TaxTMI 
TaxTMI 
2023 (9) TMI 1620
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....ee's case. Further, at the time of hearing on 15.05.2023, an application seeking adjournment was filed by assessee through Inward No. 159 dated 11.05.2023. Acceding to the request made by assessee, the case was adjourned to 08.06.2023 (today) granting last opportunity to assessee. Since none has appeared today and the Ld. DR for revenue is ready for arguments, it is not possible to grant any more opportunity. Therefore, the hearing is proceeded and the case is decided on the basis of available material and after hearing Ld. DR. 3. The assessee is a company engaged in the business of land development, sale of plots, etc. During scrutiny-assessment of relevant assessment-year framed u/s 143(3), the AO found that the assessee has made cash payments of Rs. 2,63,60,750/- against purchase of lands to be held as stock-in-trade and thereby attracted disallowance u/s 40A(3). Ultimately, while completing assessment, the AO made disallowance. The assessee carried matter in first-appeal whereupon the CIT(A) deleted disallowance. Now, the Revenue is aggrieved by action of CIT(A) and therefore in appeal before us. The assessee has also filed Cross-Objection. We would first take up Revenue's a....
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....reason that payments made for goods fall within the meaning of expression "expenditure" in section 40A(3) of the Act. Reliance is placed in this regard on the verdict of Hon'ble Punjab & Haryana High Court in the case of CIT Vs Kishan Chand Maheshwari Dass 121 ITR 232. The assessee has further argued that the genuineness of the transaction has not been questioned. Here it is noteworthy to mention that genuineness of the transaction is not sufficient as it would amount to defeat the object of enactment. The assessee as well as all the sellers had maintained their bank accounts. On perusal of the title deeds, it can be seen that major part of sale consideration has been paid through cheques to all the sellers. The need of making part payments in cash is unjustifiable. It is reiterated that not merely genuineness of transaction but existence of circumstances warranting cash payment is to be proved by the assessee. The assessee has failed to make out a case of unavoidable circumstance in which it was compelled to make part payments in cash. The assessee has further claimed that the sellers of the properties were strangers for the assessee hence it had to give toke....
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.... of Purchase Total payment through cheques Total payment in Cash 1. Shri Gyan Singh Survey No. 307/1, 308/1, 309, 310, 314, Vill Kalyanpur, Patwari Halka No. 13 Old and 19 New. Fanda Tehsil Huzoor, Dist. Bhopal 25.03.2014 1,74,49,000/- 51,000/-on dt. 16.03.2014 Shri Govind Singh Survey No. 307/1, 308/1, 309, 310, 314, Kalyanpur, Patwari Halka No. 13 Old and 19 New, Fanda Tehsil Huzoor, Dist. Bhopal 25.03.2014 1,75,00,000/- Nil 2. Shri Pradeep Agrawal Survey no 3/2/2/2, 6/1/1, 6/1/3, 6/2/1 etc. Vill- Gudawal, paiwari halka no.20, chiklodkhurd, The-Goharganj, Dist-Raisen 19.08.2013 2,86,62,000/- 60,00,000/- dt.19.08.2013 3. Shri Gaurishankar Survey No. 101/1, Vill. Joshi Guradia, Patwari Halka No. 27. (New No. 67), Simrol, Tehsil Mhow, Dist. Indore 08.07.2013 26,00,000/- 16,38,000/- 4. Shri Kayum Khan Survey No. 246/2 246/1, Vill. Shivnagar, Patwari Halka No. 27. Tehsil Mhow, Dist. Indore 30.03.2014 18.50,000/- 35,90,000 on dt.29.03.2014 Sint Madhu Tanwar Survey No. 246/2 246/1, Vill. Shivnagar, Patwari Halka No. 27. Tehsil Mhow, Dist. Indore 30.03.2014 18,63,750/- 35....
