AMIT COLONIZERS LIMITED,JAIPUR vs. ACIT, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 253/JP/2023 fu/kZkj.k o"kZ@Assessment Years : 2012-13 cuke Amit Colonizers Limited ACIT, Vs. Flat No. 1, Plot No. E-97, Subhash Jaipur Marg, C- Scheme, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCA 9928 R vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Vedant Agarwal (Adv.) jktLo dh vksj ls@ Revenue by : Sh. Anup Singh (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 01/08/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 26/09/2023 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM

This appeal is filed by assessee and is arising out of the order of the Commissioner of Income Tax (Appeals)-4, Jaipur dated 18/01/2023 [here in after (CIT(A))] for assessment year 2012-13 which in turn arise from the order dated 11.03.2015 passed under section 143(3) of the Income Tax Act, by the DCIT, Circle-02, Jaipur.

2. In this appeal, the assessee has raised following grounds: -

2 Amit Colonizers Limited vs. ACIT “1. On the facts & circumstances of the case and in law also ld. Lower authorities grossly erred in making and confirming addition of Rs.12,43,645/- u/s 40A(3) of the Income Tax Act.

2. That the appellant craves his indulgence to add, amend, alter or delete the grounds of appeal.”

3.1 In the assessment proceedings on perusal of record produced and details furnished by the assessee it is noted by the assessing officer that the assessee has made payments exceeding Rs 20,000/- against purchase of land during the period under consideration. Thus, the assessee has incurred expenses exceeding Rs. 20,000 otherwise by an account payee cheque drawn on a bank or detail account. Details of such payment is tabulated here in below:

S. No. Date of Transaction Name of the payee party Amount 1 22.03.2012 Jitendra Kumar Yadav 9,99,000 2 22.03.2012 Jitendra Kumar Yadav 1,01,000 3 25.11.2011 Ramesh Chand 42,645 4 21.11.2011 Jitendra Patni 50,000 5 20.03.2012 Mr. Prabhu and Mr. Suja 9,51,000 Total 12,43,645 S. No.1 & 2:- The assessee company has entered into a development agreement with Mr. Jitendra Kumar Yadav on 22.03.2012 for development of Plot No. E-97, Subhash Marg, C-Scheme, Jaipur. During F.Y 2011-12 the assessee paid Rs. 11,00,000/- in cash. Since payments are above Rs. 20,000/- therefore, Section 40A(3) attracted on these payment and same is disallowed. S. No.3:- The assessee company purchased agricultural land of Rs. 9089000/- from Sh. Ramesh Chand & Others on 25.11.2011 and cash payment made by assessee amounting to Rs. 42,645/-. Since payments are above Rs. 20,000/- therefore, Section 40A(3) attracted on these payment and same is disallowed. S. No. 4:- The assessee company purchased property House No. 297, Above shop No. 45-46, Ghatgate Bazar, Ramganj Anaj Mandi, Jaipur from Mr. Jitendra Patni on 21.11.2011 and cash payment made by assessee amounting to Rs. 50,000/-. Since payments are above Rs. 20,000/- therefore, Section 40A(3) attracted on these payment and same is disallowed. S. No. 5:- The assessee company purchased land in village-Lakheshra, Sanganer, Jaipur on 20.03.2012 from Mr. Prabhu & Mr. Suja and made cash payment of Rs. 9,51,000/-. Since payments are above Rs. 20,000/- therefore, Section 40A(3) attracted on these payment and same is disallowed.”

“5.3 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- (1) There are three limbs to this ground of appeal, which is as under :- i) The first limb of the ground of appeal is disallowance of Rs. 99,000/- on a/c of cash payment made to Shri Jitendra Kumar Yadav on 22.03.2012. The claim of appellant is that the payment was made by an a/c payee cheque no. 52648. The appellant has filed copy of a/c Shri Jitendra Kumar Yadav in the books of appellant The supporting documents which the appellant should have furnished is copy of his O/D account maintained in Punjab National Bank showing the debit of the said amount. The evidence furnished by the appellant is self-serving document and cannot be accepted as an evidence for making the payment otherwise than by cash. During the appellate proceedings also the appellant has failed to furnish the copy of bank a/c showing the debit of such cheque. In view of these facts, it is not established that the payment was made by cheque and not in cash. ii) The second limb of the ground of appeal is the payment of Rs. 1,01,000/- made in cash to Shri Jitendra Kr. Yadav on 22.03.2012. The said payment is claimed to be made for development agreement, the benefit of which is of an enduring nature. As per the written submissions the appellant claims that the payment is on a/c of security deposits, however no evidence/details of the security deposits, the purpose thereof has been filed. However in the rejoinder on the report of the AO, as submitted by the” appellant, he has changed his arguments. Relevant portion is reproduced herein as under: "Beside cash payment of Rs.1,01,000/-on 22.03.2012, Rs.9,99,000/- was paid to Mr. Jitendra Kumar by a/c. payee cheque from the O.D. a/c. No. 0247009300028698 of the Appellant with Punjab National Bank as per copy of account of Mr. Jitendra Kumar in its books..." This means that the appellant is admitting that the payment of Rs. 1,01,000/- was made in cash. Besides, the submissions of the appellant and the contents of rejoinders (on the remand report sent by AO) are unsubstantiated In view of these facts, it is not established that the payment was made as a security deposits and the provisions of section 40A(3) are clearly applicable on this payment.

