AI Drafter 
TaxTMI 
TaxTMI 
2023 (1) TMI 1111
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.... order. 3. The learned Principal Commissioner of Income-tax erred on facts and in law in holding the subject land to be stock-in-trade merely because the appellant is a property dealer. 4. The learned Principal Commissioner of Income-tax erred on facts and in law in setting aside the order of the Assessing Officer without justifiable reasons. All the grounds are inter-connected and relates to challenging the order of the learned Principal Commissioner of Income-tax ("Pr. CIT") in invoking and passing order under section 263 of the Income-tax Act, 1961. Therefore, we thought it fit to decide all the issues by passing the present combined order. 2. The brief facts of the case are that the assessee filed the return of income for the assessment year 2012-13 on March 18, 2013 declaring total income of Rs. 10,75,940 which has been processed under section 143(1) of the Act. As per ITS statement, the assessee has purchased an immovable property for a consideration of Rs. 60,00,000 on July 20, 2011 and registration/stamp charges have been paid for Rs. 3,58,360. The Assessing Officer reopened the case by issuing notice under section 148 on March 22, 2019 with th....
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....otal income of Rs. 10,75,940. According to ITS information received in the case of the assessee, the assessee had purchased immovable property for Rs. 60,00,000 on July 20, 2011 and paid registration charges of Rs. 3,58,360. Therefore, the case of the assessee is reopened with prior approval of the Principal Commissioner of Income-tax, Kota vide approval Sl. No. 4310, dated March 19, 2019 by issuing notice under section 148 on March 22, 2019 which was served on the assessee online, through registered post as well as through notice server. In compliance thereof, the assessee furnished written reply, copy of Income-tax return with computation of income, profit and loss account, cash flow statement, confirmation of accounts, receipts for sale consideration, agreement for sale, sale deed dated July 20, 2011. Thereafter, in the case of the assessee notice(s) under section 142(1) and questionnaire were issued time to time. In response thereto, written explanations information sought for, copy of Income-tax return with computation of income, copies of bank statements, documents, etc., were furnished online which have been kept on record and were test checked. 2. The assessee is e....
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....equently, land purchased by you is to be considered as stock-in-trade for your business. On perusal of your trading and profit and loss account, it is found that you have purchased land during the year, at Rs. 94,51,228 (which includes land purchased at village Kustala at Rs. 63,58,360 (cost Rs. 60,00,000 + stamp Rs. 3,58,360)). On perusal of purchased deed of this property dated July 20, 2011, it is noticed that entire purchase consideration of Rs. 63,58,360 was paid in cash by you. As per provisions of section 40A(3) of the Income-tax Act, stock, (i. e., land) cannot be purchased in cash over Rs. 20,000. Otherwise, whole expenditure is required to disallow, as per said section. Hence, disallowance of Rs. 63,58,360 is required to be made under section 40A(3) of the Income-tax Act and the same was not made by the Assessing Officer. (iii) On perusal of cash flow statement of the assessment year 2012-13 submitted to the Assessing Officer during the assessment proceedings, it is found that you had taken loans from following persons in cash over Rs. 20,000 during the year under consideration : Sl. No. Name of loan provider PAN Date of loan Amount of loa....
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....interests of the Revenue. 3.5 The learned authorised representative in support of his arguments has relied upon his written submissions and the learned Departmental representative has supported the order of the learned Principal Commissioner of Income-tax. 4. We have heard the rival contentions and perused the material placed on record and the orders passed by the Revenue authorities and the case law cited by the parties. From the record, we noticed that the assessee had furnished return of income for the year under consideration under presumptive taxation under section 44AD and disclosed required particulars. The Assessing Officer while passing the order has categorically mentioned that he had verified and examined the reply and documents furnished by the assessee. The Assessing Officer has further mentioned that the assessee had furnished written reply, copy of Income-tax return with computation of income, profit and loss account, cash flow statement, confirmation of accounts, receipts for sale consideration, agreement for sale, sale deed dated July 20, 2011 bank statements, etc. This finding and recording of these facts is not disputed by the learned Principal Commis....
