TaxTMI 
TaxTMI 
2014 (2) TMI 811
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.... the ground." 2. Briefly the facts relating to the ground No 2 with reference to addition of Rs. 4,09,98,105/- are that the assessee is carrying on real estate business of developing land into housing plots. A survey operation u/s 133A was conducted in Assessee's case on 17/03/2008. It was found that payments for purchase of lands had been made to the tune of Rs. 20,49,90,525/-, in cash, to various persons, in excess of Rs. 20,000/-, violating the provisions u/s 40A(3) of the Act. During the course of assessment proceedings, the assessee was asked to explain as to why these payments should not be disallowed u/s 40A(3), since the land forms the stock in trade in the assessee's business. In reply, justifying the cash payments, the assessee initially relied on clause (g) of Rule 6DD. Later on, the assessee quoted the clause (h), which excludes payments made in a village or town, which on the date of such payment is not served by any bank to any person who ordinarily resides, or is carrying on any business, profession or vocation in any such village or town from the ambit of section 40A(3). The assessee further averred that the persons to whom payments were made are residents of vario....
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....of Rs. 1,18,56,250/- was paid to Sri B. Chinna Butchaiah, as the property situated at Rangapur Village, Kothur Mandal, which is not covered by banking facility. Another payment of Rs. 26,00,000/- was paid to Sri G. Hari Shankar, whose property was situated at Salivendragudem Village, Kothur Mandal, which is not covered by banking facility. The payment of Rs. 88,21,100/- made to Sri Nawabpet Narayana, whose property was situated at Rangapur Villae, Kothur Mandal is not covered by banking facility. Another payment of Rs. 1,14,82,500/- was made to Sri P. Angaiah & Venkataiah, whose property was situated at Rangapur Village, Kothur Mandal, does not have bank facility. Another payment of Rs. 6,00,000/- was made to Sri P. Kistaiah, whose property was situated at Rangapur Village, Kothur Mandal, does not have bank facility. As regards the payment of Rs. 1,00,000/- made to Sri Raja Gopal, whose property was situated at Rangapur Village, Kothur Mandal, does not have bank facility. 8. As regards the Pearl City property, the AR submitted that an amount of Rs. 15,60,000/- was paid to Sri E. Narayana, whose property was situated at Mekaguda Village, Kothur Mandal, which is not covered by banki....
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....d on the decision of Hon'ble Supreme Court in the case of CIT Vs. Gwalior Rayon Silk Manufacturing Co. Ltd., reported in 196 ITR 149. He also relied on the orders of the lower authorities. 13. We have heard the arguments of both the parties, perused the record and have gone through the orders of the revenue authorities. Sec 40A(3) reads as under: Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub section (3) and this sub section where 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 in such cases and under such circumstances as may be prescribed having regard to the nature and extent of banking facilities available considerations of business expenditure and other relevant factors. 14. The exceptions to the application of sec 40A (3) is laid down in Rule 6DDJ. Rule 6DD after its amendment from 1995, reads as under: Rule 6DD Prior to 25.7.1995, clause (j) of Rule 6DD of the IT Rules read as follows: 6DD....... i) in any other cause, where the assessee satisfies t....
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.... an assessee which can be made a foundation for attacking the validity of the said section. Therefore, it is not open for attacking the provision as violative of any provision of the constitution. There is no arbitrariness or discrimination in the said provision warranting interference by this court under the circumstances. In view of the above there is absolutely no merits in the challenge made as to the validity of section 40A(3) of the Act by mere deletion of sub clauses (1) and (2) of rule 6DD(j). The said provision is perfectly valid and we may hasten to add that the deletion of sub clauses (1) and (2) of rule 6DD(j) is only a step forward in the achievement of the avowed object envisaged u/s 40A(3) of the Act. 15. Therefore the only exception that the Assessee can claim is when payments are required to be made on days when the Banks were closed on account of holidays or strike. Transactions after the banking hours in the course of regular business will not fall within this exception. In those transactions, the payment is not required to be made when the banks are closed i.e. after banking hours. Further the purpose of the disallowance u/s 40A (3) is to dissuade transactions....
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....Rs. 1.30 crores. He averred that the actual amount as per the impounded material was only Rs. 1.05 crores and having been assessed in the hands of Sri Chowdary, the same could not have been added in the hands of the appellant once again. The representative also furnished a copy of the assessment order in the case of Sri T. Veeraiah Chowdary for the A.Y. 2006-07, along with a copy of letter dated 18.12.2008 filed by the appellant's representative before the DCIT Circle 3(1) Hyderabad . After considering the submissions of Assessee, the learned CIT(A) held as follows: "9. I have gone through the submission of the appellant and the facts of the case. From the letter of the appellant's representative dated 18.12.2008, addressed to the DCIT Circle 3(1), Hyderabad, it is seen that the appellant had admitted that due to contingencies in the market, he had obtained funds to the extent of Rs. 1,05,00,000/- from various persons and that he was not in a position to give details to establish the same. Accordingly, he had admitted the said amount as income as his income. As seen from the Assessment order in the case of Sri T. Veeraiah Chowdary for the A.Y. 2006-07, the amount of Rs. 1,05,00,00....
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....relating to these payments are found in the Pendrive was taken and considered in the hands of Sri T. Veeraiah Chowdhary for AY 2006-07 and there is no entry for Rs. 1,30,00,000/- in the hands of Assessee as other four entries are considered in the case of Sri T. Veeraiah Chowdhary and the same material found in the Pendrive. According to the AR, the department is playing a dual role. 22. On the other hand, the learned DR submitted that the entry found in the pendrive not only relating to Sri Veeraiah Choudhary but also relating to Assessee and whatever is relating to Sri Veeraiah Choudhary was considered in the hands of Sri Veeraiah choudhary and the balance of Rs. 1,30,00,000/- was considered in the hands of Assessee as there is no reasonable explanation from Assessee. 23. We have heard the arguments of both the parties and perused the record as well as gone through the orders of the revenue authorities. In this case, the entry found in Pendrive was considered n the case of Sri Veeraiah Choudhary for AY 2006-07. It is also brought to our notice that vide letter dated 18/12/2008 Shri T. Veeraiah Chowdhary through his auditor brought to the notice of the DCIT, Circle 3(1) that the....