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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. MADHUMITA ROY & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 09.03.2018 passed by learned Commissioner of Income-Tax (Appeals)-1, Indore [“Ld. CIT(A)”], which in turn arises out of assessment-order dated 29.03.2016 passed by learned ACIT-2(1), Indore [“Ld. AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2013-14, the Revenue has filed this appeal on following effective grounds:
“(1) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) Indore was justified in law as well as on facts in deleting the addition of Rs. 2,70,15,725/- on account of unexplained credits under head current liabilities by ignoring the findings of Assessing officer in the assessment order and without supporting evidences related to the identity, capacity of creditors and genuineness of transactions.
M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) Indore was justified in admitting the additional evidences under rule 46A of IT Rules and ignoring the findings in remand report of assessing officer. 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) Indore was justified in deleting the addition of Rs. 1,39,72,500/- on account of cash payment covered under section 40A(3) by ignoring the findings of Assessing Officer in the assessment order.” 2. Heard the learned Representatives of both sides at length on 15.09.2022 and the case was adjourned to 21.09.2022 for final hearing. On 21.09.2022, the case was again adjourned to 26.09.2022 at the request of Ld. DR. On 26.09.2022, none appeared on behalf of revenue, hence the case was again adjourned to 27.09.2022. But none appeared on behalf of revenue on 27.09.2022. Since the matter was already heard at length earlier and further adjournments were not possible due to physical-bench nearing end, it was concluded on 27.09.2022.
Briefly stated the facts are such that the assessee-company is engaged in the business of land and building. It filed return of relevant AY 2013-14 declaring a loss of Rs. 81,46,749/-, which was subjected to scrutiny- assessment by Ld. AO and statutory notices u/s 143(2)/142(1) were issued from time to time which were duly complied with by assessee. Finally, Ld. AO completed assessment u/s 143(3) vide order dated 29.03.2016 at a total income of Rs. 3,28,62,646/- after making certain additions. Aggrieved, the assessee filed first-appeal to Ld. CIT(A) and succeeded. Now the revenue is in appeal before us assailing the order of Ld. CIT(A).
Ground No. 2:
We first take up this ground in which the revenue has challenged the action of Ld. CIT(A) in admitting additional evidences filed by assessee under Rule 46A as well as ignoring the findings made by Ld. AO in remand-report.
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 5. We note that the Ld. CIT(A) has admitted the additional evidences in terms of Rule 46A(1)(b) of Income-tax Rules, 1962 by observing and holding thus:
“4. The appellant submitted the ledger copies of advances and in the process of collecting remaining papers to be submitted before AO. The father of Shri Saurabh Jain, C.A. who is representing the case was suffering from liver cirrhosis and undergoing for medical treatment at Mumbai. The appellant furnished the medical certificate in this behalf. The accountant of the company has also suffered food poisoning and to be hospitalized. Therefore, there was sufficient cause for not producing the evidences which has been called by the assessing officer. Therefore, the appellant’s case is falling under rule 46A(1)(b) of Income Tax Rules. Therefore, additional evidences produced during the course of appellate proceedings have been admitted and the additional evidences have been forwarded to the AO for his comments. The AO submitted the remand report dated 16/02/2018.” 6. Thus, the Ld. CIT(A) has carefully considered that the non-submission of the evidences before the Ld. AO was due to illness of father of Shri Subhash Jain, CA and representative of assessee as well as hospitalization of the accountant of assessee. Ld. CIT(A) has also considered medical certificates filed by assessee in support of these happenings. This way, the Ld. CIT(A) has found that the assessee was prevented from submitting those evidences before Ld. AO due to a sufficient cause in terms of clause (b) of sub-rule (1) of Rule 46A of Income-tax Rules. It is further stated by Ld. CIT(A) that the additional-evidences were forwarded to Ld. AO and the Ld. AO filed remand-report dated 16.02.2018. We also note from Para No. 3 / Page No. 2 of the appeal-order that the assessee filed a Written-Submission dated 27.02.2018 to Ld. CIT(A) incorporating re-joinder to the Remand- Report submitted by Ld. AO. These clinching facts demonstrate that the Ld. CIT(A) has admitted additional-evidences after following a procedure prescribed in the Income-tax Rules, 1962; sought remand-report from Ld. AO; invited the response of assessee on the Remand-Report; and considered all such material. Being so, there is hardly any merit in the ground raised by revenue. We, therefore, dismiss Ground No. 2.
