TaxTMI 
TaxTMI 
2013 (2) TMI 379
X X X X Extracts X X X X
X X X X Extracts X X X X
....ircumstances of the present case, the provisions of section 40A(3) are not applicable in respect of the agricultural land purchased by the assessee. The Ld. CIT(A) ought to have deleted the aforesaid addition of Rs. 1,12,00,000/- made in the declared income, 5. The Ld. CIT(A) ought to have accepted the assessee's contention that the payment so made by the assessee for purchase of agricultural land is covered by the exceptional circumstances mentioned in Rule 6DD. The entire disallowance made by the Ld. AO amounting to Rs. 1,12,00,000/- ought to have been deleted by the Ld. CIT(A). 6. The Ld. CIT(A) have ought to have cancelled the interest charged u/s 234A, 234B and 234C." 2. We have heard the ld. Representatives of both the parties, perused the findings of the authorities below and considered the material available on record. 3. On ground No.1 & 2, noted above, the assessee challenged the jurisdiction of the Assessing Officer (Addl. CIT, Range-I, Jodhpur) in passing the assessment order in question. The assessee submitted before the ld. CIT(A) that the return was filed with the ACIT, Circle-1 and notice u/s. 143(2)/142(1) were issued by the ACIT. Howeve....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., Range - 1, Jodhpur is having concurrent jurisdiction over the cases pertain to Range - 1, of Jodhpur. The Addl. CIT in exercise of power conferred in sec. 120 has rightly issued the notices. Further, as per sec. 124(3) no person shall be entitled to call in question the jurisdiction of an Assessing Officer. So, the point raised during the appellate proceeding cannot be accepted. The appellant cannot be validly raised as any challenge to order of transfer shall be raised by the assessee in independent proceeding; if no such challenge was made at the initial stage, the issue cannot be raised in an appeal against assessment order, as has been clarified by Hon'ble Punjab & Haryana in the case of Jaswindeer Kaur Kooner (291 ITR 80 P&H). In view of this, the ground of appeal is dismissed." 4. The ld. counsel for the assessee reiterated the submissions made before the ld. CIT(A) and submitted that first notice u/s. 143(2) was issued by the ACIT, Circle-1, Jodhpur. Therefore, Addl. CIT, Range-1 Jodhpur cannot pass the assessment order without further issue of notice u/s. 143(2). He has, however, admitted that the assessee participated in the proceedings before the Addl. CIT in response....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ef Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners concerned or, if they are not in agreement, by the Board or by such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, specify. (3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer- (a) where he has made a return 21[under sub-section (1) of section 115WD or] under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or 21[sub-section (2) of section 115WE or] sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier; (b) where he has made no such return, after the expiry of the time allowed by the notice under 22[sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144] to show cause why the assessment should not be completed t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ting revenue, the Legislature did not intend collection of revenue to be bogged down on account of technical plea of jurisdiction. It has, therefore, prescribed the limit up to which the plea of jurisdiction may be raised. As provided in section 124(5)(a), the right is lost as soon as the assessment has been completed. Even where the right is exercised before the assessment is completed, the question is to be decided by the Commissioner or by the Board. Courts do not come into the picture. From the above provisions of the Act, it is apparent that the Act does not treat the allocation of functions to various authorities or officers as one of substance. It treats the matter as one of procedure and a defect of procedure does not invalidate the end action. The answer to the first question, therefore, is that the power is administrative and procedural and is to be exercised in the interest of exigencies of tax collection and the answer to the second question is that, under the Act, a defect arising from allocation of functions is a mere irregularity which does not affect the resultant action." 5.2 The ITAT, Delhi Bench in the case of Triveni Engg. & Industries Ltd. v. Dy. CIT [2006] 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Explanation.-In section 120 and this section, the word "case", in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such orde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....asked to furnish mode of payment to parties to whom payments for purchase have been made. The assessee furnished the details of purchases vide letter dated 23-11-2010 wherein the mode of payment was mentioned. In these details the following two details were noticed:- F.Y. Party Name Address Payment Gross Amount 2007-08 Shivya Bijiya & Dhaliya Vill & Post Choka, Jodhpur Cash 1,80,60,000/- 2007-08 Shivya Bijiya & Dhaliya Vill & Post Choka, Jodhpur Cheque 10,00,000/- During the discussion, the assessee was asked as to why payment for purchase of land has been made in cash. The first reply of the assessee was that the persons receiving the money insisted for payment through cash only. However, it was indicated to him that next payment to the same person has been made in cheque. So the reply of the assessee is contradictory. The Assessing Officer further stated on the same day vide order sheet entry dated 23-11-2010, the assessee was asked to explain why the expenditure made in cash for purchase of land should not be disallowed u/s 40A(3). The assessee furnished the details of mode of payment as under :- F.Y. Party Name Address Payment Gross Amount 2007-08 Shivya ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, 1961 during the year under consideration, the account copies of the parties to whom the payments made toward the purchase of land was enclosed. In this regard, it is submitted that the payment for purchases are made otherwise than by an account payee cheque within the limits specified under the provision of law. Further the assessee submitted that the payment was made for purchase of agricultural land which cannot be regarded as expenditure within the meaning of Sec. 40A(3) until the land is converted according to prevailing law. It is further submitted that the payment made toward purchase of agriculture land is an asset until the same is sold. The unsold land cannot be regarded as expenditure but the same will have to