2022 (10) TMI 759

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....allowance of Rs.21,33,333/- u/s. 40A(3) of the Act. 3. Brief facts relating to the case are that the assessee is an individual engaged in the business of purchase and sale of agricultural land, plots, etc. The assessee conducts her business under the name and style as "M/s. Sarth Associates". The assessee filed return of income declaring a total income of Rs.4,08,119/- and under scrutiny, the AO determined the same at Rs.25,41,452/- inter alia making addition on account of cash payment in violation of section 40A(3) of the Act. The CIT(A) confirmed the same. 4. Heard both the parties and perused the material available on record. The ld. AR submits that the assessee along with her co-purchasers purchased three different lands with two ....

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.... it is also not disputed that the said cash payment to the share of assessee was not reflecting in the sale deed. 5. Coming to the other Wagh group, I note that the assessee along with two others purchased agricultural land at Gat No. 663, Madsangwi, Nashik, through two sale deeds. I note that the details of payment regarding the first sale deed for Rs.79,50,000/- for 1 hectare and 2 ares at page 8 of the impugned order. The ld. AR submits that there was a Civil Suit pending in connection with the dispute amongst legal heirs of Wagh family. The parties therein agreed for settlement, but, one of such party agreed for settlement on a condition that out of sale consideration in both the sale deeds concerning 1 hectare and 2 ares and other f....

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....re applicable to the facts on hand and no disallowance u/s. 40A(3) is warranted. 6. I note that the Hon'ble Supreme Court in the case of Attar Singh Gurmukh Singh Vs. ITO reported in (1991) 191 ITR 667 (SC) held that the provisions u/s. 40A(3) of the Act must not be read in isolation or to the exclusion of Rule 6DD. Further, it was observed that the provisions u/s. 40A(3) of the Act are not intended to restrict the business activities. It is insisted only to enable the AO to ascertain whether the cash payments made are out of the income from disclosed sources. Further, it is held the terms of section 40A(3) of the Act are not absolute. I find the collective reading of provisions u/s. 40A(3) of the Act along with Rule 6DD of the Rules pro....

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.... Act. 8. Further, this Tribunal in the case of Dnyaneshwar Jagannath Dhamne (supra), the Tribunal in para 11 at page 7 of the said order clearly held the cash payment of Rs.3 lakhs were part and parcel of total sale consideration which was admitted before the Government authority i.e. Sub-Registrar of State of Maharashtra. The Tribunal held the disallowance u/s. 40A(3) of the Act is not maintainable if the cash payment is part and parcel of total sale consideration. In the present case also the cash payment was part and parcel of total sale consideration which is not disputed by both the lower authorities. Therefore, the finding of this Tribunal in the case of Dnyaneshwar Jagannath Dhamne (supra) is applicable. 9. Further, to the deci....