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 Ground No. 1:
This ground relates to the addition of Rs. 2,70,15,725/- made by Ld. AO on account of “unexplained credits”.
Ld. AO has made this addition by observing and holding thus:
“3. On perusal of balance sheet for the year ending 31.03.2013 it is found that assessee has shown advances from customers (in return this amount is reflected as Loan and advances from related parties) under the head of current liabilities amounting to Rs.2,70,15,725/-. Now during the course of assessment proceedings the assessee via notice u/s 142(1) dated 23.12.2015 was asked that “on perusal of balance sheet the year ending 31.3.2013 it is found that you have shown Loan and Advances from related parties under the head of “Current Liabilities” amounting to Rs. 2,70,15,725/-. In this regard you are hereby requested to produce all the details like persons/ companies/firm/HUF from whom such advances are claimed to be received, their complete addresses, copy of bank accounts and their permanent Account Number also”. In response to which the AR of the assessee via reply dated 05.01.2016 merely submitted that “copy of ledger of Sunder Creditors and other payables are enclosed”. However, no ledger copy of other payables i.e. Advances from customers shown as liabilities were filed. Assessee did not provide complete addresses, copy of bank accounts statement, confirmations and permanent account number of persons from whom such advances are claimed to be received which is lying as liability. Thus, assessee has failed to prove the identity of persons and genuineness of these liabilities and has failed to explain the sources of these credit entries in its books. Assessee also had failed to give any documents showing the purpose for which these advances from the customers were received. Therefore amount of Rs. 2,70,15,725/- is being added to the total income of assessee as unexplained credit entries in form of liabilities especially from receipts of customers taken in advance. I am satisfied that the assessee had furnished inaccurate particulars and concealed its income therefore the penalty proceedings u/s 271(1)(c) is initiated. Addition: Rs. 2,70,15,725/-” 9. During first-appeal, the Ld. CIT(A) deleted this addition by observing and holding thus:
“5.1 Ground No.1: Through this ground of appeal, the appellant has challenged the addition of Rs.2,70,15,725/- on account of current liabilities. The appellant company is a builder and colonizer. It develops land and sale plot to customers. The development of land is made in various stages. The customers of the plot pay the sale consideration in installments depending on level of development. After, completion of full development, the appellant
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 company register the sale deed in favour of the customers. However, the customer is required to pay full sale amount to the company before registration of land in his favour. The amount received from the customers is grouped under the head “Advance from Customers”. The balance outstanding under this head as on 31.03.2013 was Rs.2,70,15,725/-. The AO made the addition on the ground that, the appellant failed to produce all the details of the persons/companies/firm/HUF from which such advances are claimed to be received. During the course of appellate proceedings, the appellant furnished all the details in respect of the customers.
5.1.1 The appellant furnished full records of the customers to prove their identity. The sale deeds were also filed wherever registration has taken place in favour of the customers. The appellant has filed evidence to prove the identity and genuineness of the Advances from customers. The said amount of Advances from customers is acceptable as genuine.
5.1.2 The appellant furnished the correct addresses of the customers and confirmations were filed from customers. The AO has all power to force the attendance of the customers. The AO has not made any enquiry before arriving to the conclusion that current liabilities are bogus. The customers furnished the confirmation, copy of bank account and proof of filing of the return. The appellant furnished the following documents in support of his claim. 1. Plot booking form. 2. Copy of sale deed.
By filing the above documents the appellant is able to establish the i. Identity of the customers - Most of the customers are income tax payers and filed the sale deed. ii. Genuineness of the transaction - the appellant has taken the advance by entering through sale deed of the plots. The appellant is having complete details in respect of the customers. iii. Creditworthiness of the customers - The customers not only booked the plots, but also confirmed the same.
