble Supreme Court in case of CIT v. Brandix Mauritius Holdings Ltd. (2024) 297 Taxman 228 (SC). Similarly it was brought to our notice that even judgment of Hon’ble Bombay High Court in case Hexaware Technologies Ltd. vs. ACIT 464 ITR 430 has also have been stayed by the Hon’ble Supreme Court. Accordingly in the absence of any binding precedent we do not think it appropriate to hold that the impugned order passed by the Pr. CIT is invalid on this ground when the DIN was duly generated on the same day and communicated to the assesse but was not mentioned in the body of the order. This additional ground of the assesse’s appeal is rejected.

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. income at Rs.60,04,220/- therefore, the jurisdiction to frame the assessment lies with DCIT/ACIT circle 4(1) Bhopal and not with ITO Bhopal. Ld. AR has referred to the assessment order and submitted that after initiating scrutiny assessment by issuing notice u/s 143(2) the case was subsequently transferred to DCIT 4(1) Bhopal which itself shows that initiation of the scrutiny proceedings by issuing notice u/s 143(2) by ITO 4(1) Bhopal having no jurisdiction to assess the assesse is invalid and therefore, the consequential assessment order passed u/s 143(3) of the Act deserves to be quashed and set aside. Ld. AR has thus submitted that once the assessment order itself is not valid and liable to be quashed then initiation of the proceedings u/s 263 as well as the impugned order passed by the Pr. CIT are not sustainable in law. In support of his contention he has relied following decisions:

(i) M/s Durga Manikanta Traders vs. ITO Raipur in ITANo.59/RPR/2019 (Raipur ITAT)

(ii) Shri Sukumar Ch. Sahoo vs. ACIT in ITANo.2073/Kol/2016 (Kolkata ITAT)

(iii) Krishnandu Chowdhury vs. ITO 55 ITR 52 (Kolkata ITAT)

(iv) Gajmukh Merchantile Pvt. Ltd. vs. DCIT in ITANo.2195/Kol/2019 (Kolkata ITAT)

(v) ITO Kanpur, vs. Arti Securities & Services Ltd. 123 taxmann.com 395 (ITAT, Lucknow)

Page 17 of 27 ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd.

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. “(c) where any order referred to in this sub-section and passed by the Assessing Officer for the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal "[filed on or before or after the 1st day of June, 198810], the powers of the [Principal Commissioner or] Commissioner under this sub- section shall extend "[and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.]” 11.1 Therefore, once this issue of jurisdiction of the AO is a subject matter of the appeal before the CIT(A) then the same cannot be a subject matter of proceedings u/s 263 of the Act and the appeal against the order passed u/s 263 of the Act. In any case we refrain from giving any finding on this issue due to the reason that it would amount to adjudication of the issue which is subject matter of the appeal pending before the CIT(A).

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. opening balance and therefore, the transactions of purchase to that extent were not during the year under consideration. Therefore, the question of disallowance u/s 40A(3) in respect of those transactions which were not during the year does not arise. He has further submitted that even an addition made during the year in the land bank to the extent of Rs.46,34,000/- was also not a transaction of purchase during the year but the same was purchased vide sale deed dated 1st June 2016 and falls in the subsequent assessment year. Thus, Ld. AR has submitted that in fact there was no transactions for purchase of land during the year under consideration and consequently the disallowance u/s 40A(3) does not arise. He has referred to the notice issued u/s 142(1) dated 23.11.2017 and submitted that the AO has specifically asked the assesse about all the details of sale and purchase of immovable property entered into by the assessee during F.Y.2014-15 along with copies of sales/ purchase deed, bank account from where the payment were made. The assesse vide reply dt.17.11.2017 furnished all the details along with documentary evidences before the AO and therefore, when the entire record was also placed before the AO and was available on the assessment record then it is not a case of lack of inquiry on the part of the AO on the issue of disallowance u/s 40A(3) of the Act. Ld. AR has referred to para 6 of the assessment order and submitted that the AO has considered the issue of unexplained expenditure for payment of stamp duty in respect of the purchase of land and also reproduced the details of the stamp duty purchased by the assesse showing registration of Page 20 of 27

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. the sale deed as on 1st June 2016 though the stamp duty was purchased on 31.03.2016. Therefore, the Ld. AR has submitted that this fact was very much examined by the AO during the assessment proceedings that there was no purchase transactions of land during the year under consideration and only stamp duty was paid by the assesse which was examined and an addition has been made by the AO on this account. Ld. AR has then referred to para 7 of the assessment order and submitted that the AO has considered all the transactions of purchase of land and stamp duty paid by the assessee. Therefore, the AO has already considered all the relevant facts and record regarding the purchase of land by the assessee through registered sale deed and none of the transactions was executed during the year under consideration but only stamp duty was paid for which addition made by the AO which has been challenged before the CIT(A). Thus, Ld. AR pleaded that the impugned order of the Pr. CIT is not sustainable and liable to be quashed. In support of his contention he has relied upon following decisions:

(i) CIT v. Gabriel India Ltd. reported in [1993] 203 ITR 108 (Bombay)

(ii) CIT v. Nirma Chemicals Works (P.) Ltd.. reported in [2009] 182 Taxman 183 (Gujarat)

(iii) CIT v. Achal Alloys (P) Ltd. as reported in [1996] 218 ITR 46

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. (iv) M/s Essargee Construction Pvt. Ltd. vs. ITO-1(5), Bhopal [ITA No. 10/Ind/2023] vide order dated 03-08-2023 (ITAT, Mumbai)

12.1 Ld. AR has thus submitted that even otherwise the cash payment for purchase of land from the farmers falls in the exceptions provided under Rule 6DD of the Rules. The AO as well as Pr. CIT has not disputed the genuineness of the transactions and the payments which is made as on account of business expediency and therefore, the disallowance u/s 40A(3) is not warranted.