5 Amit Colonizers Limited vs. ACIT iii) The third limb of the ground of appeal is payment of Rs. 50,000/- paid to Shri Jitendra Kr. Patni on 21.11.2011, in the capacity of agent for and on behalf of the appellant. In respect of this payment the AO has given a categorical finding that the appellant company purchased property house no. 297, above shop no. 45- 46, Ghatgate Bazar, Ramganj Anaz Mandi, Jaipur from Shri Jitendra Kr. Patni on 21.11.2011 and cash payment made by the appellant amounting to Rs. 50,000/- is clearly mentioned therein. There is no evidence furnished either during appellate proceedings and nor during assessment proceedings that this payment is made to the person in his capacity as an agent. iv) The submissions of the appellant have been considered, which are repetitive since the appellant has failed to establish with evidence- (a) sum of Rs. 99,000/- paid to Shri Jitendra Kumar Yadav on 22.03.2012 was paid through the banking channels and not in cash (b) sum of Rs. 1,01,000/-paid to Sh. Jitendra Kumar Yadav on 22.03.2012 was in pursuance of a development agreement and did not come under the purview of section 40A(3) of the Act. (c) sum of Rs. 50,000/- paid to Sh. Jitendra Kumar Patani on 21.11.2011 was paid in his capacity as an agent, involving reimbursement of expenses. (II) As per detailed discussion in the foregoing paragraphs and in absence of any evidences, the submissions cannot be considered and in view of categorical finding of the AO, I do not agree with the submissions of the appellant and this Ground of Appeal No. 2 is rejected and the addition made by the AO is upheld.

6. In the result, the appeal of the appellant is dismissed.”

5. Feeling dissatisfied from the order of the ld. CIT(A), the assessee preferred this appeal on the grounds as stated here in above para 2.

Apropos to the grounds so raised the ld. AR appearing on behalf of the assessee has relied upon the written submission and the same is reiterated here in below:

MAY IT PLEASE YOUR HONOR: 1. That the present appeal has been filed against the order passed by the Ld. Commissioner of Income Tax (Appeals) dated 18.01.2023.

3. That the present appeal has been filed on 24.04.2023 i.e., within 60 days of the communication of the order. 4. There is only one ground of appeal in the said appeal i.e., the Ld. Lower Authorities erred in making and confirming an addition to the tune of Rs. 12,43,645/- u/s 40A(3) of the Income Tax Act, 1961. Submissions are as under: A. The said addition of Rs. 12,43,645/- can be divided into five sub-heads: I. Payment of Rs. 99,000/- dated 22.03.2012 to Mr. Jitendra Kumar Yadav. [wrongly calculated as Rs. 99,000/-, instead of Rs. 9,99,000/- which was paid via cheque] II. Payment of Rs. 1,01,000/- dated 22.03.2012 to Mr. Jitendra Kumar Yadav. [it is in the nature of security deposit] III. Payment of Rs. 42,645/- dated 25.11.2011 to Mr. Ramesh Chand. [three separate payments under Rs. 20,000/- on 4.11.2011, 5.11.2011, and 6.11.2011 as is clear from the sale deed (p.pg. 40 of the Paper Book)] IV. Payment of Rs. 50,000/- dated 21.11.2011 to Mr. Jitendra Patni. [not sought a deduction of the same] V. Payment of Rs. 9,51,000 dated 20.03.2012 to Mr. Prabhu and Mr. Suja. [Purchase of agricultural land which has been capitalized. Moreover, the sellers of the said land requested for initial cash payment and the Assessee was in need of the said land.] B. That sub-section (3) of Section 40A i.e., ‘Expenses or payments not deductible in certain circumstances’, of the Income Tax Act, 1961 for the AY in question read as follows: “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.” C. Rule 6DD is as under: D. That from the aforementioned provisions, it is clear that this section only talks about ‘not allowing deduction’ of ‘payments or expenses’ made in cash. E. Addressing the issue of payment of Rs. 99,000/- dated 22.03.2012 made to Mr. Jitendra Kumar Yadav. At the very outset, no payment of Rs. 99,000/- has been made to Mr. Jitendra Kumar Yadav on the alleged date. Therefore, this addition must be struck down on this submission alone as the information of the Assessing Officer is improper, non- application of mind, and there is a casual approach in confirming the addition. [Kindly refer to CIT(A) order dated 18.01.2023, whereby he has categorically erred in confirming an addition of Rs. 99,000/- when there is no such cash payment on the given date.]