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....CIT, 28 ITI 289. In this case Hon'ble ITAT held that the payment were made at the direction of the department and the situation was not within the control of the appellant and ITAT deleted the said disallowances. 4.1.7 ITAT Indore bench Indore in the case of ITO Vs Jitendra Kumar Mandlecha, 23 ITJ 644 In this case the facts of the case was as under:- "Assessee made payment of business expenditure above Rs. 20000/- in cash, AO made disallowances of the same - ITAT Held that object behind the provisions is that persons are not allowed to show false expenditure for avoiding income tax and therefore, once the genuineness of payment and identity of the payee is established fully, the object is achieved and in such a situation, if the payment has been made looking to the necessity of settlement or difficulty of payee as payee was in need of money after banking hours. The same cannot be said to have been made in violation of object of the rules - Expenditure is therefore allowable in present case, as same is genuine and duly recorded and out of business exigencies Therefore, respectfully following the same the addition made by the AQ amounting to Rs. 2,63,60,750/- is....
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....that matter the CIT(A) or the Tribunal and therefore, it is submitted that genuineness of the transactions is a very relevant factor, which should be taken into consideration. 8. The learned Standing Counsel for the Revenue submitted that the assessees have not been able to bring their cases under any one of the exceptional circumstances in Rule 6DD and having failed to bring the same under the exceptional clauses, the authorities as well as the Tribunal rightly denied relief to the assessees. Further, it is submitted that the assessees did not furnish the full details in the relevant column in the return of income and these details were available only in the annual report, which will go to show the conduct of the assessees. It is further submitted that the assessees are established parties and therefore, to say that they effected cash payments due to certain circumstances is an unacceptable plea. That apart, both the assessees are based on Chennai and nothing prevented them to avoid payment through banking channels. Further, the assessees have failed to prove unavoidable circumstances, which necessitated payments by cash over and above a sum of Rs. 20,000/-. Further, the ....
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....angalore (2021) 123 Taxman.com 218: "9. Thus, from the perusal of the relevant extract of the order passed by the assessing officer, it is evident that the assessee's authorized representative in his written submission dated 18.12.2008 had disclosed the reason for payment in cash on the ground that the payments were made at place which was not served with any banking facility. The assessing officer has found that the place at which the payment was made had banking facility and therefore, has held that the assessee failed to prove that it was covered in the exception clause as provided under Section 40A(3) read with Rule 6DD. The aforesaid finding has been affirmed by Commissioner of Income Tax (appeals) vide order dated 23.02.2011. The relevant extract reads as under: "Considering the various fats, I find that the appellant could not demonstrate with cogent evidences that there was business expediency or sufficient cause for such cash payments to various parties in the relevant assessment year. The explanation of the appellant that the transaction has taken place in Devenahalli Taluk which lacked the banking facilities in and around the place is not acceptable....
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.... that the assessee has purchased two parcel of land vide two sale deeds both dated 27.03.2014. He has referred to the details of the cash payment and submitted that the payment of Rs. 25000/- each to seven co-owners in respect of the one land parcel was paid as token money out of the total sale consideration of Rs. 4,05,30,000/- and balance was paid in cheque to each of the seven sellers. Similarly in case of second land parcel the assessee has paid sum of Rs. 1 lac in cash out of the total consideration of Rs. 79,10,000/-. Thus, Ld. AR has submitted that the cash payment made by the assessee was only a token amount at the time of deal which is a tradition and practice in this business without which the parties are not bound by their promise to strict to the deal. He has further submitted that at the time of initial negotiation and deal it is not possible to make token payment in Cheque and therefore, a minor amount of cash payment as a token money has been paid due to business expediency and the same would not attract the provision of section 40A(3) of the Act. 5. He has further submitted that the AO has not disputed the genuineness of the transactions as it is duly recor....
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....ny of the exceptions incorporated in Rule 6DD of the Income Tax Rules. 7. Ld. DR has referred to the finding of the Ld. CIT(A) and submitted that the genuineness of the transaction is not relevant for disallowance u/s 40A(3) of the Act. In support of his contention, he has relied upon the judgment of Hon'ble Madras High Court in case of Vaduganathan Talkies v. ITO 428 ITR 224 (Mad) and Hon'ble Karnataka High Court in case of Nam Estates Pvt. Ltd. v. ITO (2020) 428 ITR 186. He has also relied upon the judgment of Hon'ble Supreme Court in case of Attar Singh Gurmukh Singh vs. ITO 191 ITR 667. He has relied upon the orders of the authorities below. 8. We have considered the rival submission as well as relevant material on record. It is evident from the record that the assessee has paid cash of Rs. 25000/- to seven persons and Rs.1 lac to another person the details of which are given by the AO in the assessment order as under: XXX 9. The first seven payments of Rs. 25,000/- each are made by the assessee in respect of the land purchased from these persons, vide sale deed dated 27.03.2014 for total consideration of Rs. 4,05,30,000/-. It is evident from....