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. “15. Furnish the details of transactions of sale and purchase of immovable property entered in to by you during FY 2014-15. Furnish copies of sale/purchase deeds, copies of bank account from where payments were made.” 14.1 In reply to the said notice the assessee has vide its reply dated 29th November 2017 has stated that no land was purchased during the year in support this contention the sale deeds for purchase of land by the assessee were produced before the AO. The Assesse has also produced copies of the sale deed in respect of the three transactions of purchase of land in the paper book at page no.47 to 92 of the paper book. Even the details of the land as given in the balance sheet shows that the assessee has shown the land bank to the extent of Rs.1,54,92,620/- as opening balance and therefore, to the extent of land purchased by the assessee in the previous year is reflected as opening balance. Thus the question of cash payment and consequently disallowance u/s 40A(3) to that extent for the year under consideration does not arise.

14.2 Though in the balance sheet the assesse has shown only addition of Rs.46,34,000/- but sale deed in respect of the said transaction is placed on record which is executed and registered on 1st June 2016. Therefore even the transaction of purchase was completed in the subsequent year and not during the year under consideration. Though the assessee has shown addition in the stock of land but the actual transactions of purchase of the land happen in the next year. The Pr. CIT has issued the show cause notice dated 16.03.2021 as under:

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. “Notice u/s 263 of of Income-tax Act for AY 2015-16-Show Cause-reg. Please refer to the assessment order uis. 143(3) of the Income Tax Act, 1961 dated 29.09.2017 passed by DCIT-3(1), Bhopal for A.Y. 2015-16. On perusal of the assessment order and case records, it has been observed that the assessee company had made payment in cash to Shri Phool Singh Kushwah, Smt. Kamlesh and Shri Vishnu Joshi amounting to Rs. 6533000/- was required to be disallowed and added back in the assessees income u/s 40A (3) which was not done. The omission would have resulted in under assessment to the extent of Rs. 6533000/- involving short levy of tax of Rs. 28,19,111/- (being 32.445% of 6533000 including interest u/s 234B for Rs. 6,99,479/- being 33% on 2119632). Keeping in view of the above, the assessment order passed by the Assessing Officer is considered to be erroneous in so far as it is prejudicial to the interest of revenue, and therefore, I, propose to invoke powers vested u/s 263 of the Income Tax Act, 1961 in respect of the order referred to above. You are hereby given an opportunity of being heard as per section 263 (1) of the Income Tax Act to present yourself in person or through an authorized representative on 23.03.2021 at 1:15 PM to explain your case. In case, no reply is received by stipulated date, it will be presumed that you have nothing to say in the matter and a decision will be taken on the basis of records available in this office.” 14.3 The Pr. CIT took the payment of cash to Shri Phool Singh Kushwah, Smt. Kamlesh and Shri Vishnu Joshi total amounting to Rs.6533000/- however, all these transaction of purchase of land from these farmers were not executed during the year under consideration as reflected from the concerned sale deeds.

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. 14.4 It is manifest from record that two transactions of purchase of land from Smt. Kamlesh and Vishnu Joshi were in the earlier years i.e. F.Y.2013-14 whereas the 3rd transaction of purchase of land from Shri Phool Singh Kushwah has been executed on 01.06.2016 as per registered sale deed. The Pr. CIT has initiated the proceedings u/s 263 without even verifying the record available with the AO in the shape of sale deeds vide which the assessee has purchased land in question. Therefore, without giving any details as how and when the assessee has made payments in cash in respect of these transactions of purchase of land issuing show cause notice u/s 263 itself is without application of mind. Further when all the details and documentary evidences regarding purchase of agricultural land by the assessee from the farmers are available on record and manifest the fact that none of the transactions are actually done during the year under consideration as none of the sale deeds were executed during the year under consideration then without specifying event of payment made in cash during the year under consideration invoking provisions of section 263 on the issue of disallowance u/s 40A(3) is not warranted. The AO has examined all other issues relating to these transactions of purchases including payment of stamp duty by the assessee in respect one transaction carried out in the subsequent year but the stamp duty was paid on 31.03.2016. Once all these facts are matter of record then without giving specific details of violation of provisions of section 40A(3) the initiation of the proceedings u/s 263 and consequential order passed by the Pr. CIT were not based on the Page 25 of 27

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. correct facts. The Pr. CIT has referred only the total amount involved in purchase of the lands but has not specified whether these amounts were paid during the year under consideration or not. The AO has even examined the issue of payment of stamp duty and unexplained expenditure on this account and also unexplained investment and given all the details of transaction of purchase of land as under:

Land Owner Registered land Stamp Value Purchase Price owner Phool Singh Phool singh 1,64,74,000/- 1,64,74,000/- Kushwaha Chain Singh Kamlesh w/o 2,70,00,000/- 2,54,25,000/- Chain Singh & d/o Om Prakash Yashwant Kushwaha Yashwant 1,39,28,000/- 1,39,28,000/- Kushwaha Prathavi Kushwaha 66,74,000/- 66,74,000/- Parashar Ji 8,92,000/- 8,92,000/- V. Govind 46,34,000/- 46,34,000/- Total 6,96,02,000/- 6,80,27,000/-

ITANo.229/Ind/2023 M/s Rana & Joshi Buildtech Pvt. Ltd. merely on suspicion of violation of provisions of section 40A(3) of the Act based on incorrect presumption of facts and consequential order passed by the Pr. CIT are not sustainable in law. Accordingly the same is set aside.

Order pronounced in the open court on 26 .09.2024.