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TaxTMI 
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TaxTMI 
2016 (9) TMI 436
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....hat the assessee is a real estate developer and engaged in several real estate projects. During the year under consideration the assessee made purchases of land aggregating to Rs. 7,52,26,461/- for Tirupati Garden, Tirupati Avenue, Tirupati Dham and Tirupati Jewels but for making the purchase of land, the assessee made payment of purchase consideration by cheque as well as cash the details of which are as under :- Image No. 1 The Assessing Officer observed that the assessee has made cash payment of Rs. 3,51,72,500/- to various persons against the purchase of land which he has shown as stock in trade of the assessee. He held that the assessee has violated the provisions of section 40A(3) of the Act and, therefore, made the addition for the entire amount of Rs. 3,51,72,500/- to the income of the assessee. 7. The assessee being not satisfied with the order of the Assessing Officer carried the matter in appeal before the learned CIT(A). The assessee contended that all the payments were made to the parties who were new to the assessee firm and the assessee firm had entered with single transaction with the seller. The sellers insisted for cash payment. In support of the same, the asse....
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....action of the Assessing Officer. He held that in his opinion disallowance of expenditure beyond the specified limit by means of crossed cheque or crossed draft was fully justified. With the amendment made from 1.4.2009 the Assessing Officer had no discretionary power than to disallow 100% of expenditure if the payment was made in violation of section 40A(3) of the Act. He held that in the case of the assessee land purchased was stock in trade and in purchasing it expenditure/payments were made in cash and, therefore, it falls within the purview of section 40A(3) of the Act. The learned CIT(A) further observed that the assessee has cited case laws on the issue that where expenditure on the purchase of stock in trade has not been claimed in profit and loss account then no disallowance u/s 40A(3) can be made whereas in the case of the assessee the assessee has debited and claimed all the expenses incurred on purchase of land including the payments made in cash. Therefore, the case laws applied are distinguishable and misplaced. He further observed that the assessee has furnished PAN of seller parties of the land and it is clear that most of the seller parties were having PAN and bank ....
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....was purchased from one Sardarsingh and others against whom FIR was lodged and other legal formalities were going on in the Hon'ble High Court, the land was purchased from Narendrasingh and others through the agent Dashrath Patel holding power of attorney on behalf of the seller since the sellers were residing in village Kudana which was not served with any bank and that all the payments were made before the Registrar who is a Government official as the sellers were not willing to accept the cheques, therefore, it was contention of the learned counsel for the assessee that the transaction fell within the exceptions as carved out in the proviso below sub-section (3A) to section 40A(3) wherein it has been 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 subsection where a payment or aggregate of payments made to a person in a day, other than by an account payee cheque drawn on a bank or account payee draft, exceeds Rs. 20,000/- in such cases and under such circumstances, as may be prescribed, having regard to the nature and extent of banking facilities available, consider....
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.... It was found that out of the total purchases Rs. 2,45,000/- was paid by cheque and the balance amount was paid in 74 instalments of Rs. 18,200/-. Therefore, the Assessing Officer disallowed the purchases of Rs. 13,34,400/- for which the payments were made in cash by the assessee holding it to be bogus as the assessee could not produce the original bills of purchases and also not produced Shri Kailash Porwal before him for verification. 15. On appeal, the learned CIT(A) confirmed the action of the Assessing Officer. 16. Before us also, the learned counsel for the assessee besides submitting that the payments were made for purchases made at the site of construction and that they were made through vouchers could not produce the purchase bills for purchases made. The learned DR, on the other hand, supported the orders of the authorities below. We find that the Assessing Officer has himself allowed deduction for purchases of Rs. 2,45,000/- made from Kailash Porwal. Thus, part of the purchases was accepted from the said party by the Assessing Officer as genuine. He has doubted the purchases of Rs. 13,34,400/- only for the reason that payments were made in cash for them. The Assessing ....
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....iness of these parties. The assessee submitted before the Assessing Officer that the parties have informed him that no notice u/s 133(6) was received by them. The Assessing Officer noted that the notices were despatched at the addresses given by the assessee and, therefore, the contention of the assessee is rejected. Therefore, the Assessing Officer made addition of Rs. 2,30,00,000/- and disallowed the interest payment of Rs. 2,79,808/- made to these parties. 19. Before the learned CIT(A) it was contended that the assessee furnished copy of return of income of the loan creditors. The learned CIT(A) observed that in the return of income the parties were having loss/very small positive income and he, therefore, inferred that it was not possible to give huge loans by the said companies. 20. Before us, the learned counsel for the assessee argued that the assessee filed - (i) copy of confirmation letters from the loan creditors. (ii) copy of ledger account of the assessee firm in books of three companies. (iii) copy of bank statement of the assessee companies from where they have transferred the loan amount to the assessee firm. (iv) copy of income tax return, PAN and balance shee....
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....itor, copies of income tax return and balance sheet, copy of assessment order, the loans have been received through banking channel and the Assessing Officer has brought no material after verifying these evidences to show that the loans received by the assessee during the year are not genuine or loan creditors did not have the credit worthiness to advance sum of money to the assessee. It is not in dispute that the assessee has received the amount through banking channel and has also filed confirmation of loan creditors together with PAN, copy of income tax return and balance sheet together with assessment order in support of the loan received by the assessee. We find that since the rate of interest paid by the assessee on the said loan was 3.06% and to other creditors it was 7% to 26.1% the Assessing Officer doubted the genuineness of the loan transaction He has brought no material on record after making inquiries on the basis of material filed by the assessee to show that the loan creditors are not genuine or that they had no credit worthiness to advance the sum of money to the assessee. We find that the learned CIT(A) also on the basis of suspicion while verifying the income tax ....