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....aving regard to the nature and extent of banking facilities available consideration of business expediency and other relevant factors. The Hon'ble Supreme Court in case of Attar Singh Gurmukh Singh vs. ITO as relied upon by the Ld. DR has also considered this aspect in para 7 as under: "In our opinion, there is little merit in this contention. Section 40A(3) must not be read in isolation or to the exclusion of Rule 6DD. The Section must be read along with the Rule. If read together, it will be clear that the provisions are not intended to restrict the business activities. There is no restriction on the assessee in his trading activities. Section 40A(3) only empowers the assessing officer to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The payment by crossed cheque or crossed bank draft is insisted on to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of the income from disclosed sources. The terms of Section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. The genuine and bona fide tran....
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.... Gurmukh Singh vs. ITO (supra), the Hon'ble Gujarat High Court in case of Anupam Tele Services vs. ITO (supra) has analysed the provisions of section 40A(3) with Rule 6DD of Income Tax Rules 1962 as under: "18. Rule 6DD of the IT Rules, 1962 provides for situations under which disallowance under s. 40A(3) shall not be made and no payment shall be deemed to be the profits and gains of business or profession under the said section. Amongst the various clauses, cl. (i) which is relevant, read as under: (i) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike: 19. It could be appreciated that s. 40A and in particular sub-clause (3) thereof aims at curbing the possibility of on-money transactions by insisting that all payments where expenditure in excess of a certain sum (in the present case twenty thousand rupees) must be made by way of account payee cheque drawn on a bank or account payee bank draft. 20. As held by the apex Court in case of Attar Singh Gurmukh Singh (supra). In our opinion, there is little merit in this contention. Sec. 40A(3) must not be read in isolation or to the....
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.... would base our conclusions on the following reasons: (a) The paramount consideration of s. 40A(3) is to curb and reduce the possibilities of black money transactions. As held by the Supreme Court in Attar Singh Gurmukh Singh (supra), s. 40A(3) of the Act does not eliminate considerations of business expediencies. (b) In the present case, the appellant assessee was compelled to make cash payments on account of peculiar situation. Such situation was as follow- (i) the principal company, to which the assessee was a distributor, insisted that cheque payment from a co-operative bank would not do, since the realization takes a longer time; (ii) the assessee was, therefore, required to make cash payments only. (iii) Tata Tele Services Ltd. assured the assessee that such amount shall be deposited in their bank account on behalf of the assessee; (iv) It is not disputed that the Tata Tele Services Ltd. did not act on such promise (v) if the assessee had not made cash payment and relied on cheque payments alone, it would have received the recharge vouchers delayed by 4/5 days and thereby severely affecting its business operations....
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....d enquiries were directed to the Board as to what shall constitute exceptional and unavoidable circumstances within the meaning of Clause (j). That led to issuance of Circular by the Board on May 31, 1977 ([1977] 108 ITR (St.) 8), which is published in Taxmann, Vol. 1, 1988 Edition. Significantly paragraph 4 of the aforesaid Circular shows very clearly that all the circumstances in which the conditions laid down in Rule 6DD(j) could be applicable cannot be spelt out. However, some of them which will seem to meet the requirements of the said rule are as follows: a. the purchaser is new to the seller; or b. the transactions are made at a place whether either the purchaser or the seller does not have a bank account; or c. the transactions and payments are made on a bank holiday; or d. the seller is refusing to accept the payment by way of crossed cheque/draft and the purchaser's business interest would suffer due to non-availability of goods otherwise than from this particular seller; or e. the seller, acting as a commission agent, is required to pay cash in turn to persons from whom he has purchase the goods; or f. specific di....
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....n the parameters of paragraphs 4 and 5 of the aforesaid circular read together." 13. Therefore, if the assessee has brought on record to establish genuineness of the transactions and payment as well as identity of the payee to the satisfaction of the AO then the benefit of Rule 6DD is available. Hon'ble High Court has observed that section 40A(3) was intended to penalize the tax evader and not honest transactions and that is why after framing Rule 6DD(j) the CBDT steps in by issuing the circular dated 31st May 1977 reported in 108 ITR (ST) 8. The Hon'ble jurisdictional High Court in case of CIT vs. Achal Alloys (P) Ltd. (supra) has also considered this issue and held as under: "7. Section 40A(3) provides an under: "Where the assessee incurs any expenditure in respect of which payment is made, after such date (not being later than the 31st day of March, 1965) as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding ten thousand rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, such expenditure shall not be allowed as a deduction." 8. It con....
