2022 (7) TMI 1078 - AT - Income Tax

Tribunal upholds CIT(A)'s deletions, dismisses Revenue's appeal on unexplained expenses & cash payments.

Dy. Commissioner of Income Tax, Circle – 2, Nashik Versus Shri Rahul Shanta Sawale

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletions of additions made by the AO for unexplained expenditure and cash payments ... Unexplained expenditure for purchase of land - Reliance on seized loose paper - HELD THAT:- We find force in the arguments of ld. AR, we hold the AO is not justified in applying the provisions of section 132(4A) to the assessee. We note from the letter of ADIT (Inv.), which is at Page No. 2 of AO, that itself explains that purchasers have paid amount of Rs.63 lacs and the remaining amount was paid by cheques and RTGS, of which clearly establishes that the appellant-revenue is not clear about the allegation of cash payment by the assessee. Therefore, cash payment of Rs.2 crores as alleged by the Revenue in terms of the seized loose paper cannot be believed. Further, there is no conclusive evidence brought on record by the AO in support of its allegation of that the assessee paid cash of Rs.2 crores to Mr. Zaheeruddin Sallauddin Kokani and there is no indication of assessee’s name in the seized loose papers nor in the statement recorded u/s. 132(4A) vide Q. No. 12. Therefore, the addition is made by the AO is not justified in view of discussion made by us hereinabove and the order of CIT(A) in this regard is justified. Thus, the ground No. 1 raised by the Revenue is dismissed. Addition of cash payment to various persons u/s. 40A(3) - HELD THAT:- We find that the transaction in respect of purchase of plot at Adgaon Shivar, Gat No. 598/1, did not materialize and the payment made in cash of Rs.15,00,000/- was refunded to the assessee by way of bank cheques by Mr. Virendra Vijaysingh Pardeshi. Therefore, no addition is justified in this regard and we find no infirmity in the order of CIT(A). Further, payment in cash was made on bank holidays and claim of exception provided in Rule 6DD(j) of the Rules. We note that no expenditure claimed as the said payment was made on cancellation of shathekhat (agreement to purchase). On perusal of impugned order at Page No. 24, we note that the assessee filed calendar for relevant period showing bank holiday, Office Circular No.07/2010 dated 24-11-2010 issued by Chief General Manager (HRD). The CIT(A) considering the bank holidays and circular relied there upon deleted the addition made by the AO. The ld. DR did not bring on record any evidence rebutting the finding rendered by the CIT(A) in terms of exception contemplated in Rule 6DD(j) of the Rules. Therefore, we find no infirmity in the order of CIT(A) in this regard. Regarding the payment made to Mr. Gend Sagar Parasharam and Mr. Kamal Singh Sohansingh Chitodiya we note that the said two payments were made before the Sub-Registrar, Nashik which are part of sale consideration. We find the CIT(A) discussed the said issue in his order at Page No. 25 and by placing reliance on the order of this Tribunal in the case of Dnyaneshwar Jagannath Dhamne [2016 (7) TMI 1313 - ITAT PUNE] which held that the provisions of section 40A(3) of the Act are not attracted as the cash payments are part of sale consideration which are paid before Sub-Registrar i.e. State Government Office. The ld. DR did not bring on record any view contrary to the finding of CIT(A). Therefore, we find no infirmity in the order of CIT(A) and it is justified. DR challenging the finding of CIT(A). In the absence of which, we find no infirmity in the order of CIT(A). Thus, ground No. 2 raised by the Revenue is dismissed. Addition on account of payment made to Kokani family u/s. 40A(3) - HELD THAT:- We note that the payment in cash to an extent of Rs.45,00,000/- were confirmed by the Kokani family before the Sub-Registrar and the said cash payment for forming part of total consideration vide registered sale deed. A contention was raised by the assessee that the said payments were added to the value of closing stock and the same were not claimed as expenditure during the year under consideration. We note that the AO discussed the issue in detailed of the assessment order. On perusal of the same, we note that the cash payments amounting to Rs.45,00,000/- made on insistence of Kokani family members which is part and parcel of total sale consideration vide the registered sale deed. We note that it is a settled position of law that the purchase price is a part of stock-in-trade and no expenditure claimed as deduction in this regard, therefore, in our opinion, no disallowance u/s. 40A(3) is justified. The transaction being genuine no disallowance u/s. 40A(3) of the Act is maintainable. Further, it is also not disputed by the ld. DR that the said cash payment was part of closing stock and no expenditure concerning the same was claimed in the year under consideration. Therefore, we find no infirmity in the order of CIT(A) in this regard and it justified. Thus, the ground No. 3 raised by the Revenue is dismissed. Issues Involved:1. Deletion of addition on account of unexplained expenditure for the purchase of land.2. Deletion of addition on account of cash payments disallowed under Section 40A(3) of the Income Tax Act.Issue-wise Detailed Analysis:1. Deletion of Addition on Account of Unexplained Expenditure for Purchase of Land:The Revenue challenged the CIT(A)'s deletion of an addition of Rs.1,56,37,412/- made by the AO for unexplained expenditure related to the purchase of land. The AO's addition was based on a loose paper found during a search at Zaheeruddin S. Kokani's premises, which indicated a cash payment of Rs.2,00,00,000/- above the agreed sale consideration. The AO relied on the statement of Zaheeruddin S. Kokani, who confirmed the receipt of cash. However, the assessee contended that the loose papers were unsigned, undated, and lacked corroborative evidence. The CIT(A) agreed with the assessee, finding no independent evidence to support the AO's addition. The Tribunal upheld the CIT(A)'s decision, emphasizing that the presumption under Section 132(4A) of the Act is not applicable to third parties and that the addition was based on assumptions and presumptions without concrete evidence.2. Deletion of Addition on Account of Cash Payments Disallowed Under Section 40A(3) of the Act:a. Payment of Rs.53,04,500/-:The AO disallowed Rs.53,04,500/- under Section 40A(3) for cash payments exceeding Rs.20,000/-. The CIT(A) found that Rs.15,00,000/- was refunded to the assessee by bank cheques, Rs.20,81,300/- was paid on bank holidays (covered under Rule 6DD(j)), and Rs.11,00,000/- and Rs.4,00,000/- were paid before the Sub-Registrar, Nashik, as part of the sale consideration. The Tribunal upheld the CIT(A)'s findings, noting no contrary evidence from the Revenue.b. Remaining Cash Payments of Rs.4,83,500/-:The CIT(A) deleted Rs.2,41,800/- of the Rs.4,83,500/- disallowed by the AO, as these were made on bank holidays. The Tribunal found no evidence to challenge the CIT(A)'s findings and upheld the decision.3. Deletion of Addition of Rs.45,00,000/- for Payment to Kokani Family:The AO added Rs.45,00,000/- for cash payments made to the Kokani family under Section 40A(3). The CIT(A) found that these payments were part of the total sale consideration and included in the closing stock, with no expenditure claimed in the relevant year. The Tribunal upheld the CIT(A)'s decision, noting the genuine nature of the transaction and the inclusion of the amount in the closing stock.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletions of the additions made by the AO on account of unexplained expenditure and cash payments disallowed under Section 40A(3) of the Income Tax Act. The Tribunal emphasized the lack of corroborative evidence and the applicability of legal provisions, such as Rule 6DD(j) and Section 132(4A), in its decision.