5.1.3 From the above it is clear that the appellant has satisfied all the three conditions required for genuineness of the transaction. It is also to be mentioned that most of the customers are assessed to tax. The same view has been upheld by Honb’le ITAT in the following cases:- i. Umesh Electricals v/s Asst. CIT (2011) 18 ITJ 635 (Trib.-Agra): (2011) 131 ITD 127 : (2011) 141 TTJ:
Establishment of identity and credit-worthiness proved- Assessee produced the bank account of creditor in his bank account on the same day on which loan was given- Assessee furnished the cash flow statement of creditor-Based on inquiry, AO noted that creditor was
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 engaged in providing accommodation entries-HELD- In group cases, it has been held that there was no evidence against the creditor to prove that he was providing accommodation entries-Further, mere deposit of money by the creditor on the same day, does not establish that the loan is not genuine-Assessee has proved the source of credit and also the source of source -Addition cannot be made. ii. Aseem Singh v/s Asst. CIT (2012) 19 ITJ 52 (Trib.-Indore): Identity and credit-worthiness proved-Assessee took loan of Rs.1,00,000/- confirmation of creditor was filed-Lower authorities made addition u/s 68 holding that amount was deposited in cash in the bank account of lender immediately prior to date of loan – HELD- Assessee has established the identity- The party has confirmed the transaction-If AO doubted the transaction, AO should have called creditor u/s 131-Addition cannot be made.
5.1.4 The AO submitted remand report dated 16/02/2018. In the remand report the AO has not made any adverse comment in respect of the liabilities. In this line of business, advances are received for booking of plots and the amounts after registry is made. In case of the pendency of the balance amount registries are still due to be executed. Therefore, the AO is not justified in making the addition. Therefore, the addition made by the AO amounting to Rs.2,70,15,725/- is Deleted. Therefore, the appeal on this ground is Allowed.” 10. Before us, Ld. DR supported the assessment-order. Per contra, Ld. AR relied upon the order of Ld. CIT(A).
We have considered rival submissions of both sides. We observe that the assessee is a company, engaged in the business of land and building. During the course of business, the assessee sells plots to customers and receives advances from time to time and the final registries are done when full payments are received and possession is handed over. This practice of assessee is in line with the standard practice adopted by entire business community in this trade and the Ld. DR could hardly dispute it. We further observe that although during the course of assessment-proceeding, the assessee could not file the requisite evidences to prove the ingredients of section 68, viz. the identity of the customers, genuineness of transactions and creditworthiness of the customers from whom the impugned advance were received which has led the Ld. AO to make the impugned addition, but as discussed earlier the same had happened due to a sufficient cause which
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 stood covered up by way of filing additional-evidences before Ld. CIT(A) in terms of Rule 46A. On a careful consideration of the appeal-order of Ld. CIT(A), we observe that the Ld. CIT(A) has taken into account the evidences/documents filed by assessee and having regard to the nature of business carried on by assessee, came to a conclusion that the three ingredients of section 68 stood successfully proved by assessee. The observations of Ld. CIT(A) made in this regard are already re-produced earlier and we do not wish to repeat the same for the sake of brevity. Thus, on an overall consideration, we observe that the Ld. CIT(A) has passed a reasoned order on this issue which does not warrant any interference from us. Being so, we subscribe to the decision of Ld. CIT(A) whereby he has deleted the addition made by Ld. AO. Thus, the revenue fails in Ground No. 1.
Ground No. 3:
This ground relates to the addition of Rs. 1,39,72,500/- made by Ld. AO on account of disallowance u/s 40A(3).
Ld. AO has made this addition by observing and holding thus:
“5. Cash payment more than Rs.20,000/- under section 40A(3):- During the assessment proceedings it was observed from the copy of the ledger “Creditor for survey no. 11/4 & 12 (Daryav Singh)” submitted by assessee that a cash payment of Rs. 1,39,72,500 to Shri Madhav Rao. Section 40A(3) can be read as:- “Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. AR of the assessee asked via note sheet entry dated 21.03.2016 why cash purchases should not be disallowed as per section 40A(3) of the Income Tax Act. In response to which a reply was furnished by the assessee that in which it submitted that as per Rule 6DD cash payment made through an agent should not be seen in purview of section 40A(3). Assessee has submitted that
