TaxTMI 
TaxTMI 
2022 (3) TMI 763
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.... the assessment was completed at total assessed income of Rs. 9,09,855/- as against the returned income of Rs. 5,10,380/-. Subsequently, the assessment records were called for and examined by the Ld. Pr.CIT and a show cause notice u/s. 263 of the Act was issued on 20.02.2021 and after calling for submissions from the assessee, the assessment order passed by the AO u/s. 143(3) of the Act was held to be erroneous in so far as prejudicial to the interest of the Revenue and the same was set aside to pass a fresh order after making necessary enquiries/investigations in the light of the discussion made in the impugned order after giving due opportunity to the assessee. 3. Against the said findings and the order of the Ld. Pr.CIT, the assessee is in appeal before us. 4. During the course of hearing, both the parties have drawn our reference to the findings of the Ld. Pr.CIT and we, therefore, deem it appropriate to reproduce the same in verbatim as under: "4. The facts of the case are that the assessee has shown sundry creditor for Rs. 1,83,04,731/- in the name of M/s. Rana Wines, L-1, Solan which also includes the liability of Rs. 1,11,42,804/- outstanding for the previous....
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....17 to sell his land situated at Mehal Malyana, Tehsil Teera, Distt. Mandi (H.P.) to clear the liability/Debts of assessee with M/s. Rana Wines. The copy of agreement is enclosed herewith. The reply of the assessee clearly shows that the assessee has made payment in contravention of Section 40A(3) of the Act. The AO has not examined the case in view of section 40A(3) of the Act. As the AO has failed to consider this the order issued by the assessing officer is erroneous and prejudicial to the interest of the revenue. 2. Payment by sale of Property of father Regarding balance payment of Rs. 1,11,04,731/-, the assessee submitted that his father Sh. Kashmir Singh sold a property for Rs. 1,25,00,000/- to Rana Wines on 09.05.2017 and this liability was discharged. The assessee only filed copy of an Ikrarnama as proof of this transaction. On perusal of this Ikrarnama, it is noted that this Ikrarnama was not registered as required under Transfer of property Act, 1883. Even this Ikrarnama does not bear the required Stamp Duty as required under the Indian Stamp Act, 1899. No copy of registered Deed is found placed on record. Further, the assessee submitted....
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....from M/s. Rana Liquor Solan and the AO has accepted the accounts of the assessee without verifying the genuineness of the accounts. As the AO has failed to consider this the order issued by the assessing officer is erroneous and prejudicial to the interest of the revenue. 4.4 Cash-in-Hand as per Balance Sheet In Balance Sheet as on 31.03.2016, the assessee has declared advances at Rs. 1,80,00,000/-. It is mentioned in assessment record that this amount represents cash-in-hand which was kept for License Fee of next year but he was not allotted any License for the next year. The licence fee is being paid to Government in the form of draft. Hence no cash in hand is required to be kept. The AO has however failed to consider this aspect and not verified whether the cash-in-hand is genuine or not, the order thus issued by the assessing officer is erroneous and prejudicial to the interest of the revenue. 4.5 Payment of Rs. 9,20,000/- in cash On perusal of Ledger Account of Rana Wines L-1, Solan from Books of Accounts of Sh. Sher Singh, it has come to notice that the assessee has made payment of Rs. 9,20,000/- in cash to Rana Wines. This payment was made....
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.... It is submitted that the assessee has paid Rs. 72,00,000/- to M/s. Ran Wines L-1 during the F.Y. 2016-17 and remaining liability was discharged by executing an agreement dated 09/05/2017 regarding sale of property of Rs. 1.25 Crore in future date. It is submitted that the agreement of sale of property is a valid agreement with is notarized by notary public appointed by Govt. of India and there is no need to registered the agreement of sale under the transfer of property Act. As far as the copy of registered sale deed is concerned, it is submitted that the sale deed was to be executed upto 31/03/2019 as per terms of the agreement dated 09/05/2017 but the assessee and his father were not granted any further liquor business from the Excise Department of Punjab and Himachal and has suffered monetary loss in the draw/lottery filed with the Excise Department to fetch liquor contract which he did not get. Due to the weak financial position of the assessee and his father, they did not discharged the liability and executed sale deed in favour of M/s. Rana Wines L-1 on the stipulated date i.e. 31/03/2019 and the balance outstanding credit liability is still pending with M/s. Rana Wines....