Moreover, the actual payment of Rs. 9,99,000/- has been made via cheque number 52648. To substantiate its claim, the Assessee had submitted copy of the account of Mr. Jitendra Kumar Yadav in his books, which was rejected for the reason that it is a ‘self-serving’ document. It is submitted that the books of the Assessee are audited books and this rejection of this deduction is arbitrary. The Assessee has however annexed the copy of his OD account as additional evidence, which may be considered by the bench in the interest of principles of natural justice.

F. Addressing the issue of Payment of Rs. 1,01,000/- dated 22.03.2012 to Mr. Jitendra Kumar Yadav. This payment was made in the nature of ‘Security Deposit’, which has not been claimed as expenses under the Profit and Loss Account. To substantiate its claim, the Assessee submitted a copy of the Balance Sheet along with its note. From the perusal of the same it is clear that the said security deposit has been capitalized and therefore, the same cannot be treated as ‘business expenditure’. The Assessing Officer could have invoked provisions of Section 269SS of the Act on the recipient, but there is no provision to disallow security deposit under the law and therefore, provisions of Section 40A(3) of the Act cannot be invoked on the Assessee. G. Addressing the issue of payment of Rs. 42,645/- dated 25.11.2011 to Mr. Ramesh Chand. The Assessing Officer while making this addition has failed to consider the facts of the case in a proper light. A bare perusal of the sale deed, which has been signed by Mr. Ramesh Chand (the recipient), it is clear that these payments have been made on three different dates and all were within the permissible limit of Rs. 20,000/- per day. Perusal of particular Page 40 of the Paper Book would reveal that these payments were received by Mr. Ramesh Chand on 4.11.2011, 5.11.2011, and 6.11.2011. The Assessing Officer has nothing contrary on record to substantiate the basis of his addition. The CIT(A) has rejected this contention of the Assessee for the reasons that the AO has recorded a ‘factual finding’ that the payments were made on a single day and the document relied upon is a ‘self-serving’ document. However, both the AO and the CIT(A) failed to peruse the sale deed which is not a ‘self-serving’ document and has been signed by the recipient of the ‘cash’ as well. Basically, Mr. Ramesh Chand has accepted on a stamp paper that these payments were received by him on three different dates. Therefore, provisions of Section 40A(3) are not applicable on these set of facts. H. Addressing the issue of payment of Rs. 50,000/- dated 21.11.2011 to Mr. Jitendra Patni- Not pressed I. Addressing the issue of payment of Rs. 9,51,000 dated 20.03.2012 to Mr. Prabhu and Mr. Suja. From the sale deed between the Assessee and Prabhu and Suja, which was available before the Ld. Lower Authorities, it is clear that the Assessee has purchased the property for a total amount of Rs. 16,51,000/-. Out of the total transaction, the amount of Rs. 9,51,000/- has been paid by the Assessee to Mr. Prabhu and Mr. Suja in cash. The remaining amount has been paid by the Assessee vide bank account. It is pertinent to note that the Assessee has consistently submitted that the seller of the ‘agricultural land’ insisted on the first payment i.e., ‘syahi’, to be made vide cash as they were in need of money and did not want the payment to be made via cheque. As the Assessee was inclined to purchase the said land, it offered cash amount to the sellers on their insistence as a gesture of good faith. Once the same was established, it made the rest of the payments vide bank account. However, the Ld. Lower Authorities were not convinced with Assessee’s submission. It is humbly submitted that the object of the provision is to ensure that no fictitious amount is claimed as expenditure by the bearer. It is further submitted that it was not the intention of the legislature to restrict the genuine business transactions, therefore, the provision cannot be applied where such cash has 8 Amit Colonizers Limited vs. ACIT been paid as part of a commercial consideration. We rely on the Hon’ble ITAT Jaipur’s judgment in the case of A Daga Royal Arts [ITA 1065/JP/2016], KK Construction [ITA 990/JP/2017], and Vijayeta Buildcon [ITA 980/JP/2018]. We also rely on the latest judgment of ITAT Delhi in the case of Geo Connect Ltd. [ITA 2896/DEL/2018]. PRAYER: Therefore, in light of the aforementioned submissions, it is humbly prayed that the said additions u/s 40A(3) may kindly be deleted.

