MAA SANKALP BUILDCON,PUNE vs. INCOME TAX OFFICER, WARD 14 (1), PUNE

Although a number of grounds have been raised by the assessee, however, these all relate to the order of the Ld. CIT(A) in confirming the disallowance of Rs.22,80,823/- made by the Assessing Officer u/sec.40A(3) of the Act.

Facts of the case in brief are that the assessee is a partnership firm engaged in the business of construction and selling of residential and commercial complex. It filed its return of income on 31.10.2018 declaring total income of Rs.67,84,626/-. The case of the assessee was selected for compulsory scrutiny for verification of the income from real estate business. Statutory notices u/sec.143(2) and 142(1) were issued and served upon the assessee, to which, the A.R. of the assessee appeared from time to time and filed various details.

Before the ld. CIT(A), it was argued that the Assessing Officer without calling for the details of expenses incurred made the addition of the same and that the provisions of sec.40A(3) are not applicable to the facts of the case since the payments have been made for plying, hiring or leasing of goods carriage for which the limit is of Rs.35,000/- and not Rs.10,000/-. The assessee also enclosed transport invoices for additional clarity since the case is falling under the second proviso to sec.40A(3) of the Act.

Aggrieved by the order of the Ld. CIT(A), the assessee carried the matter in appeal before the Tribunal.

The Learned DR on the other hand heavily relied on the order of Assessing Officer and Ld. CIT(A). He submitted that during assessment proceedings the assessee did not file the requisite details despite being asked by the Assessing Officer.

We have heard the rival arguments advanced by both the sides and perused the record. We find the Assessing Officer made addition of Rs.22,80,823/- on the ground that the assessee has violated the provisions of sec.40A(3) by making cash payments exceeding Rs.10,000/-. We find although the assessee before the Ld. CIT(A) made submissions that his case is falling under second proviso to sec.40A(3) of the Act, however, the Ld. CIT(A) observed that the assessee is a builder and contractor and all the payments were not made to the transporters but majority of payments were made towards purchase of sand and certain other material etc. In our opinion, even if all the payments were not made to the transporters but majority of payments were made towards purchase of sand and certain other material etc., it was incumbent upon the Ld. CIT(A) to identify those payments which were made to the transporters to which the second proviso of sec.40A(3) of the Act are applicable and should have given appropriate relief to the assessee on account of non- violation of provisions of sec.40A(3) of the Act. However, the Ld. CIT(A) by passing a general remark, has dismissed the appeal filed by the assessee, which in our opinion, is not in accordance with law. We find merit in the submission of the learned counsel for the assessee that since payments were made to transporters for which the second proviso to sec.40A(3) are applicable and since it requires verification at the level of the Assessing Officer, the matter may be restored to the file of Assessing Officer for adjudication of the issue afresh. Further, the details reproduced by the Ld. CIT(A) in his order at pages 5 to 13 clearly indicates that certain payments were made to transporters. Therefore, considering the totality of the facts and circumstances of the case and in the interest of justice, we deem it proper to restore the issue back to the file of the Assessing Officer with a direction to examine the details of payments made to various parties in excess of Rs.10,000/- and also examine the applicability of the second proviso to sec.40A(3) of the Act and decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

In the result, appeal of the assessee is allowed for statistical purposes.