2014 (3) TMI 1074 - AT - Income Tax

Revision u/s 263 - non-fulfillment of conditions laid down under rule 6DD(j) of the I.T. rules - CIT directing AO to invoke the provisions of section 40A(3) and make necessary addition as directed by him - Held that - It is to be noted that, similar cash payments towards purchase of agricultural land was also made in the financial year 2007-08 relevant to the assessment year 2008-09. Disallowances made u/s 40A(3) of the Act by the assessing officer was confirmed by the CIT(A). When the matter came up before the coordinate bench of this Tribunal 2013 (12) TMI 1605 - ITAT VISAKHAPATNAM and the Tribunal after considering the submissions of the parties in the context of the statutory provision held that so far as cash payments made on Sundays and public holidays are concerned, no disallowance can be made u/s 40A(3) of the Act as such payments come within the exception provided under rule 6DD(j) of the IT rules. However, so far as assessee s claim of exemption under sub rule (g) of rule 6DD, the matter was remitted back to the assessing officer for verification. Facts being identical and issue being materially the same respectfully following the order of the coordinate bench as aforesaid, we direct the assessing officer to verify the cash payments made by the assessee and exclude the payments made on Sundays and public holidays from the purview of section 40A(3) of the Act. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Application of Section 40A(3) of the Income-tax Act concerning cash payments.
3. Validity of the assessment order passed under Section 263 of the Income-tax Act.
4. Consequential order passed under Section 143(3) read with Section 263 of the Income-tax Act.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal against the order passed under Section 263 of the Income-tax Act with a delay of 603 days. The delay was attributed to the assessee's bona fide belief that the proceedings would attain finality only after the assessment order was modified. The Tribunal found the explanation reasonable, noting that the issue in dispute had been decided in favor of the assessee in a previous tribunal order. Referring to the Bombay High Court's decision in Remex Constructions/Remex Electricals Vs. First Income-tax Officer, the Tribunal emphasized that technicalities should not impede substantial justice. Consequently, the delay was condoned, and the appeal was admitted for hearing.

2. Application of Section 40A(3) of the Income-tax Act:
The main issue revolved around cash payments amounting to Rs. 4,79,22,915/- made by the assessee in contravention of Section 40A(3) of the Act. The assessee argued that the payments were made to farmers for purchasing agricultural land, a common practice in the real estate business. The CIT, however, was not convinced, noting that the payments were made over a long period, suggesting a continuing relationship rather than a cash-and-carry situation. The CIT concluded that the payments did not meet the exceptions under Rule 6DD and directed the assessing officer to disallow the expenditure under Section 40A(3).

The Tribunal, upon reviewing the facts, noted that similar cash payments were made in the previous assessment year and were partly allowed by the Tribunal. It was held that payments made on Sundays and public holidays should be excluded from Section 40A(3) as they fall under the exceptions provided in Rule 6DD(j). The Tribunal directed the assessing officer to verify and exclude such payments.

3. Validity of the Assessment Order Passed Under Section 263:
The assessee contended that the CIT's order under Section 263 was without jurisdiction. The Tribunal found that the CIT's primary concern was the non-fulfillment of conditions under Rule 6DD(j), leading to the invocation of Section 40A(3). The Tribunal upheld the CIT's order to the extent that it directed the assessing officer to examine the cash payments, but it provided relief for payments made on Sundays and public holidays.

4. Consequential Order Passed Under Section 143(3) Read with Section 263:
Following the CIT's order under Section 263, the assessing officer disallowed Rs. 95,84,583/- under Section 40A(3). The assessee's appeal against this order was dismissed by the CIT(A) on the grounds that the assessment was completed as per the CIT's directions. The Tribunal, having already directed the assessing officer to verify and exclude certain payments, found this appeal to be infructuous and dismissed it.

Conclusion:
The Tribunal condoned the delay in filing the appeal and provided partial relief to the assessee by directing the exclusion of cash payments made on Sundays and public holidays from the purview of Section 40A(3). The consequential appeal was dismissed as it became infructuous following the primary decision.