“MAY IT PLEASE YOUR HONOR:

1. 1. That the present appeal has been filed against the order passed by the Ld. Commissioner of Income Tax (Appeals) dated 18.01.2023.

2. That the Assessee was represented by another Assessee Representative at the CIT(A) stage.

3. That while preparing the case, the undersigned Assessee Representative found out that an addition of Rs. 99,000/- has been made on account of cash paid to Mr. Jitendra Kumar Yadav.

4. That the Assessee had vehemently argued before the Id. Lower Authorities that the said payment was of Rs. 9,99,000/- and not Rs. 99,000/-. Moreover, the same was made via cheque number 52648. The account of Mr. Jitendra Kumar Yadav in the books of Assessee was submitted before the Id. Lower Authorities as supporting evidence.

5. That the Ld. CIT(A) in the impugned order observed that the 'appellant should have furnished' 'copy of his O/D account maintained in Punjab National Bank'.

6. That, due to bonafide and inadvertent error, the said O/D Account has been submitted with the Paper Book [at S. No. 4 on page 26-35] filed by the Assessee on 26.06.2023, whereby it has been verified that all the documents are part and parcel of record of lower authority. The actuality is that the OD account that was submitted before the Ld. Lower Authorities is only for limited period (i.e. May 2011) and the said transaction dated 24.03.2012 is not part of the said record. Prayer Therefore, in light of the above submissions, it is humbly requested from the Hon’ble Tribunal to allow this application of additional evidence and consider the bank account to the tune of Bank Payment made by the Appellant-Assessee on 24.03.2012. quoting rule 29 submitted that the bank statement and pleased that the bank statement cannot be considered as additional evidence. The payment made on 22.03.2012 wrongly typed at as 9,99,000/- instead it is Rs. 99,000/- only. The contention of the assessee cannot be considered as additional evidence before the bench [Bank statement assessee paper book page 28]. The ld. CIT(A) has merely stated that the documents submitted are self serving documents which is supported by the bank statement and copy of account of Mr. Jitendra Kumar Yadav from his books [APB16-17] and therefore, the addition has no basis. As regards the payment of Rs. 1,01,000/- the ld. AR of the assessee submitted that the assessee has accounted this amount as security deposit [ Schedule 11 page 18-19 of paper book ]. As this is not a claim of expenses the same is not covered u/s. 40A(3) of the Act. As regards the payment of Rs. 42,645/- the same is not paid on single day but has been made Rs. 18,000/- on 4- 11, Rs. 18,000/- on 5-11 and Rs. 6,645/- on 6-11 as the same is evident from the registered deed copy placed on record at page 40 of the paper book and as the same is paid on three different date it is outside the purview of section 40A(3) of the Act. As regards the payment of Rs. 50,000/- the ld. AR of the assessee not pressed the disallowance. As cash book page 23 of the paper book for purchase of agricultural land [ APB 81]. The total consideration of the property was at Rs. 16,51,000/- out of which Rs. 9,51,000/- paid in cash one to Ms. Suja on 12.03.2012 Rs. 4,75,500/- [ cash book page 23] and Rs. 4,75,500/- on 16.03.2012 to Mr. Prabhu [ cash book page 24 ]. Since the payment was made at the request of the seller who are agriculturist and their identities were already proved before the state revenue authority while making the registration of the purchase of the property by the assessee. The ld. AR of the assessee also relied upon the para 29 of the decision of this tribunal decision in and decision of the Delhi bench of the ITAT.