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....s of source from which land was purchased. The Assessing Officer finally issued show cause vide notice under section 142(1) dated November 14, 2019 and in response thereto the appellant furnished reply which is appearing at page 51 of paper book. The reply of the appellant as reproduced below clearly indicates that the Assessing Officer made necessary inquiries with regard to purchase of land in cash in the course of real estate business, acceptance of cash loans from the family members and applicability of provisions of section 269SS of the Act : "In above reference we confirm that the said land has been purchased on dated July 19, 2011 for Rs. 60,00,000 and registry charges Rs. 3,58,360 has been paid in cash. The assessee deals in real estate business and income shown as business income. We are already submitted the cash flow statement, i. e., source of cash paid to the seller. Main source of cash generated is sale of plots and cash loan taken from wife and younger brother and cash withdrawal from banks which can be seen attached cash flow statement. The assessee sold the 90B converted plots in cash. We are submitting herewith the copies of sale agreements of pl....
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....00 75,000 75,000 75,000 29-4-2011 Sale of land/plot 75,000 75,000 75,000 75,000 4-5-2011 Sale of land/plot 75,000 75,000 75,000 75,000 9-5-2011 Sale of land/plot 75,000 75,000 75,000 75,000 12-5-2011 Sale of land/plot 75,000 75,000 75,000 75,000 14-5-2011 Sale of land/plot 75,000 75,000 75,000 75,000 17-5-2011 Sale of land/plot 75,000 75,000 75,000 75,000 12-5-2011 Sale of land/plot 75,000 75,000 75,000 75,000 12-5-2011 Sale of land/plot 75,000 75,000 75,000 75,000 18-5-2011 Sale of land/plot 7,50,000 7,50,000 7,50,000 7,50,000 23-5-2011 Sale of land/plot 9,75,000 9,75,000 9,75,000 9,75,000 23-5-2011 Cash withdrawn (Corp. Bank) 20,000 20,000 20,000 20,000 23-5-2011 ATM withdrawal 10,000 10,000 10,000 0 23-5-2011 ATM withdrawal 10,000 10,000 10,000 0 23-5-2011 ATM withdrawal 10,000 10,000 10,000 0 23-5-2011 ATM withdrawal 10,000 10,000 10,000 0 29-5-2011 Advance against land received 1,20,000 1,20....
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....s of deposits fall subsequent to the date of purchase of land in cash for which sufficient cash was available with the appellant which is evident from the aforesaid cash flow statement and, therefore, there was no shortfall in available cash funds for purchase of land as on July 18/19, 2011. Cash loans taken from the family members coincided with purchase of land in cash and, therefore, necessity for taking loans in cash was also established and acceptance of cash loans was supported with confirmation of respective parties. 4.1 According to the learned authorised representative, in view of the decision of Kolkata Bench of the Tribunal in the case of Nikhil Banik Mazumder v. Jt. CIT in I. T. A. Nos. 453 and 454/Kol/2016, dated January 10, 2018 for the assessment year 2010-11, the Assessing Officer did not refer the matter to the Joint Commissioner of Income-tax for initiation of penalty proceedings under section 271D of the Act which was one of the permissible view available to him. The hon'ble Rajkot Bench of Tribunal in Master Vijay R. Oswal v. ITO [2003] 87 ITD 98 (Rajkot) and Visakhapatnam Bench of the Tribunal in Ambica Chemical Products (Regd.) v. Asst. CIT [2003]....
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....ed that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3) and this sub-section where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors." It is in this background of the case, the Assessing Officer completed assessment accepting returned income in the reassessment proceedings. 4.3 In our view, the assessment order was revised merely by holding that the Assessing Officer had not narrated his conclusion as to why he had accepted cash flow statement and no disallowance under section 40A(3) as made and further no penalty under section 271D was subjected. However, these conclusions drawn by the learned Principal Commissioner of Income-tax are cryptic and without assigning any reasons as to why the explanations and submissions of the appellant were not mainta....
