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TaxTMI 
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2016 (3) TMI 1233
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.... the assessee being in the business of real estate developer had purchased land during the year amounting to Rs. 1,43,13,750/- out of which purchases to the extent of Rs. 60,50,000/- were made in cash. On being confronted by the Assessing Officer, the assessee replied that no business has been done during the year and only purchases had been made, therefore, the provisions of section 40A(3) of the Income Tax Act, 1961 (in short 'the Act') are not applicable. It was further submitted that the payment to the seller were made on bank holidays. The Assessing Officer rejecting the contention of the assessee, made a disallowance of an amount of Rs. 12,10,000/- being 20% of Rs. 60,50,000/- on account of cash payments. 5. Before the learned CIT (Appeals), the contentions raised before the Assessing Officer were reiterated. It was stated that since no business was done during the year, no expenses have been claimed, therefore, no disallowance under section 40A(3) of the Act can be made. Further, it was argued that the cash payment was made to the agriculturists for purchase of their land, on account of business expediency because there was no other option with the assessee but to make paym....
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....tention of the learned counsel for the assessee that since no expenses have been claimed, no disallowance under section 40A(3) of the Act is called for. Further, it was submitted that the genuineness of transactions cannot be doubted as the lands have been purchased after duly registering the same before the Sub Registrar on full payment of the consideration. The cash payment made to the farmers for purchase of land was on account of business expediency because there was no other option with the assessee but to make the payment in cash. Reliance was placed on the judgment of Hon'ble Punjab & Haryana High Court in the case of Gurdas Garg Vs. CIT, ITA No.413 of 2014, dated 16.7.2015, which was delivered after considering the judgment of the Hon'ble Apex Court in the case of Attar Singh Gurmukh Singh Vs. ITO, whereby it was held that cash payments made by real estate developers cannot be disallowed under section 40A(3) of the Act. Further, the said judgment of Punjab & Haryana High Court has been followed by the I.T.A.T., Chandigarh Bench in the case of Dhuri Wine Vs. DCIT in ITA No.115/Chd/2013, dated 9.10.2015. 9. The learned D.R. relied on the orders of the lower authoriti....
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....e of hearing, it was brought to our notice by the learned counsel for the assessee that in these years, the assessee was into the business of real estate and the purchases form part of stock-in-trade and not a part of 'project in progress' as in earlier two years. In view of this, it was stated that no claimed was made and hence, no disallowance under section 40A(3) of the Act can be made, does not hold good in these years. The learned counsel for the assessee confined his arguments to the genuineness of the transaction being carried out of business exigency. Reliance was placed on the judgment of Punjab & Haryana High Court in the case of Gurdas Garg (supra) and that of I.T.A.T., Chandigarh Bench in the case of Dhuri Wine (supra). 16. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The issue is identical to the facts of the case of Gurdas Garg (supra) decided by the Punjab & Haryana High Court. This case has been very aptly analyzed in following terms in the order of the I.T.A.T., Chandigarh Bench in the case of Dhuri Wine (supra) : "10. Since heavy reliance was placed ....
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....the Hon'ble Apex Court in the case of Attar Singh Gurmukh Singh Vs. ITO (1991) 4SCC 385, whereby it was held that the provisions of section 40A(3) of the Act and Rule 6DD of the Income Tax Rules were intended to regulate the business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions. After analyzing all these, the Hon'ble High Court held that the Tribunal has not disbelieved the transactions or the genuineness thereof, nor has it disbelieved the fact of payments having been made, more importantly, the reasons furnished by the assessee for making the cash payments have not been disbelieved. This clearly makes out a case of business expediency. In this view, the Hon'ble High Court held the payments to be outside the purview of section 40A(3) of the Act. 11. Taking the guidance from the above said judgment of the Hon'ble Jurisdictional High Court, which is also a very recent judgment of the Hon'ble High Court we now advert to analyze the case of the present assessee. The proposition laid down by the Hon'ble High Court is quite unambiguous to the effect that even if the case of the asses....