8.1. As regards the disallowance of Rs. 99,000/- [ wrongly typed in the order as 9,99,000] the bench noted that the assessee has paid the amount by an account payee cheque and the ld. AO has wrongly considered it as paid in cash. For this contention we have persuaded the cash book at page 24 where the cash payment of that dated i.e. 22.03.2012 is alleged to have been paid once it is clear from the cash book placed on record and the assessee has not considered that payment in the cash book and there is no assessee has not provided the relevant bank statement. In the remand report ld. AO also accepted that for this amount the assessee mentioned the cheque number for payment but the assessee has not filed copy of bank account through which the said payment was made. Thus, considering the non disputed fact that the assessee provided the cash book and that payment is not referred as made in cash the disallowance of that amount by the lower authorities is on account of incorrect appreciation of the facts and therefore, the same is deleted.

8.2 As regards the payment of Rs. 1,01,000 made on 22.03.2012 made to Jitendrakumar Yadav we note from the arguments that the assessee contended that the amount is paid for security deposit and has not been debited to the profit and loss account by the assessee. Whereas the revenue contended that the assessee has changed his contentions and therefore, the same was not accepted by the ld. CIT(A). On this issue we note that it not under dispute that the assessee has accounted security deposit [ Schedule 11 page 18-19 of paper book ] under the loans and advances Rs. 1,66,45,521/- and under that sub schedule Rs. 11,00,000/- appearing as “Jitendra Kumar Yadav [ Security Dep. for Ria Avenue ]. The breakup of this amount is Rs. 9,99,000 paid by cheque and Rs. 1,01,000/- this payment. As it is evident that the said amount is shown as receivable as security deposit and the same has not been debited to the profit & loss account. Therefore, it is imperative to go through the provision of the section 40A(3) of the Act and the relevant provision is extracted here in below:

Section 40A(3) 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, or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed46, exceeds ten thousand rupees, no deduction shall be allowed in respect of such expenditure. On this issue the finding of the ld. AO in the remand proceeding is persuaded wherein the ld. AO noted as under:

The assessee has claimed that out Rs. 11,00,000/-, Rs. 9,99,000/- was made by cheque and Rs. 1,01,000 as cash. The assessee has also mentioned a cheque number for payment of Rs. 9,99,000, but the assessee has not filed copy of bank account through which the said payment was made during the course of assessment proceedings as well as now along with its submission hence the same cannot be verified and therefore cannot be accepted as such. Thus, it is evident that the ld. AO is taking about the cheque details not commenting upon the payment accounted by the assessee as security deposit. Thus, when the assessee has not debited this amount in the profit and loss account and therefore, this payment does not attract the provision of section 40A(3) of the Act. assessee has filed an independent evidence in the form of registered document of property (APB-40) wherein the payment is made on three different dates and the same is not paid on a single day. The assessee has paid Rs. 18,000/- on 4-11-2011, Rs. 18,000/- on 5-11-2011 and Rs. 6,645/- on 6-11-2011 as the same is evident from the registered deed copy placed on record. Whereas the ld. AO contended that the assessee has debited the said amount on 25.11.2011. Thus, when the evidence in the form of the third party evidence categorically in the form of the registered document signed by the parties before the state revenue officer has more evidential value then the self made cash book and therefore, considering that evidence placed on record and considering the provision of section 40A(3) of the Act we are of the considered view that amount Rs. 42,645/- is not disallowable u/s. 40A(3) of the Act.

8.4 As regards the payment of Rs. 50,000/- the assessee has fairly admitted not to dispute the disallowance and therefore, the same is confirmed.

8.5 Now the last disallowance made by the ld. AO for an amount of Rs. 9,51,000/- paid to two parties. This payment is accounted by the assessee in cash one to Ms. Suja on 12.03.2012 an amount of Rs. 4,75,500/- [ cash book page 23] and Rs. 4,75,500/- on 16.03.2012 to Mr. Prabhu [ cash book page 24 ]. Since the payment was made at the request of the seller who are agriculturist and their identities were already proved before the state revenue authority while making the registration of the purchase of the property by the assessee. Therefore, though the payment is made by the assessee for the purchase of agricultural land the assessee was on account of the business exigences and at the request of the buyer paid the cash.

The identity and genuineness of the transactions is not under dispute. The ld. AR of the assessee relied upon the decision of this bench in the case of M/s. Vijayeta Buildcon Private Limited in the similar issue is dealt with by the co-ordinate bench and the relevant part of the decision in that case relied upon is reproduced here in below :

In the result, appeal of the assessee is partly allowed.

Order pronounced in the open court on 26/09/2023. Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼ jkBkSM deys’k t;arHkkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 26/09/2023 *Ganesh Kumar, PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Amit Colonizers Limited, Jaipur izR;FkhZ@ The Respondent- ACIT, Jaipur 2. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 253/JP/2023) 6. vkns'kkuqlkj@ By order,

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