TaxTMI 
TaxTMI 
2021 (9) TMI 773
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.... the disallowance made under Section 40(A)(3) amounting to Rs. 3.93 crores is to be allowed? and 2. Whether the Tribunal was right in upholding the action of the CIT(A), towards land development expenses amounting to Rs. 12.13 crores is to be allowed even though the assessee failed to produce any evidence in support of such claim?" (ii) TCA.Nos.570 & 571 of 2015 (admitted on 01.9.2015 ): "1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the disallowance made under Section 40A(3) amounting to Rs. 22.56 lakhs is to be allowed? and 2. Whether the Tribunal was right in upholding the action of the CIT(A), towards land development expenses amounting to Rs. 9.84 crores is to be allowed even though the assessee failed to produce any evidence in support of such claim?" (iii) TCA.Nos. 994 & 995 of 2019 (admitted on 17.12.2019) : "(i) Whether on the facts and in the circumstances of the case, the ITAT was right in law in holding that the assessing officer cannot initiate proceedings under Section 153A of the I.T.Act, where there was no incriminating material found during the course of search operation u/s.132 of the Act? (ii) W....
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....ers had bank accounts and the assessee has been resorting to cash payments as per his convenience? 3. Whether on the facts and the circumstances of the case, the ITAT was correct in law, in deciding that the additions are not based on incriminating materials without appreciating that these additions are based on solid evidences found during search proceedings? and 4. Whether on the facts and the circumstances of the case, the ITAT was justified in deleting the addition in respect of the receipts from Kannagapattu land purchased from Smt.D.Sangupathi and M/s.SSD Homes & Estate Developers P limited later transferred to the assessee as advances which ought to have been accounted for sales but has been classified under advances?" 4. We have heard Mr.T.R.Senthil Kumar, learned Senior Standing Counsel assisted by Mrs.K.G.Usharani, learned Junior Standing Counsel appearing for the appellant-Revenue and Mrs.Pushya Sitaraman, learned Senior Counsel appearing for Mr.R.Murali, learned counsel for the respondent-assessee. Prelude : AY 2007-08 : 5. For the relevant assessment year namely 2007-08, the assessee filed e-return on 15.11.2008 admitting an income of Rs. 11,39,56,780/-. The re....
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....see did not deduct tax at source in respect of that portion of the payments. In furtherance of it, cash expenses to the tune of Rs. 39,08,78,254/- was accounted to self made debit vouchers, which only contained the amount paid and the signature of the recipient and it did not contain the address of the party. The assessee also claimed a total cash payment of Rs. 39,08,78,254/- during the relevant year namely AY 2007-08 and the average expenses per day were shown as Rs. 10,70,900/-. In the absence of proper documents, the Assessing Officer disallowed a sum of Rs. 6,22,75,902/- towards 20% of the claim of expenditure made in cash and added back to the total income and finally arrived at the assessed income to the tune of Rs. 22,09,77,552/-, completed the assessment by order dated 29.12.2009 and raised a demand to the tune of Rs. 5,68,31,528/-. 9. As against the order of assessment, the assessee filed an appeal before the CIT(A), who, by order dated 18.3.2011, partly allowed the appeal by confirming the disallowance made by the Assessing Officer under Section 40A(3) of the Act and allowing the claim of the assessee towards development expenses among other things. Aggrieved by that, b....
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....tigation on the ground that the assessee effected cash and cheque payments for purchasing the land in Kannagapattu village. 12. Aggrieved by the order of assessment dated 31.3.2016, the assessee filed an appeal before the CIT(A), who allowed it by order dated 03.4.2018. As against the same, the Revenue filed an appeal before the Tribunal, which, by order dated 28.3.2019, dismissed the same. Hence, the Revenue is on appeal before us by filing TCA.No.792 of 2019. AY 2011-12 to 2014-15 : 13. For these assessment years also, the assessments were completed on 31.3.2016 pursuant to the search and seizure operations conducted on 03.9.2013. For the assessment years from 2011-12 to 2013-14, the notices under Section 153A of the Act 29.4.2014 were issued. But, in all the four cases, a notice under Section 142(1) came to be issued. Pursuant to that, the assesssee filed their return of income declaring the income to the tune of Rs. 6,09,19,530/-, Rs. 10,70,23,600/-, Rs. 8,05,82,670/- and Rs. 1,01,46,150/- respectively. 14. The Assessing Officer arrived the total income at Rs. 15,99,81,007/- and Rs. 4,53,69,402/- respectively for the assessment years 2011-12 and 2014-15 in view of disallowa....
