TaxTMI 
TaxTMI 
2019 (3) TMI 553
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....ade even if no incriminating document was found and also erred in holding that normal disallowances and addition u/s 40A(3) are permitted to be made/can be made in these proceedings. The said observations are wrong and not in accordance with law. 3. That the respondent craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of cross objection on or before final hearing, if necessity so arises. It is noted that the assessee has raised issue of legality of the proceedings initiated u/s 153C of the Income Tax Act (herein after called as 'the Act). Therefore, the cross objection of the assessee requires to be adjudicated first. 3. The facts giving rise to the present appeal are that a search & seizure operation u/s 132 of the Act was carried out on 4.2.2009 in the cases of commonly known as M/s. Zoom Developers and Brilliant Estate. During the course of search, certain documents pertaining to the assessee company were found. Accordingly, a notice u/s 153C of the Act was issued on 15.12.2009. In response to the notice, the assessee has raised an objection. The assessee filed an objection dated 15.1.2010, wherein the legality of the....
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....that the identity of sellers was disclosed. The Ld. CIT(A) has completely ignored that no such exception is prescribed u/s 40A(3) of the I.T. Act, 1961. 3. Erred in deleting the addition on the basis of practicability of business, while completely ignoring that the so called practicability is no justification in the eyes of law; and if this norm is applied, all the infringements of law would be legalised. 4. The appellant reserves the right to add, amend or alter the ground of appeal on or before the date the appeal is finally heard for disposal. 8. The only effective ground is against deleting the addition of Rs. 65,87,000/- by invoking the provisions of section 40A(3) of the Act. 9. Ld. D.R. supported the order of the A.O. and submitted that Ld. CIT(A) was not justified in deleting the addition as admittedly the assessee has made payment in cash and the case of the assessee does not fall in any of the exception. He therefore, prayed that the finding of the Ld. CIT(A) be set aside and that of the A.O. be confirmed. 10. Per contra, Ld. Counsel for the assessee submitted that there is no finding that these expenses are not genuine. Some of the advances were paid in cash fo....
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....ble. However the other argument of appellant is valid that since identity of payee is disclosed in registered sale deeds of these lands and genuineness of payments is also not doubted by AO, provisions of Section 40A(3) will not be attracted. When majority of payments out of Rs. 46.71 crore were made through crossed account payee cheques for purchase of land and only Rs. 5 lakh is paid through cash and Rs. 3,24,35,000/- is paid through bearer cheques of the same bank (PNB) from which all subsequent payments were made through account payee cheques, appellant will not be hit by these provisions. Mere making of first payment in cash or through bearer cheque because while making first payment or token payment parties were unknown & sellers of land insisted for cash payment, would not attract provision of section 40A(3). For this purpose reliance of appellant on the decisions in cases of Choudhary & Co. (All.) 1995 : 217 ITR 431, Rhydberg Pharmaceutical Ltd. (Del.) 2004 269 ITR 561 and Magnificient Construction P. Ltd. [2013] 40 taxmann.com 306 (MP) is fully justified and accordingly the addition of Rs. 65,87,000/- made u/s. 40A(3) of I.T., Act is hereby deleted. Gr. No. 2 of appeal is ....
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....r telegraphic transfer through a bank; iii. A book adjustment from any account in a bank to any other account in that or any other bank; iv. A bill of exchange made payable only to a bank; v. The use of electronic clearing system through a bank account; vi. A credit card; vii. A debit card. Explanation-For the purposes of this clause and clause (g), the term "bank" means any bank, banking company or society referred to in subclauses (i) to (iv) of clause (a) and includes any bank [not being a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), whether incorporated or not, which is established outside India; (d) Where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee; (e) Where the payment is made for the purchase of- (i) Agricultural or forest produce; or (ii) The produce of animal husbandry (including livestock, meat, hides and skins) or dairy or poultry farming; or (iii) Fish or fish products; or (iv) The products of horticulture or apiculture, to the cultivator, grower or....
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....nt year 2006-07 to 2008-09 in respect of cash payment made for purchase of agricultural land. By the impugned order, the ld. CIT(A) confirmed the addition after having following observations : "The CIT(A) has confirmed the disallowance by observing that where the land so purchased was as stock in trade and merely because the assessee has not accounted for such expenditure in the profit and loss account and corresponding closing balance, work in progress, has not been credited the profit and loss account, due to wrong presentation in the profit and loss account, the assessee cannot come out of the purview of Section 40A(3)." 16. We have considered the rival contentions and find from record payment so made was not claimed as expenditure in the profit and loss account and, therefore, provisions of Section 40A(3) is not attracted. The assessee has also given undertaking to offer the disallowance u/s. 40A(3), while claiming such business expenditure in the future. In view of these undertaking of the assessee and keeping in view, the provisions of Section 40A(3) as discussed hereinabove, we do not find any justification for the disallowance made during the year under consideration. Acc....