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 the cash payment has been made through an agent hence no such disallowance should be made under section 40A(3). Now this reply of assessee is not acceptable because it has not furnished any details of agent not even the name of agent, or copy of purchase deed or bank statement where it could be seen that any payment has been made to such particular agent. There is no mention of any payment to such an agent even if it exists in lieu of the service provided by him. Also TDS has to be deducted on payment to agent which is nothing but commission. Total brokerage expenses incurred by assessee in the year is Rs.58,27,008/- hand assessee in the same reply submitted on 23.03.2016 has submitted that this entire commission expenses are sales commission. The reply in point no.3 is as below: “During the relevant assessment year assessee has claimed brokerage of Rs.5827008/- on which assessee has deducted TDS as per income tax act and deposited to department and also filed the TDS returns. The % of brokerage/commission depends on the basis of no. of sales executive in the Director Sales (DS) team and the commission gives to them on the monthly collection by them. The commission % of DS fixed by the company and sales executives & executives commission % decided by DS out of his commission balance commission after distribute to sales executives and executives retained by the DS. Details of brokerage/commission paid during the relevant financial year enclosed with this reply in prescribed format.” Assessee has provided list of all brokers also to whom sales commission of Rs.58,27,008/- are paid and in the list also submitted that all such brokerage are on sales, Hence it is proved that assessee has not paid any commission to so called agent even if it exists on cash purchase. Thus, it is clear that there is no such agent because had there been such an agent he would have some identity and assessee would have paid some commission for its assistance in cash purchase. Also assessee in that case would have deducted TDS on this amount. Assessee has also not given any specific details like name, address and pan of such an agent. Therefore, assessee’s argument is hereby rejected and an addition of Rs.139,72,500/- being made in the total income of assessee. I am satisfied that the assessee had furnished inaccurate particulars and concealed its income therefore, the penalty proceedings u/s 271(1)© is initiated.” 14. During first-appeal, the assessee made following submission before Ld. CIT(A) which is noted on Page No. 5 of the order of Ld. CIT(A):
“2] Ground No.2: (Addition of Rs. 1,39,72,500/- U/s 40A(3). 1. The assessee in the ground No.2 of the present appeal, has challenged the addition of Rs. 1,39,72,500/- u/s 40A(3) made to the income of the assessee on account of cash payments for purchase of land.
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 2. The assessee had purchased a land from Shri Madhav Rao S/o Shri Balwant Rao ji Maratha through an agent shri Amit Kumar Ghungarwal. The seller is a farmer and he insisted cash payment as there was no long term relationship with the assessee. Since the farmer was unknown to the assessee, therefore, this deal was finalized by Shri Amit Kumar Ghungarwal, who was known to both seller & Purchaser. Copy of Form P.II-Khasra is enclosed as per Paper Book (Page No.- 25)
On 21.03.2016, the assessing officer vide note sheet entry asked as to why land of Rs. 1,39,72,500/- purchased by cash should not be disallowed as per Section 40A(3) of the income Tax Act. In response to this note sheet entry, the AR of the assessee submitted that as per clause (k) of rule 6DD cash payment made through an agent is not hit by the disallowance provision of section 40A(3). The assessee was making all efforts to produce Shri Amit Kumar Ghungarwal to attend the office of AO and record his statement. However, before producing him, the Ld AO passed the order on 29.03.2016 and made an addition of Rs. 1,39,72,500/- on the ground that the assessee has failed to give specific details like name, address of the agent. Therefore, your good self will kindly appreciate the fact that the assessee was not given adequate opportunity to prove its case. We are enclosing herewith an affidavit of agent Shri Amit Kumar Ghungharwal to the effect that he was appointed as an agent and his commission was paid by the seller Shri Madhav Maratha. Affidavit is enclosed as per Paper Book (Page No.26-31). Since, the payment was made through an agent, therefore, clause (k) of rule 6DD applicable to the case of the assessee. In this regard we would like to draw your attention to the following judgement of ITAT Chennai Bench ‘B’ in the case of Om Shakty Agencies (P) Ltd. vs deputy Commissioner of Income Tax Central Circle-III (I) Chennai [2016] 66 taxmann.com 287 (Chennai-Trib) / [2016] 157 ITD 1062 (Chennai- Trib.) / [2016] 177 TTJ 419 (Chennai-Trib)-
--There is no dispute to the fact the assessee has no direct dealing with the landowners. The payment were made to landowners through agents and payments also received by the assessee as a principal. Being so, as the Provisions of Rule 6DD(k) 1962 Rules, where the payment is made by any person to his agent, who is required to make payment in cash for services on behalf of such person, the provisions of section 40A(3) cannot be applied so as to disallow any portion of the expenditure. [para 10.1]