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....gard to cash deposits in the bank account (referred to in final conclusions in revision order) even though on statements were already available on record. Therefore, revision order has been passed with dictating approach. The learned Principal Commissioner of Income-tax has invoked clauses (a) and (b) of Explanation 2 to section 263 of the Act while setting aside the order of the Assessing Officer. No such disclosure was made while issuing show-cause notice that the learned Principal Commissioner of Income-tax intended to invoke clauses (a) and (b) of Explanation 2 to section 243 in the case of the appellant. The hon'ble Gujarat High Court in the case of Pr. CIT v. Shreeji Prints (P.) Ltd. [2021] 437 ITR (St.) 10 (Guj) ; [2021] 130 tax mann.com 294 (Guj), has held that revision order passed against the asses see is not sustainable when the Principal Commissioner of Income-tax has not mentioned in the show-cause notice issued under section 263 that he is going to invoke Explanation 2 to section 263 hence, invocation of Explanation in the order without confronting the assessee is not appropriate and sustainable in law. The special leave petition of the Revenue has been dis missed....
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....the Assessing Officer is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal enquiry. If the Principal Commissioner of Income-tax is of the view that the Assessing Officer did not undertake any enquiry, it becomes incumbent on the Principal Commissioner of Income-tax to conduct such enquiry. If the Principal Commissioner of Income-tax does not conduct such basic exercise then the Commissioner of Income-tax is not justified in setting aside the order under section 263 of the Income-tax Act. 26. We find the hon'ble Delhi High Court in the case of DIT v. Jyoti Foundation [2013] 357 ITR 388 (Delhi) has held that where revisionary authority opined that further enquiry was required, such enquiry should have been conducted by revisionary authority himself to record finding that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue. We find the hon'ble Delhi High Court in the case of Sunbeam Auto Ltd. (supra) has held that if the Assessing Officer, while making an assessment, has made inadequate enquiry that would not by itself give occasion to the Commissioner of Income-t....
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....icer had not carried out any investigation with regard to the queries as contained in sub-para graphs (a) to (f) of paragraph 3 but in fact the Assessing Officer had investigated all these points and in this respect, our attention was invited to paper book pages 21-39 wherein the documents relating to the reply filed with the Assessing Officer, vide letter dated September 20, 2010, was placed. Similarly, our attention was invited to paper book pages 40-86 wherein reply relating to query at (b) in respect of sundry creditors was placed. Similarly, pages 109-124 were referred to highlight that the query regarding unsecured loan was also made by the Assessing Officer and in reply, necessary confirmations were filed. As regards the observation of the Commissioner of Income-tax as contained in paragraph (d), the learned authorised representative took us to pages 125-166 of the paper book to highlight that the same was also replied to the Assessing Officer. Similarly, he took us to copy of form 2 filed with the Registrar of Companies for the allotment of shares was placed. It was submitted that no share application money was raised during the year and it was only the share applicants of ....
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.... decision of the Bombay High Court in Income-tax Appeal No. 296 of 2013 (CIT v. Fine Jewellery (India) Ltd. [2015] 372 ITR 303 (Bom)) decided on February 3, 2015, wherein also the Bombay High Court, following its earlier decision in Idea Cellular Ltd. v. Dy. CIT [2008] 301 ITR 407 (Bom) has taken a similar view and said as under (page 307 of 372 ITR) : '. . . if a query is raised during the assessment proceedings and responded to by the assessee, the mere fact that it is not dealt with in the assessment order would not lead to a conclusion that no mind had been applied to it.' 13. We are not persuaded by placing any other authority or by any substantial argument so as to take a different view to what has been taken in the decisions, as noticed above. We also find that the learned counsel for the Department though sought to re-argue before this court that no inquiry has been made by the Assessing Officer with respect to the queries set up in paragraph 3(a) to (f) of the notice issued under section 263 of the Act but when his attention was drawn to the order passed by the Tribunal recording otherwise findings, he could not place anything to show that the afo....
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....sed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. The Commissioner of Income-tax cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inade quate enquiry but not lack of enquiry, again the Commissioner of Income-tax must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner of Income-tax and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in law. In some cases possibly though rarely, the Commissioner of Income-tax can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not under taken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the or....
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....order of the Assessing Officer is erroneous." The hon'ble Patna Bench of the Tribunal in Ramakant Singh v. CIT [2011] 8 ITR (Trib) 403 (Patna) held that where on all points raised by the Commissioner under section 263, the assessee had furnished necessary details and evidence during the assessment proceedings and the Assessing Officer had applied his mind on all those issues, order of the Commissioner under section 263 was unsustainable. The hon'ble Supreme Court in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) ; 109 Taxman 66, had observed that the phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to revenue ; or two views were possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax may not agree ; the said order cannot be treated as an erroneous order prejudi....