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....ppeal by the assessee, the CIT(A), by order dated 18.3.2011, partly allowed the appeal by confirming the disallowance made by the Assessing Officer under Section 40A(3) of the Act and by allowing the claim of the assessee towards development expenses. Aggrieved by that, both the Department as well as the assessee filed two appeals before the Tribunal. The two salient features in the order dated 09.7.2013 passed by the Tribunal are (i) upholding the order passed by the CIT(A) in deleting the disallowance made under Section 40A(3) of the Act and (ii) allowing the claim of the assessee towards land development expenses. 20. The Assessing Officer was of the opinion that the expenditure claimed by the assessee towards land development was highly excessive and bogus. The Assessing Officer examined each of the heads of expenses namely JCB work, bulldozer hire charges, tractor hire charges, land leveling charges, expenses towards jelly and sand materials, etc. and disallowed the expenses claimed by the assessee, which was approximately to the tune of Rs. 27 lakhs per acre of land. 21. On appeal before the CIT(A), the assessee had elaborately made submissions and primarily contended that ....
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....her the assessee would be entitled to claim the benefit of the proviso to Section 40A(3) of the Act. The CIT(A) rejected the finding on the fact that the cash payments were duly recorded in the registered sale deed and they were endorsed by the concerned Sub-Registrar and the total sale consideration was taken into consideration for the purpose of demanding the stamp duty and registration purposes. Therefore, the CIT(A) held that when the Government official namely Registering Authority certified that the payments were actually made to the sellers and when the genuineness of the sale was not doubted, the disallowance under Section 40A(3) of the Act could not be made. The CIT(A) did not agree with the assessee and confirmed the disallowance. 27. The Tribunal tested the correctness of the decision of the CIT(A). The assessee was a builder and developer and the lands purchased by the assessee were in the nature of stock-in-trade and certain purchases were made in cash and such purchases by cash would be hit by Section 40A(3) of the Act unless otherwise exempted under Rule 6DD of the Rules. The Tribunal noted that the assessee was a business man and the cash payments were done for the....
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....ly disallowed that portion of the payments, which were made by the assessee by cash to the vendors excluding the amounts paid for stamp duty and registration charges. 32. Aggrieved by such an order, the assessee preferred an appeal before the CIT(A). The factual position was explained before the CIT(A), who found that for the payment made in respect of 15 land owners to the tune of Rs. 3,93,00,000/-, the vendors were residents of Kannagapattu Village, that they did not have banking facilities and that the Village Administrative Officer concerned certified that there was no bank in Kannagapattu Village. Hence, the explanation offered by the assessee was accepted and the disallowance to that extent was deleted. With regard to the balance payments namely the payments made to 40 vendors, which were by cash as well as by cheque to the tune of Rs. 10,25,77,251/-, the CIT(A) did not agree with the assessee stating that there was no acceptable reason given by the assessee as to why they could not effect the entire payment by cheque when they were able to pay certain amounts through cheque. Therefore, the disallowance made by the Assessing Officer to that extent was sustained. 33. The ass....
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.... a proper explanation/reply to the query raised by the Assessing Officer. In any event, we do not propose to non suit the assessee on the ground that certain details were not furnished in proper form. The assessee would state that certain of the vendors, who did not have bank accounts, could not come out of the village to open up the bank account and after insistence, they had opened the bank accounts and in certain cases, advance was paid to the vendors so as to enable them to keep up various other commitments, to which, they had been fastened. 37. Therefore, while vacating the remarks made by the Tribunal as against the CIT(A) and the Assessing Officer, we remand the matter to the Assessing Officer to consider the genuineness of the stand taken by the assessee in so far as the payments made to the tune of Rs. 10,25,77,251/-, afford an opportunity of personal hearing to the authorized representative of the assessee and redo the assessment only to the extent indicated in accordance with law. In the light of the order of remand passed by us for the assessment year 2008-09 with regard to disallowance under Section 40A(3) of the Act, TCA.Nos.228 of 2014 and 792 of 2019 stand allowed.....
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....pointed out by the learned Senior Standing Counsel that as against the decision of the Delhi High Court in the case of Smt. Amita Garg, the Revenue filed a special leave petition before the Hon'ble Supreme Court, in which, leave has been granted and the matter has been tagged along with Civil Appeal No.14702 of 2015 as reported in (2020) 114 Taxmann.com 552 [PCIT Vs. Devi Dass Garg]. 43. As against the decision of the Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd., an appeal was filed before the Hon'ble Supreme Court, leave has been granted and the appeal has been directed to be tagged along with Civil Appeal No.8900 of 2012 as reported in (2015) 64 Taxmann.com 34. 44. Further, we note that the same issue was decided against the assessee and the assessee is on appeal before the Hon'ble Supreme Court in the case of Dayawanti Vs. CIT [S.L.P.(C).No. 20559 of 2017], in which, an order of interim stay has been granted by the Hon'ble Supreme Court by order dated 03.10.2017. 45. Thus, the issue as to whether the incriminating materials are required to be present or not is now before the Hon'ble Supreme Court. What is required....