Without prejudice to above it is submitted that the registered sale deed was executed on 7th August 2012 in the office of Sub-Registrar, Indore. Copy of the registered sales deed is enclosed as per Paper Book (Page No. 32 to 45). The amount of Rs. 13972500/- paid in cash was certified by the stamp Registration Authority. The identity of the payee is established. The cash payment was made since the vendor did not know the assessee, therefore, insisted for payment in cash as result thereof, payment had to be made in cash. That the above payment was made due to business expediency, therefore not liable to be hit by provisions of Section 40A(3) of the Act read with rule 6DD of the Income tax Rules, 1962. Proviso to Section 40A(3) provided that “No disallowance shall be made and no payment shall be
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 deemed to be the profit and gains no disallowance shall be made and no payment shall be deemed to be the profit and gains of business and profession under sub-section (3) and the sub-section where a payment or aggregate of payment made to a person in a day otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand Rupees, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, consideration of business expediency and other relevant factors:”
In this connection we draw your honor’s kind attention to the following judgements: -
In the case of M/s Tirupati Construction, Ujjain Vs. Commissioner of Income Tax, Ujjain ITA No.420/Ind/2014, ITAT Indore Bench, Gurdas Garg vs Commissioner of Income tax-(Appeal), Bhatinda [2015] taxmann.com 289 (High court of Punjab & Haryana), Anupam Teleservices vs. ITO; 218 ITR 46 (Hon’ble High Court) and Harshila Chordia Vs. ITO (2008) 298 ITR 349 (Hon’ble Rajasthan High Court) ….that the assessee cash transaction was genuine, the conveyance deed was executed before the Registrar, the name and address of the seller was mentioned in the sale deed itself, the identity of the person was not in doubt. In these circumstances, the Assessing Officer must have come to the conclusion that the provisions of section 40A(3) of the Act were not applicable – Considering all these aspects, also well established, the payments have been made to the seller of the land in rural areas, the AO rightly accepted the claim of the assessee and found that the provisions of section 40A(3) are not applicable in the case of purchase of land by the assessee even if it was acquired as a stock in trade……the exemptions contained under rule 6DD are not exhaustive and that the said rule must be interpreted liberally. Further in the case of CIT vs. Achal Alloys Ltd. 218 ITR 46, (Hon’ble M.P. High Court) …. held that where any cash payments were duly signed by payees and insistence of cash payment was found on the ground that the payee did not have any bank account and being illiterate, they require payment in cash then no disallowance is called for by invoking provisions of section 40A(3) of the Act. Following the aforesaid judgments of Hon,ble M.P. High Court and Rajasthan High Court, Hon’ble ITAT, Indore has allowed the appeal in the case of M/s Tirupati Construction, Ujjain Vs. Commissioner of Income Tax, Ujjain 27 ITJ 499, ITAT Indore Bench. The said case law squarely applies in the present case of appellant. That in view of the above the addition of RS. 1,39,72,500/- made by the assessing officer requires to be deleted in full.” 15. The Ld. CIT(A), after considering the submissions of assessee, deleted the addition by observing and holding thus:
“5.2 Ground No.2: Through this ground of appeal, the appellant has challenged the addition of Rs.1,39,72,500/- on account of cash payment more than Rs.20,000/- u/s 40A(3). The appellant submitted that he had purchased the land from Shri Madhav Rao S/o Shri Balwant Raoji Maratha. The seller of land is a farmer and was not having long term relationship with the appellant.
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 The farmer was unknown to the appellant. The seller refused to accept the payment by cheque, therefore, the appellant has to make the payment in cash. It has been held in the case of Gurdas Garg v/s The commissioner of Income Tax Appeals, the high court of Punjab and Haryana held that ... The Identity of the payees i.e.; the vendors in respect of the land purchased by the applicant was established ... each of these agreement was certified by the stamp registration Authority ...the transaction were genuine and bar against the grant of deduction under section 40A(3) was not attracted. 5.2.1 In case of Rakesh Kumar v/s Asst. CIT the ITAT Amritsar Bench also held that ... sale deeds of properties were registered with revenue Dept. of govt... the payments cannot be disallowed under Section 40A(3) of the Act.
5.2.2 In the present case, the genuineness of payment has not been doubted as Assessing Officer himself has held that sale deeds of properties were registered with the Revenue Department of Govt. Therefore, the case of the assessee is fully covered by the above decision of Hon’ble Punjab and Haryana High Court.
5.2.3 The Hon’ble ITAT Indore Bench, Indore vide ITA No. 522/Ind/2014 dated 14.07.2016 in the case of Tirupati Constructions has allowed complete relief on the aforesaid point of addition to the appellant.