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....s, clear doubts and mitigate hardships. From the words of Judge Learned Hand, spoken in Cabell v. Markham 11245] 148 F 28 737, 739, we get enough light to locate the correct path. "It is one of surest indexes of a mature and developed jurisprudence to remember that statutes always have some purpose or object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning." 14. There is no doubt about the purpose or object of the relevant provision. To accomplish it, we cannot ignore the second proviso engrafted to fill gaps and mitigate hardships The Tribunal on appreciation of facts applied this proviso and held that disallowance of payments made to the sellers and consequent addition of equivalent amount to the income as returned were steps hostile to the purpose and object and that the assessee was required to be given the benefit of such payments made in exceptional circumstances. Law lives on logic and as such illogicality, resting on technical view, it to be spurned. 15. This finding of fact, not shown to be perverse or perishable, reached by the Tribunal did not give, as held in CIT Ashoka Marketing LA [1976] 103 ITR ....
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.... the disallowance u/s 40A(3) of the Act and the same deserves to be deleted. We accordingly order so and allow Ground No.1 & 2 raised by the assessee. 11. Apropos the second plea raised in Ground No.3 of the assessee's appeal contending that the disallowance is not called for as the alleged amount was not claimed as an expenditure during the year becomes infructuous and merely academic as we have already deleted the disallowance u/s 40A(3) of the Act at Rs. 5,40,000/- while adjudicating Ground No.1 & 2 of instant appeal." 15. Though the Ld. DR has relied upon the judgment of Hon'ble Madras High court as well as Hon'ble Karnataka High court however, the jurisdictional High Court is binding on the tribunal functioning at Indore. Accordingly, in the facts and circumstances as discussed above and relied upon the various decisions of Hon'ble jurisdictional High Court and Coordinate Bench of this Tribunal we decide this issue in favour of the assessee and consequently disallowance made by the AO u/s 40A(3) is deleted." [Emphasis supplied] 9. Thus, the broader conclusions drawn by this Bench in above decision can be summed up as follows: (i) Section 40....
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....e commercial expediency for making cash-payment, there cannot be any disallowance. 10. Now, we revert to present case before us. Firstly, we find that it is a case of purchase of land duly supported by registered deeds. The consideration for purchase and the mode of payment, namely cheque and cash, are clearly mentioned in registered-deeds. The identity of the payee is also mentioned in registered-deeds. Therefore, the genuineness of transaction is not having any question. In fact, the AO has not disputed the genuineness and the Ld. DR for revenue is also not having dispute on genuineness point. This way, the genuineness part is proved. 11. In so far as circumstance/commercial expediency is concerned, we find that the assessee has claimed before AO that the sellers of lands were farmers and new to assessee. The sellers required the assessee to make cash-payments and to lock the deals, the assessee had to make part- payment in cash. Before CIT(A), the assessee has submitted a detailed chart in a tabular format giving explanation of circumstance/commercial expediency of all six transactions. This chart, as re-produced by Ld. CIT(A) on Page No. 5 to 10 of his order, is scanned a....
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....d for atleast 50% payment in cash licence, the assessee company to win the trust of the seller and to bring him on a consensus for execution of the deal of land made such cush payment. The amount of Rs. 16.38 Lakhs was paid in cash and for remaining amount PIX''s were issued in respect of said land. The payments made were out of the available cash balance of the company which can be verified from the records. It is submitted that the assessee company under business prudence acted in the course of business under business circumstances. 3. Shri Mansoor Patel Rural Agriculture Land situated at Village Shivnagar. Survey No. 240/2, 241/2. Parwari Halka No. 27, Tehsil Mhow, Dist. Indore (M.P) Date of Registry 27-01-2014 Value of Land (Rs. In Lakhs) Rs. 217.70 Cash Amount Paid (In Rs.) 50000/- Rs. 50000/-, 21-01-2014 The appellant in the said purchase has made a merger payment of Rs. 50000 on 21-01-2014, as token money or booking amount to hold the land deal under the impression of routine commercial practice and remaining amount was paid through Cheques and PDC's of Rs. 217.20 Lakhs Further the land is situated at distance of 18 kms from Indore (MP) 4. ....
