TaxTMI 
TaxTMI 
2025 (2) TMI 1801
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....f the AO of assessing the income of the assessee at Rs. 43,25,1007/- as against income declared at Rs. 18,49,600/- in the return of income. 2. That the Worthy Commissioner of Income Tax (Appeals)-5, Ludhiana has erred in confirming the addition of Rs. 23,92,500/- u/s 40A(3) of the Income Tax Act, 1961 by making cash payment to the sellers on account of purchase of land. 3. That Ld. CIT(A) erred on facts and law in confirming the addition made by the AO by invoking the provisions of section 40A(3) as the assessee made cash payments exceeding Rs. 20,000/- for purchase of land held as stock in trade. The explanation furnished by the assessee, based on facts and case laws, during the course of appellate proceedings has not bee....
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....said properties have been purchased from Agriculturists, the payment of the same has to be made in cash due to many reasons which are not in the control of the assessee including banking difficulties, reliance of agriculturists more on cash etc. 3. Therefore, the Ld. AO during the assessment proceedings disallowed such cash payments made to the sellers u/s 40A(3). 4. The assessee as mentioned above is a real estate developer and the land purchased by the assessee has direct nexus to its business expediency and no adverse with regard to the same has been noticed by the Ld. AO or by the CIT(A). 5. The assessee has also filed the copies of the purchase deeds before the Ld. AO and before the Worthy CIT(A) and no adver....
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.... 12. Therefore, considering the above submissions it is clear that when the genuineness of transactions, identity of the sellers and sources of the assessee has been accepted then no disallowance u/s 40A(3) can be made. 13. The case of the assessee is covered by its own judgment of the Jurisdictional bench of this Hon'ble ITAT in the case of the Assessee for the Assessment Years 2006-2007 to 2009-2010 in ITA No. 749/CHD/2014. 14. Further, even after the judgment of Gurdas Garg reported in 63 taxmann.com 289 P&H-HC has been recalled by the Punjab and Haryana High Court, various / benches of the ITAT has passed order pertaining to Assessment Years subsequent to AY 2009-2010, wherein it has been held that when the genuin....
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....l these things were considered necessary to run the business of event management and for these expenses money is to be paid instantly. Accordingly, payment exceeding the prescribed limit u/s 40A(3) was allowed. Similarly, the ld. Counsel for the Assessee has brought on record the case laws in the case of 'ITO vs. Shri Kailash Sharma C/o M/s Verka Milk Agency' in ITA No. 817/Chd/2018 (supra). In this case also the Chandigarh Bench had allowed the payment exceeding eligible limit and additions were not confirmed by the ITAT u/s 40A(3) on the fact that the Assessee was a cash carry dealer for supplying Verka Milk and fresh milk products in Palampur and adjoining areas. The assessee has also explained that the milk was to be lifted daily and th....
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....nd in such circumstances, clearly cash is paid. 8. Similarly, in the case of 'Kailash Sharma C/o M/s Verka Milk Agency' (supra) the Assessee is engaged in the business of procurement of milk on day to day basis where milk was procured in the morning and payments were necessarily to be made by the evening. Normally, credit is not available in these kinds of business, therefore, keeping in view the necessity / requirements / exigencies of the business, cash payments exceeding Rs. 20,000/- could be made. But in the instant case, the Assessee is engaged in the business of land development and it had purchased land from different parties. Payment for purchase of lands have been made in cash, which in our view, is not acceptable because the As....