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....ve, the assessee in his reply to the show-cause notice under section 263 had specifically mentioned that the entire matter was scrutinised and accepted while passing the assessment order. Our attention was also drawn to annexure "D". A submission made by the assessee to the Income-tax Officer, Surat, dated October 18, 1976, regarding the assessment year 1974-75 giving detailed chronological data of the constitution of the firm on November 11, 1968, induction of four more partners on November 7, 1972, the creation of goodwill in the books of account of the firm by debiting the goodwill account and crediting the old partners' capital accounts in their profit sharing ratio on that date, formation of a private limited company in the name of Rayon Silk Mills P. Ltd., and its induction into the firm as partner by the deed of partnership dated October 27, 1973, and the dissolution of the partnership firm on February 23, 1974, leaving the private limited company as a sole proprietor thereof and the valuation of the business at the book value as on that date. After giving the chronological sequence of events, the assessee also contended in his submission before the Income-tax Officer th....
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....ined in sub-section (1) of section 263 of the Income-tax Act provides that if the Principal Commissioner or Commissioner considers that any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making an enquiry pass an order modifying the assessment made by the Assessing Officer or cancelling the assessment and directing fresh assessment. The interpretation of expression 'erroneous in so far as it is prejudicial to the interests of the Revenue' has been a contentious one. In order to provide clarity on the issue it is proposed to provide that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the Revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which, should have been made ; (b) the order is passed allowing any relief without inquiring into the claims ; (c) the order has not been made in accordance with any order, direction or instruc....
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.... has been an amendment in the provisions of section 263 of the Act by which Explanation 2 has been inserted with effect from June 1, 2015 but the same does not give unfettered powers to the Commissioner to resume jurisdiction under section 263 to revise every order of the Assessing Officer to re-examine the issues already examined during the course of the assessment proceedings. The Mumbai Income-tax Appellate Tribunal Bench has dealt with Explanation 2 as inserted by the Finance Act, 2015, in the case of Narayan Tatu Rane v. ITO reported in [2016] 70 taxmann.com 227 (Mum) to hold that the said Explanation cannot be said to have over ridden the liability as interpreted by the hon'ble Delhi High Court, according to which the Commissioner has to conduct the inquiry and verification to establish and show that the assessment order was unsustainable in law. The Income-tax Appellate Tribunal, Mumbai Bench has further held that the intention of the Legislature could not have been to enable the Commissioner of Income-tax to find fault with each and every assessment order without conducting any inquiry or verification in order to establish that the assessment order is not sustainable in....
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....ges 98-110 of case law compilation furnished in the course of hearing) : "16. We are not in agreement with the same. The assessee having demonstrated his claim being in accordance with law and nothing adverse being pointed out by the learned Principal Commissioner of Income-tax in the explanation of the assessee, there arises no question of the assessment order being erroneous at all. No inquiry may have been conducted by the Assessing Officer in the present case, but if the assessee demonstrates to the learned Principal Commissioner of Income-tax that his claim was in accordance with law, as in the present case and no infirmity is pointed out by him in the explanation of the assessee, how can the assessment order be erroneous. The fact of mere non-inquiry in itself, in such circumstances, will not be sufficient to hold the assessment order erroneous so as to cause prejudice to the Revenue. Explanation 2 to section 263 of the Act, which the learned Principal Commissioner of Income-tax has relied upon, for the said purpose, mentions orders passed without making inquiries or verifications which should have been made (italics provided by us) as resulting in erroneous orders. ....
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....on 263. Having said that, it will not be necessary to burden this order with any further description or narration. The foundation for the exercise of the power being the formation of an opinion or conclusion, there is no escape from the view that the Commissioner of Income-tax must record his conclusions in the matter before setting aside an order of assessment in exercise of the power under section 263. It will again be futile to embark upon any discussion as to the "intensity" or "strength" of the conclusion that must be reached by the Commissioner of Income-tax before setting aside an assessment under section 263 as the answer to the said question would really depend on the facts that may be confronting the Commissioner in any given case. The position can be best resolved by saying that in certain situations the opinion or conclusion recorded would be the final opinion ; in other situations it may be "less than final". What would be necessary for our purposes is to take note of the fact that there has to be an opinion that the assessment which has been set aside is, indeed, erroneous and prejudicial to the interests of the Revenue. Furthermore, the power under section 263 being ....