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....o the owner/legal heir/relatives and Joint family property). It can be verified from the records, the purchased land is a distinguished case, a part from the seller of land it also involves I joint owner and 3 other family persons of seller. To materialize the effective and legal purchase of land & to avoid further litigations and disputes the assessee company had to involve it under series of cash transaction in part for purchasing of the said land so that the joint owner and relatives of seller could give their individual consent, as each one had interest in land. It is also informed that since the seller/joint owner/relatives were villagers farmers highly demanding major payment in cash to settle and clear their family consent but the assessee to exam possible paid the part money in cash and reaming payment through PDC's of Rs. 100.00 Lacs on the direction of seller of land Shri Nankishore Patidar The appellant was highly under the circumstances to make some payments in cash for the concerned land and the complexity of the case cannot be denied as the registration of the purchase materialized at the end of next financial year. For your perusal the registry of the said land i....
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....ural agricultural land situated in a village belonging to the owner/legal heir/relatives and (joint family property). It can be verified from the records, the purchased land is a distinguished case, apart from the seller of land it also involves joint owner and 3 other family persons of seller. To materialize the effective and legal purchase of land & to avoid further litigations and disputes the assessee company the assessee company had to involve it under series of cash transaction in part for purchasing of the said land so that the joint owner and relatives of seller could give their individual consent, as each one had interest inland. It is also informed that since the seller/joint owner/relatives were villagers /farmers highly demanding major payment in cash to settle and clear the family consent but the assessee to extent possible paid the part money in cash and reaming payment through PDC's of Rs. 100.00 Lacs on the direction of seller of land Shri Nandkishore Patidar. The appellant was highly under the circumstances to make some payments in cash for the concerned land and the complexity of the case cannot be denied as the registration of the purchase materialized i....
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....aim made before CIT(A). The CIT(A) simple recorded the newer stand of assessee in his order and granted relief based on judicial rulings. Therefore, in that peculiar situation, the ITAT reversed CIT(A)'s action and upheld the disallowance made by AO. In present case, there is no change in stand taken by assessee before AO and CIT(A). The assessee has been claiming same stand before AO as well as CIT(A). Therefore, the decision relied upon by Ld. DR is very much different on facts and does not apply to present appeal of assessee. Assessee's Cross-objection: 15. The assessee has come in cross objection on following grounds: (i) On the facts and circumstances of the case, the ITO, 2(5) has erred in disallowance u/ s 40A(3) of the Income-tax Act, 1961, of Rs. 2,63,60,750/-. (ii) Without prejudice to ground no.1, on the facts and circumstances that the assessee failed to prove exceptional or unavoidable circumstances necessitating payment of cash towards the payment for purchases of land. (iii) Further without prejudice to the above grounds, on the facts and circumstances of the case and in law, the ld. AO was not justified in filing the appeal merely on....
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....°, सरà¥à¤µà¥‡ नंबर 233 /2/1 रकबा 0.344 हेकà¥à¤Ÿà¥‡à¤¯à¤° व सूरà¥à¤µà¥‡ नंबर 234/1/1 रकबा 0.142 हेकà¥à¤Ÿà¥‡à¤¯à¤° कà¥à¤² रकबा 1.841 हेकà¥à¤Ÿà¥‡à¤¯à¤° à¤à¥‚मि यहाठपर सà¥à¤¥à¤¿à¤¤ है। वरà¥à¤¤à¤®à¤¾à¤¨ में सदर कृषि à¤à¥‚मि à¤à¥‚-रेवेनà¥à¤¯à¥‚ रेकारà¥à¤¡ में विकà¥à¤°à¥‡à¤¤à¤¾à¤ªà¤•à¥à¤· à¤à¤µà¤‚ शà¥à¤°à¥€ ओमपà¥à¤°à¤•à¤¾à¤¶ पिता शà¥à¤°à¥€ कनà¥à¤¹à¥ˆà¤¯à¤¾à¤²à¤¾à¤² पाटीदार के संयà¥à¤•à¥à¤....