be shown as an asset in the balance sheet. Therefore, until the sale deed is executed and registered the amount paid toward purchases of the land cannot be regarded as an expenditure referred to in Section 40A(3). In this regard, the assessee has relied the decision of Hon'ble ITAT Delhi in the case of Kanshi Ram Madan Lal v. ITO [1983] in which it has been held that the Sec.40A(3) is not attracted in the case of capital expenditure. The assessee has further sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the appellant has made the payment of Rs. 1,90,60,000/- in cash for purchase of land. The Assessing Officer has made disallowance of Rs. 1.12 crores (Rs. 1,90,60,000/- Rs. 78,60,000/-) for the payment made during the year. The appellant has taken argument that the payment has been made for purchase of agriculture land, so until the land is sold the expenditure cannot be referred to in Sec.40A(3) is not acceptable being as already mentioned that the appellant is dealing in real estate and the land purchased is stock in trade, therefore, the payment made for land purchase is clearly contravention of Sec.40A(3). Further, the appellant has stated that each payment has been made which is below Rs. 20,000/-. The appellant has purchased a chunk of land from the person concerned and it is only the payment which has been staggered over a period of time. The idea behind the introduction of such provision was to curb the transaction in cash. However, a limit was specified so that small traders, business man do not feel the pinch of the provision and their small day to day activity are not effect. The explanation of the appellant may be applied to a case where each bill is for less than R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uch cases and such circumstances as may be prescribed having regard to the nature and extent of banking facility available, consideration of business expediency and other relevant factors. The appellant has not mentioned impracticability or impossibility of payment by cheque and other compelling reasons which enable it to make payment in cash. It is also not acceptable because appellant's has not specified Rule 6DD(J) under which the appellant's case falls. Therefore, under this situation, applicability of the cases relied by the appellant cannot be liked to the facts of the present case and the argument in this regard is rejected. Further, I also rely the decision of Hon'ble Rajasthan High Court, in the case of Nahgi Lal vs. CIT, reported in 167 ITR 139 (Raj) where on the issue of disallowance u/s 40A(3) under Rule 6DD(J), it is held that it is not sufficient for the assessee merely to establish that the purchases were genuine and the payments were identifiable. The assessee is further required to prove that due to exception and unavoidable circumstances, or because payment by cheques was not practicable, cash payments were made. Further, the Hon'ble Gujarat High Court in the case....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6DD(J) or in 6DD. So plea taken by the appellant is not acceptable. In view of the above discussion, I hold that the Assessing Officer rightly made the disallowance u/s 40A(3). The ground of appeal in this regard is dismissed." 9. The ld. counsel for the assessee reiterated the submissions made before the authorities below and submitted that though the assessee deals in real estate, but unless and until the land is converted into urban land and user thereof for non-agricultural purpose is allowed, the provisions of section 40A(3) cannot be applied in respect of purchase of agricultural land. Further regard should be had of the nature and extent of banking facility available and consideration of business expediency and other relevant factors and relied upon the order of the ITAT, Jaipur Bench in the case of Shri Salasar Overseas (P.) Ltd. v. Dy. CIT [2012] 66 DTR 9. He has submitted that genuine and bona fide transactions should not be considered for the purpose of making the addition. He has relied upon the decision of Hon'ble Supreme Court in the case of Attar Singh Gurumukh Singh v. ITO [1991] 191 ITR 667. The proviso to section 40A(3) would apply in the case of the assessee. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has submitted that the payments have been staggered to circumvent the provisions of law and could not be treated as genuine payments. No exception has been specifically explained in Rule 6DD of the Income-tax Rules, in which the case of the assessee would fall. He has relied upon the order of the ITAT, Allahabad Bench in the case of Ingenieurs & Agents v. ITO [2005] 5 ITD 696, wherein it was held - "Where the assessee made payments in cash for less than Rs. 2,500 more than once on the same day to the same party under continuous voucher Nos. aggregating to more than Rs. 2,500, disallowance under s. 40A(3) was rightly made." 10.1 He has submitted that the decisions cited by the ld. counsel for the assessee are not applicable to the facts of the case. 11. We have considered the rival submissions and the material available on record. There is no dispute about the facts noted above in this order. The assessee is dealing in Real Estate and land purchased is stock in trade. Therefore, the payment made for purchase of land is expenditure in the business of the assessee and attract the provisions of section 40A(3) of the IT Act. It is also admitted fact that the assessee has purchased c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovisions of section 40A(3) are not attracted. The AO, however, did not accept the contention of the assessee. The Tribunal recorded a finding of fact that the assessee has failed to furnish any evidence in support of the explanation that the party insisted on payment in cash and it had consciously split up the payment so that each payment did not exceed Rs. 10,000/-, only to circumvent the provisions of law. Accordingly, the addition was confirmed. Hon'ble High Court dismissed the appeal of the assessee. 11.1 Hon'ble Punjab and Haryana High Court in the case of Aggarwal Steel Traders v. CIT [2001] 250 ITR 738, considering the Board's Circular on Rule 6DD held- "Held, (i) that the explanation rendered by the assessee in respect of the payments of Rs. 24,000 and Rs. 40,000 would be covered by the exceptional circumstances as provided in the Board's circular, yet that by itself would not entitle the assessee to claim the relief. There is a further requirement provided in the Board's circular itself of furnishing a confirmatory letter from the concerned parties. Admittedly, no such letter in the above terms had been furnished by the assessee. Hence, the Tribunal was justified in sus....