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....e above facts, set aside the assessment order and directed the Assessing Officer to make a fresh assessment after examining the submissions and contentions advanced by the assessee and after due scrutiny of the documents adduced. The course of action adopted was clearly impermissible in law in the absence of a finding that on consideration of the explanations submitted and for the reasons shown the assessment has to be reiterated to be erroneous and prejudicial to the interests of the Revenue. Unfortunately, the Commissioner did not do so which omission will have the effect of rendering the impugned order dated November 1, 1996, legally fragile. 18. The Income-tax Appellate Tribunal, Mumbai Bench has considered Explanation 2 to section 263, in the case of Narayan Tatu Rane v. ITO [2016] 47 CCH 309, holding that it cannot be said to have overridden the law interpreted by courts that before holding any order to be erroneous, the Principal Commissioner of Income-tax should have conducted inquiries to show that the finding of the Assessing Officer was erroneous. That the provision would apply only if an order has been passed without making inquiries which a prudent officer sho....
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....se of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. 20. Further, clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by the learned Principal Commissioner of Income-tax cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the Assessing Officer vis-a-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to section 263 is whether the Assessing Officer has passed the order after carrying out enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the learned Principal Commissioner of Income-tax to revise each a....
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....icates from the sellers stating that they had insisted on cash payment ; 4. The genuineness of the payments.' 9. In view of the facts of the present case, we find that the affidavits filed by the assessee during the assessment proceeding were not rebutted by the Revenue. Those affidavits contain clear recital that the purchasers insisted for cash payment. Their identity is certainly not in doubt. There is no finding to that effect in any of the orders leading to this appeal. The sale deeds are also admitted to be registered documents and there is no other material as may be considered adverse to the claim set up by the assessee. In view of the undisputed facts of the present case we find no good ground to distinguish the law laid down by this court in Chaudhary and Co. (supra) that has held the field for more than 26 years now. Accordingly, question No. (iii) is answered in the negative, i. e., in if favour of the assessee and against the Revenue. 10. Present appeal stands partly allowed." (ii) N. R. Shetty Prashanth v. ITO [2020] 58 CCH 266 (Bang) "5. We heard the rival contentions and perused the material on record. The sole disput....
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....ances and the seller has accepted the cash transaction for sale of goods. The assessee has no alternative but to make the payment in cash, so that the business of the assessee should not affect due to the technical provisions of law and the assessee has to earn income and pay taxes to the Income-tax Department. We are of the opinion that the addition made by the Assessing Officer cannot be sustained as there is no doubt about the genuineness of transactions and the supplier's confirmation are filed before the assessing authorities." (iii) Krishna Prasad Potnuri v. ITO [2018] 53 CCH 435 (Kol) (assessment year 2014-15). "Consideration of business expediency and other relevant factors are not taken out of the sweep of section 40A(3) and it is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee." (iv) ITO v. Jayanga Anitha 46 CCH 407 (Vizag) "In a particular case, where there exists business expediency and other relevant factors, then, the Act provides for immunity f....
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....well as the identity of the payee are not disputed. Further, the appellant has explained the business expediency of making the cash payments to both the parties which has not been controverted by the Revenue. Following the decision of the Gujarat High Court in the case of Anupam Tele Services v. ITO [2014] 366 ITR 122 (Guj) ; [2014] 88 CCH 35 (Guj) and Rajasthan High Court in the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 (Raj), the addition of Rs. 45,738 under section 40A(3) is deleted." (vii) A. Daga Royal Arts v. ITO [2018] 64 ITR (Trib) (S.N.) 55 (Jaipur) ; [2018] 53 CCH 86 (Jaipur) 2013-14 : "Held We find force in the contentions so raised by the learned authorised representative. The transactions have been executed by the assessee within a span of one and half month and there are trans actions where the payment has been made through cheque and there are transactions where the payment has been made through cash. The said contentions are supported by the fact that on the same day, there are cash and cheque payments as evidenced from the details of the transactions appearing at pages 7 and 8 of the assessment order. It is therefore clear t....