5.2.4 Similar view has been taken by ITAT Indore bench, Indore in the case of Vijay Kumar Jaiswal vs ACIT, 28 ITJ 289. In this case H’ble TAT held that the payment were made at the direction of the department and the situation was not within the control of the appellant and ITAT deleted the said disallowances.
5.2.5 ITAT Indore bench Indore in the case of ITO Vs Jitendra Kumar Mandlecha, 23 ITJ 644 In this case the facts of the case was as under: Assessee made payment of business expenditure above Rs. 20000/- in cash, AO made disallowances of the same – ITAT Held that object behind the provisions is that persons are not allowed to show false expenditure for avoiding income tax and therefore, once the genuineness of payment and identity of the payee is established fully, the object is achieved and in such a situation, if the payment has been made looking to the necessity of settlement or difficulty of payee as payee was in need of money after banking hours. The same cannot be said to have been made in violation of object of the rules – Expenditure is therefore allowable in present case, as same is genuine and duly recorded and out of business exigencies.
5.2.6 Therefore, respectfully following the same the addition made by the AO amounting to Rs.1,39,72,500/- is Deleted. Therefore, the appeal on this ground is Allowed.” 16. Before us, Ld. DR vehemently supported the assessment-order. He argued that the orders of lower authorities clearly demonstrate that not only
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 the assessee has taken different stands before Ld. AO and Ld. CIT(A) to come out of section 40A(3) but also miserably failed to prove his stands. Therefore, according to Ld. DR, the assessee does not deserve the benefit of the judicial rulings relied upon by him and considered by Ld. CIT(A). Ld. DR strongly contended that the disallowance u/s 40A(3) is a statutory disallowance and since the assessee is not able to make out a successful case to demonstrate why section 40A(3) cannot be applied, there has to be a disallowance as provided for in the section. Ld. DR, therefore, prayed to uphold the disallowance.
Per contra, the Ld. AR relied upon the order of Ld. CIT(A), a Written Synopsis and a Compilation of Decisions filed by him. He submitted that the seller of the land was a farmer and refused to accept payment through cheque and therefore the assessee had to make cash-payment only. He further submitted that the transaction has been done through a registered- deed and therefore the payment, even if made by assessee in cash, cannot be tainted with a bogus claim of expenditure. Ld. AR submitted that the section 40A(3) has been enacted to restrict the claim of bogus deductions by tax-payers, which is not in present case. Ld. AR also relied upon the following decisions, copies of which have been filed in the Compilation of Decisions:
Geo Connect vs. DCIT (I.T.A.T. Delhi) dated 29.08.22 2. Sangeeta Verma vs. CIT (Allahabad HC) dt. 8.10.21 3. Tirupati Construction (I.T.A.T. Indore) did.14.07.16 4. Mohd. Ali Sheikh (I.T.A.T. Vizag) did.7.4.21 5. Vijayeta Buildcon (I.T.A.T. Jpr) 27.10.20 6. A Daga Royal Arts (I.T.A.T. Jpr) dt 15.5.18 7. Girish Poddar (I.T.A.T. Pune) dt.30.10.19 8. Anup Tele Services (Guj HC) dt. 22.01.14 9. Gurdas Garg vs. CIT(A) (P&H HC)
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 Ld. AR submitted that the order passed by Ld. CIT(A) is a reasoned order on the issue and his action to delete the disallowance must be upheld.
We have carefully considered the rival submission of both sides and the material available before us. We observe that the assessee has purchased a land; the cost of land has been claimed as a business- deduction; the purchase consideration has been paid in cash; and therefore the situation attracts the provision of section 40A(3) of Income-tax Act, 1961. There is no dispute on these points by either side. Now, what remains to be decided is a very short-point i.e. whether the assessee has any valid reason to come out of section 40A(3) or not? On a careful consideration of assessment-order, we observe that the before Ld. AO, the assessee attempted to take benefit of clause (k) of Rule 6DD which provides that the disallowance u/s 40A(3) shall not be attracted if the cash-payment is made through an agent. Accordingly, the assessee submitted to Ld. AO that the impugned cash-payment was made through an agent. But when the Ld. AO tested this claim of assessee, he found clear-cut shortcomings i.e. (i) the assessee did not submit any detail of agent, even the name of agent was not submitted, and (ii) the assessee has not paid any brokerage for purchase- transaction; although during the year the assessee had incurred brokerage of Rs. 58,27,008/- but that brokerage, as accepted by assessee itself in own reply dated 23.03.2016, was for sale-transactions and not for any kind of purchase-transaction; the assessee has not deducted any kind of TDS out of brokerage for purchase-transaction. With such concrete findings, the Ld. AO concluded “Thus it is clear that there is no such agent because had there been such an agent he would have some identity and assessee would have paid some commission for its assistance in cash purchase. Also assessee in that case would have deducted TDS on this amount. Assessee has also not given any specific details like name, address and PAN of such an agent. Therefore assessee’s argument is hereby rejected and an addition of Rs. 1,39,72,500/- being made in the total income of assessee”. Then came the next stage of first-appeal before Ld.
