TaxTMI 
TaxTMI 
2018 (6) TMI 1391
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....isallowance of Rs. 1 ,54,97,974/- made by AO an account of cash payments invoking the provision of section 40A(3) of the Act. 4. On the facts and circumstances of the case the learned CIT(A) has erred both on facts and in law in confirming the disallowance despite the fact that the reason for cash payment was an account of one of the reasons provided in exceptional circumstances for these payments under Rule 6DD of the Act. 5. On the facts and circumstances of the case the learned CIT(A) has erred both on facts and in law, in confirming the disallowance despite the payments having been made out of business expediency. 6. On the facts and circumstances of the case the learned CIT(A) has erred both on facts and in law, in confirming the disallowance despite the fact that there being no doubt as to the genuineness of transactions and thus no disallowance u/s 40A(3) can be made. 7. That the appellant craves leave to add, amend or alter any of the grounds of appeal. 2. The brief facts of the case are that the assessee company is stated to be engaged in the business of real estate. The case of the assessee was selected under scrutiny through CASS. Accordingly, notice u/s. 143(2)....
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....he factual findings regarding violation of clause (j) of Rule 6DD have not been controverted by the assessee during appeal proceedings and in view of the continued non-compliance and non-prosecution of appeal by the assessee, he upheld the assessment order. Aggrieved with the impugned order dated 22.09.2017, Assessee is in appeal before the Tribunal. 3. Ld. Counsel of the assessee has filed a Paper Book containing pages 1-68 having the copy of acknowledgement return of income alongwith computation of income; copy of Audited Financial Statements; copy of reply filed with the AO dated 18.2.2016 alongwith the copy of sale deeds of the property purchased; copy of reply filed by the assessee before AO on 22.2.2016 and copy of letter filed before AO dated 23.3.2016 enclosing affidavit from Real Estate Broker. He submitted that learned CIT(A) has passing the exparte order without giving assessee an opportunity of being heard in violation of principle of natural justice, despite the fact that non appearance before the CIT(A) was an account of reasons beyond the control of the assessee. It was further submitted that Ld. CIT(A) wrongly confirmed the disallowance of Rs. 1,54,97,974/- made by....
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....rdia vs. ITO 2006 (11) TMI 117. 4. On the other hand, Ld. Sr. DR relied upon the orders of the authorities below. He submitted that assessee company has purchased various land. From the sale deed it is revealed that that substantial cash amount has been utilized for purchase of inventory. Total cash amount that has been paid for the purchase of inventory of Rs. 1,54,97,974/-. He further submitted that that payments in cash to persons who are holding land in and around Delhi are not out of purview of taxation. There is substantial possibility that the persons selling the land are not filing their return of income or not disclosing the full income. Thus the act of the assessee by making payment in cash cannot be assumed to be bonafide, even though it is a complete violation of the provisions of section 40A(3) of the Income Tax Act. However, there was sufficient application of mind by AO while framing the assessment and the factual findings regarding violation of clause (j) of Rule 6DD have not been controverted by the assessee during appeal proceedings and in view of the continued non-compliance and non-prosecution of appeal by the assessee, Ld. CIT(A) has rightly upheld the assessm....
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....ed in the registered document i.e. sale deed itself. The date on which the advance payment was made was 05.08.2012 and on that date banking facility was not available due to Bank Holiday and the assessee company has no alternative option and had to make payment in cash and the same is not disallowed under section 40A(3) of the Income Tax Act and expressly provided in the exceptions provided in Rule 6DD(j) which reads as under: "(j) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike;" 5.2 5.2 We further note that on the date of registry assessee went to farmers' home to take them for registration of land. However, farmers changed their mind and demanded more money than what they had earlier agreed into. Then the assessee company had no option but to make immediate payment due to the following reasons on account of business expediency: I. There was no time to avail banking facility at it would have resulted into lapse of time for registry. II. Assessee company has already made the substantial payments to farmers any further delay in registry would have made their advance payment at risk. Moreover, the time ....
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....s Ld. CIT(A) and Rule 6DD(j) specifically provides exception for disallowance under section 40A(3) on the day on, which banks are closed. The payments were made to farmers for purchase of their agricultural land and the payments are duly supported by the various documentation in form of conveyance deed etc. Therefore, in the above circumstances, disallowance made under section 40A(3) is not justified. Our aforesaid view is fortified by the following decisions:- I. When payment is made on the day on which Banks are closed and the exception is covered under Rule 6DD: a) Hotel Nagas Pvt. Ltd. vs. CIT [2016J 69 taxman.com 438 (Mad.) a. "Therefore, if as rightly observed by the Tribunal in paragraph 4 of its order, the purpose of Section 40A(3) is to discourage cash transactions leading to circulation of unaccounted money, then, the same may not normally happen before the Sub Registrar at the time of registration of documents, as the payments made at that time get recorded officially.[Para 22]. b. All the three authorities have failed to appreciate that when a vast extent of agricultural lands is purchased from several persons, especially in villages, it is not possible to expec....
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....s, is outside the scope of the enquiry. As a matter of fact, there existed some justification for the traders, at least at the relevant point of time, in insisting the payment of amounts, in cash. The reason is that the banking activity was not that prominent and popular, and instances of cheques issued by agencies or persons, in the course of business being bounced, were not infrequent. The delay in receiving the consideration for any material supplied by a trader would have its own cascading effect on the business activities. It is only when both the parties to the contract are known to each other so intimately, and the seller is very confident not only of the solvency of the purchaser, but also his business ethics, that he would be inclined to receive the consideration through cheque. d. Obviously because the Parliament as well as the CBDT were live to these issues, the provisions, referred to above, were enacted or incorporated. The Assessing Authority has taken a hyper-technical view and failed to discern the spirit underlying the relevant provisions. Though the Appellate Authority exhibited an element of objectivity, it was only in a limited aspect. The Tribunal has ignore....
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....r 4.00 P.M., which is usually the banking hours. Therefore, considering all these facts and circumstances, we partly allow this ground of assessee's appeal." d) ITO Faridabad Vs M/S Marigold Merchandise (P) Ltd. [ITA No. 5170/0el/2014 Dated: - 11 September 2017] a. Addition made u/s. 40A(3) - purchase of land holding these cash payment falls under exceptional circumstances r.w.r. 6DD of Income Tax Rules - Held that:- CIT(A) has rightly held that the assessee's case is found to be covered under the exceptional circumstances under rule 6DD of IT Rules. Accordingly, the addition made by the AO amounting to Rs. 60 lacs was rightly deleted by the Ld. CIT(A). - Decided in favour of assessee. II. When Genuineness of the transaction is not doubted by the AO, no disallowance under section 40A(3) is called for: 5.7 We note that in the present case the genuineness of the transactions which were entered by the assessee have not been disputed by the authorities below. This fact is evident from the plain reading of the Orders of the authorities below. We further note that the authorities below have not raised any doubt about the genuineness of the transaction therefore there ....