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....IT v. Brilliant Sare Reality P. Ltd. in I. T. (SS) A. No. 44/ Indore/2015, dated December 28, 2018 (Indore-Bench) (copy placed at pages 4-20 of case law compilation given at the time of hearing) At page 18 of compilation CIT v. Rhydburg Pharmaceuticals Ltd. [2004] 269 ITR 561 (Delhi) (page 562) : "We may note that we are not of the view that obtaining a cheque or a bank draft is hazardous and cumbersome procedure. Suffice it to say that in the present case, the Tribunal was of the opinion that the payee insisted on cash payment as observed by the learned Commissioner of Income-tax (Appeals) and further that the transactions were found to be genuine. We may also note that in Attar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667 (SC), at page 673, it is pointed out that the terms of section 40A(3) are not absolute. Considerations of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which payment, in the manner prescribed in section 40A(3), was not practicable....
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....gmatic view of the matter. The Income-tax Officer should take a practical approach to problem and strike a balance between the direction of law and hard ship to the assessee. He should not enmesh himself in technicalities. After all, the object is not to deprive the assessee of the deduction which he is otherwise entitled to claim. Where the amount was paid in cash or received in cash. The Assessing Officer has to find out whether the transaction is genuine or not and if he finds that the transaction is genuine, he should allow the deduction. The circular of the Board is not exhaustive ; it is only illustrative and the Assessing Officer has to take into account the surrounding circumstances, considerations of business expediency and the facts of each particular case in exercising his discretion either in favour or against the asses see. There may be an oral agreement between the assessee and the seller for payment in cash, seller may not be willing to accept cheques; cash payment may be made at the request of the payee who is also an assessee and a certificate to that effect filed ; absence of banking facilities in places where cash payments are made. All such cases would come with....
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....sment years 2006-07 and 2007-08. The relevant portion of the order passed in I. T. A. No. 734/Jaipur/2015 is as under : '2.4 The learned counsel for the assessee assails the addition and the learned counsel for the assessee filed the written submission in which the sums and substances raises following pleas. (i) According to section 44AF, the assessee was to be assessed on presumptive basis, i. e., at five per cent. net profit and no further addition can be made. In this regard nothing is wrong in the trading activities and there has been found a technical issue of section 40A(3) of the Act. (ii) Section 44AF begins with a non obstante clause and specifically bars the application of provisions of sections 28 to 43C which includes section 40A(3) as well. Therefore, it is clear that when the assessee has declared his income under section 40A(3) of the Act, no further disallowance under section 40A(3) can be made. (iii) The learned authorised representative relied on the case of Income-tax Appellate Tribunal, Ahmedabad Bench in the case of Gopalsingh R. Rajpurohit v. Asst. CIT [2005] 94 TTJ 865 (Ahd) wherein it has been held that once the return....
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....Co. v. Asst. CIT in I. T. A. No. 990/Jaipur/2017, dated December 5, 2019 (copy placed at pages 39-67 of case law compilation given at the time of hearing) assessment year 2012-13. "20. In the instant case, we find that the identity of the persons from whom the purchases have been made has been established and the source of cash payments is clearly identifiable in form of the withdrawals from the assessee's bank accounts and the said details were submitted before the lower authorities and have not been disputed by them. It is not the case of the Revenue either that unaccounted or undisclosed income of the assessee has been utilised in making the cash payments. The genuineness of the transaction has been established as purchase of construction material for road construction and lastly, the test of business expediency has been met as it is the admit ted position that the mining activities had been banned in the State of Haryana and the assessee had no other option but to buy construction material from State of Rajasthan where the suppliers and stone crushing units had insisted on cash payments at the time of delivery of material. Further, as held by the hon'ble Rajast....
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....eeding prescribed limits (Genuineness of transactions)- During assessment proceedings the Assessing Officer noted that assessee, who was engaged in trading in properties, made certain transactions in cash in excess of Rs. 20,000 and disallowed same under section 40A(3)-Whether since genuineness of said transactions had not been disbelieved by authorities below, it made out a case of business expediency and could not be disallowed under section 40A(3).' -The hon'ble Rajasthan High Court in the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 (Raj) wherein the court observed as under (headnote only) "Addition under section 40A(3)-Payments through bank only- Held that requirement under rule 6DD(j) are deemed to have been satisfied if genuineness of transactions and payments and identity of receiver is established additions are invalid-Assessability of amount of cash credits would be finalized after the Assessing Officer outcome.' 6. In the background of the aforesaid discussions and respectfully following the precedents, as cited above, the disallowance of Rs. 1,54,97,974 under section 40A(3) of the Income-tax Act, 1961 made by the Assessi....