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....d from the books of both assessee and M/s. Rana Wines. There is thus no contravention to provisions of Section 40A(3) of I.T. Act 1961." 6. It was submitted by the Ld. AR that firstly on the issue of bogus liability for financial year 2014-15, there is no basis for arriving at such a finding by the Ld. Pr.CIT as she has failed to consider the entries in the ledger account so submitted by the assessee wherein she has failed to consider opening balance of Rs. 1,11,42,804/- which has been taken as nil by the Ld. Pr.CIT, whereas if it look at ledger account of M/s. Rana Wines, L-1, Solan, the same is clearly appearing as opening balance and it seems that the Ld. Pr.CIT has considered the said opening balance as part of the purchases figure of Rs. 2,34,33,281/-. It was further submitted that the assessee was having regular purchases from M/s. Rana Wines, L-1, Solan in the earlier year as well as in the year under consideration and payments have been made during the year, which is also evident from the figures reproduced by the Ld. Pr.CIT. It was submitted that, therefore, the finding of the Ld. Pr.CIT that no payments had been made to M/s. Rana Wines, L-1, Solan, is not factually cor....
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....ooks of the assessee company are tallying with the balances in the books of M/s. Rana Wines, L-1, Solan and the Ld. Pr.CIT has failed to state how the order so passed by the AO can be held to be erroneous and prejudicial to the interest of the Revenue. 9. Regarding the cash in hand of Rs. 1.80 crores, it was submitted that there is no basis for arriving at the finding by the Ld. Pr.CIT that there was no need for the assessee to keep cash in hand. It was submitted that the said finding is clearly based on presumption and assumption and it is the prerogative of the assessee whether he wants to keep cash in hand or deposit in the bank account and the same depends on the business exigencies and cannot be challenged by the Ld. Pr.CIT and in any case, the fact that there was cash in hand of the assessee was duly disclosed in financial statement and books of account which have been duly verified and examined by the AO, there is no basis to hold that the order so passed by the AO is erroneous and prejudicial to the interest of the Revenue. 10. Regarding payment of Rs. 9,20,000/- in cash to M/s. Rana Wines, L-1, Solan during the year under consideration, it was submitted that the asse....
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....learly erroneous and prejudicial to the interest of the Revenue. 14. We have heard the rival contentions and pursued the material available on record. Firstly, the Ld. PCIT has held that the assessee has shown bogus liability of Rs. 1,11,42,804/- towards Rana Wines L-1, Solan in his balance sheet for the financial year 2014-15 and the AO has failed to consider this matter and therefore, the order so passed by the Assessing officer for the impugned assessment year is erroneous and prejudicial to the interest of the Revenue. The basis of arriving at such a finding by the Ld. PCIT is that the assessee has shown nil opening balance towards Rana Wines L-1 Solan in its books of accounts as on 1.04.2015 and has not made any payment towards such liability in the subsequent years. In his submissions, the assessee has submitted that he has shown opening balance of Rs. 1,11,42,804/- towards Rana Wines L-1, Solan in his balance sheet for the financial year 2015-16 and apparently, the Ld. PCIT has wrongly considered the opening balance as part of purchases during the year. Secondly, it has been submitted that the payments to the tune of Rs. 32,95,000/- have been made during the year and ther....
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...., if any, in respect of discharge of liability in cash in the subsequent financial year 2016-17, a liability which has been incurred in current financial year will arise u/s. 40A(3A) and not under section 40A(3), and the AO will be at liberty to examine the same as per law for the assessment year 2017-18 and not for the impugned assessment year 2016-17. Similar is the situation relating to discharge of remaining outstanding liability by way of entering into an agreement to sell dated 9.05.2017 which again falls in financial year 2017-18 relevant to assessment year 2018-19 and the implications, if any will arise in the financial year 2017-18 and the AO is at liberty to examine as per law for the assessment year 2018-19 and not for the impugned assessment year 2016-17. Therefore, where the AO has not examined the implications relating to discharge of outstanding liability which has evidently happened in the subsequent financial years, the order so passed by the AO for the impugned assessment year 2016-17 cannot be held to be erroneous in so far as prejudicial to the interest of the Revenue. 16. Regarding confirmation of balance in the account of Rana Wines, Solan, the Ld. PCIT has....
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....f section 40A(3) of the Act. In response, the Ld. AR submitted that the assessee was under pressure from M/s. Rana Wines, regarding huge outstanding and, therefore, left with no alternative, he was compelled to make payment of Rs. 9,20,000/- under consideration which were beyond his control and, therefore, there was no contravention of the provisions of section 40A(3) of the Act. It was submitted that necessary explanation was submitted before the Ld. Pr.CIT and he has failed to consider the same while passing the impugned order. Without prejudice, it was submitted that if at all, the order of the AO has to be set aside then the same can be set aside for the limited purpose of examining the explanation so submitted by the assessee before the Ld. Pr.CIT. 18. On perusal of the ledger account of Rana Wines Solan in the books of the assessee, it is evident that the assessee has made cash payment of Rs. 9,20,000/- to Rana Wines during the year under consideration and we find that there is no query raised or any examination which has been carried out by the AO in terms of implications arising u/s. 40A(3) of the Act, the provisions of which are prima facie attracted in the instant case....