2019 (3) TMI 553 - AT - Income Tax

Tribunal validates income tax proceedings, rejects addition under Section 40A(3). Assessee's appeal dismissed.

The Tribunal upheld the validity of the proceedings initiated under Section 153C of the Income Tax Act, finding that the documents seized during the ... Assessment u/s 153C - legality of the proceedings initiated u/s 153C - HELD THAT:- As perused the materials available on record and gone through the orders of the authorities below. We find that the submissions of the assessee are contrary to the records as the documents filed are the journal entries and some of the vouchers or debit notes which are belonging to the assessee. Therefore, under these facts, it cannot be construed that there was no incriminating material for initiating the proceedings u/s 153C. We therefore, reject the grounds raised by the assessee. Accordingly, the cross objection filed by the assessee is dismissed. Disallowance of cash payments u/s 40A(3) - payment in cash exceeding the monetary limit so prescribed - assessee has made payment in cash and the case of the assessee does not fall in any of the exception - CIT-A deleted the addition - business expediency - as per assessee sellers of the land insisted for making payments in cash - HELD THAT:- In view of the fact that the assessee had to make payment on the insistence of the sellers respectively and following the judgement in the case of Smt. Harishila Chordia Vs. ITO [2006 (11) TMI 117 - RAJASTHAN HIGH COURT] and Anupam Teleservices Vs. ITO [2014 (2) TMI 30 - GUJARAT HIGH COURT], we do not see any reason to interfere in the finding of the Ld. CIT(A) and the same is hereby affirmed. - Decided against revenue. Issues Involved:1. Legality of the proceedings initiated under Section 153C of the Income Tax Act.2. Deletion of addition made under Section 40A(3) of the Income Tax Act.Detailed Analysis:1. Legality of the Proceedings Initiated under Section 153C:The assessee challenged the validity of the proceedings initiated under Section 153C of the Income Tax Act, arguing that no incriminating material was found during the search and seizure operation that would justify such proceedings. The assessee contended that the assessment order passed under Section 143(3) read with Section 153C was not in accordance with the law and should be quashed.The facts reveal that a search and seizure operation was conducted on 4.2.2009, during which certain documents pertaining to the assessee were found. Consequently, a notice under Section 153C was issued on 15.12.2009. The assessee objected to the notice, arguing that no incriminating material was recovered. However, the objection was not accepted, and the assessment was framed, leading to an addition of Rs. 65,87,000 for cash payments amounting to Rs. 32,93,500.The Tribunal found that the documents in question included journal entries and vouchers or debit notes belonging to the assessee, thereby constituting incriminating material. Therefore, the Tribunal rejected the grounds raised by the assessee and dismissed the cross-objection, upholding the validity of the proceedings under Section 153C.2. Deletion of Addition Made under Section 40A(3):The revenue appealed against the deletion of an addition of Rs. 65,87,000 made under Section 40A(3) of the Income Tax Act, which disallows cash payments exceeding a specified limit. The revenue argued that the assessee made payments in cash and did not fall under any exceptions provided under the Act.The assessee contended that the cash payments were made due to business expediency, as the sellers of the land insisted on cash payments. It was also argued that substantial payments were made through banking channels and that the transactions were genuine business transactions. The assessee relied on various judicial pronouncements to support the contention that the provisions should be liberally construed.The Tribunal noted that the CIT(A) had decided in favor of the assessee, relying on several judicial precedents, including the cases of CIT Vs. Choudhary & Company and CIT Vs. Rhydberg Pharmaceuticals Ltd. The CIT(A) observed that the payments were reflected in the balance sheet as stock-in-trade and that the identity of the payees was disclosed in the registered sale deeds, with no doubt raised about the genuineness of the transactions.The Tribunal upheld the CIT(A)'s decision, noting that the assessee made cash payments due to the insistence of the sellers and that the transactions were genuine. The Tribunal also referred to the case of Anupam Teleservices Vs. ITO, emphasizing that business expediency and genuine difficulties should be considered. Consequently, the Tribunal dismissed the revenue's appeal.Conclusion:The Tribunal dismissed both the cross-objection filed by the assessee and the appeal filed by the revenue. The proceedings initiated under Section 153C were deemed valid, and the deletion of the addition made under Section 40A(3) was upheld. The Tribunal emphasized the importance of business expediency and the genuineness of transactions in its judgment.