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....levant factors" which is a principal legislation, there is no need to look on the subordinate legislation, i. e., Rules. The learned Principal Commissioner of Income-tax while passing revision order has not held non-applicability of jurisdictional High Court judgment in the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 (Raj) which is apparent from para 4 of the revision order. 4.5 It was submitted by the learned authorised representative that during the course of reassessment proceedings, the Assessing Officer had inquired into the matter relating to purchase of land in cash, its source, nature of business carried on by the appellant, acceptance of loans in cash and applicability of provisions of section 269SS, etc., by issuing notice(s) under section 142(1) of the Act along with questionnaire and accepted the returned income only after due verification which cannot be termed as erroneous or prejudicial to the interests of the Revenue. View taken by the Assessing Officer is a plausible view and is supported with the rulings including of the jurisdictional High Court as well as the Tribunal. The appellant took loan of Rs. 4,50,000 on July 11, 2011 from younger bro....
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.... is not in dispute cannot be considered to be a case of passing of erroneous order by the Assessing Officer or prejudicial to the interests of the Revenue. The learned Principal Commissioner of Income-tax vehicle making order under section 263 in para 4 at page 9 of revision order has observed that "regarding the issue of unsecured loans accepted in cash which is a violation of section 269SS and initiation of penalty proceedings under section 271D, the reply filed by the assessee is not acceptable. The assessee rendered various decisions but these are not applicable in this case". From the conclusions and finding of the learned Principal Commissioner of Income-tax, we found that it is apparent that genuineness and necessity of accepting cash from the brother and wife is not in dispute as said cash was warranted for making payment of land consideration in next few days. Therefore, we can conclude that said funds were obtained for business necessities and on account of insistence of sellers of land to make payment in cash. The learned Principal Commissioner of Income-tax in revision order has not elaborated as why explanation offered by the appellant was not acceptable. The learned P....
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....t unreasonable and is based on business exigencies also for payments to laborers and lenders. Under these circumstances, we are of the view that the transactions being genuine and the assessee having offered reasonable explanation justifying these cash transactions, the impugned penalty under section 271D is not leviable." The Income-tax Appellate Tribunal, Jaipur in the case of Smt. Meera Devi Kumawat v. Jt. CIT [2022] 193 ITD 250 (Jaipur) deleted penalty under section 271D in a situation where wife received cash loan from husband. It was explained that the assessee had no option but to discharge the remaining consideration in cash at the time of registry as so insisted by the seller of the property and in absence thereof, the deal might have not fructified. The Explanation so furnished as reasonable and plausible and do not find any mala fide in the explanation so submitted as everything is flowing from the registered sale deed were transactions have been duly documented including the payment through demand draft cash which is from the known sources of funds contributed by the assessee's husband. The Income-tax Appellate Tribunal, Delhi Bench in the case of Sunil Kum....
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.... and wife could not attract mischief of provisions of section 269SS of the Act. The Rajkot Tribunal laid an important postulation. The aforesaid contention of the assessee pleading bona fide cannot be brushed aside summarily having regard to conventional constructs and postulations which define Indian socio-eco structure". In ITO v. Tarlochan Singh [2003] 128 Taxman 20 (Amritsar) (Mag.) it was held that where the assessee had allegedly received a loan in cash from his wife for investment in acquisition of immovable properties, and the assessee was under bona fide belief that amount was not to be returned, no penalty was leviable. The hon'ble Kolkata Bench of the Tribunal in Plaban Kumar Basu v. ITO (I. T. A. No. 1088/Kol/2018, dated November 27, 2019) deleted the penalty under section 271D for alleged violation of provisions of section 269SS in the following terms when transactions were entered between the family members : "3. We have given our thoughtful consideration to rival contentions. The assessee has admittedly availed loans in cash from his mother and wife, Smt. Mala Basu and Renuka involving sums of Rs. 1.20 lakh and Rs. 1.30 lakh ; respectively. There is furt....