TaxTMI 
TaxTMI 
2021 (4) TMI 1352
X X X X Extracts X X X X
X X X X Extracts X X X X
....into plots, converted into stock-in-trade and later on sold and admitted profit on sale of such plots and hence the provisions of section 40A(3) were not applicable. However, the AO did not get impressed and made the disallowance of Rs. 1,35,87,225/- u/sec. 40A(3) of the Act and consequently made the addition. 4. Aggrieved against the order of the AO, the Assessee challenged the said addition before the ld. Commissioner, wherein the Assessee filed the additional evidences by way of confirmation letters of the sellers qua 05 transactions of purchase of agricultural lands during the year out of total 08 transactions. It was also claimed by the Assessee that the agriculturists insisted on payment of consideration in cash as they do not have any bank accounts. The said additional evidences were forwarded to the AO with a request to examine the same and to furnish the remand report, in response to which, the AO while following the directions of Ld. Commissioner sought confirmation letters from all the sellers and held necessary enquiries by deputing ITI who confirmed the identity of the sellers and the AO submitted in the Report that cash purchases are inevitable and thus prove the b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of the Inspector during the remand proceedings. Therefore, it is seen that the exception laid down under rule 6DD(g) of the I.T. Rules is clearly applicable to the cash payments of Rs. 1,08,09,000/-. Hence, the said cash payments are not liable for disallowance u/sec. 40A(3) of the Act. 4.2 However the ld. Commissioner sustained the remaining addition by observing: That as regards the balance cash payment of Rs.24,70,000/- made towards purchase of agricultural lands and cash payment of Rs. 3,91,410/- made towards purchase of vacant site, it is seen that the said payments are not covered any of the exceptions laid down in rule 6DD, therefore, the said cash payments aggregating to Rs. 28,61,410/- are liable for disallowance u/sec. 40A(3) of the Act. 5. The Assessee challenged the impugned order before tribunal and in support of appeal, ld. AR Shri C. Subrahmanyam vehemently argued as claimed before the authorities below. Further during the argument, Mr. Subrahmanyam fairly conceded that the Assessee is not insisting on the confirmation of addition to the extent of Rs. 3,91,410/- qua cash payment made towards purchase of vacant site. 6. On the other hand, ld. DR re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....M.Bhaskar 3714500 5. 05.12.2011 6114/11 Agricultural M.Bhaskar 2926000 Total 108,09,000 31. After examining the additional evidence furnished by the assessee for the purpose of establishing that Edupugallu Village was not served by any bank during the year under consideration and that the Andhra Bank branch at Edupugallu was established subsequently in the year 2015, the AO stated in the remand report that the contention of the assessee is factually correct. Further, the fact that the above mentioned sellers of the land are ordinarily residing at Edupugallu Village is evident from the recitals in the relevant registered documents through which the assessee purchased the agricultural lands from the said persons and the enquiry report of the Inspector during the remand proceedings. It is therefore seen that the exception laid down rule 6DD(g) is clearly applicable to the cash payments of Rs.1,08,09,000/- made towards purchase of agricultural lands. Hence, it is held that the said cash payments are not liable for disallowance u/s. 40A(3) of the Act. 32. As regards the balance cash payments of Rs.24,70,000/- made towards purchase of agricult....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under sub-section (3) of section 40A shall be made, which include Rule 6DD (e) (i) which covers the payment made for the purchase of agricultural or forest produce. 7.3 Here in this case, this is un-controversial fact that the lands sold were agricultural lands and the sellers were agriculturists and their identity are also not in dispute and the payments in cash except Rs. 3,91,410/-, were also made for the purchase of agricultural lands only, because it clearly reflects from the remand report that the AO through ITI thoroughly investigated the matter by making elaborate enquiry and not only confirmed the identity of the sellers but also clarified that it is general practice that agriculturists always insist on cash payments and on account of lack of literacy they do not approach the banks excerpt perhaps. From the facts narrated in the report of the ITI, it is clear that there is business expediency in the said cash payments and the sellers are agriculturists and have insisted on cash payments. It was further mentioned in the remand report that the sellers have specifically stated that cheques are not reliable and that the reasons why they have insisted upon cash payments. In ....