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 CIT(A). We observe that before Ld. CIT(A), the assessee took an altogether new and different stand i.e. the seller of land was a farmer and insisted on cash-payment, therefore based on decided rulings the section 40A(3) was not applicable. At the same time, the assessee also submitted an affidavit of one Shri Amit Kumar Ghungarwal to the effect that he was engaged as an agent in the transaction for which he received brokerage from the seller of land. The assessee also submitted that it was in the process of producing Shri Amit Kumar Ghungarwal before Ld. AO and have his statements recorded before Ld. AO but the Ld. AO passed assessment-order. We do not find any credence in these submissions of assessee. We fail to understand as to how the assessee can have an agent who did not charge any brokerage from assessee in a property-transaction. This claim of assessee is very ridiculous and just to dislodge the findings made by Ld. AO in assessment- order. Further, the claim of assessee that he was in the process of producing Amit Kumar Ghungarwal but the AO passed assessment-order is also not having any worth for the reason that the assessee even did not supply the name of agent to Ld. AO. It is simply an effort of assessee to blame the Ld. AO and thereby upset the assessment-order. Furthermore, the claim of assessee that the seller was a farmer and insisted on cash-payment, is a newer theory taken by assessee for the first time before Ld. CIT(A) just to take benefit of decided rulings when the assessee realized that its claim of agent was not going to be successful. It is also noteworthy that the assessee has not produced any iota of evidence to Ld. CIT(A) or even before us to prove that the seller in fact insisted on cash payment. On a careful analysis of operative part of the order passed by Ld. CIT(A) [Para No. 5.2 of his order as reproduced above], we also observe that the Ld. CIT(A) has not uttered any voice on the original claim of clause (k) of Rule 6DD raised by assessee before Ld. AO. The Ld. CIT(A) has simply considered the newer stand of assessee, cited the judicial rulings thereon and deleted the disallowance. In fact, the Ld. CIT(A) has not taken pains to consider (i) that the assessee made a different claim before Ld. AO which was turned down by Ld. AO; and
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14 (ii) that the assessee has not given any evidence in support of newer stand taken for the first time before him. That brings us to conclude that the assessee miserably failed to prove on facts as to how the section 40A(3) is not applicable to it. We do not have quarrel with the decisions cited by Ld. AR but since we do not find credence / strength in the claims of assessee on facts, we do not hesitate in concluding that the assessee has failed to prove the circumstances to come out of the clutches of section 40A(3). Therefore, we are of the view that the disallowance u/s 40A(3) is attracted in this case. We, therefore, uphold the action of Ld. AO and so also the disallowance made by him. Thus, the revenue succeeds in Ground No. 3.
In the result, this appeal of revenue is partly allowed.
Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 15/12/2022.
Sd/- Sd/-
(MADHUMITA ROY) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore �दनांक /Dated : 15.12.2022 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY
Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
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M/s Ideal Ashiyana Private Ltd. ITA No.528/Ind/2018 Assessment year 2013-14
Date of taking dictation 13.12.22 2. Date of typing & draft order placed before the 13.12.22 Dictating Member 3. Date on which the approved draft comes to the 13.12.22 Sr. P.S./P.S. 4. Date on which the approved draft is placed before 13.12.22 other Member 5. Date on which the fair order is placed before the Dictating Member for pronouncement 6. Date on which the file goes to the Bench Clerk 7. Date on which the file goes to the Head Clerk 8. Date on which the file goes to the Assistant Registrar for signature on the order 9. Date of dispatch of the Order
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